Filed pursuant to Rule 424(b)(3)
Registration No. 333-278560
PROSPECTUS
HWH
International Inc.
149,443
Shares of Common Stock
This
prospectus relates to the resale by the selling stockholders of HWH International Inc. (the “Company”) named in this
prospectus from time to time of up to 149,443 shares of common stock, par value $0.0001 per share, issued pursuant to a Satisfaction
and Discharge of Indebtedness Agreement (the “Satisfaction Agreement”) between the Company and EF Hutton LLC (“EF
Hutton”), dated as of December 18, 2023. The consideration received for 149,443 shares of common stock consisted of deferred underwriting
commission, equivalent to $1,509,375 in deferred underwriting commission equitized at $10.10 per share.
We
will not receive any proceeds from the sale of shares of common stock by the selling stockholders.
Our
registration of the shares of common stock covered by this prospectus does not mean that the selling stockholders will offer or sell
any of such shares of common stock. The selling stockholders named in this prospectus, or their donees, pledgees, transferees or other
successors-in-interest, may resell the shares of common stock covered by this prospectus through public or private transactions at prevailing
market prices, at prices related to prevailing market prices or at privately negotiated prices. For additional information on the possible
methods of sale that may be used by the selling stockholders, you should refer to the section of this prospectus entitled “Plan
of Distribution.”
No
underwriter or other person has been engaged to facilitate the sale of the common stock in this offering. We will bear all costs, expenses
and fees in connection with the registration of the common stock. The selling stockholders will bear all commissions and discounts, if
any, attributable to their sales of our common stock.
Our
common stock commenced trading on the Nasdaq Global Market LLC (“Nasdaq”) under the ticker symbol “HWH” on January
9, 2024, and the Company’s warrants are expected to commence trading under the symbol “HWHW” at a later date. On June
14, 2024, the closing price of our common stock on Nasdaq was $1.00 per share.
Investment
in our common stock involves a high degree of risk. See “Risk Factors” contained in this prospectus on page 5, in our
periodic reports filed from time to time with the Securities and Exchange Commission (the “SEC”), and in any applicable prospectus supplement. You should carefully read this prospectus before you invest in our common stock.
Neither
the SEC nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or the accuracy
of this prospectus. Any representation to the contrary is a criminal offense.
The
date of this prospectus is June 17, 2024.
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
This
prospectus is part of the registration statement that we filed with the SEC pursuant to which the selling stockholders named herein may,
from time to time, offer and sell or otherwise dispose of the shares of our common stock covered by this prospectus. As permitted by
the rules and regulations of the SEC, the registration statement filed by us includes additional information not contained in this prospectus.
This
prospectus includes important information about us, the securities being offered and other information you should know before
investing in our securities. You should not assume that the information contained in this prospectus is accurate on any date subsequent
to the date set forth on the front cover of this prospectus, even though this prospectus is delivered or shares of common stock
are sold or otherwise disposed of on a later date. It is important for you to read and consider all information contained in this prospectus in making your investment decision. You should also read and consider the
information in the documents to which we have referred you under “Where You Can Find More Information” in this prospectus.
You
should rely only on this prospectus. We
have not, and the selling stockholders have not, authorized anyone to give any information or to make any representation to you other
than those contained in this prospectus. If anyone provides you with different or inconsistent information,
you should not rely on it. This prospectus does not constitute an offer to sell or the solicitation of an offer to buy securities in
any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction.
Unless
otherwise indicated, information contained in this prospectus concerning our industry, including our general
expectations and market opportunity, is based on information from our own management estimates and research, as well as from industry
and general publications and research, surveys and studies conducted by third parties. Management estimates are derived from publicly
available information, our knowledge of our industry and assumptions based on such information and knowledge, which we believe to be
reasonable. In addition, assumptions and estimates of our and our industry’s future performance are necessarily uncertain due to
a variety of factors, including those described in “Risk Factors” beginning on page 5 of this prospectus. These and other
factors could cause our future performance to differ materially from our assumptions and estimates.
This
prospectus is an offer to sell only the securities offered hereby, and only under circumstances and in jurisdictions where it is lawful
to do so. We are not making an offer to sell these securities in any state or jurisdiction where the offer or sale is not permitted.
PROSPECTUS
SUMMARY
This
summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information that you
should consider before deciding to invest in our securities. You should read this entire prospectus carefully, including the “Risk
Factors” section in this prospectus. In this prospectus, unless otherwise stated or the context otherwise requires, references
to “HWH International,” “Company,” “we,” “us,” “our” or similar references
mean HWH International Inc. and/or our subsidiaries on a consolidated basis.
Company
Overview
The
business we acquired in January of 2024 started
in South Korea with a single-level membership marketing model with limited products for sale. We registered the business on April 1,
2019, and we started selling founders packages on July 1, 2019. While we had been profitable and growing, the COVID-19 pandemic
had a material adverse effect on such growth and profits. Due to the decline in membership and revenue starting in 2020, we reorganized
our internal staff by adding a broader team in each of the United States, Hong Kong and Singapore with direct selling and business development
experience to head up and expand our operations across various geographies and revised our business plan to a multi-level membership
tier model in 2022, with more products and services to be made available to our members. We created a new corporate structure, with subsidiaries
in the United States, Hong Kong and Singapore, that would allow for quick geographical expansion and turning our focus
to the Hapi Café development.
We
have 9,811 individuals with founding member status. This is a privileged class that will be able to enjoy continuous membership benefits
given that they have trusted the Company and joined at an early stage. Such benefits include the ability to purchase new memberships,
in the model described below, at a favorable rate to be determined by the Company. They will also continue to be able to earn affiliate
commissions as they sell our products in the marketplace and enjoy discounted rates when visiting Hapi Cafés until further notice.
The total number of founding members was capped at 10,000. The Company is in the midst of implementing a new membership model that operates
on a yearly subscription basis. While we are not currently selling memberships, we intend to resume membership sales under this new model.
Members
will get exclusive discounts on HWH Marketplace products, priority invites to product launch events and other parties, and can earn passive
income when a member’s referral signs up for membership or makes an initial purchase of HWH Marketplace products through
them.
Our
operations include:
HWH
Marketplace, which offers certain products manufactured by our affiliate companies, at a discounted price to our members. It
is in the development stage, as we have been in discussions regarding the import and export of these products internationally.
The various aspects of the HWH Marketplace will be launched in phases across various regions, each with their own timeline, depending
on the completion of the establishment of the logistical aspects for implementation (i.e., payment gateway systems, business licenses,
banking set up, import licenses, managerial resources, etc.). This will be an on-going process as we expand our product and service offering
range. There are, however, certain limited products currently for sale at our Hapi Cafés, including spaghetti, a gig-economy business
book and certain skincare products.
Hapi
Cafés, which are, and will be, in-person, location-based social experiences, which offer members the opportunity to build
a sense of community with like-minded customers who share a potential interest in our products. The cafes expose our members to and educate
them about the products and services of our affiliates, providing us with the chance to significantly increase our membership base as
well as increase the amounts spent by our members on our affiliates’ products and services. Each of our cafés is a “Hapi
Café.” We opened proof-of-concept Hapi Café locations in Seoul, South Korea and Singapore in May 2022, July 2022
and April 2024, and plan to open additional Hapi Cafés as we beta test and further improve our business concept. We intend
to grow our memberships as we grow the number of Hapi Cafés around the world. Hapi Cafe is positioned to be an integral part of
HWH’s business model.
Our
travel business is in the planning stage as we are
working with our affiliates to determine the market-by-market services. Through our travel business, we plan to offer exclusive
access to unpublished rates and discounts on air travel, cruises, car rentals, hotels, and resorts for members.
Hapi
Wealth Builder is in the planning stage as we are exploring the options of providing services to our members through financial
educational materials aimed at various types of investing opportunities. 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. We have been
establishing Hapi Cafés as venues and destinations that help build the credibility and reputation of the Company and its Hapi Wealth
Builder business, which we intend to launch later in 2024.
Market
Opportunity
Following
the COVID-19 pandemic, we believe people are looking for in-person community. By offering a social and business centric atmosphere
at our Hapi Cafés, we plan to leverage this deeply-rooted desire and build a membership organization, increase their familiarity
with and educate them about the products and services of our affiliates and how those products and services can help them in their own
individual pursuits of health, wealth and happiness.
Growth
Strategy
Our
strategy is to continuously grow our membership base, while displaying to our members the added benefits of the higher tiers of membership.
We will look to accomplish this by providing a comfortable in person setting of a Hapi Café for our customers in many more locations.
We also plan to continually expand our product offerings and the services our affiliate companies can provide in the belief that this
can serve to grow our membership base and have our members increasingly opt to avail themselves of membership options that offer them
larger discounts and other benefits on the products and services of our affiliates.
Nasdaq
Deficiency
On
March 7, 2024, we received notice from 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 has 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 have 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 must close at $50,000,000 or more for a minimum of ten consecutive business
days prior to September 3, 2024. In the event we do not regain compliance with the MVLS requirement prior to the expiration of the compliance
period, we will receive written notification that our securities are subject to delisting. We may be able to continue our listing by
transferring the listing of our securities from the Nasdaq Global Market to the Nasdaq Capital Market, which has a lower MVLS requirement
of $35,000,000.
Credit
Facility
On
April 24, 2024, we entered into a Credit Facility Agreement (the “Credit Agreement”) with Alset Inc., a Texas corporation
and the Company’s indirect, majority stockholder (“Alset Inc.”), 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.
Pursuant
to the Credit 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 Credit Agreement. HWH may at any time during the term of the Credit
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 HWH.
Corporate
Information
Our
mailing address is 4800 Montgomery Lane, Suite 210, Bethesda, MD, 20814. We were 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 Company consummated a 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. The Company maintains a website at https://www.hwhintl.com.
THE OFFERING
Common
Stock to be Offered
by
the Selling Stockholders |
|
Up
to 149,443 shares of our common stock. |
| |
|
|
| Use
of Proceeds |
|
All
shares of our common stock offered by this prospectus are being registered for the account of the selling stockholders and we will
not receive any proceeds from the sale of these shares. See “Use of Proceeds” beginning on page 23 of this prospectus
for additional information. |
| |
|
|
| Plan
of Distribution |
|
The
selling stockholders named in this prospectus, or their pledgees, donees, transferees, distributees,
beneficiaries or other successors-in-interest, may offer or sell the shares of common stock
from time to time through public or private transactions at prevailing market prices, at
prices related to prevailing market prices or at privately negotiated prices. The selling
stockholders may also resell the shares of common stock to or through underwriters, broker-dealers
or agents, who may receive compensation in the form of discounts, concessions or commissions.
See
“Plan of Distribution” beginning on page 48 of this prospectus for additional information on the methods of sale that
may be used by the selling stockholders. |
| |
|
|
| Nasdaq
Global Market Symbol |
|
Our
common stock is listed on the Nasdaq Global Market LLC under the ticker symbol “HWH”. |
| |
|
|
| Risk
Factors |
|
Investing
in our common stock involves significant risks. See “Risk Factors” beginning on page 5 of this prospectus. |
RISK
FACTORS
An
investment in our securities involves a high degree of risk. You should carefully consider the following information about
these risks, together with the other information about these risks contained in this prospectus, as well as the other information
contained in this prospectus generally, before deciding to buy our securities. Any of the risks we describe below could
adversely affect our business, financial condition, operating results or prospects. The market prices for our securities
could decline if one or more of these risks and uncertainties develop into actual events and you could lose all or part of your
investment. Additional risks and uncertainties that we do not yet know of, or that we currently think are immaterial, may also
impair our business operations. You should also refer to the other information contained in this prospectus, including our financial
statements and the related notes.
If
any of the events described in these risk factors actually occurs, or if additional risks and uncertainties that are not presently known
to us or that we currently deem immaterial later materialize, then our business, prospects, results of operations and financial condition
could be materially adversely affected. In that event, the trading price of our securities could decline, and you may lose all or part
of your investment in our securities. The risks discussed include forward-looking statements, and our actual results may differ substantially
from those discussed in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements.”
Risks
Affecting HWH’s Business and Operations
Our
stock price may incur negative pressure from sales pursuant to this registration statement.
The
potential sale of shares of common stock pursuant to this registration statement may exert downward pressure on the public trading price
of our shares of common stock. As of June 17, 2024, the shares registered herein represent approximately 0.92% of the total number
of shares outstanding. Although the current trading price may be significantly below our SPAC IPO price of $10.00 per unit, selling stockholders
could still have an incentive to sell. Such sales could result in increased market supply, leading to a decrease in the stock price.
This downward pressure on the stock price could negatively impact investor sentiment, market perception, and the Company’s ability
to raise capital or pursue strategic initiatives. Investors should consider the potential impact of these sales on the trading price
of our common stock carefully before making investment decisions.
Our
future growth may be limited.
The
Company’s ability to achieve its expansion objectives into each of its intended four operational activities and to manage
the growth of each and all effectively depends upon a variety of factors, including the Company’s ability to properly customize
the products and services in each country of operations, to attract and retain members’ interest in each, any, or all four operational
activities, to successfully position and market its products and services in each, any, or all four operational activities,
and to capitalize on potential opportunities in a multitude of countries. The Company may never be able to successfully offer products
and services in each, any, or all four operational activities which may cause it to cease operations.
Our business plan and
operational structure may change.
As an
emerging company, we continually analyze our business plan and operations in each of our four operational activities in light
of current trends within certain countries. As a result of our ongoing analyses, we may decide to make substantial changes in one or
all of our operational activities and the operations therein. In the future, as we continue our internal analyses and as market
conditions and our available capital change, we may decide to make organizational changes and/or alter some or all of our operational
activities, including ceasing operations in one or more of our planned operational activities. Currently, the Company has
no intention of changing its business model or operational structure.
Our
continued operations depend on the public’s acceptance of our product lines and services in the applicable country.
The
ability to customize and develop our products and services that the applicable market finds desirable and willing to purchase membership
is critically important to our success. We cannot be certain that the products and services we offer our members will be appealing to
the applicable market and as a result there may not be any demand and our membership sales could be limited. In addition, there are no
assurances that if we alter, customize, or develop new products or services in the future that the applicable markets demand for these
will develop and this could adversely affect our business and any possible revenues.
The
loss of key management personnel could adversely affect HWH’s business, financial condition, results of operations or independent
associate relations.
Although
HWH’s executive officers and senior management team do not work full-time for HWH and are instead employed by affiliates of HWH,
HWH nevertheless depends on the continued services of its executive officers and senior management team as they work closely with independent
associate leaders and are responsible for HWH’s day-to-day operations. HWH’s success depends in part on its ability to retain
its executive officers and to continue to attract additional qualified individuals to HWH’s management team. Although HWH has not
entered into employment agreements with any of its senior executive officers or members of its management team, all of those individuals
have entered into employment agreements with affiliates of HWH, and HWH does not believe that any of them are planning to leave or retire
in the near term, no assurances can be made that HWH’s senior executive officers or members of HWH’s senior management team
will remain with it. The loss or limitation of the services of any of HWH’s executive officers or members of its senior management
team, including its regional and country managers, or the inability to attract additional qualified management personnel could have a
material adverse effect on HWH’s business, financial condition, results of operations, or independent associate relations.
The
inability to attract, train and retain highly qualified employees could adversely impact HWH’s business, financial condition and
results of operations.
HWH’s
success depends on the contributions of its employees, the members of its senior management and other key operations, and administrative
personnel. Excluding its senior executives and members of the senior management team, none of whom work full-time for HWH or under an
employment contract, HWH has three employees at HWH World (Korea), three employees at Hapi Café Korea, Inc., and four employees
at Hapi Café SG Pte Ltd. HWH must attract, train and retain a large and growing number of qualified employees, while controlling
related labor costs. HWH’s ability to control labor and benefit costs is subject to numerous internal and external factors, including
the continuing impacts of the pandemic, regulatory changes, prevailing wage rates, and healthcare and other insurance costs. HWH competes
with other retail and non-retail businesses for these employees and invests significant resources in training and motivating them. There
is no assurance that HWH will be able to attract or retain highly qualified employees in the future, which could have a material adverse
effect on HWH’s business, financial condition and results of operations.
Although
HWH relies on its affiliates to provide it with a number of key services necessary for its day-to-day operations, it does not have written
contracts in place with those affiliates that contractually obligate them to provide such services, and if such affiliate providers do
not perform adequately or perform at all, HWH’s costs may increase and HWH’s business, financial condition and results of
operations could be adversely affected.
HWH
relies heavily on HWH’s relationships with its affiliates to provide services for it. For example, and as discussed above, HWH
relies on its affiliates to provide it with its executive officers and senior members of the management team. As another example, HWH
relies on its affiliates to handle nearly all of its back-office functions, and it does not have written contracts or other written arrangements
in place that govern how costs should be allocated between HWH and its affiliates in respect of such services or as to how the responsibilities
should be allocated among HWH and its affiliates in respect of such services. For example, HWH relies on the internet technology services
of NHN Godomall (“NHN”) to manage all aspects of its information technology infrastructure including for its online connectivity,
infrastructure hosting, technical infrastructure, network management, content delivery, load balancing and protection against hacking
and distributed denial-of-service attacks. Because NHN is not contractually obligated to provide these services to HWH, no assurances
can be made that NHN will continue to provide such services to HWH, or that NHN will be available to assist HWH in the event that problems
arise that need to be addressed. While HWH is seeking to transition to another service provider in the near future, there can be no assurance
that there will be a contractual relationship and whether the terms will be favorable. Any of these risks stemming from HWH’s reliance
on third-parties to provide support absent a written contract or favorable terms between them could increase HWH’s costs and adversely
affect HWH’s business, financial condition and results of operations.
HWH
relies on its affiliates, in particular its U.S.-based affiliate Sharing Services Global Corp. (“Sharing Services”), to provide
it with all of the products which HWH currently sells to its customers and members, and as of the present time, no written contract is
in place to govern the pricing and other terms of any sales from Sharing Services to HWH.
HWH
currently purchases 100% percent of the products which it sells to consumers from Sharing Services. Although affiliated companies typically
enter into written contracts between one another to set pricing terms and govern their economic relationships generally, HWH makes such
purchases in the absence of a written contract that governs such sales and allocates the risks of such sales between Sharing Services
and HWH. As a publicly-traded company, however, Sharing Services is required to act in the best interests of its own stockholders, and
in the event Sharing Services faces a lack of sufficient inventory of its products, no assurances can be made that Sharing Services
would allocate products to HWH instead of its own unaffiliated customers which potentially offer more favorable profit margins. In the
event HWH is unable to obtain sufficient inventory of products to sell from Sharing Service and its other affiliates, HWH might
have to alternatively source similar products from third-party vendors. If HWH needed to do this, no assurances can be made that this
would not increase HWH’s costs and adversely affect HWH’s business, financial condition and results of operations.
HWH
currently depends on a single supplier
for the products it sells and there is potential for material disruptions in its supply chain or potential increases in the
prices of the products HWH purchases beyond what HWH can pass along to its customers and members.
HWH
depends on its affiliate supplier for all of the products which it currently sells. Any disruption or substantial decrease in the supply
of products by this supplier, as a result of a shortage of raw materials, organized labor disputes, natural disasters,
acts of cyberterrorism, or otherwise, could disrupt or substantially decrease HWH’s ability to fulfill customer orders. If this
occurred, particularly for an extended period, HWH may not be able to continue to offer these or similar products and its future sales
may decline. In such event, HWH may not be able to offset the decline in sales through substitution of products, price increases,
or otherwise. In addition, if HWH’s supplier implemented unilateral price increases in response to the decrease in the supply of
their products, HWH might not be able to pass along such price increases to HWH’s customers and its profitability may be reduced
or eliminated as a result. The occurrence of any of these conditions could have a material adverse effect on HWH’s business, financial
condition and results of operations.
HWH’s
failure to appropriately respond to changing consumer preferences in any of its operational activities and demand for new products
or product enhancements or new services or service compliments could significantly harm its relationship with its members, its product
sales, as well as its financial condition and operating results.
HWH’s
business, and the business of each of its operational activities, is subject to changing consumer trends and preferences, including
rapid and frequent changes in demand for products, new product introductions and enhancements, and new services and compliments thereto.
HWH’s failure to accurately predict these trends could negatively impact members’ opinion of the products sold by
HWH, which in turn could harm its member relationships and cause the loss of sales. The success of HWH’s new product and service
offerings and enhancements depends upon a number of factors, including HWH’s ability to:
●
procure such products and services from its affiliates and other third-party suppliers;
●
accurately anticipate consumer needs;
●
negotiate favorable pricing for products and services from its affiliates and other third-party suppliers;
●
successfully commercialize new products or product enhancements, or new services, in a timely manner;
●
price its products and services competitively; and
●
differentiate its product and services offerings from those of its competitors.
If
HWH does not introduce new products or services or make enhancements or improvements to meet the changing needs of its customers and
members in a timely manner, some of its products or services could be rendered obsolete, which could negatively impact its revenues,
financial condition, and operating results.
HWH
faces strong competition from other retailers, membership clubs, and service agencies, which could adversely affect its business, financial
condition and results of operations.
The
retail and services business and membership driven business is highly competitive. HWH competes for members, employees, sites, products
and services and in other important respects with a number of local, regional and national wholesalers, retailers, and membership programs
in the United States and Asia, including other business or social clubs with third party benefits, supermarkets, supercenters, internet
retailers, department and specialty stores and operators selling a single category or narrow range of merchandise. Such retailers, service
providers, and membership business operators compete in a variety of ways, including products, pricing, selection and availability, services,
location, convenience, and the attractiveness and ease of use of websites and mobile applications. The evolution of online and mobile
channels has improved the ability of customers to comparison shop, which has enhanced competition. Some competitors have greater financial
resources and technology capabilities, better access to merchandise or services, and greater market penetration than HWH does. HWH’s
inability to respond effectively to competitive pressures, changes in the retail or service markets or customer expectations could result
in lost market share and negatively affect HWH’s financial results.
HWH’s
failure to drive membership growth, loyalty and brand recognition could adversely affect its results of operations.
Membership
loyalty and growth are essential to HWH’s business. The extent to which HWH achieves growth in its membership base, increases the
penetration of the higher levels of membership, and sustains high renewal rates materially influences its profitability. Damage to HWH’s
brands or reputation may negatively impact comparable sales, diminish member trust, and reduce renewal rates and, accordingly, net sales
and membership fee revenue, negatively impacting its results of operations.
HWH
sells, or plans to sell, many products and services under the brands of its affiliates. Maintaining consistent product and service quality,
competitive pricing, and availability of these products and services is essential to developing and maintaining member loyalty. If HWH’s
affiliate brands experience a loss of member acceptance or confidence, HWH’s membership sales and gross margin results could be
adversely affected.
The
partial dependence of HWH’s direct selling business model to sell its affiliates’ products and services to its members, and
the highly competitive and dynamic nature of the direct selling industry could adversely affect its results of operations.
HWH,
through the offerings of the products and services of its affiliate companies, operates in the direct selling industry market and distributes
products and services to its members. The distribution of such products and services depends upon the continued efforts of HWH employees,
and to a lesser extent, HWH members, to recruit new members. The success of their efforts to recruit and retain members may be affected
by the competitive environment among membership-based companies, the conditions of the general labor market, including levels of employment,
the occurrence of demographic and cultural changes in the workforce, and the extent to which their brand is recognized in the geographies
in which they operate. There can be no assurance that HWH will be successful in recruiting, retaining, and upleveling enough members
to grow its business worldwide.
The
direct selling part of HWH’s business is highly competitive and dynamic, and generally there are few barriers to entering the industry.
In particular, the sale of health and wellness products by direct selling industry participants, online resellers, and others is highly
competitive. There are several companies, including many with more resources than HWH’s affiliate companies, that offer competing
health and wellness products. The primary competitive factors for health and wellness products are (a) price; (b) the quality, perceived
value, brand recognition and package appeal of the product; (c) the skills and effectiveness of the independent distributor and customer
service staff interacting with the customer or potential customer; and (d) the continuous availability of enough product to fulfill orders
promptly. There can be no assurance that HWH’s affiliates will remain competitive or that competition in the industry will not
intensify.
If
HWH does not remain competitive and promptly and effectively respond to increased competition, including competition for members, and
to marketplace changes in the future, future sales of HWH memberships, and HWH’s affiliate products and services could decline.
This could have a material adverse effect on HWH’s consolidated financial condition, results of operations and cash flows.
HWH’s
ability to attract and retain members, and the potential adverse impact of the loss of a significant number of members may be for causes
out of HWH’s control.
HWH’s
operations in the direct selling industry depend on its ability to promote its membership, as well as the products and services HWH members
have discounted access to and to market its membership and distribute HWH’s affiliate products and services. HWH’s success
in recruiting and retaining members may be affected by the competitive environment among membership and direct-to-consumer companies,
the conditions of the general labor market, including levels of employment, the occurrence of demographic and cultural changes in the
workforce, and the extent to which HWH’s affiliates’ brands are recognized in the geographies in which HWH operates. HWH’s
inability to attract and retain members in the future, the failure of a member to uplevel, the ineffectiveness of a member as a source
of referrals, or the loss of a significant number of members for causes out of their control may adversely affect future sales of HWH’s
products and services. This could have a material adverse effect on HWH’s consolidated financial condition, results of operations
and cash flows.
Changes
to HWH’s membership benefits could be negatively perceived by members, could fail to achieve the desired long-term goals, and could
adversely impact future membership sales.
HWH
may modify or add aspects of the membership benefits from time to time in efforts to keep its membership benefits competitive and attractive
to its existing and future members, to address changing market conditions, to provide incentives that HWH believes will help grow its
business, and to ensure conformance with evolving government regulations, among other reasons. In addition, the Company may be required
to modify membership benefits from time to time to comply with existing or new regulations in the future, including in response to potential
governmental enforcement action. Changes to its membership, including changes perceived to reduce the benefits and discounts available,
could be negatively received by HWH members, could fail to achieve the desired long-term goals, and could adversely impact future sales.
This, in turn, could adversely affect HWH’s business, financial condition, results of operations and cash flows.
If
HWH’s is unable to maintain a positive image and brand acceptance in the dynamic, highly competitive, and sometimes unpredictable
marketplace, including the impact of social media, its results of operations could be adversely impacted.
In
recent years, there has been a significant increase in the use by businesses of social media platforms, including informal blogs, social
media websites, and other forms of internet-based communications. Social media can enable a business to reach a wide selection of consumers
and other targeted audiences, generally in a more cost-effective way than more traditional forms of marketing and advertising. However,
negative, inaccurate, or false information about a company or the products or services it sells may be circulated through social media
quickly and may damage a company’s reputation and business. In addition, negative, inaccurate, or false information about a company
or the products or services it sells may be circulated through more traditional communication means. Many members and would be members
value readily available information and often act on such information without further investigation. The harm caused by the circulation
of negative, inaccurate, or false information about a company or its products or services may be immediate, and opportunities to redress
and correct the information may be slow and costly. If HWH was the victim of allegations, or the dissemination of negative, inaccurate,
or false information, circulated through social media or otherwise, this could adversely impact HWH’s reputation and business and
could result in the loss of members and in a decline in HWH’s future sales.
HWH
may also use social media platforms to communicate with existing and prospective members, and to otherwise promote its products and services.
Laws and regulations intended to govern the use of the Internet and social media platforms are complex and evolving. If HWH, or other
third parties acting on HWH’s behalf, were found to be in violation of any of these laws and regulations, this could result in
fines and enforcement actions and adversely impact HWH’s reputation and business.
The
occurrence of any of these conditions could have a material adverse effect on HWH’s business, financial condition, results of operations
and cash flows.
Adverse
or negative publicity could cause HWH’s business to suffer.
HWH’s
business depends, in part, on the public’s perception of its integrity and the safety and quality of the products and services
it sells. Any adverse publicity could negatively affect the public’s perception about HWH’s industry, HWH’s products
and services, or HWH’s reputation and could result in a significant decline in its operations. Specifically, HWH is susceptible
to adverse or negative publicity regarding:
●
the nutritional supplements industry;
●
skeptical consumers;
●
competitors;
●
the safety and quality of the products and services it sells;
●
regulatory investigations of the products and services it sells or the products or services sold by its competitors; and
●scandals
or regulatory investigations regarding the business practices or products or HWH’s competitors, specifically those competitors
within the direct selling channel.
The
success of HWH’s growth initiatives, including its efforts to attract new members, build brand awareness, and expand into additional
international areas, is imperative.
HWH’s
long-term success is dependent on its ability to achieve sustained growth. HWH is a developing company and has no significant sales history.
In efforts to initiate growth and expansion into each of its four operational activities, HWH plans to launch a multipronged growth
strategy intended to accelerate sales growth, including by: (a) expanding its service offerings, (b) increasing the number of Hapi Cafés,
and (c) initiating operations in new countries in North America and Asia, among others. There can be no assurance that these strategic
initiatives will result in the sales growth we anticipate, or any sales growth at all, the lack of which could have a material adverse
effect on HWH’s business, financial condition, results of operations and cash flows.
A
downturn in the economy could affect consumer purchases of discretionary items such as the health and wellness products that we offer,
or the travel services we plan to offer, which could have an adverse effect on HWH’s business, financial condition, profitability,
and cash flows.
HWH
offers, or plans to offer, a broad selection of health and wellness products and travel services. A downturn in the economy could adversely
impact consumer purchases of discretionary items such as health and wellness products or travel. The United States and global economies
may slow dramatically as a result of a variety of problems, including turmoil in the credit and financial markets, concerns regarding
the stability and viability of major financial institutions, the state of the housing markets, and volatility in worldwide stock markets.
In the event of such economic downturn, the U.S. and global economies could become significantly challenged in a recessionary state for
an indeterminate period of time. These economic conditions could cause many of HWH’s existing and potential members to delay or
reduce purchases of the products and services sold by HWH for some time, which in turn could harm HWH’s business by adversely affecting
its revenues, results of operations, cash flows and financial condition. HWH cannot predict these economic conditions or the impact they
would have on HWH’s consumers or business.
HWH
is subject to payment-related risks.
HWH
accepts payments using a variety of methods, including select credit and debit cards, cash and checks, and member discounts. As HWH offers
new payment options to its members, HWH may be subject to additional rules, regulations, compliance requirements, and higher fraud losses.
For certain payment methods, HWH pays interchange and other related acceptance fees, along with additional transaction processing fees.
HWH relies on third parties to provide payment transaction processing services for credit and debit cards and HWH’s shop card.
It could disrupt HWH’s business if these processing service providers become unwilling or unable to provide these services to HWH.
HWH is also subject to evolving payment card association and network operating rules, including data security rules, certification requirements
and rules governing electronic funds transfers. If HWH’s internal systems are breached or compromised, HWH may be liable for card
re-issuance costs, subject to fines and higher transaction fees and lose its ability to accept card payments from HWH members, and HWH’s
business and operating results could be adversely affected.
HWH
might sell products that cause illness or injury to its members, harm to its reputation, and expose HWH to litigation.
If
HWH’s merchandise, including its food products prepared for human consumption, wellness products, skincare products, household
products and durable goods, among others, do not meet or are perceived not to meet applicable safety or labeling standards or HWH’s
members’ expectations, HWH could experience lost sales, increased costs, litigation or reputational harm. The sale of these items
involves the risk of illness or injury to HWH’s members. Such illnesses or injuries could result from tampering by unauthorized
third parties, product contamination or spoilage, including the presence of foreign objects, substances, chemicals, other agents, or
residues introduced during the growing, manufacturing, storage, handling and transportation phases, or faulty design. HWH’s affiliate
suppliers are generally contractually required to comply with product safety laws, and HWH is dependent on them to ensure that the products
HWH buys comply with safety and other standards. While HWH is subject to governmental inspection and regulations and works to comply
in all material respects with applicable laws and regulations, HWH cannot be sure that consumption or use of the products sold by HWH
will not cause illness or injury or that HWH will not be subject to claims, lawsuits, or government investigations relating to such matters,
resulting in costly product recalls and other liabilities that could adversely affect HWH’s business and results of operations.
Even if a product liability claim is unsuccessful or is not fully pursued, negative publicity could adversely affect HWH’s reputation
with existing and potential members and its corporate and brand image, and these effects could have a long-term adverse impact.
Furthermore,
because HWH does not have a written agreement in place that sets forth the terms of sale between HWH and its affiliate suppliers, it
is not clear that HWH would have recourse against its affiliate suppliers or any indemnification rights against such suppliers, given
the absence of any written contract in place to govern the sale of such products by the affiliate supplier to HWH.
Nutritional
supplements are often supported only by limited available clinical studies.
Nutritional
supplements, such as many of the health and wellness products available through the HWH Marketplace, have a long history of human consumption.
Some of these products may contain innovative ingredients or contain combinations of ingredients. Although HWH believes that all the
products are safe when taken as directed, there is only limited data available about human consumption of certain of these product ingredients
or combinations of ingredients in concentrated form. HWH’s affiliate suppliers conduct research and test the formulation and production
of the products. However, there are only limited, if any, conclusive clinical studies available about the products and similar product
in the marketplace. Furthermore, because HWH is highly dependent on members’ perception of the efficacy, safety, and quality of
the products, HWH could be adversely affected in the event that the products, or similar products in the marketplace, are proven or asserted
to be ineffective or harmful to consumers or in the event of publicity associated with any adverse effects resulting from the use or
misuse of such products, or similar products in the marketplace. Any of these conditions could have a material adverse effect on HWH’s
business, financial condition, results of operations and cash flows.
If
the implementation of an information technology systems is not executed efficiently and effectively, HWH’s business, financial
position, and operating results could be adversely affected.
Like
many companies, HWH’s business is heavily dependent upon its information technology infrastructure to effectively manage and operate
many of its key business functions, including:
●
order processing;
●
supply chain management;
●
customer service;
●
services provision;
●
product distribution;
●
cash receipts and payments; and
●
financial reporting.
These
systems and operations are vulnerable to damage and interruption from fires, earthquakes, telecommunications failures, and other events.
They are also subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct.
Occasionally
information technology systems must be upgraded or replaced and if this system implementation is not executed efficiently and effectively,
the implementation may cause interruptions in HWH’s primary management information systems, which may make HWH’s website
or services unavailable thereby preventing us from processing transactions, which would adversely affect HWH’s financial position
or operating results.
With
increased frequency in recent years, cyber-attacks against companies have resulted in breaches of data security. HWH’s business
requires the storage and transmission of suppliers’ data and our independent associates’ and customers’ personal, credit
card, and other confidential information. HWH’s information technology systems are susceptible to a growing and evolving threat
of cybersecurity risk. Any substantial compromise of HWH’s data security, whether externally or internally, or misuse of associate,
customer, or employee data, could cause considerable damage to its reputation, cause the public disclosure of confidential information,
and result in lost sales, significant costs, and litigation, which would negatively affect its financial position and results of operations.
Risks
Related to HWH’s International Operations
HWH
is highly dependent on the financial performance of its South Korea (“Korea”) and Singapore operations.
HWH’s
financial and operational performance is currently highly dependent on its Korea and Singapore operations. Declines in financial performance
of these operations could arise from, among other things: slow growth or declines in membership growth, comparable product sales (comparable
sales); negative trends in operating expenses, including increased labor, healthcare and energy costs; failing to meet targets for Hapi
Café openings changes or uncertainties in economic conditions in HWH’s markets, including higher levels of unemployment
and depressed home values; and failing to consistently provide high quality and innovative new products and services.
HWH
may not be able to successfully execute its international expansion strategy.
As
a key part of its business strategy, HWH is looking to expand its operations in markets outside Korea and Singapore, including through
the opening of additional overseas cafés and subsidiaries, particularly in South and Southeast Asia and in North America. In the
coming years, HWH is looking to organize subsidiaries and rapidly expand its operations in numerous other countries, with a particular
focus on the United States and Canada in North America and on Hong Kong, Malaysia, Singapore, Thailand, and Taiwan.
Notwithstanding
the foregoing, the expansion of HWH’s operations abroad may be difficult due to the presence of established competitors in the
relevant local markets. In addition, overseas expansion and the management of international operations may require significant financial
expenditures as well as management attention and customization, and will subject HWH to the challenges of operating in an unfamiliar
business environment with different regulatory, legal and taxation systems and political, economic and social risks.
HWH’s
growth is also dependent, in part, on its ability to acquire property and build or lease new Hapi Cafés. HWH competes with other
retailers and businesses for suitable locations. Local land use and other regulations restricting the construction and operation of Hapi
Cafés, as well as local community actions opposed to the location of Hapi Cafés at specific sites and the adoption of local
laws restricting HWH’s operations and environmental regulations, may impact HWH’s ability to find suitable locations and
increase the cost of sites and of constructing, leasing and operating them. HWH may also have difficulty negotiating leases or purchase
agreements on acceptable terms.
HWH
intends to open additional Hapi Cafés in new markets. Associated risks include difficulties in attracting members due to a lack
of familiarity with HWH, attracting members of other health, wealth and happiness-based club operators, HWH’s may be less familiarity
with local member preferences, and seasonal differences in the markets. Entry into new markets may bring HWH into competition with new
competitors or with existing competitors with a large, established market presence.
More
generally, HWH’s international operations and future expansion plans are subject to political, economic, and social uncertainties,
including:
●
inflation;
●
the renegotiation or modification of various agreements;
●
increases in custom duties and tariffs;
●
complex U.S. and foreign laws, treaties and regulations, including without limitation, tax laws, the U.S. Foreign Corrupt Practices Act,
and similar anti-bribery and corruption acts and regulations in many of the markets in which we operate;
●
trademark availability and registration issues;
●
changes in exchange rates;
●
changes in taxation;
●
wars, civil unrest, acts of terrorism and other hostilities;
●
political, economic, and social conditions;
●
the effects of COVID-19;
●
changes to trade practice laws or regulations governing direct selling and marketing;
●
increased government scrutiny surrounding direct selling and network marketing; and
●
changes in the perception of network marketing.
The
risks outlined above could adversely affect HWH’s ability to sell products or services, obtain international customers, or to operate
its international businesses, or business operational activities, profitably, which would have a negative impact on HWH’s
overall business and results of operations. Furthermore, any negative changes in HWH’s distribution channels may force it to invest
significant time and money related to HWH’s distribution and sales to first grow and then maintain its position in certain international
markets. Accordingly, there is no guarantee that HWH will be successful in executing its overseas expansion strategy. The failure of
its international expansion strategy could have an adverse impact on our business, results of operations and financial condition.
Fluctuations
in foreign currency exchange rates will affect HWH’s financial results, which we report in U.S. Dollars.
HWH
currently operates in multiple jurisdictions, which exposes it to the effects of fluctuations in currency exchange rates. HWH earns revenue
denominated in Korean Won, Singapore Dollars, and U.S. Dollars. Fluctuations in the exchange rates between the various currencies that
HWH uses could result in expenses being higher and revenue being lower than would be the case if exchange rates were stable. HWH cannot
assure you that movements in foreign currency exchange rates will not have a material adverse effect on HWH’s results of operations
in future periods. HWH has not previously entered into hedging contracts to limit its exposure to fluctuations in the value of the currencies
that its businesses use, though it may do so at some point in the future, should it deem it expedient to do so. HWH cannot assure you
that central banks of the jurisdictions in which it operates will, or would be able to, intervene in the foreign exchange market in the
future to achieve stabilization or other objectives, or that such intervention would be effective in achieving the intended objectives.
Restrictions
on currency exchange in certain countries may limit HWH’s ability to receive and use its revenue effectively.
A
large majority of its revenue and expenses are currently denominated in Korean Won and Singapore Dollars. If revenue denominated in Korean
Won or Singapore Dollars increase or expenses denominated in such currencies decrease in the future, HWH may need to convert a portion
of its revenue into other currencies to meet its foreign currency obligations, including, among others, payment of dividends declared,
if any, in respect of its shares. Especially as HWH expands into additional markets, HWH cannot guarantee that it will be able to convert
the currencies of the countries in which it operates into U.S. Dollars or other foreign currencies to pay dividends or for other purposes
on a timely basis or at all.
HWH
has no business insurance coverage or certain other types of insurance.
Insurance
products currently available in Asia are not as extensive as those offered in more developed regions. Consistent with customary industry
practice in Asia, HWH does not currently carry business insurance. HWH has determined that the costs of insuring for related risks and
the difficulties associated with acquiring such insurance on commercially reasonable terms makes it impractical for HWH to have such
insurance. Any uninsured damage to HWH facilities or disruption of HWH’s business operations could require it to incur substantial
costs and divert its resources, which could have an adverse effect on our business, financial condition and results of operations.
While
HWH does carry insurance to cover claims for employee health care benefits and workers’ compensation as are required under applicable
laws, general liability, property damage, directors’ and officers’ liability, and other exposures would be funded wholly
by HWH. Significant claims or events, regulatory changes, a substantial rise in costs of health care or costs to maintain HWH’s
insurance or the failure to maintain adequate insurance coverage could have an adverse impact on HWH’s financial condition and
results of operations.
HWH’s
revenue and net income may be materially and adversely affected by any economic slowdown in any regions of Asia as well as globally.
While
HWH plans to expand its operations into North American, HWH currently derives 4% of its revenue from Korea and 96% from
Singapore in the three months ended March 31, 2024, respectively, and 3% and 87% in the three months ended March 31, 2023,
in Korea and Singapore, respectively, and is exposed to general economic conditions that affect consumer confidence, consumer
spending, consumer discretionary income or changes in consumer purchasing habits. As a result, HWH’s revenue and net income could
be impacted to a significant extent by economic conditions in Asia and globally. The Asia and global economy and markets are influenced
by many factors beyond HWH’s control, including consumer perception of current and future economic conditions, political uncertainty,
employment levels, inflation or deflation, real disposable income, interest rates, taxation and currency exchange rates.
Economic
growth in Asia has experienced a mild moderation in recent years, partially due to the slowdown of the Chinese economy since 2012, as
well as the global COVID-19 pandemic, global volatility of energy and consumer prices, U.S. monetary policies and other markets, and
other factors. Asia will have to cope with potential external and domestic risks to sustain its economic growth. An economic downturn,
whether actual or perceived, a further decrease in economic growth rates or an otherwise uncertain economic outlook in Asia or any other
market in which HWH may operate could have a material adverse effect on HWH’s business, financial condition and results of operations.
Risks
Related to HWH’s Operations in Korea
Unfavorable
financial and economic developments in Korea may have an adverse effect on us.
At
the present time, a material portion of HWH’s operations and assets are located in Korea. HWH is subject to political, economic,
legal and regulatory risks specific to Korea, and HWH’s performance and successful fulfillment of its operational strategies are
dependent in large part on the overall Korean economy. The economic indicators in Korea in recent years have shown mixed signs of growth
and uncertainty, and starting in 2020, the overall Korean economy and the economies of Korea’s major trading partners have shown
signs of deterioration due to the debilitating effects of the COVID-19 pandemic. Any possible recurrence of COVID-19 or other types of
widespread infectious diseases in Korea may adversely affect HWH’s business, financial condition and results of operations.
The
future growth of the Korean economy is subject to many factors beyond our control, including developments in the global economy. In recent
years, adverse conditions and volatility in the worldwide financial markets, fluctuations in oil and commodity prices, supply chain disruptions
and the increasing weakness of the global economy, in particular due to the COVID-19 pandemic and more recently Russia’s invasion
of Ukraine and ensuing sanctions against Russia, have contributed to the uncertainty of global economic prospects in general and have
adversely affected, and may continue to adversely affect, the Korean economy. The value of the Won, Korea’s national currency,
relative to major foreign currencies has fluctuated significantly and, as a result of uncertain global and Korean economic conditions,
there has been significant volatility in the stock prices of Korean companies recently. Any future deterioration of the Korean or global
economy could adversely affect HWH’s business, financial condition and results of operations.
Developments
that could have an adverse impact on Korea’s economy include:
| |
● |
the
occurrence of severe health epidemics in Korea and other parts of the world (such as the ongoing global COVID-19 pandemic); |
| |
|
|
| |
● |
a
continuing rise in the level of household debt and increasing delinquencies and credit defaults by retail or small- and medium-sized
enterprise borrowers in Korea; |
| |
|
|
| |
● |
a
deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including deterioration resulting
from territorial or trade disputes or disagreements in foreign policy; |
| |
|
|
| |
● |
increased
sovereign default risks in select countries and the resulting adverse effects on the global financial markets; |
| |
|
|
| |
● |
a
deterioration in the financial condition or performance of small- and medium-sized enterprises and other companies in Korea due to
the government’s policies to increase minimum wages and limit working hours of employees; |
| |
|
|
| |
● |
investigations
of large Korean conglomerates and their senior management for possible misconduct; |
| |
|
|
| |
● |
social
and labor unrest; |
| |
|
|
| |
● |
substantial
changes in the market prices of Korean real estate; |
| |
● |
a
substantial decrease in tax revenues and a substantial increase in the Korean government’s expenditures for fiscal stimulus
measures, unemployment compensation and other economic and social programs, in particular in light of the Korean government’s
ongoing efforts to provide emergency relief payments to households and emergency loans to corporations in need of funding in light
of the ongoing COVID-19 pandemic, which together would likely lead to a national budget deficit as well as an increase in the Korean
government’s debt; |
| |
|
|
| |
● |
loss
of investor confidence arising from corporate accounting irregularities and corporate governance issues concerning certain Korean
conglomerates; |
| |
|
|
| |
● |
increases
in social expenditures to support an aging population in Korea or decreases in economic productivity due to the declining population
size in Korea; |
| |
|
|
| |
● |
geopolitical
uncertainty and the risk of further attacks by terrorist groups around the world; |
| |
|
|
| |
● |
political
uncertainty or increasing strife among or within political parties in Korea; |
| |
|
|
| |
● |
hostilities,
political or social tensions involving Russia (including the invasion of Ukraine by Russia and ensuing actions that the United States
and other countries may take) and the resulting adverse effects on the global supply of oil and other natural resources and the global
financial markets; |
| |
|
|
| |
● |
hostilities
or political or social tensions involving oil producing countries in the Middle East (including a potential escalation of hostilities
between the United States and Iran) and North Africa and any material disruption in the global supply of oil or sudden increase in
the price of oil; |
| |
|
|
| |
● |
natural
or man-made disasters that have a significant adverse economic or other impact on Korea or its major trading partners; and |
| |
|
|
| |
● |
an
increase in the level of tensions or an outbreak of hostilities between North Korea and Korea or the United States. |
Escalations
in tensions with North Korea could have an adverse effect on HWH.
Relations
between Korea and North Korea have been tense throughout Korea’s modern history. The level of tension between the two Koreas has
fluctuated and may increase abruptly as a result of current and future events. In particular, there have been heightened security concerns
in recent years stemming from North Korea’s nuclear weapon and ballistic missile programs as well as its hostile military actions
against Korea.
North
Korea’s economy also faces severe challenges, which may further aggravate social and political pressures within North Korea. Although
bilateral summit meetings between the two Koreas were held in April 2018, May 2018 and September 2018 and between the United States and
North Korea in June 2018, February 2019 and June 2019, there can be no assurance that the level of tensions affecting the Korean peninsula
will not escalate in the future. Any further increase in tensions, which may occur, for example, if North Korea experiences a leadership
crisis, high-level contacts between Korea and North Korea break down or military hostilities occur, could have a material adverse effect
on the Korean economy and on HWH’s Korea- based members and customers, thereby having a material adverse effect on HWH’s
business, financial condition and results of operations.
Strengthening
of Korea’s consumer protection laws could adversely affect our Korean operations.
As
a direct-to-consumer seller of consumer products in Korea, HWH is potentially subject to a variety of regulations in Korea that are designed
to protect consumers. In recent years, in light of heightened public concern regarding privacy issues, the Korean government has placed
greater emphasis on protection of personal information by companies in direct-to-consumer businesses and has implemented a number of
measures to enhance consumer protection. Under the Personal Information Protection Act, companies designated as personal information
managers may not collect, store, maintain, utilize or provide resident registration numbers of their customers, unless other laws or
regulations specifically require or permit the management of resident registration numbers. In addition, under the Use and Protection
of Credit Information Act, a company owes a higher duty to protect all information that it collects from its customers and is
required to treat such information as credit information. A company’s ability to transfer or provide the information to its affiliates
or holding company is considerably restricted, and significant damages may be imposed on a company for leakage of such information. Furthermore,
under the Electronic Financial Transaction Act, a company may be primarily responsible for compensating its customers harmed by a cyber
security breach affecting the company even if the breach is not directly attributable to the company.
Labor
unrest in Korea may adversely affect HWH’s operations.
Economic
difficulties in Korea or increases in corporate reorganizations and bankruptcies could result in layoffs and higher unemployment. Such
developments could lead to social unrest and substantially increase government expenditures for unemployment compensation and other costs
for social programs. According to statistics from the Korea National Statistical Office, the unemployment rate increased from 3.8% in
2018 and 2019 to 4.5% in 2020 and 3.7% in 2021. Further increases in unemployment and any resulting labor unrest in the future could
adversely affect HWH’s operations, and the ability of many of HWH’s customers to purchase memberships and products from HWH.
These developments in Korea may have an adverse effect on HWH’s financial condition and results of operations.
Risks
Related to Regulation
HWH’s
business may be adversely affected by legal claims and regulatory actions against it.
HWH
is subject to the risk of legal claims and regulatory actions, which may expose it to monetary damages and legal costs, injunctive relief,
criminal and civil penalties, sanctions against our management and employees and regulatory restrictions on our operations, as well as
reputational harm.
HWH
is unable to predict the outcome of many of the legal claims and regulatory actions in which it is involved, and the scope of the claims
or actions or the total amount in dispute in such matters may increase.
Furthermore,
adverse decisions, findings or resolutions in such matters could encourage other parties, including governmental authorities in other
jurisdictions, to bring similar claims and actions against HWH. Accordingly, the outcome of current and future legal claims and regulatory
actions, particularly those for which it is difficult to assess the maximum potential exposure or the ultimate adverse impact with any
degree of certainty, may materially and adversely impact HWH’s business, reputation, results of operations and financial condition.
Civil
or governmental challenges to HWH’s membership driven model or its related direct selling system or the distribution and service
policies of HWH’s affiliates could harm HWH’s business.
The
membership-based industry and the direct-to-consumer industry are subject to governmental scrutiny, including as a result of various
national, state, and local laws and regulations. For example, in the U.S., the FTC has actively warned several direct selling companies,
and the industry as a whole, about certain business practices associated with direct selling and has entered into settlements with several
direct selling companies that required those companies to modify their compensation plans and business models.
In
the countries where HWH operates, the direct selling industry and the service provision industry rely on the implementation of distributor
or service provider rules and policies designed to protect consumers, prevent inappropriate sales activities and marketing practices,
and prevent unregistered broker-dealer activity. HWH’s affiliates who engage in direct sales have adopted formal rules and policies
that HWH’s affiliates believe are consistent with best domestic and global industry standards, as applicable. However, there can
be no assurance that elements of HWH’s affiliates’ systems, or elements of their policies will not be challenged in civil
or governmental actions, or that the application and interpretation of laws or regulations governing such industry operations
in the future would not be harmful to HWH’s business. The occurrence of any of these conditions could have a material adverse effect
on HWH’s business, financial condition, results of operations and cash flows.
HWH
may fail to obtain, maintain or renew requisite licenses and approvals.
HWH
may not be able to obtain all the licenses and approvals that may be deemed necessary to provide the products and services it plans to
offer. Because the industries in which HWH operates may be relatively new in certain markets, the relevant laws and regulations, as well
as their interpretations, are often unclear and evolving. This can make it difficult to know which licenses and approvals are necessary,
or the processes for obtaining them. For these same reasons, HWH also cannot be certain that it will be able to maintain the licenses
and approvals that it has previously obtained, or that once they expire HWH will be able to renew them. HWH also believes that
some of its business operations fall outside the scope of licensing requirements, or benefit from certain exemptions, making it not necessary
to obtain certain licenses or approvals. HWH cannot be sure that its interpretations of the rules and their exemptions have always been
or will be consistent with those of the local regulators.
If
HWH fails to obtain, maintain or renew any required licenses or approvals or make any necessary filings or is found to require
licenses or approvals that it believed were not necessary or with respect to which it believed itself exempted from obtaining, HWH may
be subject to various penalties, such as confiscation of the revenue or assets that were generated through the unlicensed business activities,
imposition of fines, suspension or cancelation of the applicable license, written reprimands, termination of third-party arrangements,
suspension of business activities, criminal prosecution and the discontinuation or restriction of HWH’s operations. Any such penalties
may disrupt HWH’s business operations and materially and adversely affect HWH’s business, financial condition and results
of operations.
If
government regulations regarding network marketing change or are interpreted or enforced in a manner adverse to the business of HWH’s
affiliates, such affiliates may be subject to enforcement actions and material limitations regarding their overall business model, which
in turn could impact the supply of products to HWH for sale to its members.
HWH
does not utilize a network marketing business model. However, HWH’s affiliates, including Sharing Services, operate in that space.
Network marketing is always subject to extensive governmental regulations, including foreign, federal, and state regulations. Any change
in legislation and regulations could affect the business of HWH’s affiliates. Furthermore, significant penalties could be imposed
on HWH’s affiliates for failure to comply with various statutes or regulations. Violations may result from:
●
ambiguity in statutes;
●
regulations and related court decisions;
●
the discretion afforded to regulatory authorities and courts interpreting and enforcing laws;
●
new regulations affecting HWH’s business; and
●
changes to, or interpretations of, existing regulations affecting HWH’s business.
HWH
cannot predict what effect additional governmental regulations, judicial decisions, or administrative orders, when and if promulgated,
would have on the business operations of HWH’s affiliates, or how that might impact that availability of HWH’s affiliates
to provide such products to HWH for sale to its members as well as the cost of such products.
Legal
and regulatory requirements concerning network marketing systems, however, involve a high level of subjectivity, are inherently fact-based,
and are subject to judicial interpretation. Because of this, HWH can provide no assurance that it would not be harmed by the application
or interpretation of statutes or regulations governing network marketing to certain of its affiliates.
If
HWH violates governmental regulations or fails to obtain necessary regulatory approvals, its operations could be adversely affected.
HWH’s
operations are subject to extensive laws, governmental regulations, administrative determinations, court decisions, and similar constraints
at the federal, state, and local levels in its domestic and foreign markets. These regulations include the following:
●the
formulation, manufacturing, packaging, labeling, distribution, importation, sale, and storage of the products sold by HWH;
●pricing
restrictions regarding transactions with HWH’s affiliates or other related parties and similar regulations that affect HWH’s
level of foreign taxable income;
●the
assessment of customs duties; and
●export
and import restrictions.
Any
unexpected new regulations or changes in existing regulations could significantly restrict the ability of HWH’s affiliate suppliers
to continue operations, which could adversely affect HWH’s business. For example, changes regarding health and safety and food
and drug regulations for the nutritional products HWH sells to its members could require the affiliate suppliers of HWH to reformulate
such products to comply with such regulations, which could in turn result in HWH paying higher prices for such products.
In
some foreign countries, nutritional products are considered foods, while other countries consider them drugs. Future health and safety
or food and drug regulations could delay or prevent HWH’s introduction of new products or suspend or prohibit the sale of existing
products in a given country or marketplace. In addition, if HWH expands further into other foreign markets, its operations or the products
it seeks to sell in such markets could also be affected by the general stability of such foreign governments and the regulatory environment
relating to those products. If the products HWH sells are subject to high customs duties, both HWH sales and its competitive position
could suffer as compared to locally produced goods. Furthermore, import restrictions in certain countries and jurisdictions could limit
HWH’s ability to import products from the United States.
In
other countries, travel services are heavily regulated. Future regulations could delay or prevent HWH’s introduction of new services
or suspend or prohibit the sale of existing services in a given country or marketplace.
Increased
regulatory scrutiny of nutritional supplements as well as new regulations that are being adopted in some of HWH’s markets with
respect to nutritional supplements could result in more restrictive regulations and harm HWH’s results if the supplements sold
by it or advertising activities are found to violate existing or new regulations or if HWH is not able to persuade its affiliate suppliers
to effect necessary changes to products sold by HWH in a timely and efficient manner to respond to new regulations.
There
has been an increasing movement in the United States and other markets to increase the regulation of dietary supplements, which could
impose additional restrictions or requirements on us and increase the cost of doing business. On February 11, 2019, the U.S. Food
and Drug Administration (the “FDA”) issued a statement from FDA Commissioner, Dr. Scott Gottlieb, regarding the agency’s
efforts to strengthen the regulation of dietary supplements. The FDA will be prioritizing and focusing resources on misbranded products
bearing unproven claims to treat, cure, or mitigate disease. Commissioner Gottlieb established a Dietary Supplement Working Group tasked
with reviewing the agency’s organizational structure, process, procedures, and practices to identify opportunities to modernize
the oversight of dietary supplements. Additionally, on December 21, 2015, the FDA created the Office of Dietary Supplements (“ODSP”).
The creation of this new office elevates the FDA’s program from its previous status as a division under the Office of Nutrition
and Dietary Supplements. ODSP will continue to monitor the safety of dietary supplements. Approvals or registration may require reformulation
of products sold by HWH or may be unavailable to HWH with respect to certain products or ingredients. Products sold by HWH must comply
with product labeling regulations, which vary by jurisdiction.
In
several of HWH’s markets, new regulations have been adopted, or are likely to be adopted, in the near-term that will impose new
requirements, make changes in some classifications of supplements under the regulations, or limit the claims that can be made about the
products HWH sells. In addition, there has been increased regulatory scrutiny of nutritional supplements and marketing claims under existing
and new regulations. In August 2016, the FDA published its revised draft guidance on Dietary Supplements: New Dietary Ingredient Notifications
and Related Issues. If a company sells a dietary supplement containing an ingredient that FDA considers either not a dietary ingredient
or a new dietary ingredient (“NDI”) that needs an NDI notification, the agency may threaten or initiate enforcement against
that company. For example, it might send a warning letter that can trigger consumer lawsuits, demand a product recall, or even work with
the Department of Justice to bring a criminal action. HWH’s operations could be harmed if new guidance or regulations result in
increased costs to HWH, given HWH does not manufacturer its own products, or if the sale of certain products is completely prohibited.
Taxation
and transfer pricing affects operations and HWH could be subjected to additional taxes, duties, interest, and penalties in material amounts,
which could harm HWH’s business.
As
a multinational corporation, in multiple countries, including the United States, HWH is subject to transfer pricing and other tax regulations
designed to ensure that its intercompany transactions are consummated at prices that reflect the economic reality of the relationship
between the entities and have not been manipulated to produce a desired tax result, that appropriate levels of income are reported as
earned by the local entities, and that HWH gets taxed appropriately on such transactions. Regulators may choose to closely monitor HWH’s
corporate structure, intercompany transactions, and how HWH effectuates intercompany fund transfers. If regulators challenge HWH’s
corporate structure, transfer pricing methodologies or intercompany transfers, HWH’s operations may be harmed and HWH’s effective
tax rate may increase. Scrutiny has increased with the advent of the Organization for Economic Co-operation and Development Base Erosion
and Profit Shifting project.
On
December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “TCJA”). The Internal Revenue Service (“IRS”)
continues to issue guidance related to the passage of the TCJA. As new guidance is issued it may have a material impact on HWH’s
financial statements. In addition, there is a risk that U.S. states and foreign jurisdictions may amend their tax laws in response to
the Act, which could have a material impact on HWH’s future results.
HWH
is subject to income taxes in the U.S. and multiple international jurisdictions. HWH’s income tax provision and cash tax liability
in the future could be adversely affected by changes in earnings in countries with differing statutory tax rates, changes in the valuation
of deferred tax assets and liabilities, changes in tax laws and the discovery of new information in the course of HWH’s tax return
preparation process. HWH may also become subject to ongoing tax audits. Such audits can involve complex issues, which may require an
extended period of time to resolve and can be highly judgmental. Tax authorities could disagree with certain tax reporting positions
taken by HWH and, as a result, assess additional taxes against HWH. The amounts ultimately paid upon resolution of these or subsequent
tax audits could be materially different from the amount previously included in HWH’s income tax provision, and, therefore, could
have a material impact on HWH’s profitability.
Changes
in and actual or perceived failures to comply with applicable data privacy, security and protection laws, regulations, standards and
contractual obligations may adversely affect HWH’s business, operations and financial performance.
HWH
is subject to federal, state, and foreign laws and regulations that govern data privacy and security. The legislative and regulatory
landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection
issues, which may affect HWH’s business and may increase HWH’s compliance costs and exposure to liability. In the United
States, numerous federal and state laws and regulations govern the collection, use, disclosure, and protection of personal information,
including state data breach notification laws, federal and state health information privacy laws, and federal and state consumer protection
laws. Each of these laws is subject to varying interpretations by courts and government agencies, creating complex compliance issues.
If HWH fails to comply with applicable laws and regulations or discloses the personal information of its members in an impermissible
manner, it could be subject to penalties or sanctions. HWH may become subject to rapidly evolving data protection laws, rules and regulations
in foreign jurisdictions. For example, in Korea, HWH as a personal information controller is subject to the Personal Information Protection
Act, which falls under the regulatory scope of the Personal Information Protection Commission. In Singapore, HWH is subject to the Personal
Data Protection Act 2012, the general data protection which applies to all private sector organizations.
Compliance
with applicable data privacy and security laws, rules and regulations could require HWH to take on more onerous obligations in its contracts,
require HWH to engage in costly compliance exercises, restrict HWH’s ability to collect, use and disclose data relating to its
members, or in some cases, impact HWH or its partners’ ability to operate in certain jurisdictions. Each of these constantly evolving
laws can be subject to varying interpretations. If HWH fails to comply with any such laws, rules or regulations, HWH may face government
investigations and/or enforcement actions, fines, civil or criminal penalties, private litigation or adverse publicity that could adversely
affect HWH’s business, financial condition and results of operations.
Risks
Related to HWH’s Securities
Nasdaq
may delist our common stock from quotation on its exchange, which could limit investors’ ability to make transactions in our securities
and subject us to additional trading restrictions.
We
received a written notice (the “Nasdaq Notice”), dated March 7, 2024, from Nasdaq indicating that (i) for the preceding
30 consecutive business days, the market value of our listed securities (“MVLS”) did not maintain a minimum market
value of $50,000,000 (the “Minimum MVLS Requirement”) as required by Nasdaq Listing Rule 5450(b)(2)(A).
In
accordance with Nasdaq Listing Rule 5810(c)(3)(C), we have a compliance period of 180 calendar days, or until September 3, 2024, to regain
compliance with the Minimum MVLS Requirement. Compliance may be achieved if our MVLS closes at $50,000,000 or more for a minimum of ten
consecutive business days at any time during the 180-day compliance period, in which case Nasdaq will notify us of our compliance and
the matter will be closed.
If
we do not regain compliance with the Minimum MVLS Requirement by September 3, 2024, Nasdaq will provide written notification to
us that our common stock is subject to delisting. At that time, we may appeal the relevant delisting determination to a hearings panel
pursuant to the procedures set forth in the applicable Nasdaq Listing Rules. However, there can be no assurance, if we do appeal the
delisting determination by Nasdaq to the hearings panel, that such appeal would be successful. In such event, we may also seek to apply
for a transfer to The Nasdaq Capital Market if we meet the requirements for continued listing thereon.
The
Nasdaq Notice received has no immediate effect on our continued listing on the Nasdaq Global Market or the trading of our common stock,
subject to our compliance with the other continued listing requirements. We are presently evaluating potential actions to regain compliance
with all applicable requirements for continued listing on the Nasdaq Global Market. There can be no assurance that we will be successful
in maintaining the listing of our common stock on the Nasdaq Global Market.
If
Nasdaq delists our securities from trading on its exchange, we could face significant material adverse consequences, including:
| |
● |
a
limited availability of market quotations for our securities; |
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|
|
| |
● |
reduced
liquidity with respect to our securities; |
| |
|
|
| |
● |
a
determination that our shares are a “penny stock,” which will require brokers trading in our shares to adhere to more
stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our shares; |
| |
|
|
| |
● |
a
limited amount of news and analyst coverage for our company; and |
| |
|
|
| |
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a
decreased ability to issue additional securities or obtain additional financing in the future. |
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains certain forward-looking statements that involve substantial risks and uncertainties. All statements contained
in this prospectus, other than statements of historical facts, are forward-looking statements
including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects,
plans, objectives of management and expected market growth. These statements involve known and unknown risks, uncertainties and other
important factors that may cause our actual results, performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking statements.
The
words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “may”,
“plan”, “predict”, “project”, “target”, “potential”, “will”,
“would”, “could”, “should”, “continue” and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements
include, among other things, statements about: the status, progress and results of our research programs; our ability to obtain regulatory
approvals for, and the level of market opportunity for, our product candidates; our business plans, strategies and objectives, including
plans to pursue collaboration, licensing or other similar arrangements or transactions; our expectations regarding our liquidity and
performance, including our expense levels, sources of capital and ability to maintain our operations as a going concern; the competitive
landscape of our industry; and general market, economic and political conditions.
These
forward-looking statements are only predictions and we may not actually achieve the plans, intentions or expectations disclosed in our
forward-looking statements, so you should not place undue reliance on our forward-looking statements. Actual results or events could
differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have based these
forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect
our business, financial condition and operating results. We have included important factors in the cautionary statements included in
this prospectus that could cause actual future results or events to differ materially from the forward-looking statements that we make.
Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures
or investments we may make.
You
should read this prospectus with the understanding that our actual future results may be materially different from what we expect. We
do not assume any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise,
except as required by applicable law.
USE
OF PROCEEDS
All
shares of common stock offered by this prospectus are being registered for the account of the selling stockholders and we will not receive
any proceeds from the sale of these shares.
MARKET
INFORMATION FOR COMMON STOCK AND DIVIDEND POLICY
Market
Information
Our
common stock is currently listed on the Nasdaq Global Market under the symbol “HWH”. As of June 17, 2024, we had approximately
16,223,301 shares of common stock issued and outstanding. The number of holders of record does not include a substantially greater number
of “street name” holders or beneficial holders whose shares of Company common stock are held of record by banks, brokers
and other financial institutions.
Dividends
We
have never declared or paid cash dividends on our capital stock. We intend to retain all available funds and any future earnings for
use in the operation of our business and do not anticipate paying any cash dividends on our capital stock in the foreseeable future.
Notwithstanding the foregoing, any determination to pay cash dividends will be at the discretion of our board of directors and will depend
upon a number of factors, including our results of operations, financial condition, future prospects, contractual restrictions, restrictions
imposed by applicable law and other factors our board of directors deems relevant.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This
registration statement 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 registration statement that are not statements of historical fact including,
without limitation, statements 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 registration statement. Certain information contained in the discussion
and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Overview
We were
formed as a blank check company, incorporated as a Delaware corporation and 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 Company
consummated a 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.
The
Company did not generate any operating revenues prior to the completion of its initial business combination. The Company generated
non-operating income in the form of interest income from the proceeds derived from its initial public offering. The Company initially
selected November 30 as its fiscal year end, but the Company changed its fiscal year end to December 31.
Our
sponsor was Alset Acquisition Sponsor, LLC, a Delaware limited liability company (the “Sponsor”). The registration
statement for our initial public offering was declared effective on January 31, 2022. On February 3, 2022, we consummated our initial
public offering (the “Initial Public Offering”) of 8,625,000 units (the “Units’), including the full exercise
of the underwriters’ over-allotment option to purchase 1,125,000 Units, at a purchase price of $10.00 per Unit.
On February
3, 2022, simultaneously with the consummation of the Initial Public Offering, the Company consummated a private placement of 473,750
units (the “Private Placement Units”) to the Sponsor, which amount included 33,750 Private Placement Units purchased
by the Sponsor in connection with the underwriters’ exercise of the option in full, at a price of $10.00 per Private Placement
Unit, generating gross proceeds of approximately $4.7 million (the “Private Placement”), the proceeds of which were
placed in a trust account. No underwriting discounts or commissions were paid with respect to the Private Placement. The Private
Placement was conducted as a non-public transaction and, as a transaction by an issuer not involved in the Initial Public Offering, was
exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act. The Private Placement Units
were identical to the Units, except that (a) the Private Placement Units and their component securities were not transferable,
assignable or saleable until 30 days after the consummation of the Company’s initial business combination except to permitted
transferees and (b) the warrants and rights included as a component of the Private Placement Units, so long as they were held
by the Sponsor or its permitted transferees, were entitled to registration rights, respectively.
Of the
proceeds from the Initial Public Offering and the proceeds of the sale of the Private Placement Units, net of the underwriting commissions,
discounts, and offering expenses, $87,112,500 was placed in a trust account (the “Trust Account”) and
$1,874,050 was delivered to the Company to cover operating expenses.
On May
1, 2023, the Company amended the Investment Management Trust Agreement (the “Trust Agreement”) with Wilmington Trust, National
Association, a national banking association (“Wilmington Trust”), which was entered into on January 31, 2022 and on May 2,
2023 the Company filed an Amendment to the Amended and Restated Certificate of Incorporation. The Trust Agreement and Amended and Restated
Certificate of Incorporation were amended, in part, so that the Company’s ability to complete a business combination could
be extended, subject to certain extension payments.
The
Sponsor funded the first 30-day extension payment on May 3, 2023 and made subsequent extension payments on June 5, 2023 and
July 6, 2023, totaling $205,305 payments during the year ended on November 30, 2023. The Sponsor was entitled to the repayment
of these extension payments, without interest. The Company, following the completion of the initial business combination, and
at the option of the Sponsor, could repay the extension payments out of the proceeds of the Trust Account. As
of March 31, 2024 and December 31, 2023, there was $205,305 outstanding under the extension loan.
In
connection with the Special Meeting on May 1, 2023, Class A Common Stock stockholders redeemed 6,648,964 shares for approximately $68.4
million held in the Trust Account.
On November
2, 2023, as approved by the stockholders of the Company at the special meeting of stockholders held on November 2, 2023, the Company
and Wilmington Trust, National Association (the “Trustee”) entered into Amendment No. 2 to Investment Management Trust Agreement
dated as of January 31, 2022, as amended by Amendment No. 1 to Investment Management Trust Agreement dated May 1, 2023, (collectively
the “Trust Agreement”). The Trust Agreement, as amended, reflected the extension of the date before which the Company
was required to complete a business combination from November 3, 2023, to February 3, 2024, and extended the date on which
the Trustee would be required to liquidate the Trust Account if the Company had not completed its initial business combination.
On November
2, 2023, as approved by the Company’s stockholders at a special meeting of stockholders, the Company amended the text of Paragraph
(c) of Section 9.1 of the Company’s Certificate of Incorporation to extend the date by which the Company had to consummate
a business combination, such extension being for an additional three (3) month period from November 3, 2023, to February 3, 2024.
In
connection with the closing of the business combination on January 9, 2024, Class A Common Stock stockholders redeemed
1,942,108 shares for approximately $21 million held in the Trust Account.
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 “Target”) and HWH Merger Sub Inc., a Nevada corporation and a wholly owned
subsidiary of the Company (the “Merger Sub”). The Company and Merger Sub are sometimes referred to collectively as
the “ACAX Parties.” Pursuant to the Merger Agreement, a business combination between the Company and the Target was effected
through the merger of Merger Sub with and into the Target, with the Target surviving the merger as a wholly owned subsidiary of
the Company (the “Merger”). Upon the closing of the Merger (the “Closing”), 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.
The
Target was owned and controlled by certain member officers and directors of the Company and its sponsor. The Merger was consummated following
the receipt of the required approval by the stockholders of the Company and the shareholders of the Target and the satisfaction of certain
other customary closing conditions.
The
total consideration paid at Closing (the “Merger Consideration”) by the Company to the Target’s shareholders was $125,000,000,
and was payable in shares of common stock, par value $0.0001 per share, of the Company (the “Company Common Stock”).
The number of shares of the Company Common Stock paid to the shareholders of the Target as Merger Consideration was 12,500,000, with
each share being valued at $10.00.
Liquidity and Capital
Resources
In
the three months ended March 31, 2024, we incurred a net loss, a loss from operations and negative cash flow from operations as we expanded
our business of operating cafés and restructured our membership business.
Notwithstanding
the above, we believe 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 shall consist of plans to take over leases of existing Hapi Cafes we currently do not own, as we look to add Hapi
Cafes over the next two (2) years. If we take over these existing leases, it will require a minimum investment for each lease we take
over for each Hapi Café. There is no guarantee that we will be able to execute on our plans as laid out above.
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.
In
addition, we have received a letter from Nasdaq regarding our compliance with the exchange’s continued listing requirements.
Please see the risk factor entitled “Nasdaq may delist our common stock from quotation on its exchange, which could limit
investors’ ability to make transactions in our securities and subject us to additional trading restrictions” on page
21 for further information.
Furthermore,
we have obtained a letter of financial support from Alset International Limited and Alset Inc., a direct and indirect majority owner
of the Company, respectively, to provide any additional funding required by the Company, and not to demand repayment through twelve months
from the issuance of our Form 10-Q filed on May 15, 2024.
Results
of Operations
Below
is a summary of statements of operations for the three months ended March 31, 2024 and 2023:
| | |
Three
Months Ended March 31, | |
| | |
2024 | | |
2023 | |
| Revenue | |
$ | 286,110 | | |
$ | 200,562 | |
| Cost of revenue | |
| 122,813 | | |
| 77,769 | |
| Operating expenses | |
| 1,495,383 | | |
| 736,391 | |
| Other income (expense) | |
| (4,433 | ) | |
| 960,620 | |
| Provision for income taxes | |
| - | | |
| 175,173 | |
| Net (loss) income | |
$ | (1,336,519 | ) | |
$ | 171,849 | |
Administrative
Services Agreement
Commencing
on the date the Company’s Units were first listed on Nasdaq, the Company
agreed to pay to Alset Management Group Inc. a total of $10,000 per month for office space, utilities and secretarial and administrative
support for up to 24 months. Upon completion of the business combination, the Company ceased paying these monthly fees.
During
the three months ended March 31, 2024 and 2023, the Company recorded a charge of $0 and $30,000, respectively,
to the statement of operations pursuant to the agreement.
Registration Rights
On January 31, 2022,
the Company, the Sponsor, and certain persons and entities holding securities of the Company entered into a Registration Rights Agreement
(the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Company is obligated to register
certain securities, including (i) all of the shares of Company common stock and warrants held by the Sponsor, and Company common stock
issuable upon exercise of such warrants, and (ii) the shares of Company common stock and Company common stock underlying warrants that
were issued in the Private Placement on January 31, 2022. The Company was obligated to (a) file a resale registration statement to register
such securities within 15 business days after the closing of the business combination, and (b) use reasonable best efforts to cause such
registration statement to be declared effective by the SEC within 60 business days after the closing of the business combination.
Underwriting
Agreement
On
February 3, 2022, the Company paid a cash underwriting discount of $0.20 per Unit, or $1,725,000.
In
addition, the underwriters are 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 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
of the debt. This agreement was effective at the closing of business combination on January 9, 2024. Additionally, the Company has granted
EF Hutton an irrevocable right of first refusal (the “ROFR”) to act as the sole investment banker, sole book-runner, and/or
sole placement agent, at EF Hutton’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.
Critical
Accounting Policies
The
preparation of the consolidated financial statements and related disclosures in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those estimates.
The
Company has determined there are no critical accounting policies or estimates in the periods covered in this report.
Critical
Accounting Estimate
An
accounting estimate where (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account
for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition
or operating performance is material.
Critical
Accounting Policies and Practices
A
company’s accounting policies and practices that are both most important to the portrayal of the company’s financial condition
and results, and require management’s most difficult, subjective, or complex judgments, often because of the need to make estimates
about the effects of matters that are inherently uncertain.
Off-Balance
Sheet Arrangements
As
of March 31, 2024, we did not have any off-balance sheet arrangements, as defined under applicable SEC rules.
Inflation
We
believe that inflation has not had a material impact on our results of operations for the three months ended March 31, 2024
or the year ended December 31, 2023. We cannot assure you that future inflation will not have an adverse impact on our operating
results and financial condition.
Emerging
Growth Company Status
We
are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our
Business Startups Act of 2012, (the “JOBS Act”), and it may 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 auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding
executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory
vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”))
are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt
out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election
to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued
or revised and it has different application dates for public or private companies, us, as an emerging growth company, can adopt the new
or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our consolidated financial
statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out
of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Business Overview for Our Acquired Business
HWH
International Inc. (Nevada) (“HWH-NV”), and its consolidated subsidiaries operate food and beverage (“F&B”)
businesses in Singapore and South Korea. HWH-NV pursues a purpose-driven business model that helps individuals develop new pathways
in their pursuit of health, wealth, and happiness. HWH-NV operates a membership model where individuals pay an upfront membership
fee to become members. As members, these individuals receive discounted access to products and services offered by HWH-NV’s
affiliates. HWH-NV had approximately 9,000 members, primarily in South Korea. Currently, this membership business has been
temporarily suspended.
A
reorganization of HWH-NV’s legal entity structure was completed in July 2022. The reorganization involved the incorporation
of HWH in March 2022 and the acquisition of companies under common control, F&B Holding Pte. Ltd. and F&B One Pte. Ltd in July
2022, as wholly owned subsidiaries of HWH-NV. Prior to the business combination, HWH-NV was wholly owned by Alset
International Limited, a public company listed on the Singapore Exchange Securities Trading Limited. In the transactions under common
control, financial statements and financial information were presented as of the beginning of the period as though the assets and liabilities
had been transferred at that date. Prior years also were retrospectively adjusted to furnish comparative information.
The
revenue earned from F&B business for the three months ended March 31, 2024 and 2023 was $286,110 and $187,776, respectively.
Our
Revenue Model
Our
total revenue for the three months ended March 31, 2024 and 2023 was $286,110 and $200,562, respectively.
Our net loss for the three months ended March 31, 2024 was $1,336,519 and net income for the three months ended March 31,
2023 was $171,849.
We
currently recognize revenue from the sale of products, memberships and food and beverages to customers. Sales of memberships accounted
for approximately 0% of revenue in the three months ended March 31, 2024, and 6% of revenue in the
three months ended March 31, 2023. Sales of food and beverage accounted for approximately 100% and 94%
of revenue in the three months ended March 31, 2024, and 2023, respectively.
From
a geographical perspective, we recognized 4% and 96% of our total revenue in the three months ended on March
31, 2024, in South Korea and Singapore, respectively, and 13% and 87% in the three months ended March 31, 2023, in South Korea and
Singapore, respectively.
We
believe that, on an ongoing basis, the revenue generated from F&B sales will decline as a percentage of our total revenue
as we expect to experience greater revenue contribution from sale of memberships and product sales.
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, 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.
Summary
of Significant 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 Sales
Product
Sales: The Company’s performance obligation is to transfer ownership of its products to its members. The Company generally
recognizes revenue when a product is delivered to its members. 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 member returns a product to the Company on a timely basis, they may obtain a replacement product from the Company for
such returned products. Allowances for product and membership 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 and membership return for the three months ended March
31, 2024, and 2023 were approximately $0 and $1,162, respectively.
Membership
Fee: The Company collects an annual membership fee from its members. The fee is fixed, paid in full at the time upon
joining the membership; the fee is not refundable. The Company’s performance obligation is to provide its members
with the right to (a) purchase products from the Company, (b) access to certain back-office services, (c) receive commissions
and (d) attend corporate events. The associated performance obligation is satisfied over time, generally over the term of the membership
agreement which is for a one-year period. The Company recognizes revenue from membership fees over the one-year period
of membership.
Food
and Beverage: The revenue received from F&B business in the three months ended March 31, 2024, and
2023 were $286,110 and $187,776, respectively.
Cost
of Revenue: Cost of revenue consists of costs of procuring finished goods from suppliers and related shipping and handling
fees.
Results
of Operations
Summary
of Statements of Operations for the Three Months Ended March 31, 2024 and 2023
| | |
Three
Months Ended March 31, | |
| | |
2024 | | |
2023 | |
| Revenue | |
$ | 286,110 | | |
$ | 200,562 | |
| Cost of revenue | |
| (122,813 | ) | |
| (77,769 | ) |
| Operating expenses | |
| (1,495,383 | ) | |
| (736,391 | ) |
| Other (expense) income | |
| (4,433 | ) | |
| 960,620 | |
| Provision for income taxes | |
| - | | |
| (175,173 | ) |
| Net (loss) income | |
$ | (1,336,519 | ) | |
$ | 171,849 | |
Revenue
Revenue
was $286,110 and $200,562 for the three months ended March 31, 2024 and 2023, respectively.
Word of mouth, a social media presence, and the availability of meeting spaces are significant drivers of our revenue and revenue potential.
Our revenue increased in 2024 due to the increased revenue from F&B business in Singapore.
Please
see the following table below, which illustrates
revenues received from memberships:
| | |
For
2024 | | |
For
2023 | | |
Variance | |
| Number of Memberships Sold | |
| - | | |
| 16 | | |
| (16 | ) |
| Cash received from membership | |
| - | | |
| 12,583 | | |
| (12,583 | ) |
For
the three months ended March 31, 2024 and 2023, our revenue was generated as per the following:
| | |
March 31,
2024 | | |
March
31, 2023 | |
| Membership Fee | |
$ | - | | |
$ | 12,583 | |
| Product Sales | |
| - | | |
| 203 | |
| Food and Beverage | |
| 286,110 | | |
| 187,776 | |
| Total | |
$ | 286,110 | | |
$ | 200,562 | |
Cost
of revenue
Cost
of revenue increased from $77,769 in the three months ended March 31, 2023 to $122,813 in the
three months ended March 31, 2024. The increase is a result of the increase in sales of F&B
business.
Sales
commissions decreased from $11,868 to $0 in the three months ended March 31, 2023 and 2024, respectively,
due to decrease in sale of memberships.
The
gross margin increased from $122,793 to $163,297 in the three months ended March 31, 2023 and 2024,
respectively. The increase of gross margin was caused by the increase in F&B revenue.
Operating
expenses
Operating
expenses increased from $736,391 to $1,495,383 in the three months ended March 31, 2023 and 2024,
respectively, due to increase in general and administrative expenses from $736,391 to $1,129,191 in the three months
ended March 31, 2023 and 2024, respectively. The increase of general and administrative expenses in 2024 compared
with 2023 was mostly caused by the increase in the operating expenses for the food and beverage businesses in Korea and
Singapore and the professional fees due to the 10-Q & S-4 filings.
Other
income (expense)
In
the three months ended March 31, 2024, the Company had other expense of $4,433 compared to other income
of $960,620 in the three months ended March 31, 2023. The decrease is due to the decrease in interest
income from $944,565 to $25,458 in the three months ended March 31, 2023 and 2024, respectively,
which is included in Other Income on the Company’s Consolidated Statements of Operations and Other Comprehensive Income.
Net
loss
In
the three months ended March 31, 2024, the Company had net loss of $1,336,519 compared to net income
of $171,849 in the three months ended March 31, 2023.
Liquidity
and Capital Resources
Our
cash has decreased from $1,159,201 as of December 31, 2023 to $974,632 as of March 31, 2024. Our liabilities increased
from $6,207,178 at December 31, 2023 to $5,526,158 at March 31, 2024. Our total assets have decreased to $2,558,159
as of March 31, 2024 from $23,710,684 as of December 31, 2023.
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 shall consist of plans to take over leases of existing Hapi Cafes we currently do not own,
as we look to add Hapi Cafes over the next two (2) years. If we take over these existing leases, it will require a minimum investment
for each lease we take over for each Hapi Café. There is no guarantee that we will be able to execute on our plans as laid out
above.
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 a letter of financial support from Alset International Limited and Alset Inc., a direct and indirect owner of the Company, respectively.
Alset International Limited and Alset Inc. committed to provide any additional funding required by the Company and would not demand repayment
through twelve months from the issuance of our Form 10-Q filed on May 15, 2024.
Summary
of Cash Flows for the Three Months Ended March 31, 2024 and 2023
| | |
Three
Months Ended March 31, | |
| | |
2024 | | |
2023 | |
| Net cash (used in) / provided by operating activities | |
$ | (638,210 | ) | |
$ | 262,251 | |
| Net cash used in investing activities | |
$ | (252,072 | ) | |
$ | (8,227 | ) |
| Net cash provided by financing activities | |
$ | 749,948 | | |
$ | 182,730 | |
Cash
Flows from Operating Activities
Net
cash used in operating activities was $638,210 in the three months ended of March 31, 2024, as compared to
net cash provided by operating activities of $262,251 in the same period of 2023. Professional fees paid in relation
to the business combination of the Company contributed to the increase of cash used
in operating activities in the three months ended March 31, 2024.
Cash
Flows from Investing Activities
Net
cash used in investing activities was $252,072 in the first three months of March 31, 2024, as compared to net cash used
in investing activities of $8,227 in the same period of 2023. In the three months ended March 31, 2024,
we paid $2,072 for purchases of property and equipment and $250,000 for convertible note receivable – related party.
In the three months ended March 31, 2023, we paid $8,227 for purchases of property and equipment.
Cash
Flows from Financing Activities
Net
cash provided by financing activities was $749,948 in the three months ended March 31, 2024, compared to
net cash provided by operating activities of $182,730 in the same period of 2023. In the three months ended March
31, 2024, we received $1,101,255 from a related party. In the three months ended March 31, 2023,
we received $182,730 from a related party.
Underwriting
Agreement
On
February 3, 2022, the Company paid a cash underwriting discount of $0.20 per Unit, or $1,725,000.
In
addition, the underwriters are 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 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 EF Hutton
the ROFR to act as the sole investment banker, sole book-runner, and/or sole placement agent, at EF Hutton’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, Alset held a special meeting at which Alset stockholders considered and adopted, among other
matters, a proposal to approve the business combination. On the closing date, the parties consummated the business combination, dated
September 9, 2022 (the “Merger Agreement”), by and among Alset, Merger Sub, and HWH.
Pursuant
to the terms of the Merger Agreement, (and upon all other conditions pursuant to the Merger Agreement being satisfied or waived), on
the closing date, (i) the Merger Agreement provided for the combination of HWH and Merger Sub under Alset, with HWH surviving as the
surviving corporation (collectively, the “Merger”). At the consummation of the Merger, HWH survived as a direct, wholly-owned
subsidiary of Alset, and (ii) Alset changed its name to “HWH International Inc.”
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 Alset at the Closing from the Trust Account (after giving effect to the redemption of any shares of Alset
Class A Common Stock in connection with the Alset 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, Alset shall not have redeemed shares of Alset Class A Common Stock in the Offer in
an amount that would cause Alset 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).”
Registration
Rights Agreement
On
January 31, 2022, the Company, the Sponsor, and certain persons and entities holding securities of the Company entered into the Registration
Rights Agreement. Pursuant to the Registration Rights Agreement, the Company is obligated to register certain securities, including (i)
all of the shares of Company common stock and warrants held by the Sponsor, and Company common stock issuable upon exercise of such warrants,
and (ii) the shares of Company common stock and Company common stock underlying warrants that were issued in the Private Placement on
January 31, 2022. The Company was obligated to (a) file a resale registration statement to register such securities within 15 business
days after the closing of the business combination, and (b) use reasonable best efforts to cause such registration statement to be declared
effective by the SEC within 60 business days after the closing of the business combination.
Lock-Up
Agreements
In
connection with the execution of the Merger Agreement, at the closing, each of the HWH holders holding more than 5% of the HWH common
stock and certain members of HWH’s management team entered into a lock-up agreement with Alset in substantially the form attached
to the letter agreement dated January 31, 2022 (the “Letter Agreement”) (each, a “Lock-Up Agreement”). Under
the Lock-Up Agreement, each such holder agreed not to, during the period commencing from the closing and with respect to the shares of
Alset common stock to be received as part of the merger consideration by the HWH holder (together with any securities paid as dividends
or distributions with respect to such securities or into which such securities are exchanged or converted, the “Restricted Securities”),
(A) ending on the earlier of six months after the date of the closing, the date on which the closing sale price of shares of Alset common
stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like)
for any 20 trading days within any 30 trading day period commencing at least 150 days after the closing or (y) the date after the closing
on which Alset consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated third party that results
in all of Alset’s stockholders having the right to exchange their equity holdings in Alset for cash, securities or other property.
Termination
of Subscription Agreement
On
July 30, 2023, by and among Alset Capital Acquisition Corp., a Delaware corporation, and HWH International Inc., a Nevada corporation,
on the one hand, and Meteora Special Opportunity Fund I, LP (“MSOF”), Meteora Capital Partners, LP (“MCP”), Meteora
Select Trading Opportunities Master, LP (“MSTO”) and Meteora Strategic Capital, LLC, (“MSC”) (with MCP, MSOF,
MSTO and MSC, collectively as “Seller”), on the other hand and the subscription agreement entered into as of July 30, 2023,
by and among ACAX and Seller (the “Subscription Agreement”). The Subscription Agreement has been terminated.
Impact
of Inflation
We
believe that inflation has not had a material impact on our results of operations for the three months ended March 31,
2024 or the year ended December 31, 2023. 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 South
Korea and which were approximately $2.7 million and $2.1 million on March 31, 2024 and December 31, 2023, respectively,
are the reason for the fluctuation of foreign currency transaction gain or loss on the condensed consolidated statements
of operations and other comprehensive income. Because the intercompany loan balances between Singapore and South Korea
will remain at approximately $2.7 million over the next year, we expect this fluctuation of foreign exchange rates to still impact
the results of operations in 2024, especially given that the foreign exchange rate may and is expected to be volatile. If the amount
of intercompany loan is lowered in the future, the effect will also be reduced. However, at this moment, we do not expect to repay the
intercompany loans in the short term.
Emerging
Growth Company Status
We
are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various
reporting requirements that are applicable to other public companies that are not “emerging growth companies.” Section 107
of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided
in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging
growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
We have elected to take advantage of these exemptions until we are no longer an emerging growth company or until we affirmatively and
irrevocably opt out of this exemption.
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, 2023. 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, 2023, management determined that our company did not maintain effective controls over financial
reporting due to having a limited staff with U.S. GAAP and SEC reporting experience. 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
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.
BUSINESS
General
HWH
International Inc. was 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.
The
Company’s common stock commenced trading on the Nasdaq Global Market LLC under the ticker symbol “HWH” on January 9,
2024.
Business
Overview
Since
the closing on January 9, 2024, we now own the target company acquired pursuant to the merger agreement. Our newly acquired business
started in Korea with a single-level membership marketing model with limited products for sale. We registered the business on April 1,
2019, and we started selling memberships on July 1, 2019. While we had been profitable and growing, the COVID-19 pandemic had
a material adverse effect on such growth and profits. Due to the decline in membership and revenue starting in 2020, we reorganized our
internal staff by adding a broader team in each of the United States, Hong Kong and Singapore with direct selling and business development
experience to head up and expand our operations across various geographies and revised our business plan to a multi-level membership
tier model in 2022, with more products and services to be made available to our members. We created a new corporate structure, with subsidiaries
in the U.S., Hong Kong and Singapore, that would allow for quick geographical expansion and turned our focus to the Hapi Café development.
We currently have 9,811 members, all in a single initial tier of membership. These current members have paid for their yearly membership
to have founder member status. This is a privileged class that will be able to enjoy continuous membership benefits in time to come given
that they have trusted the company and joined at an early stage. Such benefits include the ability to purchase new memberships, in the
model described below, at a discount to be determined by HWH. They will also continue to be able to earn affiliate commissions as they
sell our products in the marketplace and enjoy discounted rates when visiting Hapi Cafés until further notice. The total number
of founding members was capped at 10,000. The Company is in the midst of implementing the new membership model described below (the “New
Model”), that operates on a yearly subscription basis. We intend to resume membership sales, albeit under the New Model, later in 2024.
HWH
members get exclusive discounts on HWH Marketplace products, priority invites to product launch events and other parties, and
can earn passive income when a member’s referral signs up for membership or makes an initial purchase through the HWH Marketplace
products through them.
Our
operations include:
HWH
Marketplace, which offers certain products manufactured by our affiliate companies, at a discounted price to our members. It
is substantially in the development stage, as we have been in discussions regarding the import and export of these products internationally.
The various aspects of the HWH Marketplace will be launched in phases across the various regions, each with their own timeline, depending
on the completion of the establishment of the logistical aspects for implementation (i.e., payment gateway systems, business licenses,
banking set up, import licenses, managerial resources, etc.) This will be an on-going process as we expand our product and service offering
range. There are, however, certain limited products currently for sale at our Hapi Cafés, including spaghetti, a gig-economy business
book and certain skincare products.
Hapi
Cafés, which are, and will be, in-person, location-based social experiences, offer members the opportunity to build a sense
of community with like-minded customers who share a potential interest in our products. The cafes expose our members to and educate them
about the products and services of our affiliates, providing us with the chance to significantly increase our membership base as well
as increase the amounts spent by our members on our affiliates’ products and services. Each of our cafés is a “Hapi
Café.” We opened proof-of-concept Hapi Café locations in Seoul, South Korea and Singapore in May 2022, July 2022
and April 2024, and plan to open additional Hapi Cafés as we beta test and further improve our business concept. We intend
to increase our memberships as we grow the number of Hapi Cafés around the world. Currently, Hapi Cafe branded outlets span across
Asia, including Singapore, Republic of China (Taiwan), Hong Kong, the People’s Republic of China, and South Korea, Hapi Cafe is
positioned to be an integral part of HWH’s business model.
Our
travel business is in the planning stage
as we are working with our affiliates to determine the market-by-market services. Through our travel business, we plan to offer
exclusive access to unpublished rates and discounts on air travel, cruises, car rentals, hotels, and resorts for members.
On
April 25, 2024, we entered into a binding term sheet through our subsidiary Health Wealth Happiness Pte Ltd. (“HWHPL”) outlining
a joint venture with Chen Ziping, an experienced entrepreneur in the travel industry, and Heng Fai Ambrose Chan, HWH’s Executive
Chairman, as a part of HWH’s strategy of building its travel business in Asia. The planned joint venture company (referred to here
as the “JVC”) will be known as HapiTravel Holding Pte. Ltd. The JVC will be initially owned as follows: (a) HWHPL will hold
19% of the shares in the JVC; (b) Mr. Chan will hold 11%; and (c) the remaining 70% of the shares in the JVC are to be held by Mr. Chen.
This new joint venture is part of HWH’s strategy of building its travel business in Asia.
Hapi
Wealth Builder is also in the planning stage as we are exploring the options of providing services to our members through financial
educational materials aimed at various types of investing opportunities. We have been establishing Hapi Cafés as venues and destinations
that help build the credibility and reputation of the Company and its Hapi Wealth Builder business, which we intend to launch in 2024.
Employees
At
the present time, the Company has 16 employees. The Company had an agreement with Alset Management Group, Inc., pursuant to which,
for a fee, Alset Management Group, Inc. provided the Company with secretarial and administrative services. This agreement expired at
the time of closing of the business combination.
Intellectual
Property
We
anticipate filing additional trademark applications as we expand into new areas of business.
Additional
Information
The Company is subject to the information requirements of the Exchange
Act, and, in accordance therewith, files annual, quarterly, and special reports, proxy statements and other information with the SEC.
The SEC maintains an internet website at http://www.sec.gov that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC. The periodic reports, proxy statements and other information that the Company
files with the SEC are available for inspection on the SEC website free of charge as soon as reasonably practicable after they are electronically
filed with or furnished to the SEC.
The
Company maintains a website at https://www.hwhintl.com where you may also access these materials free of charge. We have included our
website address as an inactive textual reference only and the information contained in, and that can be accessed through, our website
is not incorporated into and is not part of this Form S-1.
MANAGEMENT
The
name, age and position of our officers and directors are set forth below:
| Name |
|
Age |
|
Position(s) |
| Heng
Fai Ambrose Chan |
|
79 |
|
Executive
Chairman, Director |
| John
“J.T.” Thatch |
|
61 |
|
Chief
Executive Officer |
| Rongguo
(Ronald) Wei |
|
52 |
|
Chief
Financial Officer |
| Lim
Sheng Hon Danny |
|
32 |
|
Chief
Operating Officer |
| William
Wu |
|
57 |
|
Independent
Director |
| Wong
Shui Yeung |
|
53 |
|
Independent
Director |
| Wong
Tat Keung |
|
53 |
|
Independent
Director |
The
mailing address for each of the officers and directors named above is c/o of the Company at: 4800 Montgomery Lane, Suite 210, Bethesda,
MD, 20814.
Business
Experience
Heng
Fai Ambrose Chan. Mr. Chan has served as our Chairman since October of 2021, and served as our Chief Executive Officer from October
of 2021 to January of 2024. Mr. Chan has over forty-five years of experience in the financial and equity investment industry. Mr. Chan
is the founder of Alset Inc., a Nasdaq listed company, and has served as its Chairman of the Board and Chief Executive
Officer since that company’s inception in March 2018. Mr. Chan is an expert in banking and finance. He has restructured numerous
companies in various industries and countries during the past 40 years. Mr. Chan has served as the Chief Executive Officer of Alset International
Limited, an SGX listed company, since April 2014. Mr. Chan joined the Board of Directors of Alset International Limited in May
2013. From 1995 to 2015, Mr. Chan served as Managing Chairman of Hong Kong-listed Zensun Enterprises Limited (formerly Heng Fai Enterprises
Limited), an investment holding company. Mr. Chan had previously served as a member of the Board of Zensun Enterprises Limited since
September 1992. Mr. Chan was formerly the Managing Director of SingHaiyi Group Ltd. (now known as SingHaiyi Group Pte. Ltd.),
a Singapore property development company formerly listed on the SGX, from March 2003 to September 2013, and the Executive Chairman
of China Gas Holdings Limited, an HKSE listed company, and an investor and operator of the city gas pipeline infrastructure in
China from 1997 to 2002. Mr. Chan has served as a director of DSS, Inc., a NYSE American listed company since January 2017 and
as Chairman of the Board since March 2019. Mr. Chan served as a member of the Board of Directors of OptimumBank Holdings, Inc. from June
2018 until April 2022. He has also served as a director of LiquidValue Development Inc. since January 2017 and as Chairman since December
2017. Mr. Chan has served as a director of Hapi Metaverse Inc. since October 2014 and as Chairman since July 2021. Mr. Chan
has served as a member of the Board of Directors of Sharing Services Global Corporation since April of 2020. Mr. Chan has served as a
director of Value Exchange International, Inc., an OTC listed company, since December 2021. Mr. Chan also served as a non-executive
director of Holista CollTech Ltd., an ASX listed company, from July 2013 until June 2021.
Mr. Chan
was formerly a director of Global Medical REIT Inc., a healthcare facility real estate company, from December 2013 to July 2015. He also
served as a director of Skywest Ltd., a public Australian airline company from 2005 to 2006. Mr. Chan served as a member of the Board
of Directors of RSI International Systems, Inc., the developer of RoomKeyPMS, a web-based property management system, from June 2014 to
February 2019.
Mr. Chan
is the Chairman and Chief Executive Officer of Alset Inc., the majority owner of HWH’s parent company, Alset International Limited.
John
“JT” Thatch. Mr. Thatch has served as HWH’s Chief Executive Officer since January 9, 2024. Mr. Thatch has also
served as a director of DSS, Inc., a NYSE traded company, from May 2019 to October 2023, during which time he was their Lead Independent
Director. Mr. Thatch is an accomplished, energetic, entrepreneur-minded executive who has the vision and knowledge to create growth and
shareholder value any organization. Mr. Thatch has successfully started, owned and operated several sized businesses in various industries,
including service, retail, wholesale, on-line learning, finance, real estate management and technology companies. Since March 2018, Mr.
Thatch has served as the President, Chief Executive Officer and Vice Chairman of Sharing Services Global Corporation, a publicly traded
holding company focused in the direct selling and marketing industry. He is a minority member of Superior Wine & Spirits, a Florida-based
wholesale company since February of 2016. Mr. Thatch served as Chief Executive Officer of Universal Education Strategies, Inc. from January
2009 to January 2016, an organization involved in the development and sales of educational products and services. From 2000 to 2005,
he was the Chief Executive Officer of Onscreen Technologies, Inc., currently listed on NASDAQ as Orbital Energy Group “OEG”,
once a global leader in the development of cutting-edge thermal management technologies for integrated LED technologies, circuits, superconductors
and solar energy solutions. Mr. Thatch was responsible for all aspects of the company including board and stockholder communications,
public reporting and compliance with Sarbanes-Oxley, structuring and managing the firm’s financial operations, and expansion initiatives
for all corporate products and services. Mr. Thatch’s public company financial and management experience in the strategic growth
and development of various companies qualify him to serve as Chief Executive Officer of HWH.
Rongguo
(Ronald) Wei. Mr. Wei has served as our Chief Financial Officer since October of 2021. Mr. Wei is a finance professional with more
than 15 years of experience working in public and private corporations in the United States. As the Co-Chief Financial Officer of Alset
Inc., a Nasdaq listed company, the majority shareholder of Alset International Limited, HWH’s owner, and Chief Financial
Officer of SeD Development Management LLC, Mr. Wei is responsible for oversight of all finance, accounting, reporting and taxation activities
for those companies. Prior to joining SeD Development Management LLC in August 2016, Mr. Wei worked for several different U.S. multinational
and private companies including serving as Controller at American Silk Mill, LLC, a textile manufacturing and distribution company, from
August 2014 to July 2016, serving as a Senior Financial Analyst at Air Products & Chemicals, Inc., a manufacturing company, from
January 2013 to June 2014, and serving as a Financial/Accounting Analyst at First Quality Enterprise, Inc., a personal products company,
from 2011 to 2012. Mr. Wei served as a member of the Board Directors of Amarantus Bioscience Holdings, Inc., a biotech company, from
February to May 2017, and has served as Chief Financial Officer of that company from February 2017 until November 2017. Before Mr. Wei
came to the United States, he worked as an equity analyst at Hong Yuan Securities, an investment bank in Beijing, China, concentrating
on industrial and public company research and analysis. Mr. Wei is a certified public accountant and received his Master of Business
Administration from the University of Maryland and a Master of Business Taxation from the University of Minnesota. Mr. Wei also holds
a master’s in business degree from Tsinghua University and a Bachelor’s degree from Beihang University.
Lim
Sheng Hon Danny. Mr. Lim was appointed Chief Operating Officer of HWH International Inc. in February of 2024 and also serves as Chief
Strategy Officer of the Company. Mr. Lim has also served as a director of Alset Inc., a Nasdaq listed company, since October 2022,
and has served as Senior Vice President, Business Development and as Executive Director of Alset Inc.’s subsidiary, Alset International
Limited, an SGX listed company, since July 2020. Mr. Lim has served as a director of DSS, Inc., an NYSE listed company
since October 2023. Mr. Lim has served as a director of Value Exchange International Inc., an OTC listed company since December 2023.
Mr. Lim has over 7 years of experience in business development, merger & acquisitions, corporate restructuring and strategic
planning and execution. Mr. Lim graduated from Singapore Nanyang Technological University with a Bachelor’ Degree with Honors in
Business, specializing in Banking and Finance.
William
Wu. Mr. Wu has served as a member of our Board of Directors since January of 2022. Mr. Wu previously served as the Executive Director
and Chief Executive Officer of Power Financial Group Limited from November 2017 to January 2019. Mr. Wu has served on the Board of Directors
of Alset Inc. since November of 2020. Mr. Wu has served as an independent non-executive director of JY Grandmark Holdings Limited since
November 2019. Mr. Wu has served as a member of the Board of Directors of DSS, Inc. since October of 2019. Mr. Wu has served as a Director
of Asia Allied Infrastructure Holdings Limited since February 2015. Mr. Wu previously served as a Director and Chief Executive Officer
of RHB Hong Kong Limited from April 2011 to October 2017. Mr. Wu served as the Chief Executive Officer of SW Kingsway Capital Holdings
Limited (now known as Sunwah Kingsway Capital Holdings Limited) from April 2006 to September 2010. Mr. Wu holds a Bachelor of Business
Administration degree and a Master of Business Administration degree of Simon Fraser University in Canada. He was qualified as a Chartered
Financial Analyst of The Institute of Chartered Financial Analysts in 1996.
Mr.
Wu has previously worked for a number of international investment banks and possesses over 27 years of experience in the investment
banking, capital markets, institutional broking and direct investment businesses. He is a registered license holder to carry out Type
6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the Securities and Futures Ordinance (Chapter
571 of the Laws of Hong Kong). We believe that Mr. Wu’s knowledge of complex, cross-border financial matters is highly relevant
to our business and qualifies him to serve as an independent member of the board.
Wong
Shui Yeung (Frankie). Mr. Wong has served as a member of our Board of Directors since January of 2022. Mr. Wong is a practicing member
and fellow of Hong Kong Institute of Certified Public Accountants. He holds a bachelor’s degree in business administration. He
has over 25 years’ experience in accounting, auditing, corporate finance, corporate investment and development, and company secretarial
practice. Mr. Wong has served as a director of Alset Inc. and DSS Inc. since November 2021 and July 2022 respectively. In addition,
he has served on the board of Value Exchange International, Inc. since April 2022, the shares
of which are listed on the OTCQB. He has served as an independent non-executive director of Alset International Limited since June 2017,
the shares of which are listed on the Catalist Board of the Singapore Stock Exchange and First Credit Finance Group Limited since February
2024, the shares of which are listed on the GEM Board of The Stock Exchange of Hong Kong Limited. Mr. Wong was an Independent Non-Executive
Director of SMI Holdings Group Limited from April 2017 to December 2020 and SMI Culture & Travel Group Holdings Limited from December
2019 to November 2020, the shares of which were listed on the Main Board of The Stock Exchange of Hong Kong Limited.
Wong
Tat Keung (Aston). Mr. Wong has served as a member of our Board of Directors since January of 2022. Mr. Wong has over 20 years’
experience in audit, accounting, taxation and business advisory. Mr. Wong has served as a director of Alset Inc., a Nasdaq listed
company, since November 2020. Since 2010, Mr. Wong has served as the director of Aston Wong CPA Limited. He has been an independent
non-executive director of Alset International since January 2017. Mr. Wong served as an independent non-executive director of Welife
Technology Limited, a full-service restaurant group in Hong Kong and China, from January 2022 to October 2023, the shares of which are
listed on HKSE. Mr. Wong served as an independent non-executive director of Roma Group Limited, a valuation and technical advisory
firm, from March 2016 to January 2020, and served as an independent non-executive director of Lerthai Group Limited, a
property, investment, management and development company, from December 2018 to August 2022. Previously, he served as the
director and sole proprietor of Aston Wong & Co., a registered certified public accounting firm, from January 2006 to February 2010.
From January 2005 to December 2005, he was a Partner at Aston Wong, Chan & Co., Certified Public Accountants. From April 2003 to
December 2004, he served at Gary Cheng & Co., Certified Public Accountants as Audit Senior. He served as an Audit Junior to Supervisor
of Hui Sik Wing & Co., certified public accountants from April 1993 to December 1999. He served as an independent non-executive director
of SingHaiyi Group Limited (now known as SingHaiyi Group Pte. Ltd.), a Singapore property development company formerly listed on the
SGX, from July 2009 to July 2013 and Zensun Enterprises Limited (formerly Heng Fai Enterprises Limited) from December 2009
to July 2015. Mr. Wong is a Certified Public Accountant admitted to practice in Hong Kong. He is a Fellow Member of Association of Chartered
Certified Accountants and an Associate Member of the Hong Kong Institute of Certified Public Accountants. He holds a master’s in
business administration degree (financial services) from the University of Greenwich, London, England.
Family
Relationships
There
are no family relationships between the officers and directors, nor are there any arrangements or understanding between any of the
directors or officers of the Company.
Section
16(a) Beneficial Ownership Reporting Compliance
To
our knowledge, no director, officer or beneficial owner of more than ten percent of any class of our equity securities, failed to file
on a timely basis reports required by Section 16(a) of the Exchange Act during the fiscal year ended December 31, 2023.
Code
of Ethics
We
adopted a code of ethics on January 31, 2022, that applies to our principal executive officer, principal financial officer, principal
accounting officer or controller or persons performing similar functions.
Corporate
Governance
There
have been no changes in any state law or other procedures by which security holders may recommend nominees to our board of directors.
We do not have a standing nominating committee though we intend to form a corporate governance and nominating committee.
Board
Committees
Our
Board of Directors has an Audit Committee and a Compensation Committee. Each of these committees is currently composed of Wong Tat Keung,
William Wu and Wong Shui Yeung.
Our
Audit Committee and Compensation Committee each comply with the listing requirements of the Nasdaq Marketplace Rules. At least one member
of the Audit Committee is an “audit committee financial expert,” as that term is defined in Item 407(d)(5)(ii) of Regulation
S-K, and each member is “independent” as that term is defined in Rule 5605(a) of the Nasdaq Marketplace Rules. Our Board
of Directors has determined that each of Wong Tat Keung, William Wu and Wong Shui Yeung is independent.
Involvement
in Certain Legal Proceedings
None
of our directors, executive officers and control persons/promoters has been involved in any of the following events during the past ten
years:
| ● |
Any
bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the
time of the bankruptcy or within two years prior to that time, |
| ● |
Any
conviction in a criminal proceeding or being subject to any pending criminal proceeding (excluding traffic violations and other minor
offenses); |
| |
|
| ● |
Being
subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities
or banking activities; or |
| |
|
| ● |
Being
found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. |
EXECUTIVE
COMPENSATION
During the fiscal years ended December 31, 2023 and December 31, 2022, the Company and its subsidiaries did not pay
any compensation to the individuals serving as our executive officers during such period for services rendered to our
Company and its subsidiaries either before or subsequent to the business combination. Our recently acquired business did not pay compensation required to be reported to its executive officers during
the fiscal years ended December 31, 2023 and December 31, 2022.
At the present time, the Company and its subsidiaries
do not have any compensation agreements with any of our executive officers. However, Mr. Chan, our Chairman and former Chief Executive
Officer is compensated by both Alset International Limited, our majority stockholder, and by Alset Inc., which is Alset International
Limited’s majority stockholder, for his services as Chief Executive Officer of those companies; Mr. Wei, our Chief Executive Officer,
is compensated by a subsidiary of Alset International Limited for services rendered to that subsidiary, and Mr. Lim, our Chief Operating
Officer is compensated by Alset International Limited for services to that company. Mr. Chan, Mr. Lim and Mr. Wei have each devoted various
amounts of time to the management of the various subsidiaries and divisions of Alset International Limited and Alset Inc. The amount
of time these individuals have devoted to the management of the Company and its subsidiaries has varied based on the Company’s
needs, and no definite statement may be made as to what percentage of these individuals time has been spent or will be spent on matters
related to the Company. We anticipate entering into employment agreements with management in the near future.
We
have sixteen full time employees and a number of part time employees that increases and decreases from time to time.
We agreed to pay to Alset Management Group
Inc. a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our initial
business combination, we ceased paying these monthly fees.
We
have not established any limit on the amount of such fees that may be paid by us to our directors or members of management. Any
compensation to be paid to our officers will be determined, or recommended to the board of directors for determination, either by a compensation
committee constituted solely by independent directors or by a majority of the independent directors on our board of directors.
Director
Compensation
In
the fiscal years ended December 31, 2023 and December 31, 2022, neither the Company nor our recently acquired business paid any member
of the Company’s Board of Directors or the Board of Directors of the acquired business any cash, equity or other non-equity compensation
for service on the Board of the Company or its recently acquired business.
Effective
as of April of 2024, each independent member of the Board of Directors of the Company shall be paid $10,000 per year, to be paid in quarterly
increments. In April of 2024, each independent member of the Board was paid a one-time lump sum payment of $10,000 as compensation for
services rendered during the fiscal year ended December 31, 2023.
Outstanding
Equity Awards at Fiscal Year-End
There
were no grants of stock options through the date of this registration statement.
We
do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.
The
board of directors of the Company has not adopted a stock option plan. The Company has no plans to adopt it but may choose to do so in
the future. If such a plan is adopted, this may be administered by the board of directors or a committee appointed by the board of directors
(the “Committee”). The Committee would have the power to modify, extend or renew outstanding options and to authorize the
grant of new options in substitution therefore, provided that any such action may not impair any rights under any option previously granted.
The Company may develop an incentive-based stock option plan for its officers and directors.
Stock
Awards Plan
The
company has not adopted a stock awards plan but may do so in the future. The terms of any such plan have not been determined.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Amounts Due to Alset Inc.
The Company has received
loans from Alset Inc (“AEI”). AEI is a Texas corporation and is the majority stockholder of Alset International Limited,
which is the Company’s largest stockholder. The amount due to AEI represents short-term working capital advances to the Company
for its daily operations. There is no written, executed agreement and no financial/non-financial covenants and the amount due to AEI
is non-interest bearing. Since the amount due to AEI is due upon request, it is classified as a current liability. The amounts due to
AEI at March 31, 2024 and December 31, 2023 are $202,645 and $202,645 respectively.
Amounts
Due to Alset International Ltd.
Alset
International Ltd. (“AIL”) is incorporated in Singapore and is a fellow subsidiary of the common parent company, Alset Inc.
The amount due to AIL represents short-term working capital advances to the Company for its daily operations. There is no written, executed
agreement and no financial/non-financial covenants and the amount due to AIL is non-interest bearing. Since the amount due to AIL is
due upon request, it is classified as a current liability. The amounts due to AIL at March 31, 2024 and December 31, 2023 are $2,552,291
and $1,729,901, respectively.
Amounts
Due to Alset Business Development
Pte. Ltd.
Alset
Business Development Pte. Ltd. (“ABD”) is incorporated in Singapore and is a fellow subsidiary of the common parent company,
Alset Inc. The amount due to ABD represents amount loaned by ABD to Hapi Cafe Inc. (“HCI”) for the investment on Ketomei
Pte. Ltd (“Ketomei”) in March 2022. There is no written, executed agreement and no financial/non-financial covenants and
the amount due to ABD is non-interest bearing. Since the amount due to ABD is due upon request, it is classified as a current liability.
The amounts due to ABD at March 31, 2024 and December 31, 2023 are $180,237 and $184,507, respectively.
Amounts Due
to BMI Capital Partners International Ltd.
BMI
Capital Partners International Ltd. (“BMI”) is incorporated in Hong Kong and is a fellow subsidiary of the common parent
company, Alset Inc. The amount due to BMI represents short-term working capital advances to the Company for its daily operation. There
is no written, executed agreement and no financial/non-financial covenants and the amount due to BMI is non-interest bearing. Since the
amount due to BMI is due upon request, it is classified as a current liability. The amounts due to BMI at March 31, 2024 and December
31, 2023 are $1,439 and $1,442, respectively.
Amounts Due from Alset Acquisition Sponsor
LLC
Alset Acquisition Sponsor
LLC (“Sponsor”) owed $205,305 and $205,305 at March 31, 2024 and December 31, 2023, respectively, which represents expenses
paid by the Company on behalf of the Sponsor.
General
and Administrative Services
Commencing
on the date the Company’s Units were first listed on the Nasdaq, the Company
agreed to pay to Alset Management Group Inc. a total of $10,000 per month for office space, utilities and secretarial and administrative
support for up to 24 months. Upon completion of the initial business combination, the Company ceased paying these monthly
fees. During the three months ended March 31, 2024 and 2023, the Company recorded a charge of $0 and $30,000,
respectively, to the statement of operations pursuant to the agreement.
Working Capital Loans
In order to finance transaction
costs in connection with a Business Combination, the Company agreed that the Sponsor or an affiliate of the Sponsor, or certain of the
Company’s officers and directors would be allowed, but were not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes would be repaid upon completion of
a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of the notes could be converted upon
completion of a Business Combination into units at a price of $10.00 per unit. Such units would be identical to the Private Placement
Units. In the event that a Business Combination did not close, the Company was permitted to use a portion of proceeds held outside the
Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital
Loans. The Business Combination has closed, and there are no amounts outstanding under these Working Capital Loans. No amounts
were converted into these units at the business combination.
Extension
Loan
On
May 1, 2023, the Company amended the Investment Management Trust Agreement (the “Trust Agreement”) with Wilmington Trust,
National Association, a national banking association (“Wilmington Trust”), which was entered into on January 31, 2022,
and on May 2, 2023, the Company filed an Amendment to the Amended and Restated Certificate of Incorporation. The Trust Agreement
and Amended and Restated Certificate of Incorporation were amended, in part, so that the Company’s ability to complete a
business combination would be extended in additional increments of one month up to a total of twenty-one (21) additional months
from the closing date of the offering, subject to the payment into the trust account by the Company of one-third of 1% of the
funds remaining in the Trust Account following any redemptions in connection with the approval of the amendment to the Company’s
Amended and Restated Certificate of Incorporation. The Sponsor funded the first 30-day extension payment on May 3, 2023. The Sponsor
also made subsequent extension payments on June 5, 2023 and July 6, 2023 of $68,928 and $69,158, respectively.
The Sponsor is entitled to the repayment of these extension payments, without interest. When the Company completed its
initial business combination, it could, at the option of the Sponsor, repay the extension payments out of the proceeds
of the Trust Account released to it or issue securities of the Company in lieu of repayment. As of March 31, 2024 and December
31, 2023, there was $205,305 outstanding under the extension loan.
Credit Facility Agreement
On April 24, 2024,
the Company entered into a Credit Facility Agreement (the “Agreement”) with Alset Inc., 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.
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 HWH.
Letter of Financial Support
The Company has
obtained a letter of financial support from Alset International Limited and Alset Inc., a direct and indirect owner of the Company, respectively.
Alset International Limited and Alset Inc. committed to provide any additional funding required by the Company and would not demand repayment
through twelve months from the issuance of our Form 10-Q filed on May 15, 2024.
Ketomei Transactions
On June 10, 2021,
Hapi Café Inc. (“HCI”) signed a convertible loan agreement with Ketomei Pte. Ltd. (“Ketomei”), pursuant
to which HCI has agreed to grant Ketomei a loan of an aggregate principal amount of $75,525 (SG$100,000). On March 21, 2022, HCI signed
a legally binding term sheet with Ketomei, and HCI has agreed to invest in Ketomei $258,186 (SG$350,000) for 28% interest in Ketomei.
The investment was partially paid by the $75,525 (SG$100,000) loan borrowed to Ketomei and the accrued interest of $6,022 (SG$6,433).
The balance of $183,311 (SG$243,567) was paid in cash.
On July 28, 2022
HCI entered into binding term sheet with Ketomei and Tong Leok Siong Constant, pursuant to which HCI lent Ketomei $43,254 (SG$60,000).
This loan had a 0% interest rate for the first 60 days and an interest rate of 8% per annum afterwards.
On August 4, 2022,
the same parties entered into another binding term sheet (the “Second Term Sheet”) pursuant to which HCI agreed to lend Ketomei
up to $260,600 (SG$360,000) pursuant to a convertible loan, with a term of 12 months. After the initial 12 months, the interest on such
loan will be 8%. As of August 31, 2023, the $263,766 (SG$360,000) loan was paid by the $214,903 (SG$293,310) loan borrowed to Ketomei
and $48,862 (SG$66,690) was paid for the expenses on behalf of Ketomei. In addition, pursuant to the Second Term Sheet, the July 28,
2022, loan was modified to include conversion rights. The Parties agree that the conversion rate will be at approximately $0.022 per
share.
On August 31,
2023, the same parties entered into another binding term sheet pursuant to which HCI agreed to lend Ketomei up to $36,634 (SG$50,000)
pursuant to a convertible loan, with a term of 12 months. After the initial 12 months, the interest on such loan will be 3.5%. As of
October 31, 2023, the $37,876 (SG$50,000) loan was paid to Ketomei.
On October 26,
2023, the same parties entered into another binding term sheet pursuant to which HCI agreed to lend Ketomei up to $37,876 (SG$50,000)
pursuant to a non- convertible loan, with a term of 12 months. After the initial 12 months, the interest on such loan will be 3.5%. As
of March 31, 2024, the $37,000 (SG$50,000) loan was paid by the $21,134 (SG$28,560) loan borrowed to Ketomei and $15,865 (SG$21,440)
was paid for the expenses on behalf of Ketomei.
On February 20,
2024, the Company invested an additional $312,064 (SG$420,000) for an additional 38.41% ownership interest in Ketomei by converting $312,064
(SG$420,000) convertible loan. The loan was impaired at the year ended December 31, 2023, therefore, $312,064 (SG$420,000) was transferred
from impairment of convertible loan to impairment of equity method investment. After this additional investment, the Company owns 55.65%
of Ketomei’s outstanding shares and Ketomei is consolidated into the financial statements of HWH International Inc. beginning on
February 20, 2024.
Sharing Services Global Corporation
On
March 20, 2024, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with Sharing
Services Global Corporation (“SHRG”), pursuant to which the Company purchased from SHRG a (i) Convertible Promissory Note
(the “Convertible Note”) in the amount of $250,000, convertible into 208,333,333 shares of SHRG’s common stock at the
option of the Company, and (ii) certain warrants exercisable into 208,333,333 shares of SHRG’s common stock at an exercise price
of $0.0012 per share, the exercise period of the warrant being five (5) years from the date of the Securities Purchase Agreement, for
an aggregate purchase price of $250,000. At the time of filing, the Company has not converted any of the debt contemplated by the Convertible
Note nor exercised any of the warrants.
On
May 9, 2024, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with Sharing
Services Global Corporation (“SHRG”), pursuant to which the Company purchased from SHRG a Convertible Promissory Note
(the “Convertible Note”) in the amount of $250,000, convertible into 125,000,000 shares of SHRG’s common stock at
the option of the Company for an aggregate purchase price of $250,000. The Convertible Note bears an 8% interest rate and has a
scheduled maturity three years from the date of the Convertible Note. Additionally, upon signing the Convertible Note, SHRG owns the
Company commitment fee of 8% of the principal amount, which will be paid either in cash or in common stock of SHRG, at the
discretion of the Company.
SHRG
is a related party of our Company, as our stockholders Alset Inc. and Alset International Limited, in addition to certain entities affiliated
with them, are significant stockholders of SHRG, and our Chief Executive Officer and Chairman are also the Chief Executive Officer and
Chairman, respectively, of SHRG.
Joint Venture
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
Heng Fai Ambrose Chan, HWH’s Executive Chairman, as a part of HWH’s strategy of building its travel business in Asia. The
planned joint venture company (referred to here as the “JVC”) will be known as HapiTravel Holding Pte. Ltd. The JVC will
be initially owned as follows: (a) HWHPL will hold 19% of the shares in the JVC; (b) Mr. Chan will hold 11%; and (c) the remaining
70% of the shares in the JVC are to be held by Mr. Chen.
PRINCIPAL
SECURITYHOLDERS
The
following table and accompanying footnotes set forth certain information with respect to the beneficial ownership of our common stock
as of June 17, 2024, referred to in the table below as the “Beneficial Ownership Date,” by:
| ● |
each
person who is known to be the beneficial owner of 5% or more of the outstanding shares of our common stock; |
| ● |
each
member of our board of directors, director nominees and each of our named executive officers individually; and |
| ● |
all
of our directors, director nominees and executive officers as a group. |
Beneficial
ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and
the percentage ownership of that person, shares of common stock subject to stock options or warrants held by that person that are currently
exercisable or exercisable within 60 days of the Beneficial Ownership Date and shares of restricted stock subject to vesting until the
occurrence of certain events, are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other
person (however, neither the stockholder nor the directors and officers listed below own any stock options or warrants to purchase shares
of our common stock at the present time). The percentages of beneficial ownership are based on 16,223,301 shares of our common stock
outstanding as of the Beneficial Ownership Date.
To
our knowledge, except as set forth in the footnotes to this table and subject to applicable community property laws, each person named
in the table has sole voting and investment power with respect to the shares set forth opposite such person’s name.
| Name and Address | |
Number
of Common Shares
Beneficially Owned | | |
Percentage
of Outstanding Common
Stock (1) | |
| Directors and Executive Officers (2): | |
| | | |
| | |
| Heng Fai Ambrose Chan (3)(4) | |
| 13,827,250 | | |
| 84.0 | % |
| John “JT” Thatch | |
| 0 | | |
| 0.00 | % |
| Rongguo (Ronald) Wei | |
| 0 | | |
| 0.00 | % |
| Lim Sheng Hon Danny | |
| 0 | | |
| 0.00 | % |
| William Wu | |
| 0 | | |
| 0.00 | % |
| Wong Shui Yeung | |
| 0 | | |
| 0.00 | % |
| Wong Tat Keung | |
| 0 | | |
| 0.00 | % |
| All Directors and Officers (7 individuals) | |
| 13,827,250 | | |
| 84.0 | % |
| Alset Acquisition Sponsor, LLC (3) | |
| 2,914,250 | | |
| 17.7 | % |
| Alset International Limited | |
| 10,900,000 | | |
| 67.2 | % |
| Alset Inc. (3) | |
| 13,814,250 | | |
| 83.9 | % |
| Other Stockholders: None | |
| | | |
| | |
| (1) |
Based
upon 16,223,301 shares of common stock outstanding as of June 17, 2024 |
| |
|
| (2) |
The
mailing address for each individual and entity set forth above is c/o HWH International Inc., 4800 Montgomery Lane, Suite 210, MD
20814. |
| |
|
| (3) |
Alset
Acquisition Sponsor, LLC, our sponsor, is the record holder of the securities reported herein. Alset Inc. and Alset International
Limited are the owners of 55% and 45% respectively of Alset Acquisition Sponsor, LLC. Alset Inc. owns 85.5% of Alset International
Limited. Heng Fai Ambrose Chan is the Chairman, Chief Executive Officer and majority stockholder of Alset Inc. Mr. Chan may
be deemed to share beneficial ownership of the securities held of record by our sponsor. Mr. Chan disclaims any such beneficial ownership
except to the extent of his pecuniary interest. |
| |
|
| (4) |
Heng Fai Ambrose Chan directly owns 13,000 shares of
common stock of HWH International Inc. |
MATERIAL
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Material
U.S. Federal Income Tax Consequences for Holders of Common Stock
The
following is a discussion of certain material U.S. federal income tax consequences of the acquisition, ownership and disposition of our
shares of common stock, which we refer to as our securities. This discussion applies only to securities that are held as capital assets
for U.S. federal income tax purposes and is applicable only to holders who are receiving our securities in this offering.
This
discussion is a summary only and does not describe all of the tax consequences that may be relevant to you in light of your particular
circumstances, including but not limited to the alternative minimum tax, the Medicare tax on certain investment income and the different
consequences that may apply if you are subject to special rules that apply to certain types of investors (such as the effects of Section
451 of the Code), including but not limited to:
| |
● |
financial
institutions or financial services entities; |
| |
● |
governments
or agencies or instrumentalities thereof; |
| |
● |
regulated
investment companies; |
| |
● |
real
estate investment trusts; |
| |
● |
expatriates
or former long-term residents of the United States; |
| |
● |
persons
that actually or constructively own 5% or more of our voting shares; |
| |
● |
dealers
or traders subject to a mark-to-market method of accounting with respect to the securities; |
| |
● |
persons
holding the securities as part of a “straddle,” hedge, integrated transaction or similar transaction; |
| |
● |
U.S.
holders (as defined below) whose functional currency is not the U.S. dollar; |
| |
● |
partnerships
or other pass-through entities for U.S. federal income tax purposes and any beneficial owners of such entities; and |
This
discussion is based on the Code, and administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations
as of the date hereof, which are subject to change, possibly on a retroactive basis, and changes to any of which subsequent to the date
of this prospectus may affect the tax consequences described herein. This discussion does not address any aspect of state, local or non-U.S.
taxation, or any U.S. federal taxes other than income taxes (such as gift and estate taxes).
We
have not sought, and will not seek, a ruling from the Internal Revenue Service, or the IRS, as to any U.S. federal income tax consequence
described herein. The IRS may disagree with the discussion herein, and its determination may be upheld by a court. Moreover, there can
be no assurance that future legislation, regulations, administrative rulings or court decisions will not adversely affect the accuracy
of the statements in this discussion. You are urged to consult your tax advisor with respect to the application of U.S. federal tax laws
to your particular situation, as well as any tax consequences arising under the laws of any state, local or foreign jurisdiction.
This
discussion does not consider the tax treatment of partnerships or other pass-through entities or persons who hold our securities through
such entities. If a partnership (or other entity or arrangement classified as a partnership or other pass-through entity for U.S. federal
income tax purposes) is the beneficial owner of our securities, the U.S. federal income tax treatment of a partner or member in the partnership
or other pass-through entity generally will depend on the status of the partner or member and the activities of the partnership or other
pass-through entity. If you are a partner or member of a partnership or other pass-through entity holding our securities, we urge you
to consult your tax advisor.
THIS
DISCUSSION IS ONLY A SUMMARY OF CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS ASSOCIATED WITH THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF OUR SECURITIES. EACH PROSPECTIVE INVESTOR IN OUR SECURITIES IS URGED TO CONSULT ITS TAX ADVISOR WITH RESPECT TO THE PARTICULAR
TAX CONSEQUENCES TO SUCH INVESTOR OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT
OF ANY UNITED STATES FEDERAL NON-INCOME, STATE AND LOCAL, AND NON-U.S. TAX LAWS.
Material
U.S. Federal Income Tax Consequences for U.S. Holders
For
purposes of this discussion, a “U.S. Holder” is any beneficial owner of our common stock that, for U.S. federal income tax
purposes, is or is treated as:
| |
● |
an
individual who is a citizen or resident of the United States; |
| |
● |
a
corporation created or organized in or under the laws of the United States, any state thereof, or the District of Columbia; |
| |
● |
an
estate, the income of which is subject to U.S. federal income tax regardless of its source; or |
| |
● |
a
trust that (1) is subject to the primary supervision of a U.S. court and all substantial decisions of which are subject to the control
of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or (2) has a valid election
in effect to be treated as a United States person for U.S. federal income tax purposes. |
Taxation
of Distributions. If we pay distributions in cash or other property (other than certain distributions of our stock or rights to acquire
our stock) to U.S. holders of shares of common stock, such distributions generally will constitute dividends for U.S. federal income
tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles.
Distributions in excess of current and accumulated earnings and profits will constitute a return of capital that will be applied against
and reduce (but not below zero) the U.S. holder’s adjusted tax basis in common stock. Any remaining excess will be treated as gain
realized on the sale or other disposition of the common stock and will be treated as described under “U.S. Holders-Gain or Loss
on Sale, Taxable Exchange or Other Taxable Disposition of common stock” below.
Dividends
we pay to a U.S. holder that is a taxable corporation generally will qualify for the dividends received deduction if the requisite holding
period is satisfied. With certain exceptions (including, but not limited to, dividends treated as investment income for purposes of investment
interest deduction limitations), and provided certain holding period requirements are met, dividends we pay to a non-corporate U.S. holder
may constitute “qualified dividends” that will be subject to tax at the maximum tax rate accorded to long-term capital gains.
If the holding period requirements are not satisfied, then a corporation may not be able to qualify for the dividends received deduction
and would have taxable income equal to the entire dividend amount, and non-corporate holders may be subject to tax on such dividend at
regular ordinary income tax rates instead of the preferential rate that applies to qualified dividend income.
Gain
or Loss on Sale, Taxable Exchange or Other Taxable Disposition of common stock. Upon a sale or other taxable disposition of common
stock, a U.S. holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized and
the U.S. holder’s adjusted tax basis in the common stock. Any such capital gain or loss generally will be long-term capital gain
or loss if the U.S. holder’s holding period for the common stock so disposed of exceeds one year. If the holding period requirements
are not satisfied, any gain on a sale or taxable disposition of the shares would be subject to short-term capital gain treatment and
would be taxed at regular ordinary income tax rates. Long-term capital gains recognized by non-corporate U.S. holders will be eligible
to be taxed at reduced rates. The deductibility of capital losses is subject to limitations.
Generally,
the amount of gain or loss recognized by a U.S. holder is an amount equal to the difference between (i) the sum of the amount of cash
and the fair market value of any property received in such disposition and (ii) the U.S. holder’s adjusted tax basis in its common
stock so disposed of. A U.S. holder’s adjusted tax basis in its common stock generally will equal the U.S. holder’s acquisition
cost for the common stock or less, in the case of a share of common stock, any prior distributions treated as a return of capital. In
the case of any shares of common stock originally acquired as part of an investment unit, the acquisition cost for the share of common
stock that were part of such unit would equal an allocable portion of the acquisition cost of the unit based on the relative fair market
values of the components of the unit at the time of acquisition.
Information
Reporting and Backup Withholding. In general, information reporting requirements may apply to dividends paid to a U.S. holder and
to the proceeds of the sale or other disposition of our shares of common stock, unless the U.S. holder is an exempt recipient. Backup
withholding may apply to such payments if the U.S. holder fails to provide a taxpayer identification number, a certification of exempt
status or has been notified by the IRS that it is subject to backup withholding (and such notification has not been withdrawn).
Any
amounts withheld under the backup withholding rules generally should be allowed as a refund or a credit against a U.S. holder’s
U.S. federal income tax liability provided the required information is timely furnished to the IRS.
Material
U.S. Federal Income Tax Consequences for Non-U.S. Holders
This
section applies to you if you are a “Non-U.S. holder.” As used herein, the term “Non-U.S. holder” means a beneficial
owner of common stock who or that is for U.S. federal income tax purposes:
| |
● |
a
non-resident alien individual (other than certain former citizens and residents of the U.S. subject to U.S. tax as expatriates); |
| |
● |
a
foreign corporation or |
| |
● |
an
estate or trust that is not a U.S. holder; |
but
generally, does not include an individual who is present in the United States for 183 days or more in the taxable year of disposition.
If you are such an individual, you should consult your tax advisor regarding the U.S. federal income tax consequences of the acquisition,
ownership or sale or other disposition of our securities.
Taxation
of Distributions. In general, any distributions we make to a Non-U.S. holder of shares of common stock, to the extent paid out of
our current or accumulated earnings and profits (as determined under U.S. federal income tax principles), will constitute dividends for
U.S. federal income tax purposes and, provided such dividends are not effectively connected with the Non-U.S. holder’s conduct
of a trade or business within the United States, we will be required to withhold tax from the gross amount of the dividend at a rate
of 30%, unless such Non-U.S. holder is eligible for a reduced rate of withholding tax under an applicable income tax treaty and provides
proper certification of its eligibility for such reduced rate (usually on an IRS Form W-8BEN or W-8BEN-E). Any distribution not constituting
a dividend will be treated first as reducing (but not below zero) the Non-U.S. holder’s adjusted tax basis in its shares of common
stock and, to the extent such distribution exceeds the Non-U.S. holder’s adjusted tax basis, as gain realized from the sale or
other disposition of the common stock, which will be treated as described under “Non-U.S. Holders-Gain on Sale, Taxable Exchange
or Other Taxable Disposition of common stock” below.
The
withholding tax does not apply to dividends paid to a Non-U.S. holder who provides a Form W-8ECI, certifying that the dividends are effectively
connected with the Non-U.S. holder’s conduct of a trade or business within the United States. Instead, the effectively connected
dividends will be subject to regular U.S. income tax as if the Non-U.S. holder were a U.S. resident, subject to an applicable income
tax treaty providing otherwise. A Non-U.S. corporation receiving effectively connected dividends may also be subject to an additional
“branch profits tax” imposed at a rate of 30% (or a lower treaty rate).
Gain
on Sale, Taxable Exchange or Other Taxable Disposition of common stock. A Non-U.S. holder generally will not be subject to U.S. federal
income or withholding tax in respect of gain recognized on a sale, taxable exchange or other taxable disposition of common stock, unless:
| |
● |
the
gain is effectively connected with the conduct of a trade or business by the Non-U.S. holder within the United States (and, under
certain income tax treaties, is attributable to a United States permanent establishment or fixed base maintained by the Non-U.S.
holder); or |
| |
● |
we
are or have been a “U.S. real property holding corporation” for U.S. federal income tax purposes at any time during the
shorter of the five-year period ending on the date of disposition or the period that the Non-U.S. holder held common stock, and,
in the case where shares of common stock are regularly traded on an established securities market, the Non-U.S. holder has owned,
directly or constructively, more than 5% of common stock at any time within the shorter of the five-year period preceding the disposition
or such Non-U.S. holder’s holding period for the shares of common stock. There can be no assurance that common stock will be
treated as regularly traded on an established securities market for this purpose. |
Unless
an applicable treaty provides otherwise, gain described in the first bullet point above will be subject to tax at generally applicable
U.S. federal income tax rates as if the Non-U.S. holder were a U.S. resident. Any gains described in the first bullet point above of
a Non-U.S. holder that is a foreign corporation may also be subject to an additional “branch profits tax” at a 30% rate (or
lower treaty rate).
If
the second bullet point above applies to a Non-U.S. holder, gain recognized by such holder on the sale, exchange or other disposition
of common stock will be subject to tax at generally applicable U.S. federal income tax rates.
Information
Reporting and Backup Withholding. Information returns will be filed with the IRS in connection with payments of dividends and the
proceeds from a sale or other disposition of our shares of common stock. A Non-U.S. holder may have to comply with certification procedures
to establish that it is not a United States person in order to avoid information reporting and backup withholding requirements. The certification
procedures required to claim a reduced rate of withholding under a treaty will satisfy the certification requirements necessary to avoid
the backup withholding as well. The amount of any backup withholding from a payment to a Non-U.S. holder will be allowed as a credit
against such holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information
is timely furnished to the IRS.
FATCA
Withholding Taxes. Provisions commonly referred to as “FATCA” impose withholding of 30% on payments of dividends (including
constructive dividends) on common stock to “foreign financial institutions” (which is broadly defined for this purpose and
in general includes investment vehicles) and certain other Non-U.S. entities unless various U.S. information reporting and due diligence
requirements (generally relating to ownership by U.S. persons of interests in or accounts with those entities) have been satisfied by,
or an exemption applies to, the payee (typically certified as to by the delivery of a properly completed IRS Form W-8BEN-E). Pursuant
to proposed Treasury Regulations, the U.S. Treasury Department has indicated its intent to eliminate the requirement under FATCA of withholding
on gross proceeds from the sale or other disposition of property of a type which can produce U.S. source dividends or interest. The U.S.
Treasury Department has indicated that taxpayers may rely on these proposed Treasury Regulations pending their finalization. Foreign
financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be
subject to different rules. Under certain circumstances, a Non-U.S. holder might be eligible for refunds or credits of such withholding
taxes, and a Non-U.S. holder might be required to file a U.S. federal income tax return to claim such refunds or credits. Prospective
investors should consult their tax advisers regarding the effects of FATCA on their investment in our securities.
SELLING
STOCKHOLDERS
Unless
the context otherwise requires, as used in this prospectus, “selling stockholders” includes the selling stockholders listed
below and donees, pledgees, transferees or other successors-in-interest selling shares received after the date of this prospectus from
the selling stockholders as gifts, pledges or other non-sale related transfers.
We
have prepared this prospectus to allow the selling stockholders or their successors, assignees or other permitted transferees to sell
or otherwise dispose of, from time to time, up to 149,443 shares of our common stock.
Business
Combination
On
February 3, 2022, we consummated our initial public offering (the “Offering”) of an aggregate of 8,625,000 Units
including the issuance of 1,125,000 Units as a result of the underwriter’s full exercise of its over-allotment option. The Units
were sold at an offering price of $10.00 per Unit, generating gross proceeds of $86,250,000.
Simultaneously
with the consummation of the Offering, the Company consummated the private placement of 473,750 units (the “Private Placement Units”)
to the Sponsor, including the issuance of 33,750 Private Placement Units in connection with the underwriter’s full exercise
of its over-allotment option, at a price of $10.00 per Private Placement Unit, generating total gross proceeds of $4,735,500.
The Private Placement was conducted as a non-public transaction and, as a transaction by an issuer not involving a public offering, is
exempt from registration under the Securities Act, in reliance upon Section 4(a)(2) of the Securities Act.
Of
the gross proceeds received from the Offering, including the full exercise of the over-allotment option, and the Private Placement Units,
$86.25 million and $4.7 million was placed in the trust account, respectively.
On
February 3, 2022, the Company paid a cash underwriting discount of $0.20 per Unit, or $1,725,000. In addition, the underwriters were
entitled to a deferred fee of $0.35 per Unit, or $3,018,750 in the aggregate. The deferred fee became payable to the underwriters from
the amounts held in the Trust Account solely in the event that the Company completed a business combination, subject to the terms
of the underwriting agreement.
On
December 18, 2023, the Company entered into the Satisfaction Agreement in connection with the Underwriting Agreement, dated January 31,
2022, with EF Hutton, pursuant to which EF Hutton accept a combination of $325,000 in cash 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 of the deferred underwriting
commission.
Satisfaction
and discharge of the deferred underwriting commission is dependent on the Company’s delivery of the cash payment, the shares of
common stock and the promissory note under the terms of the Satisfaction Agreement. Additionally, the Company has granted EF Hutton an
irrevocable ROFR to act as the sole investment banker, sole book-runner, and/or sole placement
agent, at EF Hutton’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.
Pursuant
to the terms of the Satisfaction Agreement, we are required to file a registration statement on Form S-1 or other appropriate form registering
the resale of the shares of common stock issued to EF Hutton pursuant to the deferred underwriting commission.
Relationship
with the Selling Stockholders
EF
Hutton has been engaged in investment banking, advisory and other commercial dealings in the ordinary course of business with us for
which it has received customary compensation.
Information
About Selling Stockholders Offering
The
shares of common stock being offered by the selling stockholders are the 149,443 shares of common stock issued pursuant to the terms
of the Satisfaction Agreement. We are registering these shares in order to permit the selling stockholders to offer the shares for resale
from time to time.
The
table below lists the selling stockholders and other information regarding the ownership of the shares of common stock by the selling
stockholders. The second column lists the number of shares of common stock owned by the selling stockholders, based on their respective
ownership of the shares of common stock as of June 17, 2024 and securities convertible or exercisable into shares of common stock
within 60 days of June 17, 2024, assuming the exercise of the warrants held by each selling stockholder on that date, without
regard to any limitations on the exercise of the warrants. The third column lists the maximum number of shares of common stock being
offered in this prospectus by each selling stockholder. The fourth and fifth columns list the number of shares of common stock owned
after the offering and the percentage of outstanding common stock, assuming in both cases the exercise of the warrants held by that selling
stockholder, without regard to any limitations on the exercise of the warrants and the sale of all of the shares of common stock offered
by that selling stockholder pursuant to this prospectus.
Name of Selling Stockholder | |
Number of shares of common stock owned prior to offering | | |
Maximum number of shares of common stock to be sold pursuant to this Prospectus | | |
Number of shares of common stock owned after offering(1) |
| | Percentage
of common
stock owned
after
offering
|
|
| EF Hutton, LLC (2) | |
| 0 | | |
| 149,443 | (1) | |
| 149,443 |
(1) | | |
* |
% |
*
Less than 1%.
(1) Assumes the sale of the maximum number of shares of common stock registered pursuant to this prospectus by such selling stockholder.
(2) The selling stockholder is a registered broker dealer with a registered address of EF Hutton, LLC, 590 Madison Avenue, 39th Floor, New York, New York 10022, and has sole voting and dispositive power over the securities held.
DESCRIPTION
OF SECURITIES TO BE REGISTERED
Authorized
Capital Stock
Our
authorized capital stock consists of 56,000,000 shares, consisting of 55,000,000 shares of common stock, and 1,000,000 shares of preferred
stock.
Common
Stock
The
holders of our common stock are entitled to one vote for each share held of record on all matters to be voted on by stockholders.
Holders
of our common stock are entitled to receive dividends or other distributions, if any, as may be declared from time to time by our board
of directors in its discretion out of funds legally available therefor and share equally on a per share basis in all such dividends and
other distributions. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, holders
of our common stock will be entitled to receive their ratable and proportionate share of the remaining assets of the Company.
Holders
of our common stock will have no cumulative voting rights, conversion, preemptive or other subscription rights and there are no sinking
fund or redemption provisions applicable to our common stock. The following description is a summary of the material provisions of our
capital stock. You should refer to our Articles of Incorporation and our Bylaws, each as amended to date, both of which are on file with
the SEC as exhibits to previous SEC filings, for additional information. The summary below is qualified by provisions of applicable law.
PLAN
OF DISTRIBUTION
The
selling stockholders, including their pledgees, donees, transferees, distributees, beneficiaries or other successors in interest may,
from time to time, offer some or all of the shares of common stock covered by this prospectus. We will not receive any of the proceeds
from the sale of the shares of common stock covered by this prospectus by the selling stockholders. We will bear all fees and expenses
incident to our obligation to register the shares of our common stock covered by this prospectus.
The
selling stockholders may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time
to time directly or through one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters
or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent’s commissions.
The shares of common stock may be sold on any national securities exchange or quotation service on which the securities may be listed
or quoted at the time of sale, in the over-the-counter market or in transactions otherwise than on these exchanges or systems or in the
over-the-counter market and in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale, or at privately negotiated prices. These sales may be effected in transactions, which may involve
crosses or block transactions.
The
selling stockholders may use any one or more of the following methods when disposing of shares:
| ● |
ordinary
brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| |
|
| ● |
block
trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block
as principal to facilitate the transaction; |
| |
|
| ● |
purchases
by a broker-dealer as principal and resale by the broker-dealer for its account;
|
| ● |
an
over-the-counter distribution; |
| |
|
| ● |
an
exchange distribution in accordance with the rules of the applicable exchange; |
| |
|
| ● |
privately
negotiated transactions; |
| |
|
| ● |
short
sales effected after the effective date of the registration statement of which this prospectus is a part; |
| |
|
| ● |
through
the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
| |
|
| ● |
broker-dealers
may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; |
| |
|
| ● |
a
combination of any such methods of sale; or |
| |
|
| ● |
any
other method permitted pursuant to applicable law. |
The
selling stockholders may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by
them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares
of common stock, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act, amending the list of the selling stockholders to include the selling stockholders’ pledgees, transferees,
or other successors in interest as selling stockholder under this prospectus. The selling stockholders also may transfer the shares of
common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial
owners for purposes of this prospectus.
In
connection with the sale of shares of our common stock, the selling stockholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they
assume. The selling stockholders may also sell shares of our common stock short and deliver these shares to close out their short positions,
or loan or pledge the common stock to broker-dealers that in turn may sell these shares. The selling stockholders may also enter into
option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require
the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer
or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
Broker-dealers
engaged by the selling stockholders may arrange for other broker-dealers to participate in sales. If the selling stockholders effect
certain transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers
or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions from
purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal. Such commissions will
be in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction will
not be in excess of a customary brokerage commission in compliance with applicable FINRA rules; and in the case of a principal transaction
a markup or markdown in compliance with applicable FINRA rules.
The
aggregate proceeds to the selling stockholders from the sale of the common stock offered by them will be the purchase price of the common
stock less discounts or commissions, if any. The selling stockholders reserve the right to accept and, together with their agents from
time to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly or through agents. We will not
receive any of the proceeds from this offering.
The
selling stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities
Act, provided that they meet the criteria and conforms to the requirements of that rule.
The
selling stockholders and any underwriters, broker-dealers or agents that participate in the sale of the common stock may be deemed to
be “underwriters” within the meaning of Section 2(a)(11) of the Securities Act. Any discounts, commissions, concessions or
profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities Act. The selling stockholders
are subject to the prospectus delivery requirements of the Securities Act.
To
the extent required pursuant to Rule 424(b) under the Securities Act, the shares of our common stock to be sold, the names of the selling
stockholders, the purchase price and public offering price, the names of any agent, dealer or underwriter, and any applicable commissions
or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.
In
order to comply with the securities laws of some states, if applicable, the common stock may be sold in these jurisdictions only through
registered or licensed brokers or dealers. In addition, in some states, the common stock may not be sold unless it has been registered
or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.
The
selling stockholders and any other person participating in a sale of the common stock registered under this prospectus will be subject
to applicable provisions of the Exchange Act, and the rules and regulations thereunder, including, without limitation, to the
extent applicable, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common
stock by the selling stockholders and any other participating person. All of the foregoing may affect the marketability of the shares
of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.
In addition, we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling
stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling stockholders may indemnify
any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities
arising under the Securities Act.
LEGAL
MATTERS
The
validity of the securities offered by this prospectus will be passed upon by Sichenzia Ross Ference Carmel, LLP, New York, New York.
EXPERTS
The
consolidated financial statements of the Company, then known as Alset Capital Acquisition Corp., as of November 30, 2023 and
2022 and for the years then ended included in this prospectus, have been audited by MaloneBailey, LLP, independent
registered public accounting firm, as stated in their report, and are included herein in reliance on the report of such firm given
upon their authority as experts in accounting and auditing.
On April 23, 2024, we dismissed MaloneBailey, LLP as our independent registered public accounting firm, and engaged
Grassi & Co., CPAs, P.C. (“Grassi”) as the Company’s independent registered public accounting firm for the fiscal
year ended December 31, 2024. The decision to engage Grassi was recommended by the Company’s Audit Committee and approved by the
Company’s Board of Directors.
The
consolidated financial statements of our subsidiary HWH International Inc. (a Nevada corporation), which we acquired in January
of 2024, as of and for the year ended December 31, 2023 and December 31, 2022, respectively, included in this prospectus, have been audited
by Grassi & Co., CPAs, P.C., independent registered public accounting firm, as stated in their report, and are included herein in
reliance on the report of such firm given upon their authority as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We
are subject to the informational requirements of the Exchange Act and in accordance therewith file annual, quarterly and current reports,
proxy statements and other information with the SEC. The SEC maintains a website that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the SEC. The address of the SEC’s website is http://www.sec.gov/.
We
make available free of charge on or through our website at https://www.hwhintl.com/sec-filings, our Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Exchange Act as soon as reasonably practicable after we electronically file such material with or otherwise furnish it to the
SEC.
We
have filed with the SEC a registration statement under the Securities Act, relating to the offering of these securities. The registration
statement, including the attached exhibits, contains additional relevant information about us and the securities. This prospectus does
not contain all of the information set forth in the registration statement. You can obtain a copy of the registration statement for free
at www.sec.gov. The registration statement is also available on our website, https://www.hwhintl.com/sec-filings.
We
have not incorporated by reference into this prospectus the information on our website, and you should not consider it to be a part of
this prospectus.
HWH
INTERNATIONAL INC.
Table
of Contents
HHW
International Inc. and Subsidiaries
Consolidated
Balance Sheets (Unaudited)
| | |
March 31, 2024
| | |
December 31, 2023 (as restated) | |
| ASSETS | |
| | | |
| | |
| | |
| | | |
| | |
| Current Assets | |
| | | |
| | |
| Cash | |
$ | 974,632 | | |
$ | 1,159,201 | |
| Account Receivable, net | |
| 29,156 | | |
| 28,611 | |
| Inventory | |
| 3,598 | | |
| 1,977 | |
| Other receivables, net | |
| 59,213 | | |
| 41,203 | |
| Convertible loans receivable - related party, at fair value | |
| 324,521 | | |
| - | |
| Investment security – related party | |
| 141,667 | | |
| - | |
| Prepaid expenses | |
| 15,779 | | |
| 106,862 | |
| Other current assets | |
| | | |
| | |
| Total Current Assets | |
$ | 1,548,566 | | |
$ | 1,337,854 | |
| | |
| | | |
| | |
| Non-Current Assets | |
| | | |
| | |
| Property and Equipment, net | |
$ | 113,520 | | |
$ | 129,230 | |
| Cash and marketable securities held in Trust Account | |
| 24,874 | | |
| 21,346,768 | |
| Deposits | |
| 411,860 | | |
| 298,324 | |
| Operating lease right-of-use assets, net | |
| 459,339 | | |
| 598,508 | |
| Total Non-Current Assets | |
$ | 1,009,593 | | |
$ | 22,372,830 | |
| | |
| | | |
| | |
| TOTAL ASSETS | |
$ | 2,558,159 | | |
$ | 23,710,684 | |
| | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
| | |
| | | |
| | |
| Current Liabilities | |
| | | |
| | |
| Accounts payable and accrued expenses | |
$ | 602,624 | | |
$ | 167,355 | |
| Accrued commissions | |
| 81,634 | | |
| 85,206 | |
| Due to related parties, net | |
| 3,141,918 | | |
| 2,323,800 | |
| Operating lease liabilities - current | |
| 362,343 | | |
| 429,687 | |
| Deferred underwriting fee payable | |
| - | | |
| 3,018,750 | |
| Notes payable - current | |
| 279,795 | | |
| - | |
| Extension Loan – Related Party | |
| | | |
| | |
| Deferred revenue | |
| | | |
| | |
| Total Current Liabilities | |
$ | 4,468,314 | | |
$ | 6,024,798 | |
| | |
| | | |
| | |
| Non-Current Liabilities | |
| | | |
| | |
| Investment in associate, related party | |
| | | |
| | |
| Operating lease liabilities - non-current | |
$ | 110,344 | | |
$ | 182,380 | |
| Notes payable - non-current | |
| 947,500 | | |
| - | |
| Deferred underwriting compensation | |
| | | |
| | |
| Total Non-Current Liabilities | |
$ | 1,057,844 | | |
$ | 182,380 | |
| Total liabilities | |
| | | |
| | |
| | |
| | | |
| | |
| Commitments and Contingencies | |
| - | | |
| - | |
| | |
| | | |
| | |
| Temporary equity: | |
| | | |
| | |
| Class A common stock subject to possible redemption; 1,976,036 shares (at approximately $10.35 per share) as of December 31, 2023 | |
$ | - | | |
$ | 20,457,011 | |
| | |
| | | |
| | |
| Stockholders’ Equity | |
| | | |
| | |
| Preferred stock, $0.001 par value; 10,000,000 shares authorized; none issued and outstanding as of March 31, 2024 and December 31, 2023 | |
| - | | |
| - | |
| Common stock, $0.0001 par value; 50,000,000 shares authorized; 16,223,301 and 0 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | |
| 1,623 | | |
| 1 | |
| Class A common stock, $0.0001 par value; 50,000,000 shares authorized; 0 and 473,750 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | |
| - | | |
| 47 | |
| Class B common stock, $0.0001 par value; 50,000,000 shares authorized; 0 and 2,156,250 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | |
| - | | |
| 216 | |
| Common stock value | |
| - | | |
| 216 | |
| Additional paid in capital | |
| 1,078,343 | | |
| 9 | |
| Foreign currency translation adjustment reserve | |
| (110,223 | ) | |
| (197,041 | ) |
| Retained earnings | |
| (4,102,241 | ) | |
| (2,765,403 | ) |
| Total HWH International Inc. Stockholders’ equity | |
$ | (3,132,498 | ) | |
$ | (2,962,171 | ) |
| Non-controlling interests | |
| 164,499 | | |
| 8,666 | |
| Total Stockholders’ Deficit | |
| (2,967,999 | ) | |
| (2,953,505 | ) |
| | |
| | | |
| | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | |
$ | 2,558,159 | | |
$ | 23,710,684 | |
The
accompanying notes are an integral part of these condensed consolidated financial statements.
HWH
International Inc. and Subsidiaries
Consolidated
Statements of Operations and Other Comprehensive Income
For
the Three Months Ended March 31, 2024 and 2023 (Unaudited)
| | |
Three Months
Ended
March 31, 2024
| | |
Three Months
Ended
March 31, 2023
(As restated)
| |
| | |
| | |
| |
| Revenue | |
| | | |
| | |
| - Membership | |
$ | - | | |
$ | 12,583 | |
| - Non-membership | |
| 286,110 | | |
| 187,979 | |
| Total Revenue | |
$ | 286,110 | | |
$ | 200,562 | |
| | |
| | | |
| | |
| Cost of revenue | |
| | | |
| | |
| - Membership | |
$ | - | | |
$ | (11,868 | ) |
| - Non-membership | |
| (122,813 | ) | |
| (65,901 | ) |
| Total Cost of revenue | |
$ | (122,813 | ) | |
$ | (77,769 | ) |
| | |
| | | |
| | |
| Gross profit | |
$ | 163,297 | | |
$ | 122,793 | |
| | |
| | | |
| | |
| Operating expenses: | |
| | | |
| | |
| Administration fee - related party | |
| | | |
| | |
| General and administrative expenses | |
$ | (1,129,191 | ) | |
$ | (736,391 | ) |
| Impairment of convertible note receivable – related party, and equity method investment, related party | |
| (366,192 | ) | |
| - | |
| Total operating expenses | |
$ | (1,495,383 | ) | |
$ | (736,391 | ) |
| | |
| | | |
| | |
| Other Income (Expense) | |
| | | |
| | |
| Other income | |
$ | 78,013 | | |
$ | 999,966 | |
| Interest expense | |
| (18,131 | ) | |
| - | |
| Unrealized gain (loss) on related party transactions | |
| (49,571 | ) | |
| 13,853 | |
| Loss on equity method investment, related party | |
| (14,744 | ) | |
| (53,199 | ) |
| Investment income earned on cash and marketable securities held in Trust Account | |
| | | |
| | |
| Total Other (Expense) Income | |
$ | (4,433 | ) | |
$ | 960,620 | |
| | |
| | | |
| | |
| (Loss) income before provision for income taxes | |
| (1,336,519 | ) | |
| 347,022 | |
| | |
| | | |
| | |
| Provision for income taxes | |
| - | | |
| (175,173 | ) |
| | |
| | | |
| | |
| Net (loss) income | |
$ | (1,336,519 | ) | |
$ | 171,849 | |
| | |
| | | |
| | |
| Less: Net profit attributable to Non-Controlling Interests | |
| 319 | | |
| 722 | |
| |
| | | |
| | |
| Net (loss) income attributable to common stockholders | |
$ | (1,336,838 | ) | |
$ | 171,127 | |
| | |
| | | |
| | |
| Other Comprehensive Income, Net of Tax: | |
| | | |
| | |
| Foreign exchange translation adjustment | |
| 86,818 | | |
| 58,843 | |
| Total Other Comprehensive Income, Net of Tax: | |
$ | 86,818 | | |
$ | 58,843 | |
| | |
| | | |
| | |
| Comprehensive (loss) income: | |
$ | (1,250,020 | ) | |
$ | 229,970 | |
| | |
| 1 | | |
| 2 | | |
| 3 | | |
| 4 | | |
| 5 | | |
| 6 | |
| | |
Three
Months Ended
March 31, 2024 | | |
Three
Months Ended
March 31, 2023 | |
| | |
Common
stock | | |
Class
A common stock | | |
Class
B common stock | | |
Common
stock | | |
Class
A common stock | | |
Class
B common stock | |
| (Loss)
earnings per common share | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Basic | |
$ | (0.09 | ) | |
$ | (0.09 | ) | |
$ | (0.09 | ) | |
$ | 0.06 | | |
$ | 0.06 | | |
$ | 0.06 | |
| Diluted | |
$ | (0.09 | ) | |
$ | (0.09 | ) | |
$ | (0.09 | ) | |
$ | 0.06 | | |
$ | 0.06 | | |
$ | 0.06 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Weighted
average number of common shares outstanding | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Basic | |
| 14,797,956 | | |
| 41,648 | | |
| 189,560 | | |
| 10,000 | | |
| 473,750 | | |
| 2,156,250 | |
| Diluted | |
| 14,797,956 | | |
| 41,648 | | |
| 189,560 | | |
| 10,000 | | |
| 473,750 | | |
| 2,156,250 | |
The
accompanying notes are an integral part of these condensed consolidated financial statements.
HWH
International Inc. and Subsidiaries
Consolidated
Statements of Changes in Stockholders’ Equity (Deficit)
For
the Three Months Ended March 31, 2024 and 2023
(Unaudited)
| | |
Shares | | |
Par
Value $0.0001 | | |
Shares | | |
Par
Value $0.0001 | | |
Shares | | |
Par
Value $0.0001 | | |
Paid
in Capital | | |
Comprehensive
(Loss)
Income | | |
(Accumulated
Deficit) | | |
Stockholders’
equity | | |
controlling
interests | | |
Stockholders’
equity | |
| | |
Class
A Common
stock | | |
Class
B Common
stock | | |
Common
Stock | | |
Additional | | |
Accumulated
Other | | |
Retained | | |
Total
HWH International Inc. | | |
Non- | | |
Total | |
| | |
Shares | | |
Par Value $0.0001
| | |
Shares | | |
Par Value $0.0001
| | |
Shares | | |
Par Value $0.0001
| | |
Paid in Capital
| | |
Comprehensive
Income (Loss)
| | |
Earnings
| | |
Stockholders’ equity
| | |
controlling
interests | | |
Stockholders’ equity
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Balances
at December 31, 2022 | |
| 473,750 | | |
$ | 47 | | |
| 2,156,250 | | |
$ | 216 | | |
| 10,000 | | |
$ | 1 | | |
$ | 9 | | |
$ | (200,039 | ) | |
$ | (1,610,504 | ) | |
$ | (1,810,270 | ) | |
$ | 4,836 | | |
$ | (1,805,434 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 171,127 | | |
$ | 171,127 | | |
$ | 722 | | |
$ | 171,849 | |
| Foreign
currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 58,843 | | |
| - | | |
$ | 58,843 | | |
| | | |
$ | 58,843 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balances
at March 31, 2023 | |
| 473,750 | | |
$ | 47 | | |
| 2,156,250 | | |
$ | 216 | | |
| 10,000 | | |
$ | 1 | | |
$ | 9 | | |
$ | (141,196 | ) | |
$ | (1,439,377 | ) | |
$ | (1,580,300 | ) | |
$ | 5,558 | | |
$ | (1,574,742 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balances
at December 31, 2023 | |
| 473,750 | | |
$ | 47 | | |
| 2,156,250 | | |
$ | 216 | | |
| 10,000 | | |
$ | 1 | | |
$ | 9 | | |
$ | (197,041 | ) | |
$ | (2,765,403 | ) | |
$ | (2,962,171 | ) | |
$ | 8,666 | | |
$ | (2,953,505 | ) |
| Balances | |
| 473,750 | | |
$ | 47 | | |
| 2,156,250 | | |
$ | 216 | | |
| 10,000 | | |
| 1 | | |
| 9 | | |
$ | (197,041 | ) | |
$ | (2,765,403 | ) | |
$ | (2,962,171 | ) | |
$ | 8,666 | | |
$ | (2,953,505 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Issuance of Common Stock to EF Hutton for Deferred Underwriting Compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| 149,443 | | |
$ | 15 | | |
$ | 1,509,375 | | |
| - | | |
| - | | |
$ | 1,509,390 | | |
| - | | |
$ | 1,509,390 | |
| Issuance of Common Stock during Merger | |
| - | | |
| - | | |
| - | | |
| - | | |
| 13,433,858 | | |
$ | 1,344 | | |
$ | (1,369 | ) | |
| - | | |
| - | | |
$ | (25 | ) | |
| - | | |
$ | (25 | ) |
| Adjustment to Temporary Equity | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | (645,860 | ) | |
| - | | |
| - | | |
$ | (645,860 | ) | |
| - | | |
$ | (645,860 | ) |
| Convert
Common Stock Class A and B to Common Stock | |
| (473,750 | ) | |
$ | (47 | ) | |
| (2,156,250 | ) | |
$ | (216 | ) | |
| 2,630,000 | | |
$ | 263 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Revaluation
for SHRG note receivable and warrants | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 216,188 | | |
| - | | |
| - | | |
$ | 216,188 | | |
| - | | |
$ | 216,188 | |
| Change in Non-Controlling Interest Ketomei | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 155,514 | | |
$ | 155,514 | |
| Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | (1,336,838 | ) | |
$ | (1,336,838 | ) | |
$ | 319 | | |
$ | (1,336,519 | ) |
| Foreign
currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 86,818 | | |
| - | | |
$ | 86,818 | | |
| - | | |
$ | 86,818 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balances
at March 31, 2024 | |
| - | | |
| - | | |
| - | | |
| - | | |
| 16,223,301 | | |
$ | 1,623 | | |
$ | 1,078,343 | | |
$ | (110,223 | ) | |
$ | (4,102,241 | ) | |
$ | (3,132,498 | ) | |
$ | 164,499 | | |
$ | (2,967,999 | ) |
| Balances | |
| - | | |
| - | | |
| - | | |
| - | | |
| 16,223,301 | | |
$ | 1,623 | | |
$ | 1,078,343 | | |
$ | (110,223 | ) | |
$ | (4,102,241 | ) | |
$ | (3,132,498 | ) | |
$ | 164,499 | | |
$ | (2,967,999 | ) |
The
accompanying notes are an integral part of these consolidated financial statements.
HWH
International Inc. and Subsidiaries
Consolidated
Statements of Cash Flows
For
the Three Months Ended March 31, 2024 and 2023 (Unaudited)
| | |
Three Months
Ended
March 31, 2024
| | |
Three Months
Ended
March 31, 2023
(as restated)
| |
| Cash flows
from operating activities: | |
| | | |
| | |
| Net (loss) income | |
$ | (1,336,519 | ) | |
$ | 171,849 | |
| | |
| | | |
| | |
| Adjustments
to reconcile net (loss) income to net cash used in operating activities: | |
| | | |
| | |
| Investment income earned on cash and marketable securities held in Trust Account | |
| | | |
| | |
| Formation and organization costs paid by related parties | |
| | | |
| | |
| Unrealized fx gain (loss) on related party transactions | |
| 49,571 | | |
| (13,853 | ) |
| Loss on equity method investment,
related party | |
| 14,744 | | |
| 53,199 | |
| Depreciation | |
| 14,643 | | |
| 14,591 | |
| Non-cash lease expense | |
| 125,143 | | |
| 130,044 | |
| Impairment of convertible note receivable – related party, and equity method investment, related party | |
| 366,192 | | |
| - | |
| Inventory written off expenses | |
| | | |
| | |
| | |
| | | |
| | |
| Changes
in operating assets and liabilities: | |
| | | |
| | |
| Other current assets | |
| | | |
| | |
| Accounts payable and accrued expenses | |
| | | |
| | |
| Convertible note receivable - related party | |
| | | |
| | |
| Receivable from related party | |
| - | | |
| (19,079 | ) |
| Other receivables | |
| 106,723 | | |
| (83,954 | ) |
| Prepaid commissions | |
| - | | |
| 3,692 | |
| Deposit | |
| (111,609 | ) | |
| 588 | |
| Inventory | |
| (1,668 | ) | |
| (454 | ) |
| Accounts payable and accrued
expenses | |
| 262,732 | | |
| 194,200 | |
| Accrued commissions | |
| (379 | ) | |
| (49,835 | ) |
| Income tax payable | |
| - | | |
| (1 | ) |
| Value added tax withheld | |
| (3,573 | ) | |
| 7,983 | |
| Deferred revenue | |
| - | | |
| (20,758 | ) |
| Operating lease liabilities | |
| (124,210 | ) | |
| (125,961 | ) |
| Net
cash (used in) provided by operating activities | |
$ | (638,210 | ) | |
$ | 262,251 | |
| | |
| | | |
| | |
| Cash flows
from investing activities: | |
| | | |
| | |
| Due from Sponsor | |
| | | |
| | |
| Cash withdrawn from Trust Account for taxes | |
| | | |
| | |
| Cash withdrawn form Trust Account for redemptions | |
| | | |
| | |
| Cash deposited into Trust Account | |
| | | |
| | |
| Investment in an associate | |
| | | |
| | |
| Purchases of property and
equipment | |
$ | (2,072 | ) | |
$ | (8,227 | ) |
| Convertible
loans receivable - related party | |
| (250,000 | ) | |
| - | |
| Net
cash used in investing activities | |
$ | (252,072 | ) | |
$ | (8,227 | ) |
| | |
| | | |
| | |
| Cash flows
from financing activities: | |
| | | |
| | |
| Proceeds from sale of Units in Public Offering, net of underwriting fee | |
| | | |
| | |
| Repayment of Class A Common Stock | |
| | | |
| | |
| Proceeds from sale of Private Placement Units | |
| | | |
| | |
| Proceeds from extension loan | |
| | | |
| | |
| Repayment of related party advances | |
| | | |
| | |
| Payment of offering costs | |
| | | |
| | |
| Repayment from loans and borrowing | |
$ | (26,307 | ) | |
$ | - | |
| Repayment of Deferred Underwriting Compensation | |
| (325,000 | ) | |
| - | |
| Advances
from related parties | |
| 1,101,255 | | |
| 182,730 | |
| Net
cash provided by financing activities | |
$ | 749,948 | | |
$ | 182,730 | |
| | |
| | | |
| | |
| Net decrease
in cash | |
$ | (140,334 | ) | |
$ | 436,754 | |
| Effects of foreign exchange
rate on cash | |
| (19,361 | ) | |
| 6,558 | |
| Cash
at beginning of period | |
| 1,159,201 | | |
| 91,178,513 | |
| Cash
at end of period | |
$ | 999,506 | | |
$ | 91,621,825 | |
| Cash for the beginning period | |
| 878,803 | | |
| 1,651,088 | |
| Cash for the ending period | |
| | | |
| | |
| | |
| | | |
| | |
| Supplemental
disclosure of non-cash investing and financing activities | |
| | | |
| | |
| Deferred underwriters’ commissions charged to temporary equity in connection with the Initial Public Offering | |
| | | |
| | |
| Class A Common Stock measurement adjustment | |
| | | |
| | |
| Initial classification of Class A Common Stock subject to redemption | |
| | | |
| | |
| Remeasurement of Class A Common Stock subject to redemption | |
| | | |
| | |
| Extension funds attributable to common stock subject to redemption | |
| | | |
| | |
| Issuance of HWH Common Stock to EF Hutton for Deferred Underwriting
Compensation | |
$ | 1,509,375 | | |
$ | - | |
| Issuance of shares | |
$ | (1,359 | ) | |
$ | - | |
| Valuation gain from notes
receivable and warrant - SHRG | |
$ | (216,188 | ) | |
$ | - | |
| Initial
recognition of operating lease right-of-use asset and liability | |
$ | - | | |
$ | 46,695 | |
The
accompanying notes are an integral part of these condensed consolidated financial statements.
HWH
International Inc. and Subsidiaries
Notes
to the Condensed Consolidated Financial Statements
For
the Three Months Ended March 31, 2024 and 2023
(Unaudited)
NOTE
1 — DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS
HWH
International Inc. (“HWH”) and its consolidated subsidiaries (collectively, the “Company”) operate a food and
beverage (“F&B”) business in Singapore and South Korea. The Company operates a membership model in which individuals
pay an upfront membership fee to become members. As members, these individuals receive discounted access to products and services offered
by the Company’s affiliates. Previously, the Company had approximately 9,000 members, primarily in South Korea. Currently, this
membership business has been temporarily suspended.
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”). The Company and Merger Sub are sometimes referred
to collectively as the “ACAX Parties.” Pursuant to the Merger Agreement, a 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.
The
Target was owned and controlled by certain member officers and directors of the Company and its sponsor. The Merger was consummated following
the receipt of the required approval by the stockholders of the Company and the shareholders of the Target and the satisfaction of certain
other customary closing conditions.
The
total consideration paid at Closing (the “Merger Consideration”) by the Company to the Target’s shareholders was $125,000,000,
and was payable in shares of the common stock, par value $0.0001 per share, of the Company (“Company Common Stock”). The
number of shares of the Company Common Stock paid to the shareholders of the Target as Merger Consideration was 12,500,000, with each
share being valued at $10.00.
NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements are presented in conformity with accounting principles generally accepted
in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission
(“SEC”). These interim financial statements have been prepared on the same basis as
the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal
recurring adjustments, which are necessary for a fair statement of the Company’s financial information. These interim results are
not necessarily indicative of the results to be expected for the year ending December 31, 2024 or any other interim periods or for any
other future years. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s
audited consolidated financial statements and the notes thereto included in the Company’s Form 10-K for the year ended November
30, 2023 filed on February 28, 2024 and audited consolidated financial statements of HWH Nevada for the year ended December 31, 2023
included in the form 8-K/A filed with SEC on March 25, 2024.
Through
November 30, 2023, HWH (then known as Alset Capital Acquisition Corp.) reported on a twelve month fiscal year that ended on November
30. In connection with the business combination, the Company’s fiscal year end was changed from November 30 to December 31. As
a result of this change, the Company had a one-month transition period that began on December 1, 2023 and ended on December 31, 2023.
For details see note 18 - Change in Fiscal Year.
The
condensed consolidated financial statements include all accounts of the Company and its majority owned and controlled subsidiaries. The
Company consolidates entities in which it owns more than 50% of the voting common stock and controls operations. All intercompany transactions
and balances among consolidated subsidiaries have been eliminated.
The
following chart describes the Company’s ownership of various subsidiaries:
The
Company mainly focuses on the F&B business. During the three months ended March 31, 2024 and 2023, substantially all of the Company’s
business was generated by its wholly owned subsidiaries, 0% and 6% from HWH World Inc. (“HWH Korea”) and 100% and 94% from
F&B business respectively; 40% and 45% from Alset F&B One Pte. Ltd (“F&B1”), 4% and 7% from Hapi Café
Korea Inc.(“HCKI”), 19% and 22% from Hapi Café SG Pte. Ltd. (“HCSGPL”), 17% and 21% from Alset F&B
(PLQ) Pte. Ltd. (“F&BPLQ”) and 20% and 0% from Ketomei Pte. Ltd. (“KPL”). HWH Korea was incorporated in the
Republic of Korea (“South Korea”) on May 7, 2019. HWH Korea is in the business of sourcing and distributing dietary supplements
and other health products through its network of members in South Korea. HWH Korea generates product sales via its direct sale model
as products are sold to its members. Through the use of a Hapi Gig platform that combines e-commerce, social media, and a customized
rewards system, HWH Korea equips, trains, and empowers its members. F&B1 was incorporated in Singapore on April 10, 2017, HCSGPL
was incorporated in Singapore on April 4, 2022, F&BPLQ was incorporated in Singapore on November 11, 2022 and KPL was incorporated
in Singapore on September 17, 2019. F&B1, HCSGPL, F&BPLQ and KPL are in the F&B business in Singapore.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities
Act”), as modified by the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), and it may 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
requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic
reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and
stockholder approval of any golden parachute payments not previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of
such extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which
is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult
or impossible because of the potential differences in accounting standards used.
Functional
and Reporting Currency
The
functional and reporting currency of the Company is the United States dollar (“$”). The financial records of the Company’s
subsidiaries located in South Korea, Singapore, Hong Kong, and Malaysia are maintained in their local currencies, the Korean Won (₩)
Singapore Dollar (S$) Hong Kong Dollar (HK$) and Malaysian Ringgit (MYR), which are also the functional currencies of these entities.
Use
of Estimates
The
preparation of the financial statements in conformity with US GAAP requires the Company’s management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance
sheet.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the balance sheet, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ
significantly from those estimates.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company had cash of $999,506 and $22,505,969 as of March 31, 2024 and December 31, 2023, respectively. The Company had no cash equivalents
as of March 31, 2024 and December 31, 2023.
Investments
held in Trust Account
At
March 31, 2024 and December 31, 2023, the Company had approximately $24,874 and $21 million, respectively, in investments in treasury
securities held in the Trust Account. In connection with the closing of Business Combination on January 9, 2024,
Class A Common Stock stockholders redeemed 1,942,108 shares for approximately $21 million held in the Trust Account.
Fair
Value of Financial Instruments
The
Company adopted Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures”, for
assets and liabilities measured at fair value on a recurring basis. ASC 820 defines fair value as the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which
requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC
820 describes three levels of inputs that may be used to measure fair value:
Level
1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities
Level
2: Observable market-based inputs or unobservable inputs that are corroborated by market data
Level
3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions
For
purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced sale or liquidation. The carrying values reported in balance sheets for current
assets and liabilities approximate their estimated fair market values based on the short-term maturity of these instruments.
Inventory
Inventory
is stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method and includes all costs
in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary
course of business less the estimated costs necessary to make the sale. As of March 31, 2024 and December 31, 2023, inventory consisted
of finished goods procured from suppliers. The Company continuously evaluates the need for reserve for obsolescence and possible price
concessions required to write-down inventory to its net realizable value. As of March 31, 2024, inventory consisted of finished goods
procured from suppliers. The Company continuously evaluates the need for reserve for obsolescence and possible price concessions required
to write-down inventory to its net realizable value.
Leases
The
Company follows FASB ASC Topic 842 in accounting for its operating lease right-of-use assets and operating lease liabilities. At inception
of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is or contains a lease if it conveys the
right to control the use of an identified asset for a period of time in exchange of a consideration. To assess whether a contract is
or contains a lease, the Company assesses whether the contract involves the use of an identified asset, whether it has the right to obtain
substantially all of the economic benefits from the use of the asset and whether it has the right to control the use of the asset. The
right-of-use assets and related lease liabilities are recognized at the lease commencement date. The Company recognizes operating lease
expenses on a straight-line basis over the lease term. For leases that contain related non-lease components, such as maintenance, the Company will account for these payments
as a single lease component.
Right-of-use
of assets
The
right-of-use of asset is measured at cost, which comprises the amount of the lease liability adjusted for any lease payments made at
or before the commencement date, plus any initial direct costs incurred and less any lease incentive received.
Lease
liabilities
Lease
liability is measured at the present value of the outstanding lease payments at the commencement date, discounted using the Company’s
incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise mainly of fixed lease payments.
Short-term
leases and leases of low value assets
The
Company has elected to not recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months
or less and leases of low value assets. Lease payments associated with these leases are expensed as incurred.
Property,
Plant and Equipment
Property,
plant and equipment are recorded at cost, less depreciation. Repairs and maintenance are expensed as incurred. Expenditures incurred
as a consequence of acquiring or using the asset, or that increase the value or productive capacity of assets are capitalized. When property
and equipment is retired, sold, or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are
removed from the accounts and any gain or loss is included in statement of operations. Depreciation is computed by the reducing balance
method (after considering their respective estimated residual values) over the estimated useful lives of the respective assets as follows:
SCHEDULE
OF PROPERTY PLANT AND EQUIPMENT
| Office
Equipment |
3
– 5 years |
| Furniture
and Fittings |
3
– 5 years |
| Kitchen
Equipment |
3
– 5 years |
| Operating
Equipment |
3
– 5 years |
| Leasehold
Improvements |
Shorter
of lease life or asset life |
The
Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying
value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition.
In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an
amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment
include current operating results, trends, and prospects, as well as the effects of obsolescence, demand, competition, and other economic
factors.
Deposit
Deposit
represents mostly rental deposit paid for the office used.
Revenue
Recognition
ASC
606 – Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information about
the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services
to customers.
In
accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized
reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services. The provisions
of ASC 606 include a five-step process by which the determination of revenue recognition, depicting the transfer of goods or services
to customers in amounts reflecting the payment to which the Company expects to be entitled in exchange for those goods or services. ASC
606 requires the Company to apply the following steps:
(1)
identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price;
(4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, performance
obligations are satisfied.
The
Company generates its revenue primarily from membership fees, product sales and F&B business.
Membership
Fee: The Company collects an annual membership fee from its members. The fee is fixed, paid in full at the time upon joining the
membership and is not refundable. The Company’s performance obligation is to provide its members the right to (a) purchase products
from the Company, (b) access to certain back-office services, (c) receive commissions and (d) attend corporate events. The associated
performance obligation is satisfied over time, generally over the term of the membership agreement which is for a one-year period. The
Company recognizes revenue from membership fee over the one-year period of the membership.
Product
Sales: The Company’s performance obligation is to transfer ownership of its products to its Members. The Company generally
recognizes revenue when product is delivered to its members. 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 member returns a product to the Company on a timely basis, they may obtain a replacement product from the Company for such returned
products. We do not have buyback program. However, when the customer requests a return and management decides that the refund is necessary,
we initiate the refund after deducting all the benefits that a member has earned. The returns are deducted from our sales revenue on
our financial statements. Allowances for product and membership 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 and membership returns for the three months ended March 31, 2024
and 2023 were approximately $0 and $1,162, respectively. The table below represents a breakout of the returns related to product sales
and the returns related to memberships:
SCHEDULE
OF PRODUCT SALES AND RETURNS RELATED TO MEMBERSHIPS
| | |
Membership | | |
Products | | |
Total | |
| | |
Returns | |
| | |
Membership | | |
Products | | |
Total | |
| | |
$ | | |
$ | | |
$ | |
| | |
| | |
| | |
| |
| March 31, 2024 | |
| - | | |
| - | | |
| - | |
| March 31, 2023 | |
| 1,162 | | |
| - | | |
| 1,162 | |
| Revenue returns | |
| 1,162 | | |
| - | | |
| 1,162 | |
Food
and Beverage: The revenue received from Food and Beverage business for the three months ended March 31, 2024 and 2023 were $286,110
and $187,776, respectively.
Contract
assets and liabilities
Below
is a summary of the beginning and ending balances of the Company’s contract assets and liabilities as of March 31, 2024 and December
31, 2023.
SCHEDULE
OF CONTRACT ASSETS AND LIABILITIES
| | |
March 31,
2024 | | |
December 31,
2023 | |
| Prepaid Sales Commission | |
| | |
| |
| | |
| | |
| |
| Balances at the beginning of the period | |
$ | - | | |
$ | 6,839 | |
| Movement for the period | |
| - | | |
| (6,839 | ) |
| Balances at the end of the period | |
$ | - | | |
$ | - | |
| | |
March 31,
2024 | | |
December 31,
2023 | |
| Deferred Revenue | |
| | |
| |
| | |
| | |
| |
| Balances at the beginning of the period | |
$ | - | | |
$ | 21,198 | |
| Movement for the period | |
| - | | |
| (21,198 | ) |
| Balances at the end of the period | |
$ | - | | |
$ | - | |
Value-added
Tax
The
Company is obligated to pay value-added tax (“VAT”), among other things, on its inventory purchase as well as its rent payments
and payment of professional fees. As of March 31, 2024 and December 31, 2023, included in other receivables was VAT paid of $37,311 and
$37,179, respectively, due primarily to the purchase of inventory and payment of rents and accounting fees.
Cost
of revenue
Cost
of revenue is consisted of the cost of procuring finished goods from suppliers and related shipping and handling fees from 3rd
parties money platform, contractor fees for part-time staff, franchise commission and sales commission from membership business.
Below
is a breakdown of the Company’s cost of revenue for the three months ended March 31, 2024 and 2023.
SCHEDULE
OF COST OF REVENUE
| | |
Total | |
| March 31, 2024 | |
| |
| | |
| |
| Finished goods | |
$ | 78,507 | |
| Related shipping | |
| 2,275 | |
| Handling fee | |
| 10,927 | |
| Contractor fee | |
| 11,855 | |
| Franchise commission | |
| 4,953 | |
| Sales commission | |
| (234 | ) |
| Depreciation | |
| 14,530 | |
| Total of Cost of revenue | |
$ | 122,813 | |
| | |
| | |
| March 31, 2023 | |
| | |
| | |
| | |
| Finished goods | |
$ | 36,113 | |
| Related shipping | |
| 2,377 | |
| Handling fee | |
| 4,037 | |
| Contractor fee | |
| 4,024 | |
| Franchise commission | |
| 4,975 | |
| Sales commission | |
| 11,868 | |
| Depreciation | |
| 14,375 | |
| Total of Cost of revenue | |
$ | 77,769 | |
Shipping
and Handling Fees
The
Company utilizes the practical expedient under ASC 606-10-25-18B to account for its shipping and handling as fulfillment activities,
and not a promised service (a revenue element). Shipping and handling fees are included in costs of revenue within the statements of
operations.
Commission
Expense
The
Company compensates its sales leaders with leadership incentives for services rendered, relating to the development, retention, and management
of their sales organizations. Leadership incentives are payable based on achieved sales volume, which are recorded in cost of revenue.
Member will get 25% commission of the membership fee income if the member successfully refers a new member to subscribe to the membership.
The commission will be payable after the referee’s membership is confirmed and been paid by the new member.
Advertising
Expenses
Costs
incurred for advertising the Company’s products are charged to operations as incurred. Advertising expenses for the three months
ended March 31, 2024 and 2023 were $2,242 and $4,095, respectively.
Income
Taxes
The
Company accounts for income taxes pursuant to the provision of ASC 740-10, “Accounting for Income Taxes” (“ASC 740-10”),
which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach
requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets
for which management believes it is more likely than not that the net deferred tax asset will not be realized. Tax positions that meet
the more likely than not recognition threshold are measured at the largest amount of tax benefit that is more than 50 percent likely
of being realized upon settlement with the applicable taxing authority.
The
Company follows the provision of ASC 740-10 related to Accounting for Uncertain Income Tax Positions. When tax returns are filed, there
may be uncertainty about the merits of positions taken or the amount of the position that would be ultimately sustained. In accordance
with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which,
based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination,
including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.
The
Company has not recorded any unrecognized tax benefits. The Company’s policy is to recognize interest and penalties related to
income taxes in income tax expense.
Earnings
(Loss) per Share
The
Company presents basic and diluted earnings (loss) per share data for its common shares. Basic earnings (loss) per share is calculated
by dividing the profit or loss attributable to common stock shareholders of the Company by the weighted-average number of common shares
outstanding during the year, adjusted for treasury shares held by the Company.
Diluted
earnings (loss) per share is determined by adjusting the profit or loss attributable to common stock shareholders and the weighted-average
number of common shares outstanding, adjusted for treasury shares held, for the effects of all dilutive potential ordinary shares, which
comprise convertible securities, such as stock options, convertible bonds and warrants. At March 31, 2024 there were 4,549,375 potentially
dilutive warrants outstanding. At March 31, 2023 there were 4,549,375 potentially dilutive warrants outstanding and 909,875
potentially dilutive underlying rights.
Non-controlling
interests
Non-controlling
interests represent the equity in a subsidiary not attributable, directly or indirectly, to owners of the Company, and are presented
separately in the consolidated statements of operation and comprehensive income, and within equity in the Consolidated Balance Sheets,
separately from equity attributable to owners of the Company.
On
March 31, 2024 and December 31, 2023, the aggregate non-controlling interests in the Company were $164,499 and $8,666, respectively.
Liquidity
and Capital Resources
In
the three months ended March 31, 2024, we incurred a net loss, a loss from operations and negative cash flow from operations as we expanded
our business of operating cafés and restructured our membership business.
Notwithstanding
the above, 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 shall consist of plans to take over leases of existing Hapi Cafes we currently do not own, as we
look to add Hapi Cafes over the next two (2) years. If we take over these existing leases, it will require a minimum investment for each
lease we take over for each Hapi Café. Proceeds received as a result of the anticipated business combination, will allow us to
seek these expansion plans. Depending on the amount of proceeds we raise as part of the anticipated business combination, we may or may
not need or seek additional funding or alter our strategic growth plans after the business combination is effectuated. There is no guarantee
that we will be able to execute on our plans as laid out above.
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 a letter of financial support from Alset International Limited and Alset Inc., a direct and indirect majority
owner of the Company, respectively. Alset International Limited and 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.
NOTE
3 - MERGER WITH HWH INTERNATIONAL INC. (A NEVADA CORPORATION)
HWH
International Inc. (f.k.a. Alset Capital Acquisition Corp.; “SPAC”, the” Company”) was a special purpose acquisition
company, incorporated in Delaware on October 20, 2021 and 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”).
On January 9, 2024, the Company, HWH International Inc. (a Nevada corporation, “HWH-NV”) and HWH Merger Sub Inc. consummated
the merger (the “Reverse Recapitalization”) pursuant to an agreement and plan of merger dated as of September 9, 2022.
The
transaction was accounted for as a Reverse Recapitalization in accordance with accounting principles generally accepted in the United
States (“GAAP”). Under this method of accounting, SPAC was treated as the “acquired” company for financial reporting
purposes. This determination is primarily based on the fact that subsequent to the Reverse Recapitalization, HWH-NV stockholders comprise
a majority of voting power on the Company, most of senior management of HWH-NV continued as senior management of the combined company
and identified a majority of the members of the board of directors of the combined company, both companies are under common control;
and HWH-NV’s operations comprise the ongoing operations of the combined company. Accordingly, for accounting purposes, the Company
is considered to be a continuation of HWH-NV, with the net identifiable assets of SPAC deemed to have been acquired by HWH-NV in exchange
for HWH-NV common shares accompanied by a recapitalization, with no goodwill or intangible assets recorded.
In
connection with the business Combination:
| |
● |
The
holders of 8,591,072 Public Shares properly exercised their right to have such shares redeemed for a full pro rata portion of the
trust account holding the proceeds from the IPO. |
| |
|
|
| |
● |
Immediately
prior to the consummation of the Reverse Recapitalization (i) each of the 1,972,896 shares of SPAC’s Class A Common Stock was
cancelled and converted into 1,972,896 shares of the Company’s common stock; (ii) each of the issued and outstanding 2,156,250
shares of SPAC’s Class B Common Shares were converted into 2,156,250 shares of SPAC’s Class A Common Stock and subsequently
into 2,156,250 shares of the Company’s common stock; (iii) each of the SPAC’s 476,890 units were split into their component
securities; and (iv) 909,875 new shares of the Company’s common stock were issued in connection with the conversion of the
SPAC’s rights into the Company’s common shares. |
| |
● |
12,500,000
shares of the Company’s common stock were delivered as consideration in the Business Combination |
| |
|
|
| |
● |
149,443
shares of the Company’s common stock were issued to a third party as payment for $1,509,375 of underwriting compensation. |
The
transaction described above was a transaction between entities under common control. SPAC, prior to the Business Combination, was in
26% owned by Alset International Limited a public company listed on the Singapore Exchange Securities Trading Limited and 32% owned
by Alset Inc., the ultimate owner of both SPAC and HWH-NV. HWH-NV was wholly-owned by Alset International Limited. In the transactions
under common control, financial statements and financial information were presented as of the beginning of the period as though the assets
and liabilities had been transferred at that date.
NOTE
4 — ACCOUNTS RECEIVABLE, NET
Accounts
receivable, net at March 31, 2024, December 31, 2023, March 31, 2023 and December 31, 2022 of $29,156, $28,611, $14,302 and $9,070, respectively,
and represents collection received by the credit card processor in F&B business and rent receivable. Accounts receivable are recorded
at invoiced amounts net of an allowance for credit losses and do not bear interest. The allowance for credit losses is the Company’s
best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The measurement and recognition
of credit losses involves the use of judgment. Management’s assessment of expected credit losses includes consideration of current
and expected economic conditions, market and industry factors affecting the Company’s customers (including their financial condition),
the aging of account balances, historical credit loss experience, customer concentrations, customer creditworthiness, and the existence
of sources of payment The Company also establishes an allowance for credit losses for specific receivables when it is probable that the
receivable will not be collected and the loss can be reasonably estimated. Accounts receivable considered uncollectible are charged against
the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of March 31,
2024 and December 31, 2023, the allowance for credit losses was an immaterial amount. The Company does not have any off-balance sheet
credit exposure related to its customers.
NOTE
5 — PREPAID COMMISSIONS
During
the normal course of business, the Company pays commission to its members for product sales as well as membership sales. Prepaid commissions
are recorded for commissions paid on membership sales and recognized as an expense over the same period as the related membership revenue.
NOTE
6 — INVENTORY
As
of March 31, 2024 and December 31, 2023, the balance of finished goods was $3,598 and $1,977, respectively. There is no provision for
slow-moving or obsolete inventory during the three months ended March 31, 2024 and 2023.
NOTE
7 — PROPERTY AND EQUIPMENT, NET
The
components of property and equipment are as follows:
SCHEDULE
OF PROPERTY AND EQUIPMENT, NET
| | |
Total | |
| March 31, 2024 | |
| |
| | |
| |
| Office Equipment | |
$ | 45,605 | |
| Furniture and Fittings | |
| 45,303 | |
| Kitchen Equipment | |
| 22,470 | |
| Operating Equipment | |
| 8,325 | |
| Leasehold Improvements | |
$ | 118,983 | |
| | |
| | |
| Depreciation: | |
| | |
| Office equipment | |
| (30,716 | ) |
| Furniture and Fittings | |
| (34,448 | ) |
| Kitchen Equipment | |
| (9,517 | ) |
| Operating Equipment | |
| (3,815 | ) |
| Leasehold Improvements | |
| (48,670 | ) |
| Total, net | |
$ | 113,520 | |
| | |
| | |
| December 31, 2023 | |
| | |
| | |
| | |
| Office Equipment | |
$ | 30,861 | |
| Furniture and Fittings | |
| 46,376 | |
| Kitchen Equipment | |
| 23,044 | |
| Operating Equipment | |
| 8,522 | |
| Leasehold Improvements | |
| 122,083 | |
| | |
| | |
| Depreciation: | |
| | |
| Office Equipment | |
| (15,848 | ) |
| Furniture and Fittings | |
| (31,518 | ) |
| Kitchen Equipment | |
| (8,368 | ) |
| Operating Equipment | |
| (3,373 | ) |
| Leasehold Improvements | |
| (42,549 | ) |
| Total, net | |
$ | 129,230 | |
For
the three months ended March 31, 2024 and 2023, the Company recorded depreciation expenses of $14,643 and $14,591, respectively.
NOTE
8 — ACCRUED COMMISSIONS
Accrued
commissions as of March 31, 2024 and December 31, 2023 represent mainly sales commission payable. For the three months ended March 31,
2024 and 2023, sales commission expenses of $0
and $11,868
respectively, were recorded and included in cost
of revenue in the Company’s consolidated statement of operations.
NOTE
9 — DUE TO ALSET INC.
Alset
Inc (“AEI”) is the ultimate holding company that is incorporated in the United States of America. The amount due to AEI represents
short-term working capital advances to the Company for its daily operations. There is no written, executed agreement and no financial/non-financial
covenants and the amount due to AEI is non-interest bearing. Since the amount due to AEI is due upon request, it is classified as a current
liability. The amounts due to AEI at March 31, 2024 and December 31, 2023 are $202,645 and $202,645 respectively.
NOTE
10 — DUE TO/FROM RELATED PARTIES
Due
to Alset International Ltd.
Alset
International Ltd. (“AIL”) is incorporated in Singapore and is a fellow subsidiary of the common parent company, Alset Inc.
The amount due to AIL represents short-term working capital advances to the Company for its daily operations. There is no written, executed
agreement and no financial/non-financial covenants and the amount due to AIL is non-interest bearing. Since the amount due to AIL is
due upon request, it is classified as a current liability. The amounts due to AIL at March 31, 2024 and December 31, 2023 are $2,552,291
and $1,729,901, respectively.
Due
to Alset Business Development Pte. Ltd.
Alset
Business Development Pte. Ltd. (“ABD”) is incorporated in Singapore and is a fellow subsidiary of the common parent company,
Alset Inc. The amount due to ABD represents amount loaned by ABD to Hapi Cafe Inc. (“HCI”) for the investment on Ketomei
Pte. Ltd (“Ketomei”) in March 2022. There is no written, executed agreement and no financial/non-financial covenants and
the amount due to ABD is non-interest bearing. Since the amount due to ABD is due upon request, it is classified as a current liability.
The amounts due to ABD at March 31, 2024 and December 31, 2023 are $180,237 and $184,507, respectively.
Due
to BMI Capital Partners International Ltd.
BMI
Capital Partners International Ltd. (“BMI”) is incorporated in Hong Kong and is a fellow subsidiary of the common parent
company, Alset Inc. The amount due to BMI represents short-term working capital advances to the Company for its daily operation. There
is no written, executed agreement and no financial/non-financial covenants and the amount due to BMI is non-interest bearing. Since the
amount due to BMI is due upon request, it is classified as a current liability. The amounts due to BMI at March 31, 2024 and December
31, 2023 are $1,439 and $1,442, respectively.
General
and Administrative Services
Commencing
on the date the Company’s Units were first listed on the Nasdaq, the Company has agreed to pay to Alset Management Group Inc. a
total of $10,000 per month for office space, utilities and secretarial and administrative support for up to 24 months. Upon completion
of the Initial Business Combination, the Company ceased paying these monthly fees. During the three months ended March 31, 2024 and 2023,
the Company recorded a charge of $0 and $30,000, to the statement of operations pursuant to the agreement.
Related
Party Loans
Working
Capital Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain
of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of
a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of the notes may be converted upon completion
of a Business Combination into units at a price of $10.00 per unit. Such units would be identical to the Private Placement Units. In
the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay
the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of March 31,
2024 and December 31, 2023, there were no amounts outstanding under the Working Capital Loans.
Extension Loan
On
May 1, 2023, the Company amended the Investment Management Trust Agreement (the “Trust Agreement”) with Wilmington Trust,
National Association, a national banking association (“Wilmington Trust”), which was entered into on January 31, 2022 and
on May 2, 2023 the Company filed an Amendment to the Amended and Restated Certificate of Incorporation. The Trust Agreement and Amended
and Restated Certificate of Incorporation are now amended, in part, so that the Company’s ability to complete a business combination
may be extended in additional increments of one month up to a total of twenty-one (21) additional months from the closing date of the
Offering, subject to the payment into the trust account by the Company of one-third of 1% of the funds remaining in the trust account
following any redemptions in connection with the approval of the amendment to the Company’s Amended and Restated Certificate of
Incorporation. The Sponsor has funded the first 30-day extension payment on May 3, 2023. The Sponsor has also made subsequent extension
payments on June 5th and July 6th of $68,928 and $69,158, respectively. The Sponsor is entitled to the repayment
of these extension payments, without interest. If the Company completes its initial Business Combination, it will, at the option of the
Sponsor, repay the extension payments out of the proceeds of the Trust Account released to it or issue securities of the Company in lieu
of repayment. As of March 31, 2024 and December 31, 2023 there was $205,305 outstanding under the extension loan.
Due
from Alset Acquisition Sponsor LLC
Alset
Acquisition Sponsor LLC (“Sponsor”) owed $205,305 and $205,305 at March 31, 2024 and December 31, 2023, respectively, which
represents expenses paid by the Company on behalf of the Sponsor.
NOTE
11 — RELATED PARTY TRANSACTIONS
On
June 10, 2021, Hapi Café Inc. (“HCI”) signed a convertible loan agreement with Ketomei Pte. Ltd. (“Ketomei”),
pursuant to which HCI has agreed to grant Ketomei a loan of an aggregate principal amount of $75,525 (SG$100,000). On March 21, 2022,
HCI signed a legally binding term sheet with Ketomei, and HCI has agreed to invest in Ketomei $258,186 (SG$350,000) for 28% interest
in Ketomei. The investment was partially paid by the $75,525 (SG$100,000) loan borrowed to Ketomei and the accrued interest of $6,022
(SG$6,433). The balance of $183,311 (SG$243,567) was paid in cash.
On
July 28, 2022 HCI entered into binding term sheet with Ketomei and Tong Leok Siong Constant, pursuant to which HCI lent Ketomei $43,254
(SG$60,000). This loan had a 0% interest rate for the first 60 days and an interest rate of 8% per annum afterwards.
On
August 4, 2022, the same parties entered into another binding term sheet (the “Second Term Sheet”) pursuant to which HCI
agreed to lend Ketomei up to $260,600 (SG$360,000) pursuant to a convertible loan, with a term of 12 months. After the initial 12 months,
the interest on such loan will be 8%. As of August 31, 2023, the $263,766 (SG$360,000) loan was paid by the $214,903 (SG$293,310) loan
borrowed to Ketomei and $48,862 (SG$66,690) was paid for the expenses on behalf of Ketomei. In addition, pursuant to the Second Term
Sheet, the July 28, 2022, loan was modified to include conversion rights. The Parties agree that the conversion rate will be at approximately
$0.022 per share.
On
August 31, 2023, the same parties entered into another binding term sheet pursuant to which HCI agreed to lend Ketomei up to $36,634
(SG$50,000) pursuant to a convertible loan, with a term of 12 months. After the initial 12 months, the interest on such loan will be
3.5%. As of October 31, 2023, the $37,876 (SG$50,000) loan was paid to Ketomei.
On
October 26, 2023, the same parties entered into another binding term sheet pursuant to which HCI agreed to lend Ketomei up to $37,876
(SG$50,000) pursuant to a non- convertible loan, with a term of 12 months. After the initial 12 months, the interest on such loan will
be 3.5%. As of March 31, 2024, the $37,000 (SG$50,000) loan was paid by the $21,134 (SG$28,560) loan borrowed to Ketomei and $15,865
(SG$21,440) was paid for the expenses on behalf of Ketomei.
On
February 20, 2024, the Company invested an additional $312,064
(SG$420,000)
for an additional 38.41%
ownership interest in Ketomei by converting $312,064 (SG$420,000) convertible loan. The loan was impaired at the year ended December 31, 2023,
therefore, $312,064 (SG$420,000) was transferred from impairment of convertible loan to impairment of equity method investment. After this additional investment, the Company owns 55.65%
of Ketomei’s outstanding shares and Ketomei is consolidated into the financial statements of HWH International Inc. beginning
on February 20, 2024.
On
March 20, 2024, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with Sharing
Services Global Corporation (“SHRG”), pursuant to which the Company purchased from SHRG a (i) Convertible Promissory Note
(the “Convertible Note”) in the amount of $250,000, convertible into 208,333,333 shares of SHRG’s common stock at the
option of the Company, and (ii) certain warrants exercisable into 208,333,333 shares of SHRG’s common stock at an exercise price
of $0.0012 per share, the exercise period of the warrant being five (5) years from the date of the Securities Purchase Agreement, for
an aggregate purchase price of $250,000. At the time of filing, the Company has not converted any of the debt contemplated by the Convertible
Note nor exercised any of the warrants.
Financial
assets measured at fair value on a recurring basis are summarized below and disclosed on the consolidated balance sheet as of March 31,
2024 and December 31, 2023:
SCHEDULE OF FINANCIAL ASSETS MEASURED AT FAIR VALUE ON A RECURRING BASIS
| | |
Fair Value Measurement Using | | |
Amount at | |
| | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Fair Value | |
| March 31, 2024 | |
| | | |
| | | |
| | | |
| | |
| Asset | |
| | | |
| | | |
| | | |
| | |
| Warrants – SHRG | |
$ | - | | |
$ | 141,667 | | |
$ | - | | |
$ | 141,667 | |
| Convertible loans receivable – SHRG | |
| - | | |
| 324,521 | | |
| - | | |
$ | 324,521 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total Investment in securities at Fair Value | |
$ | - | | |
$ | 466,188 | | |
$ | - | | |
$ | 466,188 | |
The
fair value of the SHRG warrants under level 2 category as of March 31, 2024 was calculated using a Black-Scholes valuation model valued
with the following weighted average assumptions:
SCHEDULE
OF FAIR VALUE WEIGHTED AVERAGE ASSUMPTIONS
| | |
March
31, | |
| | |
2024 | |
| | |
| |
| Stock price | |
$ | 0.0016 | |
| Exercise price | |
$ | 0.0012 | |
| Risk free
interest rate | |
| 4.22 | % |
| | |
| | |
| Annualized
volatility | |
| 136.81 | % |
| Dividend
Yield | |
$ | 0.00 | % |
| Year
to maturity | |
| 4.96 | |
| Warrants measurement input | |
| 4.96 | |
The
Company has elected to recognize the convertible loan at fair value and therefore there was no further evaluation of embedded features
for bifurcation. The Company engaged third party valuation firm to perform the valuation of convertible loans. The fair value of the
convertible loans is calculated using the binomial tree model based on probability of remaining as straight debt using discounted cash
flow with the following assumptions:
| | |
March 31,
2024 | |
| Risk-free
interest rate | |
| 4.417 | % |
| Expected
life | |
| 2.96
year | |
| Discount
rate | |
| 6.00 | % |
| Expected
volatility | |
| 132.407 | % |
| Expected
dividend yield | |
| 0 | % |
| Debt
measurement input | |
| 0 | % |
| Fair
value | |
$ | 324,521 | |
Changes
in the observable input values would likely cause material changes in the fair value of the Company’s Level 2 financial instruments.
A significant increase (decrease) in this likelihood would result in a higher (lower) fair value measurement.
Revenue
from F&B business amounting to approximately $1,344 and $1,314 was related to corporate sales. That revenue was derived from corporate
sales to related parties who purchased meals and paid for their staff, during the three months ended March 31, 2024 and 2023, respectively.
Included
in Accounts Receivable, net at March 31, 2024 and December 31, 2023 is $8,953 and $7,405, respectively, of amounts due from related parties.
Included
in other income during the three months ended March 31, 2024 and 2023 is $1,819 and $1,723, respectively of rental income from related
parties.
NOTE
12 — STOCKHOLDERS’ EQUITY
The
total amount of authorized capital stock of the Company consists of 56,000,000 shares, consisting of (a) 55,000,000 shares of common
stock (the “Common Stock”), and (b) 1,000,000 shares of preferred stock (the “Preferred Stock”). As of March
31, 2024, there were no shares of preferred stock outstanding.
The
Company previously had shares of Class B common stock outstanding, which automatically converted into Class A common stock at the time
of a Business Combination, on a one-for-one basis.
Rights
- Each holder of a right automatically received one-tenth (1/10) of one share of common stock upon consummation of the initial
Business Combination.
Warrants
— Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation
of the Units and only whole warrants will trade. The Public Warrants became exercisable 30 days after the completion of a Business Combination.
The Public Warrants will expire five years after the completion of a Business Combination.
The
Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation
to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class
A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A
common stock is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from
registration is available. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue
any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified
under the securities laws of the state of residence of the exercising holder, or an exemption from registration is available.
Redemption
of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $18.00 — Once the warrants become exercisable,
the Company may redeem the outstanding Public Warrants:
| |
● |
in
whole and not in part; |
| |
|
|
| |
● |
at
a price of $0.01 per Public Warrant; |
| |
|
|
| |
● |
upon
a minimum of 30 days’ prior written notice of redemption, or the 30-day redemption period to each warrant holder; and |
| |
|
|
| |
● |
if,
and only if, the last reported sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits,
stock dividends, reorganization, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on
the trading day prior to the date on which the Company sends the notice of redemption to warrant holders. |
If
and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register
or qualify the underlying securities for sale under all applicable state securities laws.
If
the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that
wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise
price and number of common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in
the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as
described below, the Public Warrants will not be adjusted for issuances of common stock at a price below its exercise price. Additionally,
in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination
within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive
any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held
outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
The
Private Placement Warrants will be identical to the Public Warrants underlying the Units being sold in the Initial Public Offering except
the Private Placement Warrants (including the Class A common stock issuable upon exercise of the Private Placement Warrants) will not
be transferable, assignable or salable until 30 days after the completion of an Initial Business Combination, subject to certain exceptions.
The
following table summarizes the warrant activity for the three months ended March 31, 2024 and 2023.
SCHEDULE
OF WARRANT ACTIVITY
| | |
Warrant
for | | |
Weighted | | |
Remaining
Contractual | | |
Aggregate | |
| | |
Common | | |
Average | | |
Term | | |
Intrinsic | |
| | |
Shares | | |
Exercise
Price | | |
(Years) | | |
Value | |
| Warrants Outstanding
as of December 31, 2023 | |
| 4,549,375 | | |
$ | 11.5 | | |
| 4.78 | | |
$ | - | |
| Warrants Vested and exercisable
at December 31, 2023 | |
| 4,549,375 | | |
$ | 11.5 | | |
| 4.78 | | |
$ | - | |
| Granted | |
| - | | |
| - | | |
| | | |
| | |
| Exercised | |
| - | | |
| - | | |
| | | |
| | |
| Forfeited,
cancelled, expired | |
| - | | |
| - | | |
| | | |
| | |
| Warrants Outstanding as of
March 31, 2024 | |
| 4,549,375 | | |
$ | 11.5 | | |
| 4.78 | | |
$ | - | |
| Warrants Vested and exercisable
at March 31, 2024 | |
| 4,549,375 | | |
$ | 11.5 | | |
| 4.78 | | |
$ | - | |
| | |
Warrant for | | |
Weighted | | |
Remaining
Contractual | | |
Aggregate | |
| | |
Common | | |
Average | | |
Term | | |
Intrinsic | |
| | |
Shares | | |
Exercise
Price | | |
(Years) | | |
Value | |
| Warrants Outstanding
as of December 31, 2022 | |
| 4,549,375 | | |
$ | 11.5 | | |
| 5.78 | | |
$ | - | |
| Warrants Vested and exercisable
at December 31, 2023 | |
| 4,549,375 | | |
$ | 11.5 | | |
| 5.78 | | |
$ | - | |
| Granted | |
| - | | |
| - | | |
| | | |
| | |
| Exercised | |
| - | | |
| - | | |
| | | |
| | |
| Forfeited,
cancelled, expired | |
| - | | |
| - | | |
| | | |
| | |
| Warrants Outstanding as of
March 31, 2023 | |
| 4,549,375 | | |
$ | 11.5 | | |
| 5.78 | | |
$ | - | |
| Warrants Vested and exercisable
at March 31, 2023 | |
| 4,549,375 | | |
$ | 11.5 | | |
| 5.78 | | |
$ | - | |
Issuance
of HWH Shares to EF Hutton
On
December 18, 2023, the Company entered into a Satisfaction and Discharge of Indebtedness Agreement in connection with an underwriting
agreement previously entered into by the Company and EF Hutton, a division of Benchmark Investments, LLC, under which in lieu of the
Company tendering the full amount due of $3,018,750,
the underwriters accepted a combination of $325,000
in cash 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. The 149,443
shares were issued as of the price of $10.10,
totaling the amount of $1,509,375.
The fair value of the Company shares at issuance on January 9, 2024 was $2.82 per share or $421,429.
No gain or loss was recognized upon issuance of the shares on January 9, 2024 as this was an adjustment to prior underwriting costs accounted
for in equity.
NOTE
13 —LEASES
The
Company has operating leases for its office spaces in South Korea and two F&B stores in Singapore. The related lease agreements do
not contain any material residual value guarantees or material restrictive covenants. Since the Company’s leases do not provide
an implicit rate that can be readily determined, management uses a discount rate based on the incremental borrowing rate. The Company’s
weighted-average remaining lease term relating to its operating leases is 1.23 years, with a weighted-average discount rate is 4%.
The
Company has also utilized the following practical expedients:
| |
● |
Short-term
leases – for leases that are for a period of 12 months or less, the Company will not apply the recognition requirements of
ASC 842. |
| |
|
|
| |
● |
For
leases that contain related non-lease components, such as maintenance, the Company will account for these payments as a single lease
component. |
The
current portion of operating lease liabilities and the non-current portion of operating lease liabilities are presented on the balance
sheets. Total lease expenses amounted to $125,143 and $130,044 which were included in general and administrative expenses in the statements
of operations for the three months ended March 31, 2024 and March 31, 2023, respectively. Total cash paid for operating leases amounted
to $170,801 and $144,209 for the three months ended March 31, 2024 and 2023, respectively. In addition, the Company leases certain equipment
on a short-term (12 months or less) basis. Total short-term lease expense of $3,441 and $12,107 is included in general and administrative
expenses for the three months ended March 31, 2024 and 2023, respectively. Supplemental balance sheet information related to operating
leases was as follows:
SCHEDULE OF BALANCE SHEET INFORMATION RELATED TO OPERATING LEASES
| | |
March 31, 2024 | | |
December 31, 2023 | |
| | |
| | |
| |
| Right-of-use assets | |
$ | 459,339 | | |
$ | 598,508 | |
| | |
| | | |
| | |
| Lease liabilities - current | |
$ | 362,343 | | |
$ | 429,687 | |
| Lease liabilities - non-current | |
| 110,344 | | |
| 182,380 | |
| Total lease liabilities | |
$ | 472,687 | | |
$ | 612,067 | |
As
of March 31, 2024, the aggregate future minimum rental payments under non-cancelable agreement are as follows:
SCHEDULE OF AGGREGATE FUTURE MINIMUM RENTAL PAYMENTS
| Maturity of Lease Liabilities | |
Total | |
| | |
| |
| 12 months ended March 31, 2025 | |
$ | 374,451 | |
| 12 months ended March 31, 2026 | |
| 111,616 | |
| Total undiscounted lease payments | |
$ | 486,067 | |
| Less: Imputed interest | |
| (13,380 | ) |
| Present value of lease liabilities | |
$ | 472,687 | |
| Operating lease liabilities - Current | |
| 362,343 | |
| Operating lease liabilities - Non-current | |
$ | 110,344 | |
NOTE
14 — COMMITMENTS AND CONTINGENCIES
From
time to time the Company may be named in claims arising in the ordinary course of business. Currently, no legal proceedings, government
actions, administrative actions, investigations or claims are pending against the Company or involve the Company that, in the opinion
of management, could reasonably be expected to have a material adverse effect on its business and financial condition. For all periods
presented, the Company was not a party to any pending material litigation or other material legal proceedings.
NOTE
15 —DISAGGREGATION OF REVENUE
Selected
financial information of the Company’s operating revenue for disaggregated revenue purposes by revenue source are as follows: Product
sales only represent sales to members, not third parties who are not members.
SCHEDULE OF DISAGGREGATION OF REVENUE
| | |
Three Months
Ended March 31, 2024 | | |
Three Months
Ended March 31, 2023 | |
| Membership Fee | |
$ | - | | |
$ | 12,583 | |
| Product Sales | |
| - | | |
| 203 | |
| Food and Beverage | |
| 286,110 | | |
| 187,776 | |
| Total | |
$ | 286,110 | | |
$ | 200,562 | |
| Revenue | |
$ | 286,110 | | |
$ | 200,562 | |
NOTE
16 — CONCENTRATION RISK
The
Company maintains cash balances at various financial institutions in different countries. These balances are usually secured by the central
banks’ insurance companies. At times, these balances may exceed the insurance limits. As of March 31, 2024 and December 31, 2023,
uninsured cash balances were $621,561 and $21,989,947, respectively.
Major
Suppliers
For
the three months ended March 31, 2024, five suppliers accounted for approximately over 80% of the Company’s total costs of revenue.
For
the three months ended 31, 2023, five suppliers accounted for approximately over 62% of the Company’s total costs of revenue.
NOTE
17 — INVESTMENT IN ASSOCIATE & CONVERTIBLE NOTE RECEIVABLE, RELATED PARTY
Until
February 20, 2024, the Company held an equity method investment in a related party, Ketomei, and also had a convertible note receivable
with Ketomei. The following table shows the activity of the investment and note during the three months ended 2024.
SCHEDULE OF EQUITY METHOD INVESTMENT IN A RELATED PARTY
| | |
December 31,
2023 | | |
Additions | | |
Loss on
investment | | |
Impairment | | |
March 31,
2024 | |
| Investment in associate, related party | |
$ | - | | |
$ | 310,796 | | |
$ | (14,744 | ) | |
$ | (296,052 | ) | |
$ | - | |
| Convertible note receivable, related party | |
| - | | |
| (249,352 | ) | |
| - | | |
| 249,352 | | |
| - | |
| Total | |
$ | - | | |
$ | 61,443 | | |
$ | (14,744 | ) | |
$ | (46,699 | ) | |
$ | - | |
| | |
December 31,
2022 | | |
Additions | | |
Loss on
investment | | |
Impairment | | |
March 31,
2023 | |
| Investment in associate, related party | |
$ | 155,369 | | |
$ | 3,318 | | |
$ | (53,199 | ) | |
$ | - | | |
$ | 105,488 | |
| Convertible note receivable, related party | |
| 198,125 | | |
| 20,554 | | |
| - | | |
| - | | |
| 218,679 | |
| Total | |
$ | 353,494 | | |
$ | 23,872 | | |
$ | (53,199 | ) | |
$ | - | | |
$ | 324,166 | |
During
the year 2024, the Company impaired the investment in associate of $296,052 to $0, convertible note receivable of ($249,352) to $0 and
goodwill of $323,864 to $0. Total impairment expenses was $366,192.
On
February 20, 2024, the Company invested an additional $312,064
(SG$420,000)
for an additional 38.41%
ownership interest in Ketomei by converting $312,064 (SG$420,000)
convertible loan. The loan was impaired at the year ended December 31, 2023, therefore, $312,064
(SG$420,000)
was transferred from impairment of convertible loan to impairment of equity method investment. After this
additional investment, the Company owns 55.65%
of Ketomei’s outstanding shares and Ketomei is consolidated into the financial statements of HWH International Inc. beginning
on February 20, 2024.
During
the three months ended March 31, 2024, the Company held a convertible note receivable with SHRG. The following table shows the activity
of the investment and note during the three months ended 2024.
SCHEDULE OF EQUITY METHOD INVESTMENT IN A RELATED PARTY
| | |
December 31,
2023 | | |
Additions | | |
Unrealized
Gain | | |
March 31,
2024 | |
| Convertible note receivable, related party | |
$ | - | | |
$ | 250,000 | | |
$ | 74,521 | | |
$ | 324,521 | |
| Total | |
$ | - | | |
$ | 250,000 | | |
$ | 74,521 | | |
$ | 324,521 | |
During
the three months ended 2023, the Company revalued the convertible note receivable with SHRG of $250,000 to $324,521. The total $74,521
revaluated amount was booked in additional paid in capital as this was a related party transaction.
NOTE
19 – CHANGE IN FISCAL YEAR
In
connection with Business Combination, SPAC changed its fiscal year from November 30 to December 31. SPAC has recently reported its audited
financial statements on form 10-K for the year ended November 30, 2023. SPAC’s financial statement for one month of December 2023,
that were not previously reported include expenses related to business combination, ordinary business expenses and investment income.
HWH
INTERNATIONAL INC.
(Formerly
known as Alset Capital Acquisition Corp.)
CONSOLIDATED BALANCE SHEETS
SCHEDULE OF CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS
| | |
December 31, | |
| | |
2023 | |
| ASSETS | |
| | |
| Current assets: | |
| | |
| Cash | |
$ | 280,398 | |
| Other current assets | |
| 100,000 | |
| Total current assets | |
| 380,398 | |
| | |
| | |
| Cash and marketable securities held in Trust Account | |
| 21,346,768 | |
| Total assets | |
$ | 21,727,166 | |
| | |
| | |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
| | |
| Current liabilities: | |
| | |
| Accounts payable and accrued expenses | |
$ | 30,156 | |
| Extension Loan – Related Party | |
| 205,305 | |
| Total current liabilities | |
| 235,461 | |
| | |
| | |
| Deferred underwriting compensation | |
| 3,018,750 | |
| Total liabilities | |
| 3,254,211 | |
| | |
| | |
| Commitments and contingencies | |
| - | |
| | |
| | |
| Temporary equity: | |
| | |
| Class A common stock subject to possible redemption; 1,976,036 shares (at approximately $10.35 per share) as of December 31, 2023 | |
| 20,457,011 | |
| | |
| | |
| Stockholders’ deficit: | |
| | |
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | |
| - | |
| Class A common stock, $0.0001 par value; 50,000,000 shares authorized; 473,750 issued and outstanding (excluding 1,976,036 shares subject to possible redemption) as of December 31, 2023 | |
| 47 | |
| Class B common stock, $0.0001 par value; 5,000,000 shares authorized; 2,156,250 shares issued and outstanding as of December 31, 2023 | |
| 216 | |
| Common stock, value | |
| 216 | |
| Accumulated deficit | |
| (1,984,319 | ) |
| Total stockholders’ deficit | |
| (1,984,056 | ) |
| Total liabilities and stockholders’ deficit | |
$ | 21,727,166 | |
HWH
INTERNATIONAL INC.
(Formerly
known as Alset Capital Acquisition Corp.)
CONSOLIDATED
STATEMENTS OF OPERATIONS
| | |
For the One | |
| | |
Month Ended | |
| | |
December 31,
2023 | |
| EXPENSES | |
| | |
| Administration fee - related party | |
$ | 10,000 | |
| General and administrative | |
| 610,841 | |
| TOTAL EXPENSES | |
| 610,841 | |
| | |
| | |
| OTHER INCOME | |
| | |
| Investment income earned on cash and marketable securities held in Trust Account | |
| 94,130 | |
| Other Income | |
| 155,763 | |
| TOTAL OTHER INCOME | |
| 249,893 | |
| | |
| | |
| Pre-tax loss | |
| 370,948 | |
| | |
| | |
| Income tax expense | |
| - | |
| | |
| | |
| Net loss | |
$ | 370,948 | |
NOTE
20 — SUBSEQUENT EVENT
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date through the filing date of our Form 10-Q
for the three months ended March 31, 2024.
Meteora
Settlement
Pursuant
to a settlement agreement made with Meteora Special
Opportunity Fund I, LP, Meteora Capital Partners, LP, Meteora Select Trading Opportunities Master, LP, and Meteora Strategic Capital,
LLC (collectively, “Meteora”) as of April 11, 2024, the Company paid Meteora $200,000,
and agreed that Meteora could retain $100,000 already paid to Meteora. This settlement agreement was entered into in connection with
a subscription agreement entered into as of July 30, 2023, by and among the Company and Meteora.
Joint
Venture
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 Ambrose, HWH’s Executive Chairman, as a part of HWH’s strategy of building its travel business in Asia. The planned
joint venture company (referred to here as the “JVC”) will be known as HapiTravel Holding Pte. Ltd. The JVC will be initially
owned as follows: (a) HWHPL will hold 19% of the shares in the JVC; (b) Mr. Chan will hold 11%; and (c) the remaining 70% of the shares
in the JVC are to be held by Mr. Chen.
Ideal
Food & Beverage Pte. Ltd.
On
March 14, 2024, the Company entered into a shares subscription agreement through its subsidiary Alset F&B Holding Pte. Ltd. (“F&BH”)
to subscription of shares in Ideal Food & Beverage Pte. Ltd. (“IFBPL”) with the subscription of 19,000 shares constituting
S$19,000 (and 19%) of the issued and paid-up capital of IFBPL. And due to the bank account of IFBPL was under opening procedure, the
Company will pay it until the process was completed.
Credit
Facility Agreement
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 (“Alset Inc.”), 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.
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 HWH.
Promissory Note from Sharing Services
On
May 9, 2024, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with Sharing
Services Global Corporation (“SHRG”), pursuant to which the Company purchased from SHRG a Convertible Promissory Note (the
“Convertible Note”) in the amount of $250,000, convertible into 125,000,000 shares of SHRG’s common stock
at the option of the Company for an aggregate purchase price of $250,000. The Convertible Note bears an 8% interest rate and has a scheduled
maturity three years from the date of the Convertible Note. Additionally, upon signing the Convertible Note, SHRG owns the Company commitment
fee of 8% of the principal amount, which will be paid either in cash or in common stock of SHRG, at the discretion of the Company.
HWH
International Inc.
(Formerly
known as Alset Capital Acquisition Corp.)
CONSOLIDATED
FINANCIAL STATEMENTS
November
30, 2023 and 2022
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Shareholders and Board of Directors of
HWH
International Inc. (formerly known as Alset Capital Acquisition Corp.)
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of HWH International Inc. (formerly known as Alset Capital Acquisition
Corp.) and its subsidiary (collectively, (the “Company”)) as of November 30, 2023 and 2022, and the related consolidated
statements of operations, changes in stockholders’ deficit and cash flows for the years then ended, and the related notes
(collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of the Company as of November 30, 2023 and 2022, and the results of their
operations and their cash flows for the years ended November 30, 2023 and 2022, in conformity with accounting principles generally
accepted in the United States of America.
Going
Concern Matter
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described
in Note 1 to the financial statements, the Company has no operating income, working capital deficit and negative cash flow from operations
which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are
also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
/s/
MaloneBailey, LLP
www.malonebailey.com
We
have served as the Company’s auditor since 2021.
Houston,
Texas
February 28, 2024
HWH
INTERNATIONAL INC.
(Formerly
known as Alset Capital Acquisition Corp.)
CONSOLIDATED BALANCE SHEETS
| | |
November 30, 2023 | | |
November 30, 2022 | |
| ASSETS | |
| | | |
| | |
| Current assets: | |
| | | |
| | |
| Cash | |
$ | 585,654 | | |
$ | 1,172,581 | |
| Due from Sponsor | |
| - | | |
| 13,000 | |
| Other current assets | |
| 117,500 | | |
| 9,043 | |
| Total current assets | |
| 703,154 | | |
| 1,194,624 | |
| | |
| | | |
| | |
| Cash and marketable securities held in Trust Account | |
| 21,252,639 | | |
| 88,102,610 | |
| Total assets | |
$ | 21,955,793 | | |
$ | 89,297,234 | |
| | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | |
| Current liabilities: | |
| | | |
| | |
| Accounts payable and accrued expenses | |
$ | 632,270 | | |
$ | 376,541 | |
| Extension Loan – Related Party | |
| 205,305 | | |
| - | |
| Total current liabilities | |
| 837,575 | | |
| 376,541 | |
| | |
| | | |
| | |
| Deferred underwriting compensation | |
| 3,018,750 | | |
| 3,018,750 | |
| Total liabilities | |
| 3,856,325 | | |
| 3,395,291 | |
| | |
| | | |
| | |
| Commitments and contingencies (Note 6): | |
| - | | |
| - | |
| | |
| | | |
| | |
| Temporary equity: | |
| | | |
| | |
| Class A common stock subject to possible redemption; 1,976,036 and 8,625,000 shares (at approximately $10.35 and $10.20 per share) as of November 30, 2023 and November 30, 2022, respectively | |
| 20,457,011 | | |
| 87,934,212 | |
| | |
| | | |
| | |
| Stockholders’ deficit: | |
| | | |
| | |
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | |
| - | | |
| - | |
| Class A common stock, $0.0001 par value; 50,000,000 shares authorized; 473,750 issued and outstanding (excluding 1,976,036 and 8,625,000 shares subject to possible redemption) as of November 30, 2023 and November 30, 2022, respectively | |
| 47 | | |
| 47 | |
| Class B common stock, $0.0001 par value; 5,000,000 shares authorized; 2,156,250 shares issued and outstanding as of November 30, 2023 and November 30, 2022, respectively | |
| 216 | | |
| 216 | |
| Common stock, value | |
| 216 | | |
| 216 | |
| | |
| | | |
| | |
| Additional paid-in capital | |
| - | | |
| - | |
| Accumulated deficit | |
| (2,357,806 | ) | |
| (2,032,532 | ) |
| Total stockholders’ deficit | |
| (2,357,543 | ) | |
| (2,032,269 | ) |
| Total liabilities and stockholders’ deficit | |
$ | 21,955,793 | | |
$ | 89,297,234 | |
The
accompanying notes are an integral part of these consolidated financial statements.
HWH
INTERNATIONAL INC.
(Formerly
known as Alset Capital Acquisition Corp.)
CONSOLIDATED
STATEMENTS OF OPERATIONS
| | |
For the Year | | |
For the Year | |
| | |
Ended | | |
Ended | |
| | |
November 30, 2023 | | |
November 30, 2022 | |
| EXPENSES | |
| | | |
| | |
| Administration fee - related party | |
$ | 120,000 | | |
$ | 100,000 | |
| General and administrative | |
| 1,124,516 | | |
| 589,646 | |
| TOTAL EXPENSES | |
| 1,244,516 | | |
| 689,646 | |
| | |
| | | |
| | |
| OTHER INCOME | |
| | | |
| | |
| Investment income earned on cash and marketable securities held in Trust Account | |
| 2,215,619 | | |
| 990,110 | |
| TOTAL OTHER INCOME | |
| 2,215,619 | | |
| 990,110 | |
| | |
| | | |
| | |
| Pre-tax income | |
| 971,103 | | |
| 300,464 | |
| | |
| | | |
| | |
| Income tax expense | |
| (422,230 | ) | |
| (186,923 | ) |
| | |
| | | |
| | |
| Net income | |
$ | 548,873 | | |
$ | 113,541 | |
| | |
| | | |
| | |
| Weighted average number of shares of Class A common stock outstanding, basic and diluted | |
| 5,218,670 | | |
| 7,478,425 | |
| Basic and diluted net income per share of Class A common stock | |
$ | 0.07 | | |
$ | 0.01 | |
| | |
| | | |
| | |
| Weighted average number of shares of Class B common stock outstanding, basic and diluted | |
| 2,156,250 | | |
| 2,156,250 | |
| Basic and diluted net income per share of Class B common stock | |
$ | 0.07 | | |
$ | 0.01 | |
The
accompanying notes are an integral part of these consolidated financial statements.
HWH
INTERNATIONAL INC.
(Formerly
known as Alset Capital Acquisition Corp.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED NOVEMBER 30, 2023 AND 2022
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Total | |
| | |
Class
A
Common Stock | | |
Class
B
Common Stock | | |
Additional Paid-in | | |
Accumulated | | |
| |
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Total | |
| Balance at November 30, 2021 | |
| - | | |
$ | - | | |
| 2,156,250 | | |
$ | 216 | | |
$ | 24,784 | | |
$ | (5,000 | ) | |
$ | 20,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Issuance of Shares at Initial Public Offering | |
| 8,625,000 | | |
| 863 | | |
| - | | |
| - | | |
| 86,249,137 | | |
| - | | |
| 86,250,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Deferred underwriting compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| (3,018,750 | ) | |
| - | | |
| (3,018,750 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Sale of Private Placement Units | |
| 473,750 | | |
| 47 | | |
| - | | |
| - | | |
| 4,737,453 | | |
| - | | |
| 4,737,500 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Underwriter’s fees and other issuance costs | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,200,348 | ) | |
| - | | |
| (2,200,348 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Remeasurement of Class A common stock to redemption value | |
| (8,625,000 | ) | |
| (863 | ) | |
| - | | |
| - | | |
| (87,111,637 | ) | |
| - | | |
| (87,112,500 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Class A Common Stock Measurement Adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,319,361 | | |
| (1,319,361 | ) | |
| - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Remeasurement of Class A common stock subject to possible redemption to redemption amount | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (821,712 | ) | |
| (821,712 | ) |
| Additional amount deposited into trust for loan extension | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 113,541 | | |
| 113,541 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance at November 30, 2022 | |
| 473,750 | | |
$ | 47 | | |
| 2,156,250 | | |
$ | 216 | | |
$ | - | | |
$ | (2,032,532 | ) | |
$ | (2,032,269 | ) |
| Balance | |
| 473,750 | | |
$ | 47 | | |
| 2,156,250 | | |
$ | 216 | | |
$ | - | | |
$ | (2,032,532 | ) | |
$ | (2,032,269 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Remeasurement of Class A common stock subject to possible redemption to redemption amount | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (668,842 | ) | |
| (668,842 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Additional amount deposited into trust for loan extension | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (205,305 | ) | |
| (205,305 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 548,873 | | |
| 548,873 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance at November 30, 2023 | |
| 473,750 | | |
$ | 47 | | |
| 2,156,250 | | |
$ | 216 | | |
$ | - | | |
$ | (2,357,806 | ) | |
$ | (2,357,543 | ) |
| Balance | |
| 473,750 | | |
$ | 47 | | |
| 2,156,250 | | |
$ | 216 | | |
$ | - | | |
$ | (2,357,806 | ) | |
$ | (2,357,543 | ) |
The
accompanying notes are an integral part of these consolidated financial statements.
HWH
INTERNATIONAL INC.
(Formerly
known as Alset Capital Acquisition Corp.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | |
For the Year | | |
For the Year | |
| | |
Ended | | |
Ended | |
| | |
November 30, 2023 | | |
November 30, 2022 | |
| Cash Flows from Operating Activities: | |
| | | |
| | |
| Net income | |
$ | 548,873 | | |
$ | 113,541 | |
| Adjustments to reconcile net income to net cash used in operating activities: | |
| | | |
| | |
| Investment income earned on cash and marketable securities held in Trust Account | |
| (2,215,619 | ) | |
| (990,110 | ) |
| Formation and organization costs paid by related parties | |
| - | | |
| 5,000 | |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| Other current assets | |
| (108,457 | ) | |
| (9,043 | ) |
| Accounts payable and accrued expenses | |
| 255,729 | | |
| 366,541 | |
| Net Cash Used in Operating Activities | |
| (1,519,474 | ) | |
| (514,071 | ) |
| | |
| | | |
| | |
| Cash Flows from Investing Activities: | |
| | | |
| | |
| Due from Sponsor | |
| 13,000 | | |
| (13,000 | ) |
| Cash withdrawn from Trust Account for taxes | |
| 919,547 | | |
| - | |
| Cash withdrawn form Trust Account for redemptions | |
| 68,351,348 | | |
| - | |
| Cash deposited into Trust Account | |
| (205,305 | ) | |
| (87,112,500 | ) |
| Net Cash Provided By (Used in) Investing Activities | |
| 69,078,590 | | |
| (87,125,500 | ) |
| | |
| | | |
| | |
| Cash Flows from Financing Activities: | |
| | | |
| | |
| Proceeds from sale of Units in Public Offering, net of underwriting fee | |
| - | | |
| 84,525,000 | |
| Repayment of Class A Common Stock | |
| (68,351,348 | ) | |
| - | |
| Proceeds from sale of Private Placement Units | |
| - | | |
| 4,737,500 | |
| Proceeds from extension loan | |
| 205,305 | | |
| - | |
| Proceeds from related party advances | |
| 33,475 | | |
| - | |
| Repayment of related party advances | |
| (33,475 | ) | |
| (211,153 | ) |
| Payment of offering costs | |
| - | | |
| (289,195 | ) |
| Net Cash (Used in) Provided by Financing Activities | |
| (68,146,043 | ) | |
| 88,762,152 | |
| | |
| | | |
| | |
| Net change in cash | |
| (586,927 | ) | |
| 1,122,581 | |
| Cash at beginning of the year | |
| 1,172,581 | | |
| 50,000 | |
| Cash at end of the year | |
$ | 585,654 | | |
$ | 1,172,581 | |
| | |
| | | |
| | |
| Supplemental disclosure of non-cash financing activities: | |
| | | |
| | |
| Supplemental disclosure of non-cash investing and financing activities | |
| | | |
| | |
| Deferred underwriters’ commissions charged to temporary equity in connection with the Initial Public Offering | |
$ | - | | |
$ | 3,018,750 | |
| Class A Common Stock measurement adjustment | |
$ | - | | |
$ | 1,319,361 | |
| Initial classification of Class A Common Stock subject to redemption | |
$ | - | | |
$ | 87,112,500 | |
| Remeasurement of Class A Common Stock subject to redemption | |
$ | 668,842 | | |
$ | 821,712 | |
| Extension funds attributable to common stock subject to redemption | |
$ | 205,305 | | |
$ | - | |
The
accompanying notes are an integral part of these consolidated financial statements.
HWH
INTERNATIONAL INC.
(Formerly
known as Alset Capital Acquisition Corp.)
Notes
to the CONSOLIDATED financial statements
FOR
THE YEARS ENDED NOVEMBER 30, 2023 AND 2022
NOTE
1 — DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND LIQUIDITY
DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS
HWH
International Inc. (the “Company”) was 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.
As
of November 30, 2023, the Company has not commenced any operations. All activity for the period from October 20, 2021 (inception) through
November 30, 2023 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which
is described below and the pursuit of a suitable acquisition candidate. The Company will not generate any operating revenues until after
the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest
income from the proceeds derived from the Initial Public Offering. The Company has selected November 30 as its fiscal year end, which
upon closing of Business Combination on January 9, 2024 has automatically changed to December 31.
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 (“HWH”) and HWH Merger Sub Inc., a Nevada corporation and a wholly owned subsidiary
of the Company (“Merger Sub”). The Company and Merger Sub are sometimes referred to collectively as the “ACAX Parties.”
Pursuant to the Merger Agreement, a business combination between the Company and HWH was to be effected through the merger of Merger
Sub with and into HWH, with HWH surviving the merger as a wholly owned subsidiary of the Company (the “Merger”). Upon the
closing of the Merger (the “Closing”), the Company changed its name to “HWH International Inc.” Prior to the
Closing, 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.
HWH
is wholly–owned by Alset International Limited, a public company listed on the Singapore Exchange Securities Trading Limited. Alset
International Limited is majority-owned and controlled by certain officers and directors of the Company and its sponsor. The Company’s
sponsor is owned by Alset International Limited and Alset Inc.; Alset Inc. is the majority stockholder of Alset International Limited,
and Chan Heng Fai, the Company’s Chairman is also the majority stockholder, Chairman and Chief Executive Officer of Alset Inc.,
and the Chairman and Chief Executive Officer of HWH and Alset International Limited. The Merger was consummated on January 9, 2024, following
the receipt of the required approval by the shareholder of HWH and the satisfaction of certain other customary closing conditions. This
transaction was approved by the stockholders of the Company at the Special Meeting of stockholders held on August 1, 2023.
The
total consideration paid at Closing (the “Merger Consideration”) by the Company to the HWH shareholders was $125,000,000,
and was paid in shares of Class A common stock, par value $0.0001
per share, of the Company (“Company Common
Stock”). The number of shares of the Company Common Stock to be paid to the shareholders of HWH as Merger Consideration will be
12,500,000.
Refer to Note 9 – Subsequent Event.
The
registration statement for the Company’s Initial Public Offering was declared effective on January 31, 2022. On February 3, 2022,
the Company consummated the Initial Public Offering of 8,625,000 units (“Units” and, with respect to the shares of common
stock included in the Units being offered, the “Public Shares”), generating gross proceeds of $86,250,000, which includes
the full exercise of the underwriters’ option to purchase an additional 1,125,000 Units generating additional gross proceeds to
the Company of $11,250,000, which is described in Note 3.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the private sale of 473,750 units (the “Private Placement
Units”) at a price of $10.00 per Private Placement Unit in private placement to Alset Acquisition Sponsor, LLC (the “Sponsor”)
generating gross proceeds to the Company in the amount of $4,737,500.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering
and the sale of Private Placement Units, although substantially all of the net proceeds are intended to be applied toward consummating
a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company
must complete one or more initial Business Combinations with one or more operating businesses or assets with a fair market value equal
to at least 80% of the net assets held in the Trust Account (as defined below) (excluding the deferred underwriting commissions and taxes
payable on the interest earned on the Trust Account). The Company will only complete a Business Combination if the post-transaction company
owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target
business sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended
(the “Investment Company Act”). Upon the closing of the Initial Public Offering, management has agreed that an amount equal
to at least $10.10 per Unit sold in the Initial Public Offering, including proceeds from the Private Placement Units, will be held in
a trust account (“Trust Account”), located in the United States and invested only in U.S. government securities, within the
meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment
company that holds itself out as a money market fund selected by the Company meeting certain conditions of Rule 2a-7 of the Investment
Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution
of the funds held in the Trust Account, as described below.
The
Company will provide the holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem
all or a portion of their Public Shares either (i) in connection with a stockholder meeting called to approve the Business Combination
or (ii) by means of a tender offer in connection with the Business Combination. The decision as to whether the Company will seek stockholder
approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled to
redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.10 per Public
Share, plus any pro rata interest then in the Trust Account, net of taxes payable). There will be no redemption rights upon the completion
of a Business Combination with respect to the Company’s warrants. The Public Shares subject to redemption will be recorded at a
redemption value and classified as temporary equity upon the completion of the Initial Public Offering in accordance with the Accounting
Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
All
of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s
liquidation, if there is a stockholder vote or tender offer in connection with the Company’s Business Combination and in connection
with certain amendments to the Company’s Certificate of Incorporation. In accordance with the rules of the U.S. Securities and
Exchange Commission (the “SEC”) and its guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99,
redemption provisions not solely within the control of a company require common stock subject to redemption to be classified outside
of permanent equity. Given that the Public Shares will be issued with other freestanding instruments (i.e., public warrants), the initial
carrying value of Class A common stock classified as temporary equity will be the allocated proceeds determined in accordance with ASC
470-20. The Class A common stock is subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, we
have the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that
it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize
changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value
at the end of each reporting period. We have elected to recognize the changes immediately. The accretion or remeasurement will be treated
as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital). The Public
Shares are redeemable and will be classified as such on the balance sheet until such date that a redemption event takes place. Redemptions
of the Company’s Public Shares may be subject to the satisfaction of conditions, including minimum cash conditions, pursuant to
an agreement relating to the Company’s Business Combination.
If
the Company seeks stockholder approval of the Business Combination, the Company will proceed with a Business Combination if a majority
of the outstanding shares voted are voted in favor of the Business Combination, or such other vote as required by law or stock exchange
rule. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide
to hold a stockholder vote for business or other reasons, the Company will, pursuant to its second amended and restated certificate of
incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S.
Securities and Exchange Commission and file tender offer documents with the SEC prior to completing a Business Combination. If, however,
stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides
to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation
pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with
a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during
or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to
redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding
the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the
tender offer rules, the Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder
or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more
than an aggregate of 15% of the Public Shares, without the prior consent of the Company.
The
holders of the Founder Shares have agreed (a) to waive their redemption rights with respect to the Founder Shares and Public Shares held
by them in connection with the completion of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation
(i) to modify the substance or timing of the Company’s obligation to allow redemptions in connection with a Business Combination
or to redeem 100% of its Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined
below) or (ii) with respect to any other provision relating to stockholders’ rights or pre-business combination activity, unless
the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
The
Company’s Amended and Restated Certificate of Incorporation of February 2, 2022 provided that if the Company had not completed
a Business Combination within 12 months from the closing of Initial Public Offering (or 15 months if we had filed a proxy statement,
registration statement or similar filing for an initial Business Combination within 12 months from the consummation of Initial Public
Offering but had not completed the initial Business Combination within such 12-month period, or up to 21 months if we extend the period
of time to consummate a Business Combination, at the election of the Company by two separate three month extensions, subject to satisfaction
of certain conditions, including the deposit of up to $862,500 ($0.10 per unit in either case) for each three month extension, into the
trust account, or as extended by the Company’s stockholders in accordance with our amended and restated certificate of incorporation),
the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more
than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then
on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to pay
taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption
will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions,
if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining
stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations
under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights
or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete
a Business Combination within the Combination Period.
The
holders of the Founders Shares have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails
to complete a Business Combination within the Combination Period. However, if the holders of Founder Shares acquire Public Shares in
or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the
Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to
their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination
within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will
be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value
of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
In
order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims
by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed
entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per Public Share or (ii) such
lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00
per Public Share due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn
to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account
and except as to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an
executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability
for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account
due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered
accounting firm), prospective target businesses and other entities with which the Company does business, execute agreements with the
Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
On
May 1, 2023, the Company amended the Investment Management Trust Agreement (the “Trust Agreement”) with Wilmington Trust,
National Association, a national banking association (“Wilmington Trust”), which was entered into on January 31, 2022 and
on May 2, 2023 the Company filed an Amendment to the Amended and Restated Certificate of Incorporation. The Trust Agreement and Amended
and Restated Certificate of Incorporation are now amended, in part, so that the Company’s ability to complete a business combination
may be extended in additional increments of one month up to a total of twenty-one (21) additional months from the closing date of the
Offering, subject to the payment into the trust account by the Company of one-third of 1% of the funds remaining in the trust account
following any redemptions in connection with the approval of the amendment to the Company’s Amended and Restated Certificate of
Incorporation.
In
connection with the Special Meeting on May 1, 2023, Class A Common Stock stockholders redeemed 6,648,964 shares for approximately $68.4
million held in the Trust Account.
During
the year ended November 30, 2023, the Company withdrew $919,547 from the Trust account. $706,490 of these funds were used to pay income
and franchise taxes. $213,057 remain in the Company’s bank account for future taxes and dissolution expenses.
Going
Concern and Management’s Plan
The
Company expects to incur significant costs in pursuit of its acquisition plans and will not generate any operating revenues until after
the completion of its initial business combination, at the earliest. In addition, the Company expects to have negative cash flows from
operations as it pursues an initial business combination target. In connection with the Company’s assessment of going concern considerations
in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s
Ability to Continue as a Going Concern” the Company does not currently have adequate liquidity to sustain operations, which consist
solely of pursuing a Business Combination.
On
January 9, 2024, the Company consummated the business combination (the “Closing”) contemplated by the previously announced
Agreement and Plan of Merger, dated as of September 9, 2022 (the “Merger Agreement”). The Company’s common stock commenced
trading on the Nasdaq Global Market LLC under the ticker symbol “HWH” on January 9, 2024, and the Company’s warrants
are expected to commence trading under the symbol “HWHW” at a later date.
The
Company has incurred continuing losses from its operations and has a working capital deficit $134,421 as of November 30, 2023.
The Company has no operating income and incurs continuing operating expenses. There are no assurances the Company will be able to raise
capital on acceptable terms or that cash flows generated from its operations will be sufficient to meet its current operating costs.
If the Company is unable to obtain sufficient amounts of additional capital, it may be required to reduce the scope of its business,
which could harm its financial condition and operating results.
These
conditions raise substantial doubt about the Company’s ability to continue ongoing operations. These consolidated financial
statements do not include any adjustments that might result from the outcome of these uncertainties.
NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying consolidated financial statements are presented in conformity with accounting principles generally accepted in the United
States of America (“US GAAP”) and pursuant to the rules and regulations of the SEC.
Principles
of Consolidation
The
consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant intercompany
transactions and balances between the Company and its subsidiaries are eliminated upon consolidation.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities
Act”), as modified by the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), and it may 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
requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic
reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and
stockholder approval of any golden parachute payments not previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of
such extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s consolidated financial statements with another public
company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition
period difficult or impossible because of the potential differences in accounting standards used.
Use
of Estimates
The
preparation of the consolidated financial statements in conformity with US GAAP requires the Company’s management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the balance sheet.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the balance sheet, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ
significantly from those estimates.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company had cash of $585,654 and $1,172,581 as of November 30, 2023 and November 30, 2022, respectively. The Company had no cash
equivalents as of November 30, 2023 and November 30, 2022.
Investments
held in Trust Account
At
November 30, 2023 and 2022, the Company had approximately $21.3 million and $88.1 million, respectively, in investments in treasury securities
held in the Trust Account.
Offering
Costs associated with the Initial Public Offering
The
Company complies with the requirements of the Financial Accounting Standards Board (“FASB”) ASC 340-10-S99-1 and SEC Staff
Accounting Bulletin (“SAB”) Topic 5A, Offering Costs. Offering costs of $475,348 consist principally of costs incurred
in connection with the preparation for the Initial Public Offering. These costs, together with the underwriter’s discount of $4,743,750,
were allocated between temporary equity, the Public Warrants and the Private Units in a relative fair value method upon completion of
the Initial Public Offering.
Class
A common stock subject to possible redemption
The
Company accounts for its common stock subject to possible redemption in accordance with the guidance enumerated in ASC 480 “Distinguishing
Liabilities from Equity”. Common stock subject to possible redemption are classified as a liability instrument and are measured
at fair value. Conditionally redeemable common stock (including shares of common stock that feature redemption rights that are either
within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s
control) are classified as temporary equity. At all other times, shares of common stock are classified as stockholders’ equity.
The Company’s Class A common stock features certain redemption rights that are considered by the Company to be outside of the Company’s
control and subject to the occurrence of uncertain future events. Accordingly, at November 30, 2023 and 2022, the Class A common stock
subject to possible redemption in the amount of $20,457,011 and $87,934,212, respectively, are presented as temporary equity, outside
of the stockholders’ equity section of the Company’s balance sheets.
Net
income per share
Net
income (loss) per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during
the period. The Company applies the two-class method in calculating earnings per share. Earnings and losses are shared pro rata between
the two classes of shares. The calculation of diluted income (loss) per share of common stock does not consider the effect of the warrants
issued in connection with the Initial Public Offering because the warrants are contingently exercisable, and the contingencies have not
yet been met. As a result, diluted earnings per common stock are the same as basic earnings per ordinary share for the periods presented.
The
following tables reflects the calculation of basic and diluted net income (loss) per common share:
SUMMARY OF BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE
| | |
Class A | | |
Class B | |
| | |
For the Year Ended November 30, 2023 | |
| | |
Class A | | |
Class B | |
| Basic and diluted net income per share of common stock | |
| | | |
| | |
| Numerator: | |
| | | |
| | |
| Allocation of net income | |
$ | 388,396 | | |
$ | 160,477 | |
| Denominator: | |
| | | |
| | |
| Basic and diluted weighted average shares outstanding | |
| 5,218,670 | | |
| 2,156,250 | |
| | |
| | | |
| | |
| Basic and diluted net income per share of common stock | |
$ | 0.07 | | |
$ | 0.07 | |
| | |
Class A | | |
Class B | |
| | |
For the Year Ended
November 30, 2022 | |
| | |
Class A | | |
Class B | |
| Basic and diluted net income per share of common stock | |
| | | |
| | |
| Numerator: | |
| | | |
| | |
| Allocation of net income | |
$ | 88,130 | | |
$ | 25,357 | |
| Denominator: | |
| | | |
| | |
| Basic and diluted weighted average shares outstanding | |
| 7,478,425 | | |
| 2,156,250 | |
| | |
| | | |
| | |
| Basic and diluted net income per share of common stock | |
$ | 0.01 | | |
$ | 0.01 | |
Income
Taxes
The
Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred
tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial
statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period
that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized.
ASC
740 prescribes a recognition threshold and a measurement attribute for the financial statements’ recognition and measurement of
tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely
than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of November
30, 2023 and 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals
or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
The
Inflation Reduction Act (“IR Act”) was enacted on August 16, 2022. The IR Act includes provisions imposing a 1% excise
tax on share repurchases that occur after December 31, 2022 and introduces a 15% corporate alternative minimum tax (“CAMT”)
on adjusted financial statement income. The CAMT will be effective for us beginning in fiscal 2024. We currently are not expecting the
IR Act to have a material adverse impact to our consolidated financial statements.
Delaware Franchise Tax
Delaware,
where the Company is incorporated, imposes a franchise tax that applies to most business entities that are formed or qualified to
do business, or which are otherwise doing business, in Delaware. Delaware franchise tax is based on authorized shares or on
assumed par and non-par capital, whichever yields a lower result. Under the authorized shares method, each share is taxed at a graduated
rate based on the number of authorized shares. During years ended November 30, 2023 and 2022 the company incurred $205,000 and $168,398
in Delaware franchise tax respectively.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account.
The
Company had uninsured cash of $335,654 and $922,581 as of November 30, 2023, and November 30, 2022, respectively.
Fair
Value of Financial Instruments
Fair
value is defined as the price that would be received for sale of an asset or paid to transfer of a liability, in an orderly transaction
between market participants at the measurement date. US GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| |
● |
Level
1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| |
|
|
| |
● |
Level
2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted
prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active;
and |
| |
|
|
| |
● |
Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
Recent
Accounting Standards
Management
does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect
on the Company’s consolidated financial statements.
NOTE
3 — INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 7,500,000 Units at a price of $10.00 per Unit generating gross proceeds to the Company
in the amount of $75,000,000. Each Unit consists of one share of Class A common stock, one-half of one redeemable warrant (“Public
Warrant”) and one right. Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price
of $11.50 per share, subject to adjustment (see Note 7). Each right entitles the holder thereof to receive one-tenth (1/10) of one share
of Class A common stock upon the consummation of an initial Business Combination.
On
February 3, 2022, the underwriters purchased an additional 1,125,000 Units pursuant to the full exercise of the over-allotment option.
The Units were sold at an offering price of $10.00 per Unit, generating additional gross proceeds to the Company of $11,250,000.
NOTE
4 — PRIVATE PLACEMENTS
Simultaneously
with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 440,000 Private Placement Units at a price of
$10.00 per Private Placement Unit generating gross proceeds in the amount of $4,400,000. In connection with the full exercise of the
over-allotment option, the Sponsor purchased an additional 33,750 Private Placement Units at a purchase price of $10.00 per Unit for
total gross proceeds of $337,500. Each Private Placement Unit is comprised of one Class A common share, one-half of one warrant and one
right. Each private placement right entitles the holder thereof to receive one-tenth (1/10) of one share of Class A common stock upon
the consummation of an initial Business Combination. Each whole private placement warrant is exercisable to purchase one share of Class
A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).
The
proceeds from the sale of the Private Placement Units were added to the net proceeds from the Initial Public Offering held in the Trust
Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private
Placement Units held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable
law) and the Private Placement Warrants will expire worthless. The Private Placement Warrants (including the Class A common stock issuable
upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30 days after the completion of
an Initial Business Combination, subject to certain exceptions.
NOTE
5 — RELATED PARTIES
RELATED PARTY TRANSACTIONS
Founder
Shares
On
November 8, 2021, the Sponsor received 2,156,250 shares of the Company’s Class B common stock (the “Founder Shares”)
for $25,000. The Founder Shares include an aggregate of up to 281,250 shares subject to forfeiture to the extent that the underwriters’
over-allotment is not exercised in full or in part, so that the number of Founder Shares will equal, on an as-converted basis, to approximately
20% of the Company’s issued and outstanding shares of common stock after the Initial Public Offering (excluding the placement units
and underlying securities). In connection with the exercise of the underwriters’ overallotment option, these shares are no longer
subject to forfeiture.
The
holder of the Founder Shares have agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until
the earlier to occur of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x)
if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations,
reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days
after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar
transaction that results in all of the Public Stockholders having the right to exchange their shares of common stock for cash, securities
or other property.
Promissory
Note — Related Party
On
November 8, 2021, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which
the Company may borrow up to an aggregate principal amount of $300,000. The Promissory Note is non-interest bearing and payable on the
earlier of (i) May 8, 2022, or (ii) the consummation of the Initial Public Offering. As of November 30, 2023 and November 30, 2022, there
was no amount outstanding under the Promissory Note.
Advances
from Related Party
The
Sponsor paid certain offering costs on behalf of the Company and advanced working capital to the Company. These advances are due on demand
and are non-interest bearing. During the year ended November 30, 2022, the Sponsor paid a total of $75,000 of offering and operating
costs on behalf of the Company. During the year ended November 30, 2022, the Company repaid the outstanding balance of $211,153. During
the year ended November 30, 2023, the Sponsor paid a total of $33,475 of operating costs on behalf of the Company. During the year ended
November 30, 2023, the Company repaid the outstanding balance. As of November 30, 2023 and November 30, 2022, $0 and $0 was due to the
related party, respectively.
General
and Administrative Services
Commencing
on the date the Units are first listed on the Nasdaq, the Company has agreed to pay the Sponsor a total of $10,000 per month for office
space, utilities and secretarial and administrative support for up to 24 months. Upon completion of the Initial Business Combination
or the Company’s liquidation, the Company will cease paying these monthly fees. During the years ended November 30, 2023 and 2022,
the Company recorded charges of $120,000 and $100,000, respectively, to the statement of operations pursuant to the agreement.
Related
Party Loans
Working
Capital Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain
of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of
a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of the notes may be converted upon completion
of a Business Combination into units at a price of $10.00 per unit. Such units would be identical to the Private Placement Units. In
the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay
the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of November
30, 2023 and 2022, there were no amounts outstanding under the Working Capital Loans.
Extension
Loan
On
May 1, 2023, the Company amended the Investment Management Trust Agreement (the “Trust Agreement”) with Wilmington Trust,
National Association, a national banking association (“Wilmington Trust”), which was entered into on January 31, 2022 and
on May 2, 2023 the Company filed an Amendment to the Amended and Restated Certificate of Incorporation. The Trust Agreement and Amended
and Restated Certificate of Incorporation are now amended, in part, so that the Company’s ability to complete a business combination
may be extended in additional increments of one month up to a total of twenty-one (21) additional months from the closing date of the
Offering, subject to the payment into the trust account by the Company of one-third of 1% of the funds remaining in the trust account
following any redemptions in connection with the approval of the amendment to the Company’s Amended and Restated Certificate of
Incorporation. The Sponsor has funded the first 30-day extension payment on May 3, 2023 and made subsequent extension payments on June
5th and July 6th totaling $205,305 payments during the year ended on November 30, 2023. The Sponsor is entitled
to the repayment of these extension payments, without interest. If the Company completes its initial Business Combination, it will, at
the option of the Sponsor, repay the extension payments out of the proceeds of the Trust Account released to it or issue securities of
the Company in lieu of repayment. As of November 30, 2023 and 2022 there was $205,305 and $0, respectively, outstanding under the extension
loan.
Due
from Sponsor
Due
from sponsor was $0 and $13,000 at November 30, 2023 and November 30, 2022, respectively and represents expenses paid by the Company
on behalf of the Sponsor.
NOTE
6 — COMMITMENTS AND CONTINGENCIES
Registration
Rights
The
holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and
any shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working
Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights pursuant to a registration rights agreement
to be signed prior to or on the effective date of Initial Public Offering requiring the Company to register such securities for resale.
The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company
register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration
statements filed subsequent to completion of a Business Combination and rights to require the Company to register for resale such securities
pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not be required
to effect or permit any registration or cause any registration statement to become effective until the securities covered thereby are
released from their lock-up restrictions. The Company will bear the expenses incurred in connection with the filing of any such registration
statements.
Underwriting
Agreement
The
Company granted the underwriters a 45-day option from the date of Initial Public Offering to purchase up to 1,125,000 additional Units
to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. On February 3,
2022, the underwriters elected to fully exercise their over-allotment option. The Units were sold at an offering price of $10.00 per
Unit, generating additional gross proceeds to the Company of $11,250,000.
The
underwriters were paid a cash underwriting discount of $0.20 per Unit, or $1,725,000 in the aggregate, upon the closing of the Initial
Public Offering. In addition, the underwriters will be entitled to a deferred fee of $0.35 per Unit, or $ $3,018,750 in the aggregate.
The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company
completes a Business Combination, subject to the terms of the underwriting agreement.
NOTE
7 — STOCKHOLDERS’ EQUITY
Preferred
Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share. As
of November 30, 2023 and 2022, there were no shares of preferred stock issued or outstanding.
Class
A Common Stock — The Company is authorized to issue 50,000,000 shares of Class A common stock with a par value of $0.0001
per share. Holders of Class A common stock are entitled to one vote for each share. As of November 30, 2023 and 2022, there were 473,750
shares of Class A common stock issued and outstanding, respectively, (excluding 1,976,036 and 8,625,000, respectively, shares of the
Class A Common Stock subject to possible redemption that were classified as temporary equity in the accompanying balance sheets).
Class
B Common Stock — The Company is authorized to issue 5,000,000 shares of Class B common stock with a par value of $0.0001
per share. Holders of Class B common stock are entitled to one vote for each share. As of November 30, 2023 and 2022, there were 2,156,250
shares of Class B common stock issued and outstanding.
Only
holders of the Class B common stock will have the right to vote on the election of directors prior to the Business Combination. Holders
of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of
our stockholders except as otherwise required by law. In connection with our initial Business Combination, we may enter into a stockholders’
agreement or other arrangements with the stockholders of the target or other investors to provide for voting or other corporate governance
arrangements that differ from those that were in effect upon completion of the Initial Public Offering.
The
shares of Class B common stock will automatically convert into Class A common stock at the time of a Business Combination, on a one-for-one
basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or
deemed issued in excess of the amounts issued in the Initial Public Offering and related to the closing of a Business Combination, the
ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders
of a majority of the then-outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance
or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock
will equal, in the aggregate, on an as-converted basis, to 20% of the sum of the total number of all shares of common stock outstanding
upon the completion of the Initial Public Offering (excluding the placement units and underlying securities).
Rights
- Except in cases where the Company is not the surviving company in a Business Combination, each holder of a right will automatically
receive one-tenth (1/10) of one share of common stock upon consummation of the initial Business Combination. The Company will not issue
fractional shares in connection with an exchange of rights. Fractional shares will either be rounded to the nearest whole share or otherwise
addressed in accordance with Section 155 of the Delaware General Corporation Law, as further described herein. We will make the determination
of how we are treating fractional shares at the time of our initial Business Combination and will include such determination in the proxy
materials we will send to stockholders for their consideration of such initial Business Combination.
Warrants
— Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation
of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion
of a Business Combination and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years
after the completion of a Business Combination or earlier upon redemption or liquidation.
The
Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation
to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class
A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A
common stock is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from
registration is available. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue
any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified
under the securities laws of the state of residence of the exercising holder, or an exemption from registration is available.
The
Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination,
the Company will use its commercially reasonable efforts to file, and within 60 business days following a Business Combination being
declared effective, a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the
warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed.
Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities
exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the
Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis”
in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to
file or maintain in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares
under applicable blue sky laws to the extent an exemption is not available.
Redemption
of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $18.00 — Once the warrants become exercisable,
the Company may redeem the outstanding Public Warrants:
| |
● |
in
whole and not in part; |
| |
|
|
| |
● |
at
a price of $0.01 per Public Warrant; |
| |
|
|
| |
● |
upon
a minimum of 30 days’ prior written notice of redemption, or the 30-day redemption period to each warrant holder; and |
| |
|
|
| |
● |
if,
and only if, the last reported sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits,
stock dividends, reorganization, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on
the trading day prior to the date on which the Company sends the notice of redemption to warrant holders. |
If
and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register
or qualify the underlying securities for sale under all applicable state securities laws.
If
the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that
wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise
price and number of common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in
the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as
described below, the Public Warrants will not be adjusted for issuances of common stock at a price below its exercise price. Additionally,
in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination
within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive
any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held
outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
The
Private Placement Warrants will be identical to the Public Warrants underlying the Units being sold in the Initial Public Offering except
the Private Placement Warrants (including the Class A common stock issuable upon exercise of the Private Placement Warrants) will not
be transferable, assignable or salable until 30 days after the completion of an Initial Business Combination, subject to certain exceptions.
NOTE
8 — INCOME TAXES
The
Company’s deferred tax assets are as follows at November 30, 2023 and 2022:
SCHEDULE
OF DEFERRED TAX ASSETS
| | |
November 30,
2023 | | |
November 30,
2022 | |
| Deferred tax asset | |
| | | |
| | |
| Net operating loss | |
$ | - | | |
$ | - | |
| Startup/organizational costs | |
| 327,760 | | |
| 241,940 | |
| Total deferred tax asset | |
| 327,760 | | |
| 241,940 | |
| Valuation allowance | |
| (327,760 | ) | |
| (241,940 | ) |
| Deferred tax asset, net of allowance | |
$ | - | | |
$ | - | |
The
income tax provision (benefit) consists of the following for the year November 30, 2023 and November 30, 2022:
SCHEDULE
OF INCOME TAX BENEFIT
| | |
November 30,
2023 | | |
November 30,
2022 | |
| Federal | |
| | | |
| | |
| Current | |
$ | 422,230 | | |
$ | 186,923 | |
| Deferred | |
| - | | |
| - | |
| State and Local | |
| | | |
| | |
| Current | |
| - | | |
| - | |
| Deferred | |
| - | | |
| - | |
| Income tax provision / (benefit) | |
$ | 422,230 | | |
$ | 186,923 | |
In
assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all
of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible.
Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies
in making this assessment. After consideration of all of the information available, management believes that significant uncertainty
exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For
the year ended November 30, 2023 and 2022, the change in the valuation allowance was $203,935 and $123,825, respectively.
A
reconciliation of the statutory tax rate to the Company’s effective tax rates for the year ended November 30, 2023 and 2022:
SCHEDULE
OF EFFECTIVE INCOME TAX RATE RECONCILIATION
| | |
Year Ended
November 30,
2023 | | |
Year Ended
November 30,
2022 | |
| Statutory federal income tax rate | |
| 21.00 | % | |
| 21.00 | % |
| State taxes, net of federal tax benefit | |
| - | | |
| - | |
| Other | |
| 1.48 | | |
| - | |
| Change in valuation allowance | |
| 21.00 | | |
| 41.21 | |
| Income tax provision (benefit) | |
| 43.48 | % | |
| 62.21 | % |
NOTE
9 — SUBSEQUENT EVENT
On
January 9, 2024, the Company announced the completion of its previously announced business combination. In connection with the Business
Combination, Alset changed its name from Alset Capital Acquisition Corp. to HWH International Inc.
As
a result of the Business Combination, each share of Class A common stock was cancelled and converted into shares of the
Company’s common stock, on the terms set forth in the Merger Agreement, dated September 9, 2022. Pursuant to the terms of the
Merger Agreement, the aggregate number of shares of Company common stock that was delivered as consideration in the Business
Combination was 12,500,000
shares.
Also,
as a result of the Business Combination, each outstanding share of Class B common stock, with par value of $0.0001 per share, of Alset
(the “Class B Common Stock”), automatically converted into one share of Class A common stock, with $0.0001 par value per
share, of Alset (the “Class A Common Stock”), and then subsequently converted into one share of Company common stock.
In
lieu of the Company tendering the full amount of Deferred Underwriting Commission, the Company and EF Hutton entered into the Satisfaction
Agreement, pursuant to which EF Hutton accepted a combination of $325,000
in cash (the “Cash Payment”) upon
the closing of the business combination, 149,443
shares of the Company’s common stock (the
“Shares”) and a $1,184,375
promissory note (the “Promissory Note”)
as full satisfaction of the Deferred Underwriting Commission.
1,942,108
shares of the Company’s common stock were redeemed in connection with the Business Combination at a redemption price of
$10.66 per share. Following the Business Combination, 909,875
new shares of the Company’s common stock were issued in connection with the conversion of rights into HWH common shares.
HWH
International Inc. and Subsidiaries
CONSOLIDATED
FINANCIAL STATEMENTS
For
the Years Ended
December
31, 2023 and 2022
Table
of Contents
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of
HWH
International Inc. and Subsidiaries
Bethesda,
Maryland
Opinion
on the Consolidated Financial Statements
We
have audited the accompanying consolidated balance sheets of HWH International Inc. and Subsidiaries (the “Company”) as of
December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’
equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the consolidated financial
statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years then ended,
in conformity with accounting principles generally accepted in the United States of America.
Restatement
of Consolidated Financial Statements
As
discussed in Note 3 to the consolidated financial statements, the 2022 consolidated financial statements have been restated to correct
certain misstatements.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the
United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to
obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness
of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.
GRASSI
& CO., CPAs, P.C.
We
have served as the Company’s auditor since 2022.
Jericho,
New York
March
25, 2024, except for Note 19 as to which the date is June 5, 2024
HWH
International Inc. and Subsidiaries
Consolidated
Balance Sheets
| | |
December 31, 2023 | | |
December
31, 2022 (as
restated) | |
| ASSETS | |
| | | |
| | |
| | |
| | | |
| | |
| Current Assets | |
| | | |
| | |
| Cash | |
$ | 878,803 | | |
$ | 1,651,088 | |
| Accounts Receivable, net | |
| 28,611 | | |
| 9,070 | |
| Inventory | |
| 1,977 | | |
| 34,126 | |
| Other receivables | |
| 41,203 | | |
| 35,717 | |
| Convertible note receivable - related party | |
| - | | |
| 198,125 | |
| Prepaid expenses | |
| 6,862 | | |
| 17,828 | |
| Total Current Assets | |
$ | 957,456 | | |
$ | 1,945,954 | |
| | |
| | | |
| | |
| Non-Current Assets | |
| | | |
| | |
| Property and Equipment, net | |
$ | 129,230 | | |
$ | 166,338 | |
| Investment in associate, related party | |
| - | | |
| 155,369 | |
| Deposits | |
| 298,324 | | |
| 305,036 | |
| Operating lease right-of-use assets, net | |
| 598,508 | | |
| 973,069 | |
| Total Non-Current Assets | |
$ | 1,026,062 | | |
$ | 1,599,812 | |
| | |
| | | |
| | |
| TOTAL ASSETS | |
$ | 1,983,518 | | |
$ | 3,545,766 | |
| | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
| | |
| | | |
| | |
| Current Liabilities | |
| | | |
| | |
| Accounts payable and accrued expenses | |
$ | 137,199 | | |
$ | 60,771 | |
| Accrued commissions | |
| 85,206 | | |
| 143,383 | |
| Due to related parties, net | |
| 2,118,495 | | |
| 1,663,668 | |
| Operating lease liabilities - Current | |
| 429,687 | | |
| 419,303 | |
| Deferred revenue | |
| - | | |
| 21,198 | |
| Total Current Liabilities | |
$ | 2,770,587 | | |
$ | 2,308,323 | |
| | |
| | | |
| | |
| Non-Current Liabilities | |
| | | |
| | |
| Operating lease liabilities - Non-current | |
$ | 182,380 | | |
$ | 559,330 | |
| Total Non-Current Liabilities | |
$ | 182,380 | | |
$ | 559,330 | |
| Total Liabilities | |
| 2,952,967 | | |
| 2,867,653 | |
| | |
| | | |
| | |
| Commitments and Contingencies | |
| | | |
| | |
| | |
| | | |
| | |
| Stockholders’ (Deficit) Equity | |
| | | |
| | |
| Preferred stock, US$0.001 par value; 10,000,000 shares authorized; none issued and outstanding as of December 31, 2023 and
2022 | |
$ | - | | |
$ | - | |
| Common stock, US$.001 par value; 500,000,000 shares authorized; 10,000 shares issued and outstanding as of December 31, 2023,
and 50,000,000 shares authorized; 10,000 shares issued and outstanding as of December 31, 2022 | |
| 10 | | |
| 10 | |
| Accumulated other comprehensive loss | |
| (197,040 | ) | |
| (200,039 | ) |
| (Accumulated deficit) Retained earnings | |
| (781,085 | ) | |
| 873,306 | |
| Total HWH International Inc. Stockholders’ (deficit)
equity | |
$ | (978,115 | ) | |
$ | 673,277 | |
| Non-controlling interests | |
| 8,666 | | |
| 4,836 | |
| Total Stockholders’ (Deficit) Equity | |
| (969,449 | ) | |
| 678,113 | |
| | |
| | | |
| | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | |
$ | 1,983,518 | | |
$ | 3,545,766 | |
The
accompanying notes are an integral part of these consolidated financial statements.
HWH
International Inc. and Subsidiaries
Consolidated
Statements of Operations and Comprehensive Loss
| | |
Year
Ended December
31, 2023 | | |
Year
Ended December
31, 2022
(As restated) | |
| | |
| | |
| |
| Revenues: | |
| | | |
| | |
| - Membership | |
$ | 12,293 | | |
$ | 751,452 | |
| - Non-membership | |
| 818,226 | | |
| 451,438 | |
| Total Revenue | |
$ | 830,519 | | |
$ | 1,202,890 | |
| | |
| | | |
| | |
| Cost of revenues | |
| | | |
| | |
| - Membership | |
$ | (13,827 | ) | |
$ | (523,243 | ) |
| - Non-membership | |
| (320,998 | ) | |
| (165,122 | ) |
| Total Cost of revenue | |
$ | (334,825 | ) | |
$ | (688,365 | ) |
| | |
| | | |
| | |
| Gross profit | |
$ | 495,694 | | |
$ | 514,525 | |
| | |
| | | |
| | |
| Operating expenses | |
| | | |
| | |
| General and administrative expenses | |
$ | (1,874,528 | ) | |
$ | (1,471,898 | ) |
| Impairment of convertible note receivable – related party, and investment
in associate, related party | |
| (493,898 | ) | |
| - | |
| Total operating expenses | |
$ | (2,368,426 | ) | |
$ | (1,471,898 | ) |
| | |
| | | |
| | |
| Other income (expense) | |
| | | |
| | |
| Other income | |
$ | 187,282 | | |
$ | 146,711 | |
| Unrealized gain (loss) on related party transactions | |
| 68,787 | | |
| (29,551 | ) |
| Loss on equity method investment, related party | |
| (33,898 | ) | |
| (100,949 | ) |
| Total Other Income | |
$ | 222,171 | | |
$ | 16,211 | |
| | |
| | | |
| | |
| Loss before provision for income taxes | |
$ | (1,650,561 | ) | |
$ | (941,162 | ) |
| | |
| | | |
| | |
| Provision for income taxes | |
| - | | |
| - | |
| | |
| | | |
| | |
| Net loss | |
$ | (1,650,561 | ) | |
$ | (941,162 | ) |
| | |
| | | |
| | |
| Less: Net income attributable to the non-controlling interests | |
$ | 3,830 | | |
$ | 4,836 | |
| | |
| | | |
| | |
| Net loss attributable to common shareholders | |
$ | (1,654,391 | ) | |
$ | (945,998 | ) |
| | |
| | | |
| | |
| Other Comprehensive Income, Net of Tax: | |
| | | |
| | |
| Foreign currency translation adjustments | |
$ | 2,999 | | |
$ | 19,608 | |
| Total Other Comprehensive Income, Net of Tax: | |
$ | 2,999 | | |
$ | 19,608 | |
| | |
| | | |
| | |
| Comprehensive Loss | |
$ | (1,651,392 | ) | |
$ | (926,390 | ) |
| | |
| | | |
| | |
| Weighted average number of shares of common stock outstanding - basic and diluted | |
| 10,000 | | |
| 10,000 | |
| | |
| | | |
| | |
| Net loss per common share - basic and diluted | |
$ | (165.44 | ) | |
$ | (94.60 | ) |
The
accompanying notes are an integral part of these consolidated financial statements.
HWH
International Inc. and Subsidiaries
Consolidated
Statements of Changes in Stockholders’ Equity (Deficit)
| | |
Common stock (shares) | | |
Common stock (amount) | | |
Accumulated Other Comprehensive
Loss | | |
Retained Earnings (Accumulated
Deficit) | | |
Total HWH Int’l Inc. Stockholders’
equity (deficit) | | |
Non-controlling interests | | |
Total
Stockholders’
equity
(deficit) | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Balances at December 31, 2021 | |
| 10,000 | | |
$ | 10 | | |
$ | (219,647 | ) | |
$ | 1,819,304 | | |
$ | 1,599,667 | | |
$ | - | | |
$ | 1,599,667 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net loss (as restated) | |
| | | |
| - | | |
| | | |
| (945,998 | ) | |
| (945,998 | ) | |
| 4,836 | | |
| (941,162 | ) |
| Foreign currency translation adjustment | |
| | | |
| | | |
| 19,608 | | |
| - | | |
| 19,608 | | |
| | | |
$ | 19,608 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balances at December 31, 2022 (as restated) | |
| 10,000 | | |
$ | 10 | | |
$ | (200,039 | ) | |
$ | 873,306 | | |
$ | 673,277 | | |
$ | 4,836 | | |
$ | 678,113 | |
| Balances | |
| 10,000 | | |
$ | 10 | | |
$ | (200,039 | ) | |
$ | 873,306 | | |
$ | 673,277 | | |
$ | 4,836 | | |
$ | 678,113 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net loss | |
| - | | |
| - | | |
| | | |
| (1,654,391 | ) | |
| (1,654,391 | ) | |
| 3,830 | | |
| (1,650,561 | ) |
| Foreign currency translation adjustment | |
| - | | |
| - | | |
| 2,999 | | |
| - | | |
| 2,999 | | |
| - | | |
| 2,999 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balances at December 31, 2023 | |
| 10,000 | | |
$ | 10 | | |
$ | (197,040 | ) | |
$ | ($781,085 | ) | |
$ | (978,115 | ) | |
$ | 8,666 | | |
$ | (969,449 | ) |
| Balances | |
| 10,000 | | |
$ | 10 | | |
$ | (197,040 | ) | |
$ | ($781,085 | ) | |
$ | (978,115 | ) | |
$ | 8,666 | | |
$ | (969,449 | ) |
The
accompanying notes are an integral part of these consolidated financial statements.
HWH
International Inc. and Subsidiaries
Consolidated
Statements of Cash Flows
| | |
Year
Ended December
31, 2023 | | |
Year
Ended December
31, 2022
(as restated) | |
| Cash flows from operating activities: | |
| | | |
| | |
| Net loss | |
$ | (1,650,561 | ) | |
$ | (941,162 | ) |
| | |
| | | |
| | |
| Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
| Unrealized (gain) loss on related party transactions | |
| (68,787 | ) | |
| 29,551 | |
| Loss on equity method investment, related party | |
| 33,898 | | |
| 100,949 | |
| Depreciation expense | |
| 58,006 | | |
| 33,867 | |
| Non-cash lease expense | |
| 509,340 | | |
| 356,556 | |
| Impairment
of convertible note receivable – related party, and investment in associate, related party | |
| 493,898 | | |
| - | |
| Inventory written off expenses | |
| 30,753 | | |
| - | |
| | |
| | | |
| | |
| Change in operating assets and liabilities: | |
| | | |
| | |
| Receivable from related party | |
| (13,973 | ) | |
| 83,233 | |
| Convertible note receivable - related party | |
| (165,643 | ) | |
| (121,403 | ) |
| Other receivables | |
| 89,900 | | |
| 67,175 | |
| Prepaid commissions | |
| 6,651 | | |
| 294,700 | |
| Deposits | |
| 1,008 | | |
| (81,934 | ) |
| Inventory | |
| 184 | | |
| 10,566 | |
| Accounts payable and accrued expenses | |
| 70,669 | | |
| 48,223 | |
| Accrued commissions | |
| (54,247 | ) | |
| 36,615 | |
| Income tax payable | |
| - | | |
| (36,134 | ) |
| Value added tax withheld | |
| (98,223 | ) | |
| (82,981 | ) |
| Deferred revenue | |
| (20,814 | ) | |
| (641,029 | ) |
| Operating Lease Liabilities | |
| (508,018 | ) | |
| (365,324 | ) |
| Net cash used in operating activities | |
$ | (1,285,959 | ) | |
$ | (1,208,532 | ) |
| | |
| | | |
| | |
| Cash flows from investing activities: | |
| | | |
| | |
| Purchases of property and equipment | |
$ | (14,574 | ) | |
$ | (166,855 | ) |
| Investment in an associate | |
| - | | |
| (256,318 | ) |
| Net cash used in investing activities | |
$ | (14,574 | ) | |
$ | (423,173 | ) |
| | |
| | | |
| | |
| Cash flows from financing activities: | |
| | | |
| | |
| Advance from related parties | |
$ | 526,323 | | |
$ | 718,671 | |
| Net cash provided by financing activities | |
$ | 526,323 | | |
$ | 718,671 | |
| | |
| | | |
| | |
| Net (decrease) in cash | |
| (774,210 | ) | |
| (913,034 | ) |
| Effects of foreign exchange rate on cash | |
| 1,925 | | |
| (86,692 | ) |
| Cash at beginning of year | |
| 1,651,088 | | |
| 2,650,814 | |
| Cash at end of year | |
$ | 878,803 | | |
$ | 1,651,088 | |
| | |
| | | |
| | |
| Supplemental disclosure of non-cash investing and financing activities | |
| | | |
| | |
| Initial recognition of operating lease right-of-use asset and liability | |
$ | 125,331 | | |
$ | 1,134,004 | |
The
accompanying notes are an integral part of these consolidated financial statements.
HWH
International Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
Note
1. Nature of Operations
DESCRIPTION
OF ORGANIZATION, BUSINESS OPERATIONS
HWH
International Inc. (“HWH”) and its consolidated subsidiaries (collectively, the “Company”) operate a food and
beverage (“F&B”) business in Singapore and South Korea. The Company operates a membership model in which individuals
pay an upfront membership fee to become members. As members, these individuals receive discounted access to products and services offered
by the Company’s affiliates. Previously, the Company had approximately 9,000 members, primarily in South Korea. Currently, this
membership business has been temporarily suspended.
A
reorganization of the Company’s legal entity structure was completed in July 2022. The reorganization involved the incorporation
of HWH in March 2022 and the acquisition of companies under common control, F&B Holding Pte. Ltd. and F&B One Pte. Ltd in July
2022, as wholly owned subsidiaries of HWH. HWH is wholly-owned by Alset International Limited, a public company listed on the Singapore
Exchange Securities Trading Limited. In the transactions under common control, financial statements and financial information were presented
as of the beginning of the period as though the assets and liabilities had been transferred at that date.
The
following chart describes the Company’s ownership of various subsidiaries:
The
Company mainly focused on the F&B business in 2023. During the years ended December 31, 2023, and 2022, substantially all of the
Company’s business was generated by its wholly owned subsidiaries, 2% and 63% from HWH World Inc. (“HWH Korea”) and
98% and 37% from F&B business respectively; 49% and 28% from Alset F&B One Pte. Ltd (“F&B1”), 6% and 2% from
Hapi Café Korea Inc.(“HCKI”), 22% and 7% from Hapi Café SG Pte. Ltd. (“HCSGPL”) and 21% and 0%
from Alset F&B (PLQ) Pte. Ltd. (“F&BPLQ”). HWH Korea was incorporated in the Republic of Korea (“South Korea”)
on May 7, 2019. HWH Korea is in the business of sourcing and distributing dietary supplements and other health products through its network
of members in South Korea. HWH Korea generates product sales via its direct sale model as products are sold to its members. Through the
use of a Hapi Gig platform that combines e-commerce, social media, and a customized rewards system, HWH Korea equips, trains, and empowers
its members. F&B1 was incorporated in Singapore on April 10, 2017, HCSGPL was incorporated in Singapore on April 4, 2022, and F&BPLQ
was incorporated in Singapore on November 11, 2022. F&B1, HCSGPL, and F&BPLQ are in the F&B business in Singapore.
Note
2. Summary of Significant Accounting Policies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
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.
Functional
and Reporting Currency
The
functional and reporting currency of the Company is the United States dollar (“$”). The financial records of the Company’s
subsidiaries located in South Korea, Singapore, Hong Kong, and Malaysia are maintained in their local currencies, the Korean Won (₩)
Singapore Dollar (S$) Hong Kong Dollar (HK$) and Malaysian Ringgit (MYR), which are also the functional currencies of these entities.
Use
of estimates
The
preparation of the consolidated 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 as of the dates of the
balance sheets and reported amounts of revenues and expenses during the reporting periods. Estimates are used in determining, among other
items, allowance for credit losses, inventory reserve, income taxes and contingencies. Actual results could differ from these estimates.
Fair
Value of Financial Instruments
The
Company adopted Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures”, for
assets and liabilities measured at fair value on a recurring basis. ASC 820 defines fair value as the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which
requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC
820 describes three levels of inputs that may be used to measure fair value:
Level
1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities
Level
2: Observable market-based inputs or unobservable inputs that are corroborated by market data
Level
3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions
For
purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced sale or liquidation. The carrying values reported in balance sheets for current
assets and liabilities approximate their estimated fair market values based on the short-term maturity of these instruments.
Cash
and cash equivalents
The
Company considers all highly liquid investments with a maturity of three months or less at the date of acquisition to be cash equivalents.
There were no cash equivalents as of December 31, 2023 and 2022.
Inventory
Inventory
is stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method and includes all costs
in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary
course of business less the estimated costs necessary to make the sale. As of December 31, 2023 and 2022, inventory consisted of finished
goods procured from suppliers. The Company continuously evaluates the need for reserve for obsolescence and possible price concessions
required to write-down inventory to its net realizable value. The Company determined that total inventory with original cost of $30,753
requires write off and recorded it in the cost of revenue (non-membership) for the year ended December 31, 2023.
Leases
The
Company follows FASB ASC Topic 842 in accounting for its operating lease right-of-use assets and operating lease liabilities. At inception
of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is or contains a lease if it conveys the
right to control the use of an identified asset for a period of time in exchange of a consideration. To assess whether a contract is
or contains a lease, the Company assesses whether the contract involves the use of an identified asset, whether it has the right to obtain
substantially all of the economic benefits from the use of the asset and whether it has the right to control the use of the asset. The
right-of-use assets and related lease liabilities are recognized at the lease commencement date. The Company recognizes operating lease
expenses on a straight-line basis over the lease term.
Right-of-use
of assets
The
right-of-use of asset is measured at cost, which comprises the amount of the lease liability adjusted for any lease payments made at
or before the commencement date, plus any initial direct costs incurred and less any lease incentive received.
Lease
liabilities
Lease
liability is measured at the present value of the outstanding lease payments at the commencement date, discounted using the Company’s
incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise mainly of fixed lease payments.
Short-term
leases and leases of low value assets
The
Company has elected to not recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months
or less and leases of low value assets. Lease payments associated with these leases are expensed as incurred.
Property,
Plant and Equipment
Property,
plant and equipment are recorded at cost, less depreciation. Repairs and maintenance are expensed as incurred. Expenditures incurred
as a consequence of acquiring or using the asset, or that increase the value or productive capacity of assets are capitalized. When property
and equipment is retired, sold, or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are
removed from the accounts and any gain or loss is included in statement of operations. Depreciation is computed by the reducing balance
method (after considering their respective estimated residual values) over the estimated useful lives of the respective assets as follows:
SCHEDULE
OF PROPERTY PLANT AND EQUIPMENT
| Office
Equipment |
|
3
– 5 years |
| Furniture
and Fittings |
|
3
– 5 years |
| Kitchen
Equipment |
|
3
– 5 years |
| Operating
Equipment |
|
3
– 5 years |
| Leasehold
Improvements |
|
Shorter
of lease life or asset life |
The
Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying
value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition.
In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an
amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment
include current operating results, trends, and prospects, as well as the effects of obsolescence, demand, competition, and other economic
factors.
Deposit:
Deposit
represents mostly rental deposit paid for the office used.
Revenue
Recognition
ASC
606 – Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information
about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods
or services to customers.
In
accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized
reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services. The provisions
of ASC 606 include a five-step process by which the determination of revenue recognition, depicting the transfer of goods or services
to customers in amounts reflecting the payment to which the Company expects to be entitled in exchange for those goods or services. ASC
606 requires the Company to apply the following steps:
(1)
identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price;
(4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, performance
obligations are satisfied.
The
Company generates its revenue primarily from membership fees, product sales and F&B business.
Membership
Fee: The Company collects an annual membership fee from its members. The fee is fixed, paid in full at the time upon joining the
membership and is not refundable. The Company’s performance obligation is to provide its members the right to (a) purchase products
from the Company, (b) access to certain back-office services, (c) receive commissions and (d) attend corporate events. The associated
performance obligation is satisfied over time, generally over the term of the membership agreement which is for a one-year period. The
Company recognizes revenue from membership fee over the one-year period of the membership.
Product
Sales: The Company’s performance obligation is to transfer ownership of its products to its Members. The Company generally
recognizes revenue when product is delivered to its members. 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 member returns a product to the Company on a timely basis, they may obtain a replacement product from the Company for such returned
products. We do not have buyback program. However, when the customer requests a return and management decides that the refund is necessary,
we initiate the refund after deducting all the benefits that a member has earned. The returns are deducted from our sales revenue on
our financial statements. Allowances for product and membership 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 and membership returns for the years ended December 31, 2023
and 2022 were approximately $1,183 and $41,755, respectively. The table below represents a breakout of the returns related to product
sales and the returns related to memberships:
SCHEDULE
OF PRODUCT SALES AND RETURNS RELATED TO MEMBERSHIPS
| | |
Membership | | |
Products | | |
Total | |
| | |
Returns | |
| | |
Membership | | |
Products | | |
Total | |
| | |
$ | | |
$ | | |
$ | |
| | |
| | |
| | |
| |
| December 31, 2022 | |
| 41,755 | | |
| - | | |
| 41,755 | |
| December 31, 2023 | |
| - | | |
| 1,183 | | |
| 1,183 | |
| Revenue returns | |
| - | | |
| 1,183 | | |
| 1,183 | |
Food
and Beverage: The revenue received from Food and Beverage business for the years ended December 31, 2023 and 2022 were $ 817,761
and $ 449,239 respectively.
Deferred
Revenue
The
Company records all unearned revenue from membership sales as deferred revenue. Deferred revenue was $0 as of December 31, 2023. Deferred
revenue of $21,198 as of December 31, 2022 consisted of unearned membership fee of $21,198.
Contract
assets and liabilities
Below
is a summary of the beginning and ending balances of the Company’s contract assets and liabilities as of December 31, 2023 and
2022.
SCHEDULE
OF CONTRACT ASSETS AND LIABILITIES
| Prepaid
Sales Commission | |
December 31, 2023 | | |
December 31, 2022 | |
| | |
| | |
| |
| Balances at the beginning of the year | |
$ | 6,839 | | |
$ | 319,649 | |
| Movement for the year | |
| (6,839 | ) | |
| (312,810 | ) |
| Balances at the end of the year | |
$ | 0 | | |
$ | 6,839 | |
| Deferred Revenue | |
December 31, 2023 | | |
December 31, 2022 | |
| | |
| | |
| |
| Balances at the beginning of the year | |
$ | 21,198 | | |
$ | 700,385 | |
| Movement for the year | |
| (21,198 | ) | |
| (679,187 | ) |
| Balances at the end of the year | |
$ | 0 | | |
$ | 21,198 | |
Value-added
Tax
The
Company is obligated to pay value-added tax (“VAT”), among other things, on its inventory purchase as well as its rent payments
and payment of professional fees. As of December 31, 2023 and 2022, included in other receivables was VAT paid of $37,179 and $32,607,
respectively, due primarily to the purchase of inventory and payment of rents and accounting fees.
Cost
of revenue
Cost
of revenue is consisted of the cost of procuring finished goods from suppliers and related shipping and handling fees from 3rd
parties money platform, contractor fees for part-time staff, franchise commission and sales commission from membership business.
Below
is a breakdown of the Company’s cost of revenue for the years ended December 31, 2023 and 2022.
SCHEDULE
OF COST OF REVENUE
| December 31, 2023 | |
Total | |
| | |
| |
| Finished goods | |
$ | 151,703 | |
| Related shipping | |
| 9,346 | |
| Handling fee | |
| 22,629 | |
| Contractor fee | |
| 30,977 | |
| Franchise commission | |
| 18,428 | |
| Sales commission | |
| 13,827 | |
| Inventory written off | |
| 30,753 | |
| Depreciation | |
| 57,162 | |
| Total of Cost of revenue | |
$ | 334,825 | |
| | |
| | |
| December 31, 2022 | |
| | |
| | |
| | |
| Finished goods | |
$ | 97,058 | |
| Related shipping | |
| 10,376 | |
| Handling fee | |
| 10,945 | |
| Contractor fee | |
| 18,568 | |
| Franchise commission | |
| 17,624 | |
| Sales commission | |
| 501,483 | |
| Depreciation | |
| 32,311 | |
| Total of Cost of revenue | |
$ | 688,365 | |
Shipping
and Handling Fees
The
Company utilizes the practical expedient under ASC 606-10-25-18B to account for its shipping and handling as fulfillment activities,
and not a promised service (a revenue element). Shipping and handling fees are included in costs of revenue within the statements of
operations.
Commission
Expense
The
Company compensates its sales leaders with leadership incentives for services rendered, relating to the development, retention, and management
of their sales organizations. Leadership incentives are payable based on achieved sales volume, which are recorded in cost of revenue.
Member will get 25% commission of the membership fee income if the member successfully refers a new member to subscribe to the membership.
The commission will be payable after the referee’s membership is confirmed and been paid by the new member.
Advertising
Expenses
Costs
incurred for advertising the Company’s products are charged to operations as incurred. Advertising expenses for the years ended
December 31, 2023 and 2022 were $4,191 and $57,347, respectively.
Income
Taxes
The
Company accounts for income taxes pursuant to the provision of ASC 740-10, “Accounting for Income Taxes” (“ASC 740-10”),
which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach
requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets
for which management believes it is more likely than not that the net deferred tax asset will not be realized. Tax positions that meet
the more likely than not recognition threshold are measured at the largest amount of tax benefit that is more than 50 percent likely
of being realized upon settlement with the applicable taxing authority.
The
Company follows the provision of ASC 740-10 related to Accounting for Uncertain Income Tax Positions. When tax returns are filed, there
may be uncertainty about the merits of positions taken or the amount of the position that would be ultimately sustained. In accordance
with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which,
based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination,
including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.
The
Company has not recorded any unrecognized tax benefits. The Company’s policy is to recognize interest and penalties related to
income taxes in income tax expense.
Earnings
(Loss) per Share
Basic
earnings (loss) per share is computed by dividing the net income (loss) attributable to the common shareholders by weighted average number
of shares of common stock outstanding during the period. Fully diluted earnings (loss) per share is computed similar to basic income
(loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial instruments
issued or outstanding for the years ended December 31, 2023 and 2022.
Non-controlling
interests
Non-controlling
interests represent the equity in a subsidiary not attributable, directly or indirectly, to owners of the Company, and are presented
separately in the consolidated statements of operation and comprehensive income, and within equity in the Consolidated Balance Sheets,
separately from equity attributable to owners of the Company.
On
December 31, 2023 and 2022, the aggregate non-controlling interests in the Company were ($3,830) and ($4,836), respectively.
Liquidity
and Capital Resources
In
the year of 2023, we incurred a net loss, a loss from operations and negative cash flow from operations as we expanded our business of
operating cafés and restructured our membership business.
Notwithstanding
the above, 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 shall consist of plans to take over leases of existing Hapi Cafes we currently do not own, as we
look to add Hapi Cafes over the next two (2) years. If we take over these existing leases, it will require a minimum investment for each
lease we take over for each Hapi Café. Proceeds received as a result of the anticipated business combination, will allow us to
seek these expansion plans. Depending on the amount of proceeds we raise as part of the anticipated business combination, we may or may
not need or seek additional funding or alter our strategic growth plans after the business combination is effectuated. There is no guarantee
that we will be able to execute on our plans as laid out above.
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 a letter of financial support from Alset International Limited and Alset Inc., a direct and indirect owner of the
Company, respectively. Alset International Limited and 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.
Recently
Adopted Accounting Pronouncement
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial
Instruments (Topic 326). The update provides guidance on the measurement of credit losses for most financial assets and certain other
instruments that are not measured at fair value through net income. The amendment replaces the current incurred loss impairment approach
with a methodology to reflect expected credit losses and requires consideration of a broader range of reasonable and supportable information
to explain credit loss estimates. The Company adopted the provisions of this new accounting standard at the beginning of fiscal 2023
using the modified retrospective approach and did not have a material impact on its consolidated financial statements.
Note
3. Restatement of Prior Year Presentation
RESTATEMENT OF PRIOR YEAR PRESENTATION
In
preparing our 2023 consolidated financial statements, the Company identified certain misstatements. We have restated the 2022 consolidated
financial statement to correct the errors. These restatements are summarized below.
Consolidated
Statement of Operations and Other Comprehensive Loss for the Year Ended on December 31, 2022
SCHEDULE
OF CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
| | |
As Previously Reported | | |
Restatement of Prior Year Presentation
# | | |
As Restated | |
| | |
| | |
| | |
| |
| Revenues: | |
| | | |
| | | |
| | |
| - Membership | |
$ | 751,452 | | |
$ | - | | |
$ | 751,452 | |
| - Non-membership | |
| 451,438 | | |
| - | | |
| 451,438 | |
| Total Revenue | |
$ | 1,202,890 | | |
$ | - | | |
$ | 1,202,890 | |
| | |
| | | |
| | | |
| | |
| Cost of revenue | |
| | | |
| | | |
| | |
| - Membership | |
$ | (523,243 | ) | |
$ | - | | |
$ | (523,243 | ) |
| - Non-membership | |
| (132,811 | ) | |
| (32,311 | ) | |
| (165,122 | ) |
| Total Cost of revenue | |
$ | (656,054 | ) | |
$ | (32,311 | ) | |
$ | (688,365 | ) |
| | |
| | | |
| | | |
| | |
| Gross profit | |
$ | 546,836 | | |
$ | (32,311 | ) | |
$ | 514,525 | |
| | |
| | | |
| | | |
| | |
| Operating expenses: | |
| | | |
| | | |
| | |
| General and administrative expenses | |
$ | (1,583,174 | ) | |
$ | 111,276 | | |
$ | (1,471,898 | ) |
| Total operating expenses | |
$ | (1,583,174 | ) | |
$ | 111,276 | | |
$ | (1,471,898 | ) |
| | |
| | | |
| | | |
| | |
| Other income (expense) | |
| | | |
| | | |
| | |
| Other income | |
$ | 147,209 | | |
$ | (498 | ) | |
$ | 146,711 | |
| Unrealized (loss) on related party transactions | |
| - | | |
| (29,551 | ) | |
| (29,551 | ) |
| Loss on equity method investment, related party | |
| - | | |
| (100,949 | ) | |
| (100,949 | ) |
| Total Other Income | |
$ | 147,209 | | |
$ | (130,998 | ) | |
$ | 16,211 | |
| | |
| | | |
| | | |
| | |
| Loss before provision for income taxes | |
$ | (889,129 | ) | |
$ | (52,033 | ) | |
$ | (941,162 | ) |
| | |
| | | |
| | | |
| | |
| Provision for income taxes | |
| - | | |
| - | | |
| - | |
| | |
| | | |
| | | |
| | |
| Net loss | |
$ | (889,129 | ) | |
$ | (52,033 | ) | |
$ | (941,162 | ) |
| | |
| | | |
| | | |
| | |
| Less: Net (loss) income attributable to non-controlling interests | |
| (4,836 | ) | |
| 9,672 | | |
| 4,836 | |
| Net loss attributable to common stockholders | |
| (884,293 | ) | |
| (61,705 | ) | |
| (945,998 | ) |
| | |
| | | |
| | | |
| | |
| Other Comprehensive Income, Net of Tax: | |
| | | |
| | | |
| | |
| Foreign exchange translation adjustment | |
| 24,444 | | |
| (4,836 | ) | |
| 19,608 | |
| Total Other Comprehensive Income, Net of Tax: | |
$ | 24,444 | | |
$ | (4,836 | ) | |
$ | 19,608 | |
| | |
| | | |
| | | |
| | |
| Comprehensive (loss): | |
$ | (859,849 | ) | |
$ | (66,541 | ) | |
$ | (926,390 | ) |
| | |
| | | |
| | | |
| | |
| Weighted average number of shares of common stock outstanding
- basic and diluted | |
| 10,000 | | |
| 10,000 | | |
| 10,000 | |
| Net loss per common share - basic and diluted | |
| (88.43 | ) | |
| (6.17 | ) | |
| (94.60 | ) |
#
Being restated cost of revenue – non-membership was adjusted from $132,811 to $165,122, general and administrative expenses was
adjusted from $1,583,174 to $1,471,898, other income was adjusted from $147,209 to $146,711, unrealized (loss) on related party transactions
was adjusted from $0 to $29,551, loss on equity method investment, related party was adjusted from $0 to $100,949 and net (loss) income
attributable to non-controlling interests was adjusted from ($4,836) to $4,836.
Consolidated
Balance Sheet as of December 31, 2022
| | |
As Previously Reported | | |
Restatement of Prior Year Presentation
# | | |
As Restated | |
| ASSETS | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | |
| Current Assets | |
| | | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 1,651,088 | | |
$ | - | | |
$ | 1,651,088 | |
| Accounts receivable, net | |
| 9,070 | | |
| - | | |
| 9,070 | |
| Inventory | |
| 34,126 | | |
| - | | |
| 34,126 | |
| Other receivables | |
| 337,798 | | |
| (302,081 | ) | |
| 35,717 | |
| Convertible note receivable - related party | |
| - | | |
| 198,125 | | |
| 198,125 | |
| Prepaid expenses | |
| 17,828 | | |
| - | | |
| 17,828 | |
| Total Current Assets | |
$ | 2,049,910 | | |
$ | (103,956 | ) | |
$ | 1,945,954 | |
| | |
| | | |
| | | |
| | |
| Non-Current Assets | |
| | | |
| | | |
| | |
| Property and Equipment, net | |
$ | 166,338 | | |
$ | - | | |
$ | 166,338 | |
| Investment in associate, related party | |
| 207,402 | | |
| (52,033 | ) | |
| 155,369 | |
| Deposit | |
| 305,036 | | |
| - | | |
| 305,036 | |
| Operating lease right-of-use assets, net | |
| 973,069 | | |
| - | | |
| 973,069 | |
| Total Non-Current Assets | |
$ | 1,651,845 | | |
$ | (52,033 | ) | |
$ | 1,599,812 | |
| | |
| | | |
| | | |
| | |
| TOTAL ASSETS | |
$ | 3,701,755 | | |
$ | (155,989 | ) | |
$ | 3,545,766 | |
| | |
| | | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | |
| Current Liabilities | |
| | | |
| | | |
| | |
| Accounts payable and accrued expenses | |
$ | 63,354 | | |
$ | (2,583 | ) | |
$ | 60,771 | |
| Accrued commissions | |
| 143,383 | | |
| - | | |
| 143,383 | |
| VAT payable | |
| 101,373 | | |
| (101,373 | ) | |
| - | |
| Due to related party, net | |
| 1,663,668 | | |
| - | | |
| 1,663,668 | |
| Operating lease liabilities - Current | |
| 419,303 | | |
| - | | |
| 419,303 | |
| Deferred revenue | |
| 21,198 | | |
| - | | |
| 21,198 | |
| Total Current Liabilities | |
$ | 2,412,279 | | |
$ | (103,956 | ) | |
$ | 2,308,323 | |
| | |
| | | |
| | | |
| | |
| Non-Current Liabilities | |
| | | |
| | | |
| | |
| Operating lease liabilities - Non-current | |
$ | 559,330 | | |
$ | - | | |
$ | 559,330 | |
| Total Non-Current Liabilities | |
$ | 559,330 | | |
$ | - | | |
$ | 559,330 | |
| | |
| | | |
| | | |
| | |
| Commitments and Contingencies | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | |
| Stockholders’ Equity | |
| | | |
| | | |
| | |
| Preferred stock, US$0.001 par value; 10,000,000 shares authorized; none issued and outstanding as of December 31, 2022 | |
$ | - | | |
$ | - | | |
$ | - | |
| Common stock, US$.001 par value; 50,000,000 shares authorized; 10,000 shares issued and outstanding as of December 31, 2022 | |
| 10 | | |
| - | | |
| 10 | |
| Accumulated other comprehensive loss | |
| (195,203 | ) | |
| (4,836 | ) | |
| (200,039 | ) |
| Retained earnings | |
| 930,175 | | |
| (56,869 | ) | |
| 873,306 | |
| Total HWH International Inc. Stockholders’ equity | |
$ | 734,982 | | |
$ | (61,705 | ) | |
$ | 673,277 | |
| Non-controlling interests | |
| (4,836 | ) | |
| 9,672 | | |
| 4,836 | |
| Total Stockholders’ Equity | |
| 730,146 | | |
| (52,033 | ) | |
| 678,113 | |
| | |
| | | |
| | | |
| | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 3,701,755 | | |
$ | (155,989 | ) | |
$ | 3,545,766 | |
#
Being restated other receivables was adjusted from $337,798 to $35,717, convertible note receivable- related party was adjusted from
$0 to $198,125, investment in associate, related party was adjusted and restated from $207,402 to $155,369, accounts payable and accrued
expenses were adjusted from $63,354 to $60,771, VAT payable was adjusted from $101,373 to $0, accumulated other comprehensive loss was
adjusted from ($195,203) to ($200,039), retained earnings was adjusted from $930,175 to $873,306, and non-controlling interest was adjusted
from $(4,836) to $4,836.
Note
4. Accounts receivable, net
ACCOUNTS RECEIVABLE, NET
The
receivable at December 31, 2023, 2022 and 2021 for $28,611, $9,070 and $2,519, respectively, represents collection received by the credit
card processor in F&B business and rent receivable. Accounts receivable are recorded at invoiced amounts net of an allowance for
credit losses and do not bear interest. The allowance for credit losses is the Company’s best estimate of the amount of probable
credit losses in the Company’s existing accounts receivable. The measurement and recognition of credit losses involves the use
of judgment. Management’s assessment of expected credit losses includes consideration of current and expected economic conditions,
market and industry factors affecting the Company’s customers (including their financial condition), the aging of account balances,
historical credit loss experience, customer concentrations, customer creditworthiness, and the existence of sources of payment The Company
also establishes an allowance for credit losses for specific receivables when it is probable that the receivable will not be collected
and the loss can be reasonably estimated. Accounts receivable considered uncollectible are charged against the allowance after all means
of collection have been exhausted and the potential for recovery is considered remote. As of December 31, 2023 and 2022, the allowance
for credit losses was an immaterial amount. The Company does not have any off-balance sheet credit exposure related to its customers.
Note
5. Prepaid commissions
PREPAID COMMISSIONS
During
the normal course of business, the Company pays commission to its members for product sales as well as membership sales. Prepaid commissions
are recorded for commissions paid on membership sales and recognized as an expense over the same period as the related membership revenue.
Note
6. Inventory
INVENTORY
As
of December 31, 2023 and 2022, the balance of finished goods was $1,977 and $34,126, respectively. During the year ended December 31,
2023, the Company wrote off $30,753 of expired, slow-moving and obsolete inventory. This was recorded in the Company’s consolidated
statement of operations in cost of revenue (non-membership) during the year ended December 31, 2023. There was no provision for slow-moving
or obsolete inventory during the year ended December 31, 2022.
Note
7. Property and Equipment, net
PROPERTY AND EQUIPMENT, NET
The
components of property and equipment are as follows:
SCHEDULE
OF PROPERTY AND EQUIPMENT, NET
| December
31, 2023 | |
Total | |
| | |
| |
| Office Equipment | |
$ | 30,861 | |
| Furniture and Fittings | |
| 46,376 | |
| Kitchen Equipment | |
| 23,044 | |
| Operating Equipment | |
| 8,522 | |
| Leasehold Improvements | |
$ | 122,083 | |
| | |
| | |
| Depreciation: | |
| | |
| Office equipment | |
| (15,848 | ) |
| Furniture and Fittings | |
| (31,518 | ) |
| Kitchen Equipment | |
| (8,368 | ) |
| Operating Equipment | |
| (3,373 | ) |
| Leasehold Improvements | |
| (42,549 | ) |
| Total, net | |
$ | 129,230 | |
| | |
| | |
| December 31, 2022 | |
| | |
| | |
| | |
| Office Equipment | |
$ | 25,391 | |
| Furniture and Fittings | |
| 42,851 | |
| Kitchen Equipment | |
| 20,257 | |
| Operating Equipment | |
| 8,384 | |
| Leasehold Improvements | |
| 111,924 | |
| | |
| | |
| Depreciation: | |
| | |
| Office Equipment | |
| (23,449 | ) |
| Furniture and Fittings | |
| (1,671 | ) |
| Kitchen Equipment | |
| (3,240 | ) |
| Operating Equipment | |
| (1,223 | ) |
| Leasehold Improvements | |
| (12,886 | ) |
| Total, net | |
$ | 166,338 | |
For
the years ended December 31, 2023 and 2022, the Company recorded depreciation expenses of $58,006 and $33,867, respectively.
Note
8. Accrued Commissions
ACCRUED COMMISSIONS
Accrued
commissions as of December 31, 2023, and 2022 represent mainly sales commission payable. For the years ended December 31, 2023, and 2022,
sales commission expenses of $13,827 and $501,483 respectively, were recorded and included in cost of revenue in the Company’s
consolidated statement of operations.
Note
9. Income Taxes for years ended December 31, 2023 and 2022
INCOME TAXES
The
provision for income taxes consisted of the following:
SCHEDULE
OF PROVISION FOR INCOME TAXES
| | |
| 2023 | | |
| 2022 | |
| Current | |
$ | - | | |
$ | - | |
| Deferred | |
| - | | |
| - | |
| Total | |
$ | - | | |
$ | - | |
| | |
2023 | | |
2022 | |
| Income taxes at statutory rate | |
| 18.5 | % | |
| 19.0 | % |
| Change in valuation allowance | |
| (18.5 | )% | |
| (19.0 | )% |
| Other | |
| - | % | |
| - | % |
| Effective tax rate | |
| - | % | |
| - | % |
Significant
components of the Company’s deferred tax assets and liabilities are as follows:
SCHEDULE
OF DEFERRED TAX ASSETS AND LIABILITIES
| | |
2023 | | |
2022 | |
| Deferred tax assets: | |
| | | |
| | |
| Receivable from related party | |
$ | 1,020 | | |
$ | - | |
| Inventory | |
| 6,766 | | |
| - | |
| Deferred Revenue | |
| - | | |
| 3,082 | |
| Lease Liability | |
| 126,336 | | |
| 202,209 | |
Accrued Commission | |
| 18,745 | | |
| 31,544 | |
| Net Operating Loss | |
| 544,191 | | |
| 129,220 | |
| Total deferred tax assets | |
$ | 697,058 | | |
$ | 366,055 | |
| | |
| | | |
| | |
| Deferred tax liabilities: | |
| | | |
| | |
| Prepaid commissions | |
$ | - | | |
$ | (1,505 | ) |
| Right-of-Use Assets | |
| (123,371 | ) | |
| (200,996 | ) |
| Total deferred tax liabilities | |
$ | (123,371 | ) | |
$ | (202,501 | ) |
| | |
| | | |
| | |
| Deferred tax assets / (liabilities), net | |
$ | 573,687 | | |
$ | 163,554 | |
| Less valuation allowance | |
| (573,687 | ) | |
| (163,554 | ) |
| Deferred tax asset c/f | |
$ | - | | |
$ | - | |
After
consideration of all the evidence, both positive and negative, management has recognized a valuation allowance with respect to its net
deferred tax assets as at December 31, 2023 and 2022 as it believes it is unlikely that such deferred tax assets will be realized against
taxable income in future years.
Note
10. Due to Alset Inc
DUE TO ALSET INC.
Alset
Inc (“AEI”) is the ultimate holding company that is incorporated in the United States of America. The amount due to AEI represents
short-term working capital advances to the Company for its daily operations. There is no written, executed agreement and no financial/non-financial
covenants and the amount due to AEI is non-interest bearing. Since the amount due to AEI is due upon request, it is classified as a current
liability. The amounts due to AEI at December 31, 2023 and 2022 are $202,645 and $202,644 respectively.
Note
11. Due to Related Parties
DUE TO RELATED PARTIES
Alset
International Ltd. (“AIL”) is incorporated in Singapore and is a fellow subsidiary of the common parent company, Alset Inc.
The amount due to AIL represents short-term working capital advances to the Company for its daily operations. There is no written, executed
agreement and no financial/non-financial covenants and the amount due to AIL is non-interest bearing. Since the amount due to AIL is
due upon request, it is classified as a current liability. The amounts due to AIL at December 31, 2023 and 2022 are $1,729,901 and $1,281,427
respectively.
Alset
Business Development Pte. Ltd. (“ABD”) is incorporated in Singapore and is a fellow subsidiary of the common parent company,
Alset Inc. The amount due to ABD represents amount loaned by ABD to Hapi Cafe Inc. (“HCI”) for the investment on Ketomei
Pte. Ltd (“Ketomei”) in March 2022. There is no written, executed agreement and no financial/non-financial covenants and
the amount due to ABD is non-interest bearing. Since the amount due to ABD is due upon request, it is classified as a current liability.
The amounts due to ABD at December 31, 2023 and 2022 are $184,507 and $179,596 respectively.
BMI
Capital International Ltd. (“BMI”) is incorporated in Hong Kong and is a fellow subsidiary of the common parent company,
Alset Inc. The amount due to BMI represents short-term working capital advances to the Company for its daily operation. There is no written,
executed agreement and no financial/non-financial covenants and the amount due to BMI is non-interest bearing. Since the amount due to
BMI is due upon request, it is classified as a current liability. The amounts due to BMI at December 31, 2023 and 2022 are $1,442 and
$0 respectively.
Note
12. Stockholders’ Equity
STOCKHOLDERS’ EQUITY
HWH
has authorized 500,000,000 shares of common stock (par value $0.001 per share); and 10,000,000 shares of preferred stock (par value $0.001
per share). 10,000 shares of common stock and zero shares of preferred stock were issued and outstanding as of December 31, 2023 and
2022.
Note
13. Related Party Transactions
RELATED PARTY TRANSACTIONS
On
December 31, 2023, the total convertible note receivable from Ketomei was $368,299, Considering ASC 326 and after reviewing the performance
of Ketomei, the Company decided to record 100% impairment for the convertible note receivable and investment in associate (Note 18).
On
June 10, 2021, Hapi Café Inc. (“HCI”) signed a convertible loan agreement with Ketomei Pte. Ltd. (“Ketomei”),
pursuant to which HCI has agreed to grant Ketomei a loan of an aggregate principal amount of $75,525 (SG$100,000). On March 21, 2022,
HCI signed a legally binding term sheet with Ketomei, and HCI has agreed to invest in Ketomei $258,186 (SG$350,000) for 28% interest
in Ketomei. The investment was partially paid by the $75,525 (SG$100,000) loan borrowed to Ketomei and the accrued interest of $6,022
(SG$6,433). The balance of $183,311 (SG$243,567) was paid in cash.
On
July 28, 2022 HCI entered into binding term sheet with Ketomei and Tong Leok Siong Constant, pursuant to which HCI lent Ketomei $43,254
(SG$60,000). This loan had a 0% interest rate for the first 60 days and an interest rate of 8% per annum afterwards.
On
August 4, 2022, the same parties entered into another binding term sheet (the “Second Term Sheet”) pursuant to which HCI
agreed to lend Ketomei up to $260,600 (SG$360,000) pursuant to a convertible loan, with a term of 12 months. After the initial 12 months,
the interest on such loan will be 8%. As of August 31, 2023, the $263,766 (SG$360,000) loan was paid by the $214,903 (SG$293,310)
loan borrowed to Ketomei and $48,862 (SG$66,690) was paid for the expenses on behalf of Ketomei. In addition, pursuant to the Second
Term Sheet, the July 28, 2022, loan was modified to include conversion rights. The Parties agree that the conversion rate will be at
approximately $0.022 per share.
On
August 31, 2023, the same parties entered into another binding term sheet pursuant to which HCI agreed to lend Ketomei up to $36,634
(SG$50,000) pursuant to a convertible loan, with a term of 12 months. After the initial 12 months, the interest on such loan will be 3.5%.
As of October 31, 2023, the $37,876 (SG$50,000) loan was paid to Ketomei.
On
October 26, 2023, the same parties entered into another binding term sheet pursuant to which HCI agreed to lend Ketomei up to $37,876
(SG$50,000) pursuant to a non- convertible loan, with a term of 12 months. After the initial 12 months, the interest on such loan will
be 3.5%. As of December 31, 2023, the $6,766 (SG$8,932) loan was paid to Ketomei. HCI will pay the balance of $31,110 (SG$41,068)
to Ketomei in the future.
The
amount due from Ketomei at December 31, 2023 and 2022 are $0 and $198,125 respectively.
Revenue
from F&B business amounting to approximately $7,444 and $3,287 was related to corporate sales. That revenue was derived from corporate
sales to related parties who purchased meals and paid for their staff, during the years ended December 31, 2023 and 2022, respectively.
Included
in Accounts Receivable, net at December 31, 2023 and 2022 is $7,405 and $560, respectively, of amounts due from related parties.
Included
in other income during the year ended December 31, 2023 and 2022 is $6,756 and $3,780, respectively of rental income from related parties.
Note
14. Leases
LEASES
The
Company has operating leases for its office spaces in South Korea and two F&B stores in Singapore. The related lease agreements do
not contain any material residual value guarantees or material restrictive covenants. Since the Company’s leases do not provide
an implicit rate that can be readily determined, management uses a discount rate based on the incremental borrowing rate. The Company’s
weighted-average remaining lease term relating to its operating leases is 1.43 years, with a weighted-average discount rate is 3.85%.
The
Company has also utilized the following practical expedients:
| ● | Short-term
leases – for leases that are for a period of 12 months or less, the Company will not
apply the recognition requirements of ASC 842. |
| ● | For
leases that contain related non-lease components, such as maintenance, the Company will account
for these payments as a single lease component. |
The
current portion of operating lease liabilities and the non-current portion of operating lease liabilities are presented on the balance
sheets. Total lease expenses amounted to $509,340 and $356,556 which were included in general and administrative expenses in the statements
of operations for the years ended December 31, 2023 and 2022, respectively. Total cash paid for operating leases amounted to $580,580
and $355,746 for the years ended December 31, 2023 and 2022, respectively. In addition, the Company leases certain equipment on a short-term
(12 months or less) basis. Total short-term lease expense of $14,348 and $11,034 is included in general and administrative expenses for
the years ended December 31, 2023 and 2022, respectively. Supplemental balance sheet information related to operating leases was as follows:
SCHEDULE OF BALANCE SHEET INFORMATION RELATED TO OPERATING LEASES
| | |
December 31, 2023 | |
| | |
| |
| Right-of-use assets | |
$ | 598,508 | |
| | |
| | |
| Lease liabilities - current | |
$ | 429,687 | |
| Lease liabilities - non-current | |
| 182,380 | |
| Total lease liabilities | |
$ | 612,067 | |
As
of December 31, 2023, the aggregate future minimum rental payments under non-cancelable agreement are as follows:
SCHEDULE OF AGGREGATE FUTURE MINIMUM RENTAL PAYMENTS
| Maturity of Lease Liabilities | |
Total | |
| | |
| |
| 12 months ended December 31, 2024 | |
$ | 446,002 | |
| 12 months ended December 31, 2025 | |
| 185,540 | |
| Total undiscounted lease payments | |
| 631,542 | |
| Less: Imputed interest | |
| (19,475 | ) |
| Present value of lease liabilities | |
| 612,067 | |
| Operating lease liabilities - Current | |
| 429,687 | |
| Operating lease liabilities - Non-current | |
$ | 182,380 | |
Note
15. Commitments and Contingencies
COMMITMENTS AND CONTINGENCIES
Contingencies
From
time to time the Company may be named in claims arising in the ordinary course of business. Currently, no legal proceedings, government
actions, administrative actions, investigations or claims are pending against the Company or involve the Company that, in the opinion
of management, could reasonably be expected to have a material adverse effect on its business and financial condition. For all periods
presented, the Company was not a party to any pending material litigation or other material legal proceedings.
Note
16. Disaggregation of Revenue
DISAGGREGATION OF REVENUE
Selected
financial information of the Company’s operating revenue for disaggregated revenue purposes by revenue source are as follows: Product
sales only represent sales to members, not third parties who are not members.
SCHEDULE OF DISAGGREGATION OF REVENUE
| | |
Year ended
December
31,
2023 | | |
Year ended
December
31,
2022 | |
| Membership Fee | |
$ | 12,293 | | |
$ | 751,452 | |
| Product Sales | |
| 465 | | |
| 2,198 | |
| Food and Beverage | |
| 817,761 | | |
| 449,240 | |
| Total | |
$ | 830,519 | | |
$ | 1,202,890 | |
| Revenue | |
$ | 830,519 | | |
$ | 1,202,890 | |
Note
17. Concentration Risk
CONCENTRATION RISK
The
Company maintains cash balances at various financial institutions in different countries. These balances are usually secured by the central
banks’ insurance companies. At times, these balances may exceed the insurance limits. As of December 31, 2023 and 2022, uninsured
cash balances were $611,947 and $1,435,543, respectively.
Major
Suppliers
For
the year ended December 31, 2023, five suppliers accounted for approximately over 54% of the Company’s total costs of revenue.
For
the year ended December 31, 2022, five suppliers accounted for approximately over 46% of the Company’s total costs of revenue.
Note
18. Investment in Associate & Convertible Note Receivable, related party
INVESTMENT IN ASSOCIATE & CONVERTIBLE NOTE RECEIVABLE, RELATED PARTY
During
the years ended December 31, 2022 and 2023, the Company held an equity method investment in a related party, Ketomei, and also had a
convertible note receivable with Ketomei. The following table shows the activity of the investment and note during those two years.
SCHEDULE OF EQUITY METHOD INVESTMENT IN A RELATED PARTY
| | |
December 31, 2022 | | |
Additions | | |
Loss on investment | | |
Impairment | | |
December 31, 2023 | |
| Investment in associate, related party | |
$ | 155,369 | | |
$ | 4,128 | | |
$ | (33,898 | ) | |
$ | (125,599 | ) | |
$ | - | |
| Convertible note receivable, related party | |
| 198,125 | | |
| 170,174 | | |
| - | | |
| (368,299 | ) | |
| - | |
| Total | |
$ | 353,494 | | |
$ | 174,302 | | |
$ | (33,898 | ) | |
$ | (493,898 | ) | |
$ | - | |
| | |
December 31, 2021 | | |
Additions | | |
Loss on investment | | |
Impairment | | |
December 31, 2022 | |
| Investment in associate, related party | |
$ | - | | |
$ | 256,318 | | |
$ | (100,949 | ) | |
$ | - | | |
$ | 155,369 | |
| Convertible note receivable, related party | |
| 76,723 | | |
| 121,402 | | |
| - | | |
| - | | |
| 198,125 | |
| Total | |
$ | 76,723 | | |
$ | 377,720 | | |
$ | (100,949 | ) | |
$ | - | | |
$ | 353,494 | |
During
the year, the Company impaired the investment in associate of $155,369 to $0 and convertible note receivable of $368,299 to $0.
Note
19. Subsequent Events
SUBSEQUENT EVENT
On
January 9, 2024, the Company announced the completion of its previously announced business combination (the “Business Combination”),
with Alset Capital Acquisition Corp. (“Alset”) (Nasdaq: “ACAX” for common stock and “ACAXR” for rights),
The common stock of the combined company is expected to begin trading on The Nasdaq Global Market (“Nasdaq”) under the new
ticker symbol “HWH”. The Business Combination was approved at a special meeting of Alset’s stockholders on August 1,
2023. Upon the closing of the Business Combination, the previously-trading Class A common stock, and rights of Alset ceased to trade
with such rights entitling its holder to receive such one-tenth (1/10) of one share of Alset Class A common stock upon the closing of
the Business Combination.
On
February 20, 2024, the Company invested an additional $312,064 (SG$420,000) for an additional 38.41% ownership interest in Ketomei. After
this additional investment, the Company will own 55.65% of Ketomei’s outstanding shares and Ketomei will be consolidated into the
financial statements of HWH International Inc beginning on February 20, 2024.
Pursuant
to a settlement agreement made with Meteora Special
Opportunity Fund I, LP, Meteora Capital Partners, LP, Meteora Select Trading Opportunities Master, LP, and Meteora Strategic Capital,
LLC (collectively, “Meteora”) as of April 11, 2024, the Company paid Meteora $200,000, and agreed that Meteora could retain
$100,000 already paid to Meteora. This settlement agreement was entered into in connection with a subscription agreement entered into
as of July 30, 2023, by and among the Company and Meteora.
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 Ambrose, HWH’s Executive Chairman, as a part of HWH’s strategy of building its travel business in Asia. The planned
joint venture company (referred to here as the “JVC”) will be known as HapiTravel Holding Pte. Ltd. The JVC will be initially
owned as follows: (a) HWHPL will hold 19% of the shares in the JVC; (b) Mr. Chan will hold 11%; and (c) the remaining 70% of the shares
in the JVC are to be held by Mr. Chen.
On
March 14, 2024, the Company entered into a shares subscription agreement through its subsidiary Alset F&B Holding Pte. Ltd. (“F&BH”)
to subscription of shares in Ideal Food & Beverage Pte. Ltd. (“IFBPL”) with the subscription of 19,000 shares constituting
S$19,000 (and 19%) of the issued and paid-up capital of IFBPL. And due to the bank account of IFBPL was under opening procedure, the
Company will pay it until the process was completed.
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 (“Alset Inc.”), 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. 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 HWH.
On
May 9, 2024, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with Sharing
Services Global Corporation (“SHRG”), pursuant to which the Company purchased from SHRG a Convertible Promissory Note (the
“Convertible Note”) in the amount of $250,000,
convertible into 125,000,000 shares of SHRG’s common stock at the option of the
Company for an aggregate purchase price of $250,000.
The Convertible Note bears an 8% interest rate and has a scheduled maturity three years from the date of the Convertible Note. Additionally,
upon signing the Convertible Note, SHRG owns the Company commitment fee of 8% of the principal amount, which will be paid either in cash
or in common stock of SHRG, at the discretion of the Company.
UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION
Introduction
The
following unaudited pro forma combined financial statements of Alset present the combination of the historical financial information
of Alset and HWH adjusted to give effect for the Business Combination. The following unaudited pro forma combined financial information
has been prepared in accordance with Article 11 of Regulation S-X.
The
unaudited pro forma combined balance sheet as of December 31, 2023, combines the historical balance sheet of Alset as of November 30,
2023 and the historical balance sheet of HWH as of December 31, 2023, on a pro forma basis as if the Business Combination and related
transactions, summarized below, had been consummated on January 1, 2022, the beginning of the earliest period presented.
The
unaudited pro forma combined statement of operations for the year ended December 31, 2023 combines the historical statements of operations
of Alset for the year ended November 30, 2023 and HWH for the year ended December 31, 2023 on a pro forma basis as if the Business Combination
and related transactions had been consummated on January 1, 2022, the beginning of the earliest period presented.
The
unaudited pro forma combined statement of operations for the year ended December 31, 2022 combines the historical statements of operations
of Alset for the year ended November 30, 2022 and HWH (as restated) for the year ended December 31, 2022 on a pro forma basis as if the
Business Combination and related transactions had been consummated on January 1, 2022, the beginning of the earliest period presented.
The
unaudited pro forma combined financial statements have been developed from and should be read in conjunction with:
●
the accompanying notes to the unaudited pro forma combined financial statements;
●
the historical audited financial statements of Alset as of and for the year ended November 30, 2023 and 2022 and the related notes thereto;
●
the historical audited financial statements of HWH as of and for the year ended December 31, 2023 and 2022, and the related notes thereto;
●
the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of ACAX”
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of HWH,” and other financial
information relating to Alset and HWH, including the Merger Agreement.
The
unaudited pro forma combined financial information has been presented for illustrative purposes only and does not necessarily reflect
what the Combined Company’s financial condition or results of operations would have been had the Business Combination occurred
on the dates indicated.
Further,
the unaudited pro forma combined financial information also may not be useful in predicting the future financial condition and results
of operations of the Combined Company. The actual financial position and results of operations may differ significantly from the pro
forma amounts reflected herein due to a variety of factors. The unaudited transaction accounting adjustments represent management’s
estimates based on information available as of the date of this unaudited pro forma combined financial information and are subject to
change as additional information becomes available and analyses are performed. Assumptions and estimates underlying the unaudited pro
forma adjustments set forth in the unaudited pro forma combined financial statements are described in the accompanying notes. The Combined
Company believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the
Business Combination based on information available to management at this time and that the transaction accounting adjustments give appropriate
effect to those assumptions and are properly applied in the unaudited pro forma combined financial information.
Description
of transaction
On
September 9, 2022, Alset entered into an agreement and plan of merger (the “Merger Agreement”) by and among Alset, HWH and
HWH Merger Sub Inc., a Nevada corporation and a wholly owned subsidiary of Alset (“Merger Sub”). Alset and Merger Sub are
sometimes referred to collectively as the “Alset Parties.” Pursuant to the Merger Agreement, a business combination between
Alset and HWH will be effected through the merger of Merger Sub with and into HWH, with HWH surviving the merger as a wholly owned subsidiary
of Alset (the “Merger”). Upon the closing of the Merger (the “Closing”), it is anticipated that Alset will change
its name to “HWH International, Inc.” The board of directors of Alset has (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 Alset.
The
total consideration to be paid at Closing (the “Merger Consideration”) by Alset to the HWH shareholders will be $125,000,000,
and will be payable in shares of Class A common stock, par value $0.0001 per share, of Alset (“Alset Common Stock”). The
number of shares of the Alset Common Stock to be paid to the shareholders of HWH as Merger Consideration will be 12,500,000, with each
share being valued at $10.00. All cash proceeds remaining in the trust will be used to pay transaction costs and as growth capital for
HWH.
The
Business Combination was approved at a special meeting of Alset’s stockholders on August 1, 2023. Following the approval of Business
Combination, 39 of Alset’s public stockholders redeemed their common stock for cash even if they approved the Business Combination.
The
unaudited pro forma combined financial information has been prepared based on final redemption of shares by stockholders.
The
transaction is expected to be accounted for as a reverse recapitalization. Under the reverse recapitalization model, the Business Combination
will be treated as HWH issuing equity for the net assets of Alset, with no goodwill or intangible assets recorded. Factors considered
to determine that HWH is the acquirer include:
| |
● |
HWH
ownership interest post combination |
| |
|
|
| |
● |
HWH’s
business activities will be the business activities of the Combined Entity |
Pro
Forma Information
ALSET
AND HWH
UNAUDITED
PRO FORMA COMBINED BALANCE SHEET AS OF DECEMBER 31, 2023
(in
thousands)
| | |
| | |
| | |
Pro Forma | | |
| |
Pro Forma | |
| | |
| | |
| | |
Adjustments | | |
| |
Combined | |
| | |
HWH | | |
ACAX | | |
Following | | |
| |
Following | |
| | |
(Historical) | | |
(Historical) | | |
Redemptions | | |
| |
Redemptions | |
| ASSETS | |
| | | |
| | | |
| | | |
| |
| | |
| Current assets: | |
| | | |
| | | |
| | | |
| |
| | |
| Cash and cash equivalents | |
$ | 879 | | |
$ | 586 | | |
$ | 550 | | |
A | |
| 1,290 | |
| | |
| | | |
| | | |
| (325 | ) | |
B | |
| | |
| | |
| | | |
| | | |
| (400 | ) | |
C | |
| | |
| Accounts receivable | |
| 29 | | |
| - | | |
| - | | |
| |
| 29 | |
| Prepaid expenses and other current assets | |
| 50 | | |
| 117 | | |
| - | | |
| |
| 167 | |
| Total current assets | |
| 958 | | |
| 703 | | |
| (175 | ) | |
| |
| 1,486 | |
| | |
| | | |
| | | |
| | | |
| |
| | |
| Non-current assets: | |
| | | |
| | | |
| | | |
| |
| | |
| Cash and marketable securities held in Trust Account | |
| - | | |
| 21,253 | | |
| (21,253 | ) | |
A | |
| - | |
| Deposit | |
| 298 | | |
| - | | |
| - | | |
| |
| 298 | |
| Right-of-use assets | |
| 599 | | |
| - | | |
| - | | |
| |
| 599 | |
| Property and equipment, net | |
| 129 | | |
| - | | |
| - | | |
| |
| 129 | |
| Total non-current assets | |
| 1,026 | | |
| 21,253 | | |
| (21,253 | ) | |
| |
| 1,026 | |
| TOTAL ASSETS | |
| 1,984 | | |
| 21,956 | | |
| (21,428 | ) | |
| |
| 2,512 | |
| | |
| | | |
| | | |
| | | |
| |
| | |
| LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY (DEFICIT) | |
| | | |
| | | |
| | | |
| |
| | |
| Accounts payable and accrued expenses | |
| 222 | | |
| 632 | | |
| - | | |
| |
| 854 | |
| Extension Loan – Related Party | |
| - | | |
| 205 | | |
| - | | |
| |
| 205 | |
| Due to related party | |
| 2,119 | | |
| - | | |
| - | | |
| |
| 2,119 | |
| Lease liability | |
| 430 | | |
| - | | |
| - | | |
| |
| 430 | |
| Total current liabilities | |
| 2,771 | | |
| 837 | | |
| - | | |
| |
| 3,608 | |
| | |
| | | |
| | | |
| | | |
| |
| | |
| Non-current liabilities: | |
| | | |
| | | |
| | | |
| |
| | |
| Lease liability | |
| 182 | | |
| - | | |
| - | | |
| |
| 182 | |
| Deferred underwriting fee payable | |
| - | | |
| 3,019 | | |
| (3,019 | ) | |
B | |
| - | |
| Note Payable – Underwriter | |
| - | | |
| - | | |
| 1,184 | | |
B | |
| 1,184 | |
| Total non-current liabilities | |
| 182 | | |
| 3,019 | | |
| (1,835 | ) | |
| |
| 1,366 | |
| Total liabilities | |
| 2,953 | | |
| 3,856 | | |
| (1,835 | ) | |
| |
| 4,974 | |
| | |
| | | |
| | | |
| | | |
| |
| | |
| COMMITMENTS AND CONTINGENCIES | |
| | | |
| | | |
| | | |
| |
| | |
| | |
| | | |
| | | |
| | | |
| |
| | |
| Temporary equity: | |
| | | |
| | | |
| | | |
| |
| | |
| Class A and Class B common stock subject to possible redemption | |
| - | | |
| 20,457 | | |
| (20,457 | ) | |
D | |
| - | |
| | |
| | | |
| | | |
| | | |
| |
| | |
| Stockholders’ equity (deficit): | |
| | | |
| | | |
| | | |
| |
| | |
| Preferred Series A-2 | |
| - | | |
| - | | |
| - | | |
| |
| - | |
| Preferred Series A-1 | |
| | | |
| | | |
| | | |
| |
| - | |
| Common stock | |
| - | | |
| - | | |
| 1 | | |
E | |
| 2 | |
| | |
| | | |
| | | |
| 1 | | |
D | |
| | |
| Class A common stock | |
| - | | |
| - | | |
| - | | |
F | |
| - | |
| | |
| | | |
| | | |
| | | |
| |
| | |
| Class B common stock | |
| - | | |
| - | | |
| - | | |
F | |
| - | |
| Additional paid-in capital | |
| - | | |
| - | | |
| 863 | | |
D | |
| (1,495 | ) |
| | |
| | | |
| | | |
| (1 | ) | |
E | |
| | |
| | |
| | | |
| | | |
| (2,357 | ) | |
G | |
| | |
| | |
| | | |
| | | |
| | | |
| |
| | |
| Accumulated other comprehensive income | |
| (197 | ) | |
| - | | |
| - | | |
| |
| (197 | ) |
| Accumulated deficit | |
| (781 | ) | |
| (2,357 | ) | |
| 2,357 | | |
G | |
| (781 | ) |
| | |
| | | |
| | | |
| | | |
| |
| | |
| Non-controlling interest | |
| 9 | | |
| - | | |
| - | | |
| |
| 9 | |
| Total shareholders’ equity (deficit) | |
| (969 | ) | |
| (2,357 | ) | |
| 864 | | |
| |
| (2,462 | ) |
| TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’
DEFICIT | |
| 1,984 | | |
| 21,956 | | |
| (21,428 | ) | |
| |
| 2,512 | |
ALSET
AND HWH
UNAUDITED
PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2023
(in
thousands, except per share data)
| | |
| | |
| | |
Pro Forma | | |
| |
Pro Forma | |
| | |
| | |
| | |
Adjustments | | |
| |
Combined | |
| | |
HWH | | |
ACAX | | |
Following | | |
| |
Following | |
| | |
(Historical) | | |
(Historical) | | |
Redemptions | | |
| |
Redemptions | |
| Revenues | |
$ | 831 | | |
$ | - | | |
$ | - | | |
| |
$ | 831 | |
| Cost of revenue | |
| 335 | | |
| - | | |
| - | | |
| |
| 335 | |
| Gross profit | |
| 496 | | |
| - | | |
| - | | |
| |
| 496 | |
| | |
| | | |
| | | |
| | | |
| |
| | |
| Operating costs and expenses: | |
| | | |
| | | |
| | | |
| |
| | |
| Selling, general and administrative expenses | |
| 1,875 | | |
| 1,245 | | |
| - | | |
| |
| 3,120 | |
| Impairment of convertible note receivable – related party, and investment
in associate, related party | |
| 494 | | |
| - | | |
| - | | |
| |
| 494 | |
| Total operating costs and expenses | |
| 2,369 | | |
| 1,245 | | |
| - | | |
| |
| 3,614 | |
| Loss from operations | |
| (1,873 | ) | |
| (1,245 | ) | |
| - | | |
| |
| (3,118 | ) |
| | |
| | | |
| | | |
| | | |
| |
| | |
| Other income (expense): | |
| | | |
| | | |
| | | |
| |
| | |
| Other income (expense) | |
| 187 | | |
| - | | |
| - | | |
| |
| 187 | |
| Unrealized gain (loss) on related party transactions | |
| 69 | | |
| | | |
| | | |
| |
| 69 | |
| Loss on equity method investment, related party | |
| (34 | ) | |
| | | |
| | | |
| |
| (34 | ) |
| Interest income of Trust Account assets | |
| - | | |
| 2,216 | | |
| (2,216 | ) | |
AA | |
| - | |
| Total other income (expense) | |
| 222 | | |
| 2,216 | | |
| (2,216 | ) | |
| |
| 222 | |
| Net income (loss) before income tax provision | |
| (1,651 | ) | |
| 971 | | |
| (2,216 | ) | |
| |
| (2,896 | ) |
| Income tax provision | |
| - | | |
| (422 | ) | |
| - | | |
| |
| (422 | ) |
| Net income (loss) | |
| (1,651 | ) | |
| 549 | | |
| (2,216 | ) | |
| |
| (3,318 | ) |
| Net loss attributable to non-controlling interests | |
| 4 | | |
| - | | |
| - | | |
| |
| 4 | |
| Net income (loss) attributable to common stockholders | |
| (1,655 | ) | |
| 549 | | |
| (2,216 | ) | |
| |
| (3,314 | ) |
| | |
HWH | | |
ACAX | | |
Following | |
| | |
(Historical) | | |
(Historical) | | |
Redemptions | |
| Weighted average shares outstanding - Common stock | |
| 10,000 | | |
| - | | |
| - | |
| Basic and diluted net income per share - Common stock | |
| (165.44 | ) | |
| - | | |
| - | |
| Weighted average shares outstanding - Class A and Class B common stock subject
to redemption | |
| - | | |
| 5,218,670 | | |
| 16,223,301 | |
| Basic and diluted net income per share - Class A and Class B common stock
subject to redemption | |
| - | | |
| 0.07 | | |
| (0.20 | ) |
| Weighted average shares outstanding - Class A and Class B non-redeemable common
stock | |
| - | | |
| 2,156,250 | | |
| - | |
| Basic and diluted net income per share - Class A and Class B non-redeemable
common stock | |
| - | | |
| 0.07 | | |
| - | |
ALSET
AND HWH
UNAUDITED
PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2022
(in
thousands, except per share data)
| | |
| | |
| | |
Pro Forma | | |
| |
Pro Forma | |
| | |
HWH | | |
| | |
Adjustments | | |
| |
Combined | |
| | |
(Historical) | | |
ALSET | | |
Following | | |
| |
Following | |
| | |
(as restated) | | |
(Historical) | | |
Redemptions | | |
| |
Redemptions | |
| Revenues | |
$ | 1,203 | | |
$ | - | | |
$ | - | | |
| |
$ | 1,203 | |
| Cost of revenue | |
| 688 | | |
| - | | |
| - | | |
| |
| 688 | |
| Gross profit | |
| 515 | | |
| - | | |
| - | | |
| |
| 515 | |
| | |
| | | |
| | | |
| | | |
| |
| | |
| Operating costs and expenses: | |
| | | |
| | | |
| | | |
| |
| | |
| Selling, general and administrative expenses | |
| 1,472 | | |
| 690 | | |
| 700 | | |
BB | |
| 2,862 | |
| Total operating costs and expenses | |
| 1,472 | | |
| 690 | | |
| 700 | | |
| |
| 2,862 | |
| Loss from operations | |
| (957 | ) | |
| (690 | ) | |
| (700 | ) | |
| |
| (2,347 | ) |
| | |
| | | |
| | | |
| | | |
| |
| | |
| Other income (expense): | |
| | | |
| | | |
| | | |
| |
| | |
| Other income (expense) | |
| 147 | | |
| | | |
| | | |
| |
| 147 | |
| Unrealized gain (loss) on related party transactions | |
| (30 | ) | |
| | | |
| | | |
| |
| (30 | ) |
| Loss on equity method investment, related party | |
| (101 | ) | |
| | | |
| | | |
| |
| (101 | ) |
| Interest income of Trust Account assets | |
| | | |
| 990 | | |
| (990 | ) | |
AA | |
| - | |
| Total other income (expense) | |
| 16 | | |
| 990 | | |
| (990 | ) | |
| |
| 16 | |
| Net income (loss) before income tax provision | |
| (941 | ) | |
| 300 | | |
| (1,690 | ) | |
| |
| (2,331 | ) |
| Income tax provision | |
| - | | |
| (187 | ) | |
| | | |
| |
| (187 | ) |
| Net income (loss) | |
| (941 | ) | |
| 113 | | |
| (1,690 | ) | |
| |
| (2,518 | ) |
| Net loss attributable to non-controlling interests | |
| 5 | | |
| - | | |
| - | | |
| |
| 5 | |
| Net (loss) income attributable to common stockholders | |
| (946 | ) | |
| 113 | | |
| (1,690 | ) | |
| |
| (2,523 | ) |
| | |
HWH | | |
ACAX | | |
Following | |
| | |
(Historical) | | |
(Historical) | | |
Redemptions | |
| Weighted average shares outstanding - Common stock | |
| 10,000 | | |
| - | | |
| - | |
| Basic and diluted net income per share - Common stock | |
| (94.60 | ) | |
| - | | |
| - | |
| Weighted average shares outstanding - Class A and Class B common stock subject
to redemption | |
| - | | |
| 7,478,425 | | |
| 16,073,803 | |
| Basic and diluted net income per share - Class A and Class B common stock
subject to redemption | |
| - | | |
| 0.01 | | |
| (0.16 | ) |
| Weighted average shares outstanding - Class A and Class B non-redeemable common
stock | |
| - | | |
| 2,156,250 | | |
| - | |
| Basic and diluted net income per share - Class A and Class B non-redeemable
common stock | |
| - | | |
| 0.01 | | |
| - | |
NOTES
TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Note
1 — Description of the Merger
On
September 9, 2022, Alset entered into an agreement and plan of merger (the “Merger Agreement”) by and among Alset, HWH and
HWH Merger Sub Inc., a Nevada corporation and a wholly owned subsidiary of Alset (“Merger Sub”). Alset and Merger Sub are
sometimes referred to collectively as the “Alset Parties.” Pursuant to the Merger Agreement, a business combination between
Alset and HWH will be effected through the merger of Merger Sub with and into HWH, with HWH surviving the merger as a wholly owned subsidiary
of Alset (the “Merger”). Upon the closing of the Merger (the “Closing”), it is anticipated that Alset will change
its name to “HWH International, Inc.” The board of directors of Alset has (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 Alset.
The
total consideration to be paid at Closing (the “Merger Consideration”) by Alset to the HWH shareholders will be $125,000,000,
and will be payable in shares of Class A common stock, par value $0.0001 per share, of Alset (“Alset Common Stock”). The
number of shares of the Alset Common Stock to be paid to the shareholders of HWH as Merger Consideration will be 12,500,000, with each
share being valued at $10.00. All cash proceeds remaining in the trust will be used to pay transaction costs and as growth capital for
HWH.
Note
2 — Basis of Presentation
The
unaudited pro forma combined financial information was prepared in accordance with Article 11 of SEC Regulation S-X as amended by the
final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” The historical
financial information of Alset and HWH include transaction accounting adjustments to illustrate the estimated effect of the Business
Combination and certain other adjustments to provide relevant information necessary for an understanding of the combined company upon
consummation of the transactions described herein.
The
transaction is expected to be accounted for as a reverse recapitalization. Under the reverse recapitalization model, the Business Combination
will be treated as HWH issuing equity for the net assets of Alset, with no goodwill or intangible assets recorded.
The
unaudited pro forma combined financial information does not reflect the income tax effects of the transaction accounting adjustments
as any change in the deferred tax balance would be offset by an increase in the valuation allowance given the Companies’ incurred
losses during the historical period presented.
Alset
fiscal year end is November and HWH’s fiscal year end of December.
Note
3 — Transaction Accounting Adjustments to Alset and HWH Unaudited Pro Forma Combined Balance Sheet as of December 31, 2023
The
transaction accounting adjustments included in the unaudited pro forma combined balance sheet as of December 31, 2023 are as follows:
| |
(A) |
Reflects
the reclassification of approximately $21 million of cash and cash equivalents held in the Trust Account at the balance sheet date
that becomes available to fund expenses in connection with the Business Combination or future cash needs of the Company, net of $20
million of redemptions. |
| |
(B) |
Reflects
the payment of approximately $3 million of deferred underwriters’ fees, of which $0.3 million is paid in cash, $1.2 million
is a promissory note and $1.5 million is payable in shares of Combined Company (as agreed on, on December 18, 2023). The cash fees
were paid at the closing out of the trust account. |
| |
|
|
| |
(C)
|
Reflects
the payment of $250,000 of legal fee and $150,000 advisory fee paid upon closing of Business Combination. |
| |
(D) |
Reflects
the reclassification of approximately $20 million of common stock subject to redemption to permanent equity, net of $20 million of
redemptions. |
| |
(E) |
Represents
the issuance of 12.5 million shares of the post-combination company’s Class A common stock to HWH equity holders as consideration
for the acquisition. |
| |
(F) |
Reflects
the conversion of Class B shares held by the initial shareholders to Class A shares. |
| |
(G) |
Reflects
the reclassification of Alset’s historical accumulated deficit |
Note
4 — Transaction Accounting Adjustments to Alset and HWH Unaudited Pro Forma Combined Statement of Operations for the Year Ended
December 31, 2023
The
transaction accounting adjustments included in the unaudited pro forma combined statement of operations for the year ended December 31,
2023 are as follows:
(AA)
Reflects the elimination of realized and unrealized gains on the trust
Note
5 — Transaction Accounting Adjustments to Alset and HWH Unaudited Pro Forma Combined Statement of Operations for the Year Ended
December 31, 2022
The
transaction accounting adjustments included in the unaudited pro forma combined statement of operations for the year ended December 31,
2022 are as follows:
(AA)
Reflects the elimination of realized and unrealized gains on the trust
(BB)
Reflects transaction costs
Note
6 — Loss Per Share
Net
loss per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection
with the Business Combination assuming the shares were outstanding since January 1, 2022. As the Business Combination are being reflected
as if they had occurred at the beginning of the periods presented, the calculation of weighted average shares outstanding for basic and
diluted net loss per share assumes that the shares issuable relating to the Business Combination have been outstanding for the entire
period presented. Warrants have been excluded from the calculation as they are anti-dilutive.
HWH International Inc.
149,443 Shares of Common Stock
PROSPECTUS
June 17, 2024
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From May 2024 to Jun 2024
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