Notes
to Condensed Consolidated Financial Statements
For
the Three Months Ended March 31, 2022 and 2021
(Unaudited)
1.
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature
of Operations
Alset
EHome International Inc. (the “Company” or “AEI”), formerly known as HF Enterprises Inc., was incorporated in
the State of Delaware on March 7, 2018 and 1,000 shares of common stock was issued to Chan Heng Fai, the founder, Chairman and Chief
Executive Officer of the Company. AEI is a diversified holding company principally engaged through its subsidiaries in the development
of EHome communities and other real estate, financial services, digital transformation technologies, biohealth activities and consumer
products with operations in the United States, Singapore, Hong Kong, Australia and South Korea. The Company manages its principal businesses
primarily through its subsidiary, Alset International Limited (“Alset International”, f.k.a. Singapore eDevelopment Limited),
a company publicly traded on the Singapore Stock Exchange.
The
Company has four operating segments based on the products and services we offer, which include three of our principal businesses –
real estate, digital transformation technology and biohealth – as well as a fourth category consisting of certain other business
activities.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation and Principles of Consolidation
The
Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”) and following the requirements of the Securities and Exchange Commission (“SEC”)
for interim reporting. 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, 2022 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 December 31, 2021 filed on March 31, 2022.
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
Company’s condensed consolidated financial statements include the financial position, results of operations and cash flows of the
following entities as of March 31, 2022 and December 31, 2021, as follows:
SCHEDULE
OF SUBSIDIARIES
| | |
| |
Attributable interest as of, | |
| Name of subsidiary consolidated under AEI | |
State or other jurisdiction of incorporation or organization | |
March 31, 2022 | | |
December 31, 2021 | |
| | |
| |
| % | | |
| % | |
| Alset Global Pte. Ltd. | |
Singapore | |
| 100 | | |
| 100 | |
| Alset Business Development Pte. Ltd. | |
Singapore | |
| 100 | | |
| 100 | |
| Global eHealth Limited | |
Hong Kong | |
| 100 | | |
| 100 | |
| Alset International Limited | |
Singapore | |
| 77.0 | | |
| 76.8 | |
| Singapore Construction & Development Pte. Ltd. | |
Singapore | |
| 77.0 | | |
| 76.8 | |
| Art eStudio Pte. Ltd. | |
Singapore | |
| 39.3 | * | |
| 39.2 | * |
| Singapore Construction Pte. Ltd. | |
Singapore | |
| 77.0 | | |
| 76.8 | |
| Global BioMedical Pte. Ltd. | |
Singapore | |
| 77.0 | | |
| 76.8 | |
| Alset Innovation Pte. Ltd. | |
Singapore | |
| 77.0 | | |
| 76.8 | |
| Health Wealth Happiness Pte. Ltd. | |
Singapore | |
| 77.0 | | |
| 76.8 | |
| SeD Capital Pte. Ltd. | |
Singapore | |
| 77.0 | | |
| 76.8 | |
| LiquidValue Asset Management Pte. Ltd. | |
Singapore | |
| 77.0 | | |
| 76.8 | |
| Alset Solar Limited | |
Hong Kong | |
| 77.0 | | |
| 76.8 | |
| Alset F&B One Pte. Ltd | |
Singapore | |
| 69.3 | | |
| 69.2 | |
| Global TechFund of Fund Pte. Ltd. | |
Singapore | |
| 77.0 | | |
| 76.8 | |
| Singapore eChainLogistic Pte. Ltd. | |
Singapore | |
| 77.0 | | |
| 76.8 | |
| BMI Capital Partners International Limited. | |
Hong Kong | |
| 77.0 | | |
| 76.8 | |
| SeD Perth Pty. Ltd. | |
Australia | |
| 77.0 | | |
| 76.8 | |
| SeD Intelligent Home Inc. | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| LiquidValue Development Inc. | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| Alset EHome Inc. | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| SeD USA, LLC | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| 150 Black Oak GP, Inc. | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| SeD Development USA Inc. | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| 150 CCM Black Oak, Ltd. | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| SeD Texas Home, LLC | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| SeD Ballenger, LLC | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| SeD Maryland Development, LLC | |
United States of America | |
| 64.3 | | |
| 64.2 | |
| SeD Development Management, LLC | |
United States of America | |
| 65.5 | | |
| 65.3 | |
| SeD Builder, LLC | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| GigWorld Inc. | |
United States of America | |
| 76.8 | | |
| 76.6 | |
| HotApp BlockChain Pte. Ltd. | |
Singapore | |
| 76.8 | | |
| 76.6 | |
| HotApp International Limited | |
Hong Kong | |
| 76.8 | | |
| 76.6 | |
| HWH International, Inc. (Delaware) | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| Health Wealth & Happiness Inc. | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| HWH Multi-Strategy Investment, Inc. | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| SeD REIT Inc. | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| Gig Stablecoin Inc. | |
United States of America | |
| 76.8 | | |
| 76.6 | |
| HWH World Inc. | |
United States of America | |
| 76.8 | | |
| 76.6 | |
| HWH World Pte. Ltd. | |
Singapore | |
| 76.8 | | |
| 76.6 | |
| UBeauty Limited | |
Hong Kong | |
| 77.0 | | |
| 76.8 | |
| WeBeauty Korea Inc | |
Korea | |
| 77.0 | | |
| 76.8 | |
| HWH World Limited | |
Hong Kong | |
| 77.0 | | |
| 76.8 | |
| HWH World Inc. | |
Korea | |
| 77.0 | | |
| 76.8 | |
| Alset BioHealth Pte. Ltd. | |
Singapore | |
| 77.0 | | |
| 76.8 | |
| Alset Energy Pte. Ltd. | |
Singapore | |
| 77.0 | | |
| 76.8 | |
| Alset Payment Inc. (now known as GDC REIT Inc.) | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| Alset World Pte. Ltd. | |
Singapore | |
| 77.0 | | |
| 76.8 | |
| BioHealth Water Inc. | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| Impact BioHealth Pte. Ltd. | |
Singapore | |
| 77.0 | | |
| 76.8 | |
| American Home REIT Inc. | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| Alset Solar Inc. | |
United States of America | |
| 61.6 | | |
| 61.5 | |
| HWH KOR Inc. | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| Open House Inc. | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| Open Rental Inc. | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| Hapi Cafe Inc. (Nevada) | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| Global Solar REIT Inc. | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| OpenBiz Inc. | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| Hapi Cafe Inc. (Texas) | |
United States of America | |
| 100 | | |
| 100 | |
| HWH (S) Pte. Ltd. | |
Singapore | |
| 77.0 | | |
| 76.8 | |
| True Partner International Limited | |
Hong Kong | |
| 100 | | |
| 100 | |
| LiquidValue Development Pte. Ltd. | |
Singapore | |
| 100 | | |
| 100 | |
| LiquidValue Development Limited | |
Hong Kong | |
| 100 | | |
| 100 | |
| EPowerTech Inc. | |
United States of America | |
| 100 | | |
| 100 | |
| Alset EPower Inc. | |
United States of America | |
| 100 | | |
| 100 | |
| AHR Asset Management Inc. | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| HWH World Inc. (Nevada) | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| Alset F&B Holdings Pte. Ltd. | |
Singapore | |
| 77.0 | | |
| 76.8 | |
| Credas Capital Pte. Ltd. | |
Singapore | |
| 38.5 | * | |
| 38.4 | * |
| Credas Capital GmbH | |
Switzerland | |
| 38.5 | * | |
| 38.4 | * |
| Smart Reward Express Limited | |
Hong Kong | |
| 38.4 | * | |
| 38.3 | * |
| Partners HWH Pte. Ltd. | |
Singapore | |
| 77.0 | | |
| 76.8 | |
| AHR Texas Two LLC | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| AHR Black Oak One LLC | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| Hapi Air Inc. | |
United States of America | |
| 88.5 | | |
| 88.4 | |
| AHR Texas Three, LLC | |
United States of America | |
| 77.0 | | |
| 76.8 | |
| Alset Capital Pte. Ltd. | |
Singapore | |
| 100 | | |
| 100 | |
| Hapi Cafe Korea, Inc. | |
Korea | |
| 100 | | |
| 100 | |
| Green Energy Inc. | |
United States of America | |
| 100 | | |
| 100 | |
| Green Energy Management Inc. | |
United States of America | |
| 100 | | |
| 100 | |
| Alset Metaverse Inc. | |
United States of America | |
| 95.6 | | |
| 95.6 | |
| Alset Management Group Inc. | |
United States of America | |
| 79.7 | | |
| 88.2 | |
| |
|
| | |
| |
| Alset Capital Acquisition Corp. | |
United States of America | |
| 23.4 | | |
| 79.6 | |
| Alset Spac Group Inc. | |
United States of America | |
| 79.7 | | |
| 79.6 | |
| Alset Mining Pte. Ltd. | |
Singapore | |
| 77.0 | | |
| - | |
| Alset Inc. | |
United States of America | |
| 100 | | |
| - | |
| Hapi Travel Pte. Ltd. | |
Singapore | |
| 77.0 | | |
| - | |
| Hapi WealthBuilder Pte. Ltd. | |
Singapore | |
| 77.0 | | |
| - | |
| * |
Although
the Company indirectly holds percentage of shares of these entities less than 50%, the subsidiaries of the Company directly hold
more than 50% of shares of these entities, and therefore, they are still consolidated into the Company. |
Use
of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements
and the reported amounts of revenues and expenses during the reporting periods. Significant estimates made by management include, but
are not limited to, allowance for doubtful accounts, valuation of real estate assets, allocation of development costs and capitalized
interest to sold lots, fair value of the investments, the valuation allowance of deferred taxes, and contingencies. Actual results could
differ from those estimates.
In
our property development business, land acquisition costs are allocated to each lot based on the area method, the size of the lot compared
to the total size of all lots in the project. Development costs and capitalized interest are allocated to lots sold based on the total
expected development and interest costs of the completed project and allocating a percentage of those costs based on the selling price
of the sold lot compared to the expected sales values of all lots in the project.
If
allocation of development costs and capitalized interest based on the projection and relative expected sales value is impracticable,
those costs could also be allocated based on area method, the size of the lot compared to the total size of all lots in the project.
Transactions
between Entities under Common Control
On
March 12, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with Chan Heng Fai, the founder, Chairman
and Chief Executive Officer of the Company, for four proposed transactions, consisting of (i) purchase of certain warrants (the “Warrants”)
to purchase 1,500,000,000 shares of Alset International Limited, which was valued at $28,363,966; (ii) purchase of all of the issued
and outstanding stock of LiquidValue Development Pte Ltd. (“LVD”), which was valued at $173,395; (iii) purchase of 62,122,908
ordinary shares in True Partner Capital Holding Limited (HKG: 8657) (“True Partner”), which was valued at $6,729,629; and
(iv) purchase of 4,775,523 shares of the common stock of American Pacific Bancorp Inc. (“APB”), which was valued at $28,653,138.
The total amount of above four transactions was $63,920,129, payable on the Closing Date by the Company, in the convertible promissory
notes (“Alset CPNs”), which, subject to the terms and conditions of the Alset CPNs and the Company’s shareholder approval,
shall be convertible into shares of the Company’s common stock (“AEI Common Stock”), par value $0.001 per share, at
the conversion price of AEI’s Stock Market Price. AEI’s Stock Market Price shall be $5.59 per share, equivalent to the average
of the five closing per share prices of AEI’s Common Stock preceding January 4, 2021 as quoted by Bloomberg L.P. The above four
acquisitions from Chan Heng Fai were transactions between entities under common control.
On
October 15, 2020, American Pacific Bancorp (which subsequently became a majority-owned subsidiary of the Company) entered into an acquisition
agreement to acquire 3,500,001 common shares of HengFeng Finance Limited (“HFL”), representing 100% of the common shares
of HFL, in consideration for $1,500,000, to be satisfied by the issuance and allotment of 250,000 shares of the Class A Common Stock
of American Pacific Bancorp. HFL is incorporated in Hong Kong with limited liability. The principal activities of HFL are money lending,
securities trading and investment. This transaction closed on April 21, 2021. This transaction between the Company and Chan Heng Fai
is under common control of Chan Heng Fai.
The
common control transactions resulted in the following basis of accounting for the financial reporting periods:
| |
● |
The
acquisition of the Warrants and True Partner stock were accounted for prospectively as of March 12, 2021 and they did not represent
a change in reporting entity. |
| |
● |
The
acquisition of LVD, APB and HFL was under common control and was consolidated in accordance with ASC 850-50. The consolidated financial
statements were retrospectively adjusted for the acquisition of LVD, APB and HFL, and the operating results of LVD, APB and HFL as
of January 1, 2020 for comparative purposes. |
AEI’s
stock price was $10.03 on March 12, 2021, the commitment date. The Beneficial Conversion Feature (“BCF”) intrinsic value
was $50,770,192 for the four convertible promissory notes and was recorded as debt discount of convertible notes after these transactions.
The debt discount attributable to the BCF is amortized over period from issuance to the date that the debt becomes convertible using
the effective interest method. If the debt is converted, the discount is amortized to finance cost in full immediately. On May 13, 2021
and June 14, 2021 all Alset CPNs of $63,920,128 and accrued interests of $306,438 were converted into 2,123 shares of series B preferred
stock and 9,163,965 shares of common stock of the Company.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with a maturity of three months or less at the date of acquisition to be cash equivalents.
Cash and cash equivalents include cash on hand and at the bank and short-term deposits with financial institutions that are readily convertible
to a known amount of cash and are subject to an insignificant risk of changes in values. There were no cash equivalents as of March 31,
2022 and December 31, 2021.
Restricted
Cash
As
a condition to the loan agreement with the Manufacturers and Traders Trust Company (“M&T Bank”), the Company was required
to maintain a minimum of $2,600,000 in an interest-bearing account maintained by the lender as additional security for the loans. The
fund was required to remain as collateral for the loan until the loan is paid off in full and the loan agreement terminated. In March
2022 approximately $2.3 million was released from the account as the loan was fully paid off and partially closed. The remaining $300,000
still remains in the restricted account as a collateral for outstanding letters of credit. The Company also maintained an escrow account
with M&T Bank to deposit a portion of cash proceeds from lot sales. The fund in the escrow account was specifically used for the
payment of the loan from M&T Bank. The fund was required to remain in the escrow account for the loan payment until the loan agreement
terminates. These funds are now freely accessible to the Company. As of March 31, 2022 and December 31, 2021, the total balance of these
two accounts was $2,082,860 and $4,399,984, respectively.
As
a condition to the loan agreement with National Australian Bank Limited in conjunction with the Perth project, an Australian real estate
development project, the Company is required to maintain Australian Dollar 50,000,
in a non-interest-bearing account. As of March 31, 2022 and December 31, 2021, the account balance was $37,580 and $36,316, respectively.
These funds will remain as collateral for the loans until paid in full.
The
Company puts money into brokerage accounts specifically for equity investment. As of March 31, 2022 and December 31, 2021, the cash balance
in these brokerage accounts was $404,742 and $304,570, respectively.
Account
Receivables and Allowance for Doubtful Accounts
Account
receivables is stated at amounts due from buyers, contractors, and all third parties, net of an allowance for doubtful accounts. As of
March 31, 2022 and December 31, 2021, the balance of account receivables was $90,407 and $39,622, respectively. Approximately $0 and
$2,500 of account receivables as of March 31, 2022 and December 31, 2021, respectively, was from DSS with a merchant agreement, under
which the Company uses DSS credit card platform to collect money from our direct sales.
The
Company monitors its account receivables balances on a monthly basis to ensure that they are collectible. On a quarterly basis, the Company
uses its historical experience to estimate its allowance for doubtful account receivables. The Company’s allowance for doubtful
accounts represents an estimate of the losses expected to be incurred based on specifically identified accounts as well as nonspecific
amount, when determined appropriate. Generally, the amount of the allowance is primarily decided by division management’s historical
experience, the delinquency trends, the resolution rates, the aging of receivables, the credit quality indicators and financial health
of specific customers. As of March 31, 2022 and December 31, 2021, the allowance was $0.
Inventories
Inventories
are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method and includes all costs
in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary
course of business less the estimated costs necessary to make the sale. As of December 31, 2021, inventory consisted of finished goods
from HWH World Inc. As of March 31, 2022, inventory consisted of finished goods from HWH World Inc. and Hapi Cafe Korea Inc. The Company
continuously evaluates the need for reserve for obsolescence and possible price concessions required to write-down inventories to net
realizable value.
Investment
Securities
Investment
Securities at Fair Value
The
Company records all equity investments with readily determinable fair values at fair value calculated by the publicly traded stock price
at the close of the reporting period. Amarantus BioScience Holdings (“AMBS”) and True Partner Capital Holding Limited (“True
Partner”) are publicly traded companies. The Company does not have significant influence over AMBS and True Partner, as the Company
is the beneficial owner of approximately 4.3% of the common shares of AMBS and 15.5% of True Partner. The stock’s fair value is
determined by quoted stock prices.
On
April 12, 2021 the Company acquired 6,500,000 common shares of Value Exchange International, Inc. (“Value Exchange International”),
an OTC listed company, for an aggregate subscription price of $650,000. After the transaction the Company owns approximately 18% of Value
Exchange International and does not have significant influence on it. The stock’s fair value is determined by quoted stock prices.
During
the year ended December 31, 2021, the Company’s subsidiaries established a portfolio of trading securities. The objective is to
generate profits on short-term differences in market prices. The Company does not have significant influence over any trading securities
in our portfolio and fair value of these trading securities are determined by quoted stock prices.
The
Company has elected the fair value option for the equity securities noted below that would otherwise be accounted for under the equity
method of accounting. Holista CollTech Limited (“Holista”), DSS, Inc. (“DSS”) and American Premium Water Corp
(“APW”) are publicly traded companies and fair value is determined by quoted stock prices. The Company has significant influence
but does not have a controlling interest in these investments, and therefore, the Company’s investment could be accounted for under
the equity method of accounting or elect fair value accounting.
| |
●
|
The
Company has significant influence over DSS. As of March 31, 2022 and December 31, 2021, the Company owned approximately 28.21% and
24.9% of the common stock of DSS, respectively. Our CEO is a stockholder and the Chairman of the Board of Directors of DSS. Chan
Tung Moe, our Co-Chief Executive Officer and the son of Chan Heng Fai, is also a director of DSS. |
| |
|
|
| |
● |
The
Company has significant influence over Holista as the Company and its CEO are the beneficial owner of approximately 15.8% of the
outstanding shares of Holista and our CEO held a position on Holista’s Board of Directors until June of 2021. |
| |
|
|
| |
● |
The
Company has significant influence over APW as the Company is the beneficial owner of approximately 7.7% of the common shares of APW
and one officer from the Company holds a director position on APW’s Board of Directors. |
On
March 2, 2020 and October 29, 2021, the Company received warrants to purchase shares of American Medical REIT Inc. (“AMRE”),
a related party private startup company, in conjunction with the Company lending two $200,000 promissory notes. For further details on
this transaction, refer to Note 8 - Related Party Transactions, Note Receivable from a Related Party Company. As of March 31,
2022 and December 31, 2021, AMRE was a private company. Based on management’s analysis, the fair value of the AMRE warrants was
$0 as of March 31, 2022 and December 31, 2021. In March 2022 both loans, together with warrants were converted into common shares of
AMRE. After the conversion, the Company owns approximately 15.8% of AMRE.
The
Company held a stock option to purchase 250,000 shares of Vivacitas common stock at $1 per share at any time prior to the date of a public
offering by Vivacitas. As of December 31, 2020, Vivacitas was a private company. Based on management’s analysis, the fair value
of the Vivacitas stock option was $0 as of December 31, 2020. On March 18, 2021 the Company sold the subsidiary holding the ownership
and stock option in Vivacitas to an indirect subsidiary of DSS. For further details on this transaction, refer to Note 8 - Related Party
Transactions, Sale of Investment in Vivacitas to DSS.
The
Company accounts for certain of its investments in funds without readily determinable fair values in accordance with ASU No. 2015-07,
Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its
Equivalent) (“2015-07”). In the first quarter of 2022 the Company invested $100,000
in Class A Shares of Novum Alpha Global Opportunity Digital Asset Fund I SP, a segregated portfolio of Novum Alpha SPC (“Novum
Alpha Fund”). This fund invests in long-short digital assets. The Company subscribed in participating shares which are redeemable
and non-voting.
On
February 3, 2022 Alset Capital Acquisition Corp. (“Alset Capital”), a special purpose acquisition company sponsored by the
Company and certain affiliates, closed its initial public offering of 7,500,000 units at $10 per unit. As a result of the offering, the
Company lost its majority ownership in Alset Capital and deconsolidated it. Upon deconsolidation, the Company elected to apply fair value
accounting to measure the stocks and units’ value it owns. At March 31, 2022 the Company owned 23.4% of Alset Capital.
Investment
Securities at Cost
Investments
in equity securities without readily determinable fair values are measured at cost minus impairment adjusted by observable price changes
in orderly transactions for the identical or a similar investment of the same issuer. These investments are measured at fair value on
a nonrecurring basis when there are events or changes in circumstances that may have a significant adverse effect. An impairment loss
is recognized in the condensed consolidated statements of comprehensive income equal to the amount by which the carrying value exceeds
the fair value of the investment.
The
Company had an equity holding in Vivacitas Oncology Inc. (“Vivacitas”), a private company that is currently not listed on
an exchange. We measured Vivacitas at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly
transactions for an identical or similar investment of the same issuer. Our ownership in Vivacitas was sold on March 18, 2021 to DSS
for $2,480,000. The difference of $2,279,872 between the selling price and our original investment cost was recorded as additional paid
capital considering a related party transaction. For further details on this transaction, refer to Note 8 – Related Party Transactions,
Sale of Investment in Vivacitas to DSS.
On
September 8, 2020, the Company acquired 1,666 shares, approximately 1.45% ownership, from Nervotec Pte Ltd (“Nervotec”),
a private company, at the purchase price of $37,826. The Company applied ASC 321 and measured Nervotec at cost, less any impairment,
plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same
issuer.
On
September 30, 2020, the Company acquired 3,800 shares, approximately 19% ownership, from HWH World Company Limited (f.k.a. Hyten Global
(Thailand) Co., Ltd.) (“HWH World Co.”), a private company, at a purchase price of $42,562.
During
2021, the Company invested $19,609 in K Beauty Research Lab Co., Ltd (“K Beauty”) for 18% ownership. K Beauty was established
for sourcing, developing and producing variety of Korea-made beauty products as well as Korea - originated beauty contents for the purpose
of distribution to HWH’s membership distribution channel.
There
has been no indication of impairment or changes in observable prices via transactions of similar securities and investments are still
carried at cost.
Equity
Method Investment
The
Company accounts for equity investment in entities with significant influence under equity-method accounting. Under this method, the
Group’s pro rata share of income (loss) from investment is recognized in the condensed consolidated statements of comprehensive
income. Dividends received reduce the carrying amount of the investment. When the Company’s share of loss in an equity-method investee
equals or exceeds its carrying value of the investment in that entity, the equity method investment can be reduced below zero based on
losses, if the Company either is liable for the obligations of the investee or provides for losses in excess of the investment when imminent
return to profitable operations by the investee appears to be assured. Otherwise, the Company does not recognize its share of equity
method losses exceeding its carrying amount of the investment, but discloses the losses in the footnotes. Equity-method investment is
reviewed for impairment by assessing if the decline in market value of the investment below the carrying value is other-than-temporary.
In making this determination, factors are evaluated in determining whether a loss in value should be recognized. These include consideration
of the intent and ability of the Group to hold investment and the ability of the investee to sustain an earnings capacity, justifying
the carrying amount of the investment. Impairment losses are recognized in other expense when a decline in value is deemed to be other-than-temporary.
American
Medical REIT Inc.
LiquidValue
Asset Management Pte. Ltd. (“LiquidValue”), a subsidiary of the Company owns less than 3.4%
of American Medical REIT Inc. (“AMRE”) as of March 31, 2022, a startup REIT company concentrating on medical real estate.
AMRE acquires state-of-the-art, purpose-built healthcare facilities and leases them to leading clinical operators with dominant market
share under secure triple net leases. AMRE targets hospitals (both Critical Access and Specialty Surgical), Physician Group Practices,
Ambulatory Surgical Centers, and other licensed medical treatment facilities. Chan Heng Fai, our CEO, is the executive chairman and director
of AMRE. LiquidValue did not invest equity but provided a loan to AMRE (for further details on this transaction, refer Note 8, Related
Party Transactions). On balance sheet, the prorate loss from AMRE was not recorded as a liability because to the Company is not liable
for the obligations of AMRE and also not committed to provide additional financial support.
Joint
Venture with Novum
On
April 20, 2021, one of Company’s indirect subsidiaries, SeD Capital Pte. Ltd. (“SeD Capital”), entered into joint venture
agreement with a digital asset management firm Novum Alpha Pte Ltd (“Novum”). Pursuant to this agreement, SeD Capital will
own 50% of the issued and paid-up capital in the joint venture company, Credas Capital Pte. Ltd. (“Credas”) with the remaining
50% shareholding stake held by Novum. On the condensed consolidated balance sheet, the prorate loss from Credas was not recorded as a
liability because the Company is not liable for the obligations of Credas and has not committed to provide additional financial support.
American
Pacific Bancorp, Inc.
Pursuant
to Securities Purchase Agreement from March 12, 2021 the Company purchased of 4,775,523 shares of the common stock of American Pacific
Bancorp Inc. (“APB”) and gained majority ownership in that entity. APB was consolidated into the Company under common control
accounting (See Transactions between Entities under Common Control for details). On September 8, 2021 APB sold 6,666,700 shares Series
A Common Stock to DSS, Inc. for $40,000,200 cash. As a result of the new share issuances,
the Company’s ownership percentage of APB fell below 50% to 41.3% and the entity was deconsolidated in accordance with ASC 810-10.
Upon deconsolidation the Company elected to apply the equity method accounting as the Company still retained significant influence. As
a result of the deconsolidation, the Company recognized gain of approximately $28.2 million. The gain represents the difference between
the fair value of retained equity method investment of $30.8 million and $2.6 million, the Company’s investment percentage of carrying
amount of APB’s net assets of $2.9 million. Considering the transaction was between related parties, the Company recorded the gain
as additional paid in capital in its equity. From September 8 to December 31, 2021, the investment loss was $51,999. During three months
ended March 31, 2022 the investment gain was $141,343. As of March 31, 2022 and December 31, 2021, the investment in APB was $30,942,472
and $30,801,129, respectively.
Ketomei
Pte Ltd
On
June 10, 2021 the Company’s indirect subsidiary Hapi Cafe Inc. (“Hapi Cafe”) lent $76,723 to Ketomei Pte Ltd (“Ketomei”).
On March 21, 2022 Hapi Cafe entered into an agreement pursuant to which the principle of the loan together with accrued interest were
converted into an investment in Ketomei. At the same time, Hapi Cafe invested additional $179,595 in Ketomei. After the conversion and
fund investment the Company holds 28% of Ketomei. Ketomei is in the business of selling cooked food and drinks. As of March 31, 2022
the Company recognized investment loss of $3,273 and investment in Ketomei was $253,045 at March 31, 2021.
Investment
in Debt Securities
Debt
securities are reported at fair value, with unrealized gains and losses (other than impairment losses) recognized in accumulated other
comprehensive income or loss. Realized gains and losses on debt securities are recognized in the net income in the condensed consolidated
statements of comprehensive income. The Company monitors its investments for other-than-temporary impairment by considering factors including,
but not limited to, current economic and market conditions, the operating performance of the companies including current earnings trends
and other company-specific information.
The
Company invested $50,000 in a convertible promissory note of Sharing Services Global Corporation (“Sharing Services Convertible
Note”), a company quoted on the US OTC market. The value of the convertible note is estimated by management using a Black-Scholes
valuation model. The fair value of the note was $676 and $9,799 on March 31, 2022 and December 31, 2021, respectively.
On
February 26, 2021, the Company invested approximately $88,599 in the convertible note of Vector Com Co., Ltd (“Vector Com”),
a private company in South Korea. The interest rate is 2% per annum and maturity is two years. The conversion price is approximately
$21.26 per common share of Vector Com. As of March 31, 2022, the Management estimated the fair value of the note to be $88,599, the initial
transaction price.
Variable
Interest Entity
Under
Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 810, Consolidation,
when a reporting entity is the primary beneficiary of an entity that is a variable interest entity (“VIE”), as defined in
ASC 810, the VIE must be consolidated into the financial statements of the reporting entity. The determination of which owner is the
primary beneficiary of a VIE requires management to make significant estimates and judgments about the rights, obligations, and economic
interests of each interest holder in the VIE.
The
Company evaluates its interests in VIEs on an ongoing basis and consolidates any VIE in which it has a controlling financial interest
and is deemed to be the primary beneficiary. A controlling financial interest has both of the following characteristics: (i) the power
to direct the activities of the VIE that most significantly impact its economic performance; and (ii) the obligation to absorb losses
of the VIE that could potentially be significant to it or the right to receive benefits from the VIE that could be significant to the
VIE.
HWH
World Company Limited
HWH
World Co. is a direct sales company in Thailand. The Company has a 19% ownership and lent a loan of $187,500 with zero interest and due
on demand, to HWH World Co. The current level of equity in HWH World Co. is not sufficient to determine if HWH World Co. can operate
on its own without additional subordinated financial support. The Company has a variable interest in HWH World Co. However, The Company
is not deemed to absorb losses or receive benefits that could potentially be significant to HWH World Co. Ltd. The Company does not also
have the ultimate power over the activities which can impact VIE’s economic performance, like developing company budgets or overseeing
and controlling the management. The power to direct the activities are held by the manager in Thailand who owns 51% of the HWH World
Co. Therefore, the Company is not a primary beneficiary of this VIE and does not consolidate it. On March 31, 2022 and December 31, 2021
variable interest and amount receivable in the non-consolidated VIE was $236,699 and $236,699, respectively, which represents the Company’s
maximum risk of loss from non-consolidated VIE. The Company applied ASC 321 and measured HWH World Co. investment at cost, less any impairment,
plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same
issuer.
American
Medical REIT Inc.
The
Company had 3.4% ownership in AMRE and lent AMRE two loans of $200,000 each and one loan of $8,350,000, all with 8% per annum interest
rate. One of the $200,000 loans was due on March 3, 2022, the other one is due on October 29, 2024. The $8,350,000 loan is due on November
29, 2023. The Company has a variable interest in AMRE. However, the Company is not deemed to absorb losses or receive benefits that could
potentially be significant to AMRE. The Company does not also have the ultimate power over the activities which can impact VIE’s
economic performance, like developing company budgets or overseeing and controlling the management. The power to direct these activities
are held by the AMRE’s largest shareholder which owns approximately 93% of AMRE and AMRE’s management team. Therefore, the
Company is not a primary beneficiary of this VIE and does not consolidate it. In March 2022, the Company converted both $200,000 loans,
together with accompanying warrants into AMRE common shares. After the conversion the Company owns 15.8% of AMRE. On March 31, 2022 and
December 31, 2021 variable interest and amount receivable in the non-consolidated VIE was $8,350,000 and $8,901,285, respectively, which
represents the Company’s maximum risk of loss from non-consolidated VIE.
Real
Estate Assets
Real
estate assets are recorded at cost, except when real estate assets are acquired that meet the definition of a business combination in
accordance with Financial Accounting Standards Board (“FASB”) ASC 805 - “Business Combinations”, which
acquired assets are recorded at fair value. Interest, property taxes, insurance and other incremental costs (including salaries) directly
related to a project are capitalized during the construction period of major facilities and land improvements. The capitalization period
begins when activities to develop the parcel commence and ends when the asset constructed is completed. The capitalized costs are recorded
as part of the asset to which they relate and are reduced when lots are sold.
The
Company capitalized construction costs of approximately $0.4 million and $1.2 million for the three months ended March 31, 2022 and 2021,
respectively.
The
Company’s policy is to obtain an independent third-party valuation for each major project in the United States as part of our assessment
of identifying potential triggering events for impairment. Management may use the market comparison method to value other relatively
small projects, such as the project in Perth, Australia. In addition to the annual assessment of potential triggering events in accordance
with ASC 360 – Property Plant and Equipment (“ASC 360”), the Company applies a fair value-based impairment test
to the net book value assets on an annual basis and on an interim basis if certain events or circumstances indicate that an impairment
loss may have occurred.
The
Company did not record impairment on any of its projects during the three months ended on March 31, 2022 and 2021.
Properties
under development
Properties
under development are properties being constructed for sale in the ordinary course of business, rather than to be held for the Company’s
own use, rental or capital appreciation.
Rental
Properties
Rental
properties are acquired with the intent to be rented to tenants. During the three months ended March 31, 2022 and the year ended December
31, 2021, the Company signed multiple purchase agreements to acquire 3 and 109 homes in Montgomery and Harris Counties, Texas, respectively.
By March 31, 2022, all of the 112 homes were closed with an aggregate purchase cost of $25,663,582. All of these purchased homes are
properties of our rental business.
Investments
in Single-Family Residential Properties
The
Company accounts for its investments in single-family residential properties as asset acquisitions and records these acquisitions at
their purchase price. The purchase price is allocated between land, building, improvements and existing leases based upon their relative
fair values at the date of acquisition. The purchase price for purposes of this allocation is inclusive of acquisition costs which typically
include legal fees, title fees, property inspection and valuation fees, as well as other closing costs.
Building
improvements and buildings are depreciated over estimated useful lives of approximately 10 to 27.5 years, respectively, using the straight-line
method.
The Company assesses its investments in single-family residential properties for impairment whenever events or changes in business circumstances
indicate that carrying amounts of the assets may not be fully recoverable. When such events occur, management determines whether there
has been impairment by comparing the asset’s carrying value with its fair value. Should impairment exist, the asset is written
down to its estimated fair value. The Company did not recognize any impairment losses during three months end March 31, 2022 and 2021.
Revenue
Recognition and Cost of Revenue
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. The Company adopted this new standard on January 1, 2018 under the modified retrospective method. The adoption of this
new standard did not have a material effect on our financial statements.
In
accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized
reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services. The provisions
of ASC 606 include a five-step process by which the determination of revenue recognition, depicting the transfer of goods or services
to customers in amounts reflecting the payment to which the Company expects to be entitled in exchange for those goods or services. ASC
606 requires the Company to apply the following steps:
(1)
identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price;
(4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, performance
obligations are satisfied.
The
following represents the Company’s revenue recognition policies by Segments:
Real
Estate
Property
Sales
The
Company’s main business is land development. The Company purchases land and develops it for building into residential communities.
The developed lots are sold to builders (customers) for the construction of new homes. The builders enter into sales contracts with the
Company before they take the lots. The prices and timeline are determined and agreed upon in the contracts. The builders do the inspections
to make sure all conditions and requirements in contracts are met before purchasing the lots. A detailed breakdown of the five-step process
for the revenue recognition of the Ballenger project, which represented approximately 32% and 69%, respectively, of the Company’s
revenue in the three months ended on March 31, 2022 and 2021, is as follows:
| |
● |
Identify
the contract with a customer. |
The
Company has signed agreements with the builders for developing the raw land to ready to build lots. The contract has agreed upon prices,
timelines, and specifications for what is to be provided.
| |
● |
Identify
the performance obligations in the contract. |
Performance
obligations of the Company include delivering developed lots to the customer, which are required to meet certain specifications that
are outlined in the contract. The customer inspects all lots prior to accepting title to ensure all specifications are met.
| |
● |
Determine
the transaction price. |
The
transaction price per lot is fixed and specified in the contract. Any subsequent change orders or price changes are required to be approved
by both parties.
| |
● |
Allocate
the transaction price to performance obligations in the contract. |
Each
lot or a group of lots is considered to be a separate performance obligation, for which the specified price in the contract is allocated
to.
| |
● |
Recognize
revenue when (or as) the entity satisfies a performance obligation. |
The
builders do the inspections to make sure all conditions/requirements are met before taking title of lots. The Company recognizes revenue
at a point in time when title is transferred. The Company does not have further performance obligations or continuing involvement once
title is transferred.
Rental
Revenue
The
Company leases real estate properties to its tenants under leases that are predominately classified as operating leases, in accordance
with ASC 842, Leases (“ASC 842”). Real estate rental revenue is comprised of minimum base rent and revenue from the collection
of lease termination fees.
Rent
from tenants is recorded in accordance with the terms of each lease agreement on a straight-line basis over the initial term of the lease.
Rental revenue recognition begins when the tenant controls the space and continues through the term of the related lease. Generally,
at the end of the lease term, the Company provides the tenant with a one year renewal option, including mostly the same terms and conditions
provided under the initial lease term, subject to rent increases.
The
Company defers rental revenue related to lease payments received from tenants in advance of their due dates. These amounts are presented
within deferred revenues and other payables on the Company’s condensed consolidated balance sheets.
Rental
revenue is subject to an evaluation for collectability on several factors, including payment history, the financial strength of the tenant
and any guarantors, historical operations and operating trends of the property, and current economic conditions. If our evaluation of
these factors indicates that it is not probable that we will recover substantially all of the receivable, rental revenue is limited to
the lesser of the rental revenue that would be recognized on a straight-line basis (as applicable) or the lease payments that have been
collected from the lessee. Differences between rental revenue recognized and amounts contractually due under the lease agreements are
credited or charged to straight-line rent receivable or straight-line rent liability, as applicable. For the three months ended March
31, 2022, the Company didn’t recognize any deferred revenue and collected all rents due.
Sale
of the Front Foot Benefit Assessments
We
have established a front foot benefit (“FFB”) assessment on all of the NVR lots. This is a 30-year annual assessment allowed
in Frederick County which requires homeowners to reimburse the developer for the costs of installing public water and sewer to the lots.
These assessments become effective as homes are settled, at which time we can sell the collection rights to investors who will pay an
upfront lump sum, enabling us to realize the revenue more quickly. The selling prices range from $3,000 to $4,500 per home depending
on the type of the home. Our total revenue from the front foot benefit assessment is approximately $1 million. To recognize revenue of
FFB assessment, both our and NVR’s performance obligation must be satisfied. Our performance obligation is completed once we complete
the construction of water and sewer facility and close the lot sales with NVR, which inspects these water and sewer facility prior to
close lot sales to ensure all specifications are met. NVR’s performance obligation is to sell homes they build to homeowners. Our
FFB revenue is recognized on quarterly basis after NVR closes sales of homes to homeowners. The agreement with these FFB investors is
not subject to amendment by regulatory agencies and thus our revenue from FFB assessment is not either. During the three months ended
on March 31, 2022 and 2021, we recognized revenue of $ and $ from FFB assessment, respectively.
Cost
of Revenues
Real
Estate
| |
● |
Cost
of Real Estate Sale |
All
of the costs of real estate sales are from our land development business. Land acquisition costs are allocated to each lot based on the
area method, the size of the lot comparing to the total size of all lots in the project. Development costs and capitalized interest are
allocated to lots sold based on the total expected development and interest costs of the completed project and allocating a percentage
of those costs based on the selling price of the sold lot compared to the expected sales values of all lots in the project.
If
allocation of development costs and capitalized interest based on the projection and relative expected sales value is impracticable,
those costs could also be allocated based on area method, the size of the lot comparing to the total size of all lots in the project.
Cost
of rental revenue consists primarily of the costs associated with management and leasing fees to our management company, repairs and
maintenance, depreciation and other related administrative costs. Utility expenses are paid directly by tenants.
Biohealth
The
Company’s net sales consist of product sales. The Company’s performance obligation is to transfer its products to its third-party
independent distributors (“Distributors”). The Company generally recognizes revenue when product is shipped to its Distributors.
The
Company’s Distributors may receive distributor allowances, which are comprised of discounts, rebates and wholesale commission payments
from the Company. Distributor allowances resulting from the Company’s sales of its products to its Distributors are recorded against
net sales because the distributor allowances represent discounts from the suggested retail price.
In
addition to distributor allowances, the Company compensates its sales leader Distributors 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 general and administrative expenses. The Company recognizes revenue when it ships products. The Company
receives the net sales price in cash or through credit card payments at the point of sale.
If
a Distributor returns a product to the Company on a timely basis, he/she may obtain a replacement product from the Company for such returned
products. In addition, the Company maintains a buyback program pursuant to which it will repurchase products sold to a Distributor who
has decided to leave the business. Allowances for product returns, primarily in connection with the Company’s buyback program,
are provided at the time the sale is recorded. This accrual is based upon historical return rates for each country and the relevant return
pattern, which reflects anticipated returns to be received over a period of up to 12 months following the original sale.
The
Company collects an annual membership fee from its Distributors. The fee is fixed, paid in full at the time of joining the membership
and non-refundable. The membership provides the member access to purchase products at a discount, access to certain back-office services,
receive commissions for signing up new members, and attend corporate events. The Company recognizes revenue associated with the membership
over the period of the membership. Before the membership fee is recognized as revenue, it is recorded as deferred revenue. Deferred revenue
relating to membership was $220,015 and $728,343 at March 31, 2022 and December 31, 2021, respectively.
Other
Businesses
| ● | Killiney
Koptiam’s Franchise |
The
Company, through Alset F&B One Pte. Ltd. (“Alset F&B”), acquired a restaurant franchise license at the end of 2021
and has since commenced operations. This license will allow Alset F&B to operate a Killiney Kopitiam restaurant in Singapore. Killiney
Kopitiam is a Singapore-based chain of mass-market, traditional kopitiam style service cafes selling toast products, soft-boiled eggs
and coffee.
| |
● |
Remaining
performance obligations |
As
of March 31, 2022 and December 31, 2021, there were no remaining performance obligations or continuing involvement, as all service obligations
within the other business activities segment have been completed.
Stock-Based
Compensation
The
Company accounts for stock-based compensation to employees in accordance with ASC 718, “Compensation-Stock Compensation”.
ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including
stock options, based on the grant date fair value of the award and to recognize it as compensation expense over the period the employee
is required to provide service in exchange for the award, usually the vesting period. Stock option forfeitures are recognized at the
date of employee termination. Effective January 1, 2019, the Company adopted ASU 2018-07 for the accounting of share-based payments granted
to non-employees for goods and services. During the three months ended on March 31, 2022 and 2021, the Company recorded $0 and $73,292
as stock-based compensation expense.
Foreign
currency
Functional
and reporting currency
Items
included in the financial statements of each entity in the Company are measured using the currency of the primary economic environment
in which the entity operates (“functional currency”). The financial statements of the Company are presented in U.S. dollars
(the “reporting currency”).
The
functional and reporting currency of the Company is the United States dollar (“U.S. dollar”). The financial records of the
Company’s subsidiaries located in Singapore, Hong Kong, Australia and South Korea are maintained in their local currencies, the
Singapore Dollar (S$), Hong Kong Dollar (HK$), Australian Dollar (“AUD”) and South Korean Won (“KRW”), which
are also the functional currencies of these entities.
Transactions
in foreign currencies
Transactions
in currencies other than the functional currency during the periods are converted into functional currency at the applicable rates of
exchange prevailing when the transactions occurred. Transaction gains and losses are recognized in the statement of operations.
The
majority of the Company’s foreign currency transaction gains or losses come from the effects of foreign exchange rate changes on
the intercompany loans between Singapore entities and U.S. entities. The Company recorded foreign exchange gain of $408,095 and $1,462,697
during the three months ended on March 31, 2022 and 2021, respectively. The foreign currency transactional gains and losses are recorded
in operations.
Translation
of consolidated entities’ financial statements
Monetary
assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the
rates of exchange ruling at the balance sheet date. The Company’s entities with functional currency of S$, HK$, AUD and KRW, translate
their operating results and financial positions into the U.S. dollar, the Company’s reporting currency. Assets and liabilities
are translated using the exchange rates in effect on the balance sheet date. Revenue, expense, gains and losses are translated using
the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate
component of comprehensive income (loss).
The
Company recorded other comprehensive loss of $649,140 from foreign currency translation for the three months ended March 31, 2022 and
$1,769,440 loss for the three months ended March 31, 2021, in accumulated other comprehensive loss.
Non-controlling
interests
Non-controlling
interests represent the equity in subsidiary not attributable, directly or indirectly, to owners of the Company, and are presented separately
in the condensed consolidated statements of operation and comprehensive income, and within equity in the Condensed Consolidated Balance
Sheets, separately from equity attributable to owners of the Company.
On
March 31, 2022 and December 31, 2021, the aggregate non-controlling interests in the Company were $22,382,966 and $21,912,268, respectively.
Capitalized
Financing Costs
Financing
costs, such as loan origination fee, administration fee, interests, and other related financing costs should be capitalized and recorded
on the balance sheet, if these financing activities are directly associated with the development of real estates.
Capitalized
financing costs are allocated to lots sold based on the total expected development and interest costs of the completed project and allocating
a percentage of those costs based on the selling price of the sold lot compared to the expected sales values of all lots in the project.
If the allocation of capitalized financing costs based on the projection and relative expected sales value is impracticable, those costs
could also be allocated based on an area method, which uses the size of the lots compared to the total project area and allocates costs
based on their size.
As
of March 31, 2022 and December 31, 2021, the capitalized financing costs were $3,247,739.
Beneficial
Conversion Features
The
Company evaluates the conversion feature for whether it was beneficial as described in ASC 470-30. The intrinsic value of a beneficial
conversion feature inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible
note payable and may not be settled in cash upon conversion, is treated as a discount to the convertible note payable. This discount
is amortized over the period from the date of issuance to the date the note is due using the effective interest method. If the note payable
is retired prior to the end of its contractual term, the unamortized discount is expensed in the period of retirement to interest expense.
In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative
fair value of detachable instruments included in the financing transaction, if any, to the fair value of the shares of common stock at
the commitment date to be received upon conversion.
Recent
Accounting Pronouncements
Accounting
pronouncement adopted
In
October 2021, the FASB issued ASU No. 202108, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities
from Contracts with Customers.” ASU 202108 requires the company acquiring contract assets and contract liabilities obtained in
a business combination to recognize and measure them in accordance with ASC 606, “Revenue from Contracts with Customers”.
At the acquisition date, the company acquiring the business should record related revenue, as if it had originated the contract. Before
the update such amounts were recognized by the acquiring company at fair value. The amendments in this Update are effective for fiscal
years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including
in interim periods, for any financial statements that have not yet been issued. The Company adopted these requirements prospectively,
effective on the first day of year 2022.
Accounting
pronouncement not yet adopted
In
June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments” (“ASU 2016-13”). ASU 2016-13 requires financial assets measured at amortized cost to be presented
at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events,
including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported
amounts. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances.
ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal
years, and a modified retrospective approach is required, with a cumulative-effect adjustment to retained earnings as of the beginning
of the first reporting period in which the guidance is effective. In November of 2019, the FASB issued ASU 2019-10, which delayed the
implementation of ASU 2016-13 to fiscal years beginning after December 15, 2022 for smaller reporting companies. The Company is currently
evaluating the impact of ASU 2016-13 on its future consolidated financial statements.
In
March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of Reference Rate Reform on Financial Reporting.
The amendments in this Update provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP)
to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments
in this Update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate
expected to be discontinued because of reference rate reform. The Company’s line of credit agreement provides procedures for determining
a replacement or alternative rate in the event that LIBOR is unavailable. The amendments in this Update are effective for all entities
as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of ASU 2020-04 on its future consolidated
financial statements.
In
August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts
in Entity’s Own Equity (Subtopic 815-40) which simplifies the accounting for convertible instruments. The guidance removes
certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. Either
a modified retrospective method of transition or a fully retrospective method of transition is permissible for the adoption of this standard.
Update No. 2020-06 is effective for fiscal years beginning after December 15, 2023 for smaller reporting companies, including
interim periods within those fiscal years. Early adoption is permitted no earlier than the fiscal year beginning after December 15, 2020.
The Company is currently evaluating the impact of ASU 2020-06 on its future consolidated financial statements.
3.
CONCENTRATIONS
The
Company maintains cash balances at various financial institutions in different countries. These balances are usually secured by the central
banks’ insurance companies. At times, these balances may exceed the insurance limits. As of March 31, 2022 and December 31, 2021,
uninsured cash and restricted cash balances were $51,171,108 and $57,905,303, respectively.
For
the three months ended March 31, 2022, three customers accounted for approximately 41%, 52%,
and 7%
of the Company’s property development revenue. For the three months ended March 31, 2021, two customers accounted for
approximately 97%,
and 3%
of the Company’s property development revenue.
4.
SEGMENTS
Operating
segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly
by the chief operating decision maker, or decision–making group, in deciding how to allocate resources and in assessing performance.
The Company’s chief operating decision-maker is the CEO. The Company operates in and reports four business segments: real estate,
digital transformation technology, biohealth, and other business activities. The Company’s reportable segments are determined based
on the services they perform and the products they sell, not on the geographic area in which they operate. The Company’s chief
operating decision maker evaluates segment performance based on segment revenue. Costs excluded from segment income (loss) before taxes
and reported as “Other” consist of corporate general and administrative activities which are not allocable to the four reportable
segments.
The
following table summarizes the Company’s segment information for the following balance sheet dates presented, and for the three
months ended March 31, 2022 and 2021:
SCHEDULE
OF SEGMENT INFORMATION
| | |
| | |
| | |
| | |
| | |
| |
| | |
Real
Estate | | |
Digital
Transformation Technology | | |
Biohealth
Business | | |
Other | | |
Total | |
| | |
| | |
| | |
| | |
| | |
| |
| Three
Months Ended on March 31, 2022 | |
| | | |
| | | |
| | | |
| | | |
| | |
| Revenue | |
$ | 1,274,106 | | |
$ | - | | |
$ | 617,471 | | |
$ | 60,660 | | |
$ | 1,952,237 | |
| Cost
of Sales | |
| (1,093,709 | ) | |
| - | | |
| (12,038 | ) | |
| (8,803 | ) | |
| (1,114,550 | ) |
| Gross
Margin | |
| 180,397 | | |
| - | | |
| 605,433 | | |
| 51,857 | | |
| 837,687 | |
| Operating
Expenses | |
| (536,765 | ) | |
| (114,263 | ) | |
| (620,342 | ) | |
| (1,219,858 | ) | |
| (2,491,228 | ) |
| Operating Loss | |
| (356,368 | ) | |
| (114,263 | ) | |
| (14,909 | ) | |
| (1,168,001 | ) | |
| (1,653,541 | ) |
| Other
Income (Expense) | |
| 98 | | |
| (455,000 | ) | |
| (1,205,349 | ) | |
| (4,394,547 | ) | |
| (6,054,798 | ) |
| Net Loss Before Income Tax | |
| (356,270 | ) | |
| (569,263 | ) | |
| (1,220,258 | ) | |
| (5,562,548 | ) | |
| (7,708,339 | ) |
| | |
| | |
| | |
| | |
| | |
| |
| | |
Real
Estate | | |
Digital
Transformation Technology | | |
Biohealth
Business | | |
Other | | |
Total | |
| | |
| | |
| | |
| | |
| | |
| |
| Three
Months Ended on March 31, 2021 | |
| | | |
| | | |
| | | |
| | | |
| | |
| Revenue | |
$ | 3,894,131 | | |
$ | - | | |
$ | 1,712,783 | | |
$ | - | | |
$ | 5,606,914 | |
| Cost
of Sales | |
| (3,614,832 | ) | |
| - | | |
| (83,022 | ) | |
| - | | |
| (3,697,854 | ) |
| Gross
Margin | |
| 279,299 | | |
| - | | |
| 1,629,761 | | |
| - | | |
| 1,909,060 | |
| Operating
Expenses | |
| (359,489 | ) | |
| (30,128 | ) | |
| (846,480 | ) | |
| (1,076,408 | ) | |
| (2,312,505 | ) |
| Operating
(Loss) Income | |
| (80,190 | ) | |
| (30,128 | ) | |
| 783,281 | | |
| (1,076,408 | ) | |
| (403,445 | ) |
| Other
Expense | |
| (9,873 | ) | |
| (36,471 | ) | |
| (8,371,117 | ) | |
| (532,505 | ) | |
| (8,949,966 | ) |
| Net Loss Before Income Tax | |
| (90,063 | ) | |
| (66,599 | ) | |
| (7,587,836 | ) | |
| (1,608,913 | ) | |
| (9,353,411 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| March
31, 2022 | |
| | | |
| | | |
| | | |
| | | |
| | |
| Cash
and Restricted Cash | |
$ | 4,613,299 | | |
$ | 210,576 | | |
$ | 2,443,494 | | |
$ | 46,778,784 | | |
$ | 54,046,153 | |
| Total
Assets | |
| 53,290,942 | | |
| 1,708,769 | | |
| 9,199,987 | | |
| 128,630,889 | | |
| 192,830,587 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| December
31, 2021 | |
| | | |
| | | |
| | | |
| | | |
| | |
| Cash
and Restricted Cash | |
$ | 7,493,921 | | |
$ | 245,780 | | |
$ | 2,629,464 | | |
$ | 50,433,014 | | |
$ | 60,802,179 | |
| Total
Assets | |
| 55,465,600 | | |
| 2,199,466 | | |
| 11,056,779 | | |
| 115,488,298 | | |
| 184,210,143 | |
5.
REAL ESTATE ASSETS
As
of March 31, 2022 and December 31, 2021, real estate assets consisted of the following:
SCHEDULE
OF REAL ESTATE ASSETS
| | |
March 31, 2022 | | |
December 31, 2021 | |
| | |
| | |
| |
| Construction in Progress | |
$ | 7,319,106 | | |
$ | 8,597,023 | |
| Land Held for Development | |
| 8,130,264 | | |
| 7,098,104 | |
| Rental Properties, net | |
| 25,402,436 | | |
| 24,820,253 | |
| Total Real Estate Assets | |
$ | 40,851,806 | | |
$ | 40,515,380 | |
Single
family residential properties
As
of March 31, 2022 and December 31, 2021, the Company owned 112 and 109 Single Family Residential Properties (“SFRs”) in Montgomery
and Harris Counties, Texas, respectively. The Company’s aggregate investment in those SFRs was $25.7 million. Depreciation expense
was $140,635 and $0 in three months ended March 31, 2022 and 2022, respectively.
The
following table presents the summary of our SRFs as of March 31, 2022:
SUMMARY
OF SINGLE FAMILY RESIDENTIAL PROPERTIES
| | |
Number of Homes | | |
Aggregate investment | | |
Average Investment per Home | |
| SFRs | |
| 112 | | |
$ | 25,663,582 | | |
$ | 229,139 | |
6.
BUILDER DEPOSITS
In
November 2015, SeD Maryland Development, LLC (“SeD Maryland”) entered into lot purchase agreements with NVR, Inc. (“NVR”)
relating to the sale of single-family home and townhome lots to NVR in the Ballenger Run Project. The purchase agreements were amended
three times thereafter. Based on the agreements, NVR is entitled to purchase 479 lots for a price of approximately $64,000,000, which
escalates 3% annually after June 1, 2018.
As
part of the agreements, NVR was required to give a deposit in the amount of $5,600,000. Upon the sale of lots to NVR, 9.9% of the purchase
price is taken as payback of the deposit. A violation of the agreements by NVR would cause NVR to forfeit the deposit. On January 3,
2019 and April 28, 2020, NVR gave SeD Maryland two more deposits in the amounts of $100,000 and $220,000, respectively, based on the
3rd Amendment to the Lot Purchase Agreement. On March 31, 2022 and December 31, 2021, there was $0 and $31,553 held on deposit, respectively.
7.
NOTES PAYABLE
As
of March 31, 2022 and December 31, 2021, notes payable consisted of the following:
SCHEDULE
OF NOTES PAYABLE
| | |
March 31, 2022 | | |
December 31, 2021 | |
| PPP Loan | |
| 68,502 | | |
| 68,502 | |
| Australia Loan | |
| - | | |
| 162,696 | |
| Hire Purchase | |
| 82,808 | | |
| 86,473 | |
| Total notes payable | |
$ | 151,310 | | |
$ | 317,671 | |
M&T
Bank Loan
On
April 17, 2019, SeD Maryland Development LLC entered into a Development Loan Agreement with Manufacturers and Traders Trust Company (“M&T
Bank”) in the principal amount not to exceed at any one time outstanding the sum of $8,000,000, with a cumulative loan advance
amount of $18,500,000. The line of credit bears interest rate of LIBOR plus 375 basis points. SeD Maryland Development LLC was also provided
with a Letter of Credit (“L/C”) Facility in an aggregate amount of up to $900,000. The L/C commission will be 1.5% per annum
on the face amount of the L/C. Other standard lender fees will apply in the event L/C is drawn down. The loan is a revolving line of
credit. The L/C Facility is not a revolving loan, and amounts advanced and repaid may not be re-borrowed. Repayment of the Loan Agreement
is secured by $2,600,000 collateral fund and a Deed of Trust issued to the Lender on the property owned by SeD Maryland. As of March
31, 2022, the outstanding balance of the revolving loan was $0. As part of the transaction, the Company incurred loan origination fees
and closing fees in the amount of $381,823 and capitalized it into construction in process. On March 15, 2022 approximately $2,300,000
was released from collateral, leaving approximately $300,000 as collateral for outstanding letters of credit.
On
June 18, 2020, Alset EHome Inc. (“Alset EHome”), a wholly owned subsidiary of LiquidValue Development Inc., entered into
a Loan Agreement with Manufacturers and Traders Trust Company (the “Lender”).
Pursuant
to the Loan Agreement, the Lender provided a non-revolving loan to Alset EHome in an aggregate amount of up to $2,990,000 (the “Loan”).
The line of credit bears interest rate of LIBOR plus 375 basis points. Repayment of the Loan is secured by a Deed of Trust issued to
the Lender on the property owned by certain subsidiaries of Alset EHome. The maturity date of this Loan is July 1, 2022. LiquidValue
Development Inc. and one of its subsidiaries are guarantors of this Loan. The guarantors are required to maintain during the term of
the loan a combined minimum net worth in an aggregate amount equal to not less than $20,000,000.
During
the year ended December 31, 2020, Alset EHome borrowed $664,810 from M&T Bank, incurring at the same time a loan origination fees
of $61,679 which were amortized over the term of the loan. As of December 31, 2020, the remaining unamortized debt discount was $42,906.
The loan in the amount of $664,810, together with all accrued interests of $25,225, was paid off on May 28, 2021. The loan was closed
in June 2021. Additionally, the debt discount of $42,907 was fully amortized during the year ended December 31, 2021.
Paycheck
Protection Program Loan
On
February 11, 2021, the Company entered into a five year note with M&T Bank with a principal amount of $68,502 pursuant to the Paycheck
Protection Program (“PPP Term Note”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).
The PPP Loan is evidenced by a promissory note. The PPP Term Note bears interest at a fixed annual rate of 1.00%, with the first sixteen
months of principal and interest deferred or until we apply for the loan forgiveness. The PPP Term Note may be accelerated upon the occurrence
of an event of default.
The
PPP Term Note is unsecured and guaranteed by the United States Small Business Administration. The Company applied to M&T Bank for
forgiveness of the PPP Term Note, with the amount which may be forgiven equal to at least 60% of payroll costs and other eligible payments
incurred by the Company, calculated in accordance with the terms of the CARES Act. As of March 31, 2022, we owed $68,502 to M&T Bank.
In April, 2022 the Company received confirmation that the loan was fully forgiven.
Australia
Loan
On
January 7, 2017, SeD Perth Pty Ltd (“SeD Perth”) entered into a loan agreement with National Australian Bank Limited (the
“Australia Loan”) for the purpose of funding land development. The loan facility provides SeD Perth with access to funding
of up to approximately $460,000 and matures on December 31, 2018. The Australia Loan is secured by both the land under development and
a pledged deposit of $36,059. This loan is denominated in AUD. Personal guarantees amounting to approximately $500,000 have been provided
by our CEO, Chan Heng Fai and by Rajen Manicka, the CEO of Holista CollTech and Co-founder of iGalen Inc. The interest rate on the Australia
Loan is based on the weighted average interest rates applicable to each of the business markets facility components as defined within
the loan agreement, ranging from 4.48% to 4.49% per annum for the three months ended March 31, 2022 and from 4.12% to 4.58% per annum
for the three months ended March 31, 2021. On September 7, 2017 the Australia Loan was amended to reduce the maximum borrowing capacity
to approximately $179,000. During 2020, the terms of the Australia Loan were amended to reflect an extended maturity date of April 30,
2022. This was accounted for as a debt modification. The Company did not pay fees to the National Australian Bank Limited for the modification
of the loan agreement. In February 2022, SeD Perth repaid the loan and is in the process of closing of the loan.
Singapore
Car Loan
On
May 17, 2021, Alset International Limited entered into a Hire Purchase Agreement with Hong Leong Finance Limited to purchase a car for
business. The total purchase price of the car, including associated charges, was approximately $184,596.
Alset International paid an initial deposit of $78,640,
and would make monthly instalment of approximately $1,300,
including interest of 1.88%
per annum, for the 84 months.
8.
RELATED PARTY TRANSACTIONS
Personal
Guarantees by Directors
As
of March 31, 2022 and December 31, 2021, a director of the Company had provided personal guarantees amounting to approximately $500,000,
to secure external loans from financial institutions for AEI and the consolidated entities.
Purchase
of Shares and Warrants from APW
On
July 17, 2020, the Company purchased 122,039,000 shares, approximately 9.99% ownership, and 1,220,390,000 warrants with an exercise price
of $0.0001 per share, from APW, for an aggregated purchase price of $122,039. We value APW warrants under level 3 category through a
Black Scholes option pricing model and the fair value of the warrants from APW were $860,342 as of July 17, 2020, the purchase date,
$815,514 as of March 31, 2022 and $1,009,854 as of December 31, 2021, respectively. The difference of $945,769 of fair value of stock
and warrants, total $1,067,808 and the purchase price $122,039, was recorded as additional paid in capital at December 31, 2021, as it
was a related party transaction.
Sale
of Investment in Vivacitas to DSS
On
March 18, 2021, the Company sold equity investment in Vivacitas, a U.S.-based biopharmaceutical company, equaling to 2,480,000 shares
of common stock and a stock option to purchase 250,000 shares of Vivacitas common stock at $1 per share at any time prior to the date
of a public offering, to a subsidiary of DSS for $2,480,000. Chan Heng Fai, CEO and the founder of our Company, holds a director position
on both Vivacitas and DSS. After this transaction, we do not own any investment in Vivacitas. Our original cost of common stock and stock
option of Vivacitas was $200,128. We did not recognize gain or loss in this transaction. The difference of $2,279,872 between the selling
price and our original investment cost was recorded as additional paid capital considering it was a related party transaction.
Purchase
of stock in True Partners Capital Holding Limited
On
March 12, 2021, the Company purchased 62,122,908 ordinary shares of True Partners Capital Holding Limited for $6,729,629 from a related
party. The fair market value of stock on acquisition date was $10,003,689. The difference between purchase price and fair market value
of $3,274,060 was recorded as equity transaction on Company’s condensed consolidated statement of stockholders’ equity at
December 31, 2021.
Notes
Payable
Chan
Heng Fai provided an interest-free, due on demand advance to LiquidValue Development Pte. Ltd. and its subsidiary LiquidValue Development
Limited for the general operations. As of March 31, 2022 and December 31, 2021, the outstanding balance was approximately $820,113.
Chan
Heng Fai provided an interest-free, due on demand advance to Alset EHome International for the Company’s general operations. The
advance was paid back during the year ended December 31, 2021 and as of March 31, 2022 and December 31, 2021, the outstanding balance
was $0.
Chan
Heng Fai provided an interest-free, due on demand advance to SeD Perth Pty. Ltd. for its general operations. As of March 31, 2022 and
December 31, 2021, the outstanding balance was $14,017 and $13,546, respectively.
On
August 20, 2020, the Company acquired 30,000,000 common shares from Chan Heng Fai in exchange for a two-year non-interest bearing note
of $1,333,429. During the year ended December 31, 2021, the Company paid back all $1,333,429 and as of March 31, 2022 and December 31,
2021 the amount outstanding was $0.
On
March 12, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with Chan Heng Fai, the founder, Chairman
and Chief Executive Officer of the Company, for four proposed transactions, consisting of (i) purchase of certain warrants (the “Warrants”)
to purchase 1,500,000,000 shares of Alset International Limited, which was valued at $28,363,966; (ii) purchase of all of the issued
and outstanding stock of LiquidValue Development Pte Ltd. (“LVD”), which was valued at $173,395; (iii) purchase of 62,122,908
ordinary shares in True Partner Capital Holding Limited (HKG: 8657) (“True Partner”), which was valued at $6,729,629; and
(iv) purchase of 4,775,523 shares of the common stock of American Pacific Bancorp Inc. (“APB”), which was valued at $28,653,138.
The total amount of above four transactions was $63,920,129, payable on the Closing Date by the Company, in the convertible promissory
notes (“Alset CPNs”), which, subject to the terms and conditions of the Alset CPNs and the Company’s shareholder approval,
shall be convertible into shares of the Company’s common stock (“AEI Common Stock”), at par value of $0.001 per share,
at the conversion price of AEI’s Stock Market Price. AEI’s Stock Market Price shall be $5.59 per share, equivalent to the
average of the five closing per share prices of AEI Common Stock preceding January 4, 2021 as quoted by Bloomberg L.P. AEI’s stock
price was $10.03 on March 12, 2021, the commitment date. The Beneficial Conversion Feature (“BCF”) intrinsic value was $50,770,192
for the four convertible promissory notes and was recorded as debt discount of convertible notes after the transaction. On May 13 and
June 14, 2021 all Alset CPNs of $63,920,128 and accrued interests of $306,438 were converted into 2,123 shares of series B preferred
stock and 9,163,965 shares of common stock of the Company.
On
May 14, 2021, the Company borrowed S$7,395,472 Singapore Dollars (equal to approximately $5,545,495 U.S. Dollars) from Chan Heng Fai.
The unpaid principal amount of the Loan is due and payable on May 14, 2022 and the Loan has no interest. The loan was paid back in full
during 2021 and the outstanding balance was $0 as of March 31, 2022 and December 31, 2021.
Chan
Heng Fai provided an interest-free, due on demand advance to HengFeng Finance Limited for the general operations. As of March 31, 2022
and December 31, 2021, the outstanding balance was $0.
Management
Fees
MacKenzie
Equity Partners, owned by Charles MacKenzie, a Director of the Company’s subsidiary LiquidValue Development, has had a consulting
agreement with the Company since 2015. Per the terms of the agreement, as amended on January 1, 2018, the Company has paid a monthly
fee of $20,000 for these consulting services. The Company incurred expenses of $60,000 and $60,000 for the three months ended March 31,
2022 and 2021, respectively, which were capitalized as part of Real Estate on the Company’s Condensed Consolidated Balance Sheets
as the services relate to property and project management. During 2021, MacKenzie Equity Partners was granted an additional $120,000
bonus payment. On March 31, 2022 and December 31, 2021, the Company owed this related party $20,000 and $80,000, respectively.
Notes
Receivable from Related Party Companies
On
March 2, 2020 and on October 29, 2021, LiquidValue Asset Management Pte. Ltd. (“LiquidValue”) received two $200,000 Promissory
Notes and on October 29, 2021 Alset International received $8,350,000 Promissory Note from American Medical REIT Inc. (“AMRE”),
a company which is 15.8% owned by LiquidValue as of March 31, 2022. Chan Heng Fai and Chan Tung Moe are directors of American Medical
REIT Inc. The notes carry interests of 8% and are payable in two, three years and 25 months, respectively. LiquidValue also received
warrants to purchase AMRE shares at the exercise price of $5.00 per share. The amount of the warrants equals to the note principle divided
by the exercise price. If AMRE goes to IPO in the future and IPO price is less than $10.00 per share, the exercise price shall be adjusted
downward to fifty percent (50%) of the IPO price. In March 2022 the Company converted two $200,000 loans, together with associated warrants
into 167,938 common shares of AMRE, and increased its ownership in AMRE from 3.4% to 15.8%. As of March 31, 2022 and December 31, 2021,
the fair market value of the warrants was $0. The Company accrued $167,000 and $130,000 interest income as of March 31, 2022 and December
31, 2021, respectively.
On
January 24, 2017, SeD Capital Pte Ltd, a 100% owned subsidiary of Alset International lent $350,000 to iGalen Inc. The term of the loan
was two years, with an interest rate of 3% per annum for the first year and 5% per annum for the second year. The expiration term was
renewed as due on demand after two years with 5% per annum interest rate. As of December 31, 2020, the outstanding principle was $350,000
and accrued interest $61,555. On December 31, 2021, the management of the Company evaluated the financial and the operation results of
iGalen and concluded that possibility to repay this loan is not probable, and the principal and accrued interests total of $412,754 was
recorded as bad debt expense.
As
of March 31, 2022, the Company provided advances for operation of $236,699 to HWH World Co., a direct sales company in Thailand of which
the Company holds approximately 19% ownership.
On
October 13, 2021 BMI Capital Partners International Limited (“BMI”) entered into loan agreement with Liquid Value Asset Management
Limited (“LVAML”), pursuant to which BMI agreed to lend $3,000,000
to LVAML. The loan has variable interest rate
and matures on October 12, 2022. As of March 31, 2022 and December 31, 2021 LVAML owes $2,971,494
and $2,987,039,
respectively.
During
2021 the Company estimated $4,800,000
bonus due to Chan Heng Fai which was paid in January 2022. Once the final financial statements of the Company were available,
the actual amount of bonus due was calculated, resulting in approximately $1.2
million
of overpayment to Chan Heng Fai. As of March 31, 2022 Chan Heng Fai owes $1,185,251
to
the Company. Chan Heng Fai paid the overpayment back in April 2022.
In
first quarter of 2022, the Company lent a non-interest bearing loan of $476,250 to Alset Investment Pte. Ltd., the company 100% owned
by Chan Heng Fai. As of March 31, 2022 Alset Investment Pte. Ltd. owed $476,250 to the Company.
The
Company paid some operating expenses for Alset Capital Acquisition Corp., a special purpose acquisition company of which the Company
holds 23.4%. The advances are interest free with no set repayment terms. On March 31, 2022 and December 31, 2021, the balance of these
advances was $7,171 and $0, respectively.
Loan
to Employees
On
November 24, 2020, American Pacific Bancorp. Inc. lent $560,000 to Chan Tung Moe, an officer of one of the subsidiaries of the Company
and son of Chan Heng Fai, Chairman and Chief Executive Officer of the Company, bearing interest at 6%, with a maturity date of November
23, 2023. This loan was secured by an irrevocable letter of instruction on 80,000 shares of Alset EHome International. On November 24,
2020, American Pacific Bancorp. Inc. lent $280,000 to Lim Sheng Hon Danny, an employee of one of the subsidiaries of the Company, bearing
interest at 6%, with a maturity date of November 23, 2023. This loan was secured by an irrevocable letter of instruction on 40,000 shares
of Alset EHome International. Subsequent to the making of these loans, the Company acquired the majority of the issued and outstanding
common stock of American Pacific Bancorp. During the year ended December 31, 2021, both principal and interest, $840,000 and $28,031,
of both loans to Chan Tung Moe and Lim Sheng Hong, were fully paid off.
9.
EQUITY
On
June 14, 2021, the Company filed an amendment (the “Amendment”) to its Third Amended and Restated Certificate of Incorporation,
as amended, to increase the Company’s authorized share capital. The Amendment increased the Company’s authorized share capital
to 250,000,000 common shares and 25,000,000 preferred shares, from 20,000,000 common shares and 5,000,000 preferred shares, respectively.
The
Company has designated 6,380 preferred shares as Series A Preferred Stock and 2,132 as Series B Preferred Stock.
Holders
of the Series A Preferred Stock shall be entitled to receive dividends equal, on an as-if-converted basis, to and in the same form as
dividends actually paid on shares of the Company’s common stock, par value $0.001 per share (“Common Stock”) when,
as and if paid on shares of Common Stock. Each holder of outstanding Series A Preferred Stock is entitled to vote equal to the number
of whole shares of Common Stock into which each share of the Series A Preferred Stock is convertible. Holders of Series A Preferred Stock
are entitled, upon liquidation of the Company, to receive the same amount that a holder of Series A Preferred Stock would receive if
the Series A Preferred Stock were fully converted into Common Stock.
Holders
of the Series B Preferred Stock shall be entitled to receive dividends equal, on an as-if-converted basis, to and in the same form as
dividends actually paid on shares of the Company’s common stock par value $0.001 per share (“Common Stock”) when, as
and if paid on shares of Common Stock. Each holder of outstanding Series B Preferred Stock is entitled to vote equal to the number of
whole shares of Common Stock into which each share of the Series B Preferred Stock is convertible. Holders of Series B Preferred Stock
are entitled, upon liquidation of the Company, to receive the same amount that a holder of Series B Preferred Stock would receive if
the Series B Preferred Stock were fully converted into Common Stock.
The
Company analyzed the Preferred stock and the embedded conversion option for derivative accounting consideration under ASC 815-15 “Derivatives
and Hedging” and determined that the conversion option should be classified as equity.
On
January 19, 2021, the Company issued 10,000 shares of its common stock as compensation for public relations services at a fair value
of $60,900.
On
May 3, 2021, the Company entered into a Loan and Exchange Agreement with its Chief Executive Officer, Chan Heng Fai pursuant to which
he loaned the Company his shares of Common Stock of the Company by exchanging 6,380,000 shares of common stock which he owned for an
aggregate of 6,380 shares of the Company’s newly designated Series A Convertible Preferred Stock. Effective upon the filing of
the Amendment in June 2021, the Company issued an entity owned by Chan Heng Fai 6,380,000 shares of common stock upon the automatic conversion
of all 6,380 outstanding shares of the Company’s Series A Convertible Preferred Stock.
On
May 12, 2021, the Company entered into an Exchange Agreement with Chan Heng Fai, pursuant to which he converted $13,000,000 of note payable
for 2,132 shares of the Company’s newly designated Series B Preferred Stock. Effective upon the filing of the Amendment in June
2021, the Company issued Chan Heng Fai 2,132,000 shares of common stock upon the automatic conversion of all 2,132 outstanding shares
of the Company’s Series B Convertible Preferred Stock.
On
May 10, 2021, the Company entered into an underwriting agreement with Aegis Capital Corp., as the sole book-running manager and
representative of the underwriters named therein (the “Underwriters”), relating to an underwritten public offering (the
“May Offering”) of (i) 4,700,637 common units (the “Common Units”), at a price to the public of $5.07 per
Common Unit, with each Common Unit consisting of (a) one share of common stock, par value $0.001 per share (the “Common
Stock”), (b) one Series A warrant (the “Series A Warrant” and collectively, the “Series A Warrants”)
to purchase one share of Common Stock with an initial exercise price of $5.07 per whole share, exercisable until the fifth
anniversary of the issuance date, and (c) one Series B warrant (the “Series B Warrant” and collectively, the
“Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase one-half share of
Common Stock with an initial exercise price of $6.59 per whole share, exercisable until the fifth anniversary of the issuance date
and (ii) 1,611,000 pre-funded units (the “Pre-funded Units”), at a price to the public of $5.06 per Pre-funded Unit,
with each Pre-funded Unit consisting of (a) one pre-funded warrant (the “Pre-funded Warrant” and collectively, the
“Pre-funded Warrants”) to purchase one share of Common Stock, (b) one Series A Warrant and (c) one Series B Warrant. The
shares of Common Stock, the Pre-funded Warrants, and the Warrants were offered together, but the securities contained in the Common
Units and the Pre-funded Units were issued separately. Following the May Offering, all the investors exercised their
Pre-funded Units and additional 1,611,000 shares of common stock and Series A and Series B Warrants were issued.
The
Company also granted the Underwriters a 45-day over-allotment option to purchase up to 808,363 additional shares of Common Stock and/or
up to 808,363 additional Series A Warrants to purchase 808,363 shares of Common Stock, and/or up to 808,363 additional Series B warrants
to purchase 404,181 shares of Common Stock. The May Offering, including the partial exercise of the Underwriters’ over-allotment
option to purchase 808,363 Series A Warrants and 808,363 Series B Warrants, closed on May 13, 2021. During the month of June, 2021, Aegis
exercised its option to purchase an additional 808,363 common shares at a price of $5.07 per common share and as of March 31, 2022 still
holds 808,363 Series B Warrants. Through March 31, 2022, investors exercised 1,364,025 of Series A Warrants and 6,598 of Series B Warrants.
As a result of the May Offering and subsequent exercise notice received for the pre-funded units and warrants, the Company issued
8,487,324 common shares. As a result of the May Offering and subsequent exercise notice received for the pre-funded units and
warrants, and the net proceeds to the Company were $39,765,440.
The
Company incurred approximately $88,848 in expenses related to the May Offering and subsequent warrants exercises, including SEC
fees, FINRA fees, auditor fees and filing fees.
The
following table presents net funds received from the May Offering and warrants exercised as of March 31, 2022.
SCHEDULE OF NET FUNDS RECEIVED ON OFFERING AND WARRANTS EXERCISED
| | |
Shares | | |
Par value | | |
Amount received | |
| Offering | |
| 4,700,637 | | |
$ | 4,701 | | |
$ | 29,145,056 | |
| Exercise of Pre-Funded Units | |
| 1,611,000 | | |
$ | 1,611 | | |
$ | 16,110 | |
| Exercise of Underwriter’s Series A Warrants | |
| | |
$ | 808 | | |
$ | |
| Exercise of Series A and Series B Warrants | |
| 1,367,324 | | |
$ | 1,367 | | |
$ | 6,937,347 | |
| Offering Expenses | |
| - | | |
$ | - | | |
$ | (88,848 | ) |
| Total | |
| 8,487,324 | | |
$ | 8,487 | | |
$ | 39,765,439 | |
On
July 27, 2021, the Company entered into another underwriting agreement with Aegis Capital Corp., as the sole book-running manager and
representative of the underwriters named therein (the “Underwriters”), relating to an underwritten public offering (the “July Offering”) of (i) 5,324,139 shares of common stock, par value $0.001 per share (the “Common Stock”), at a price to
the public of $2.12 per share of Common Stock and (ii) 9,770,200 pre-funded warrants (the “Pre-funded Warrants”) to purchase
9,770,200 shares of Common Stock, at a price to the public of $2.11 per Pre-funded Warrant. The Offering closed on July 30, 2021. As
a result of the July Offering and subsequent exercise notice received for the pre-funded warrants, the net proceeds to the Company
were $33,392,444.
The
Company granted the Underwriters a 45-day over-allotment option to purchase up to 2,264,150 additional shares of Common Stock. The Company
also paid the Underwriters an underwriting discount equal to 7.0% of the gross proceeds of the Offering and a non-accountable expense
fee equal to 1.5% of the gross proceeds of the Offering. In addition, the Company agreed to issue to the representative warrants (the
“Representative’s Warrants”) to purchase a number of shares equal to 3.0% of the aggregate number of shares (including
shares underlying the Pre-funded Warrants) sold under in the Offering, or warrants to purchase up to an aggregate of 520,754 shares,
assuming the Underwriters exercise their over-allotment option in full. The Representative’s Warrants have an exercise price equal
to 125% of the public offering price, or $2.65 per share, with an exercise period of 24 months from issuance. On September 9, 2021 the
Underwriters exercised their over-allotment option and were issued 2,264,150 shares of our Common Stock. On September 9, 2021 the Underwriters
exercised the option and the Company received $4,386,998 proceeds from this exercise.
The
Pre-funded Warrants were offered and sold to purchasers whose purchase of Common Stock in the Offering would otherwise result in the
purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the
purchaser, 9.99%) of the Company’s outstanding Common Stock immediately following the consummation of the Offering in lieu of Common
Stock that would otherwise result in the purchaser’s beneficial ownership exceeding 4.99% of the Company’s outstanding Common
Stock (or, at the election of the purchaser, 9.99%). Each Pre-funded Warrant is exercisable for one share of Common Stock at an exercise
price of $0.01 per share. The Pre-funded Warrants are immediately exercisable and may be exercised at any time until all of the Pre-funded
Warrants are exercised in full. All of the Pre-Funded Warrants were exercised during 2021.
The
Company incurred approximately $49,553 in expenses related to the July Offering and subsequent warrants exercises, including
SEC fees, FINRA fees, auditor fees and filing fees.
On
December 5, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp.,
as the sole book-running manager and representative of the underwriters named therein (the “Underwriters”), relating to an
underwritten public offering (the “December Offering”) of (i) 18,076,666 shares of common stock, par value $0.001 per share
(the “Common Stock”), at a price to the public of $0.60 per share of Common Stock and (ii) 31,076,666 pre-funded warrants
(the “Pre-funded Warrants”) to purchase 31,076,666 shares of Common Stock, at a price to the public of $0.599 per Pre-funded
Warrant. The December Offering closed on December 8, 2021. As a result of the December Offering and subsequent exercise notice received
for the pre-funded warrants, the net proceeds to the Company were $27,231,875.
The
Company granted the Underwriters a 45-day over-allotment option to purchase up to 7,500,000 additional shares of Common Stock. The Company
also paid the Underwriters an underwriting discount equal to 7% of the gross proceeds of the Offering and a non-accountable expense fee
equal to 1% of the gross proceeds of the Offering. On December 14, 2021, the Company consummated the sale of these 7,500,000 shares of
Common Stock, representing 15% of the shares of common stock and the shares underlying the Pre-funded Warrants sold in the offering,
that were subject to the underwriters’ over-allotment option at a price of $0.60 per share, generating net proceeds of $4,115,000.
The
Company granted the Underwriters a 45-day over-allotment option to purchase up to 7,500,000 additional shares of Common Stock. The Company
also paid the Underwriters an underwriting discount equal to 7% of the gross proceeds of the Offering and a non-accountable expense fee
equal to 1% of the gross proceeds of the Offering. On December 14, 2021, the Company consummated the sale of these 7,500,000 shares of
Common Stock, representing 15% of the shares of common stock and the shares underlying the Pre-funded Warrants sold in the offering,
that were subject to the underwriters’ over-allotment option at a price of $0.60 per share, generating net proceeds of $4,115,000.
The
Pre-funded Warrants were offered and sold to purchasers whose purchase of Common Stock in the Offering would otherwise result in the
purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the
purchaser, 9.99%) of the Company’s outstanding Common Stock immediately following the consummation of the Offering. Each Pre-funded
Warrant is exercisable for one share of Common Stock at an exercise price of $0.001 per share. The Pre-funded Warrants are immediately
exercisable and may be exercised at any time until all of the Pre-funded Warrants are exercised in full. At March 31, 2022 31,076,666
warrants were exercised, some in cashless exercise transactions.
The
Company incurred approximately $40,621 in expenses related to the December Offering and subsequent warrants exercises, including SEC
fees, FINRA fees, auditor fees and filing fees.
On
March 31, 2022, there were 113,187,898 common shares issued and outstanding.
The
following table summarizes the warrant activity for the three months ended March 31, 2022.
SCHEDULE
OF WARRANT ACTIVITY
| | |
Warrant for Common Shares | | |
Weighted Average Exercise Price | | |
Remaining Contractual Term (Years) | | |
Aggregate Intrinsic Value | |
| Warrants Outstanding as of December 31, 2021 | |
| 28,533,147 | | |
$ | 1.79 | | |
| 1.88 | | |
$ | - | |
| Warrants Vested and exercisable at December 31, 2021 | |
| 28,533,147 | | |
$ | 1.79 | | |
| 1.88 | | |
$ | - | |
| Granted | |
| - | | |
| - | | |
| | | |
| | |
| Exercised | |
| (15,843,378 | ) | |
| 0.001 | | |
| | | |
| | |
| Forfeited, cancelled, expired | |
| - | | |
| - | | |
| | | |
| | |
| Warrants Outstanding as of March 31, 2022 | |
| 12,689,769 | | |
$ | 4.02 | | |
| 3.99 | | |
$ | - | |
| Warrants Vested and exercisable at March 31, 2022 | |
| 12,689,769 | | |
$ | 4.02 | | |
| 3.99 | | |
$ | - | |
GigWorld
Inc. Sale of Shares
During
the three months ended, March 31, 2021, the Company sold 250,000 shares of GigWorld to international investors for the amount of $250,000,
which was booked as addition paid-in capital. The Company held 505,551,376 shares of the total outstanding shares 506,898,576 before
the sale. After the sale, the Company still owns approximately 99% of GigWorld’s total outstanding shares.
During
the three months ended March 31, 2021, the sales of GigWorld’s shares were de minimis compared to its outstanding shares and did
not change the minority interest.
Distribution
to Minority Shareholder
During
the three months ended March 31, 2021, SeD Maryland Development LLC Board approved the payment distribution plan to members and paid
$82,250 in distribution to the minority shareholder.
Changes
of Ownership of Alset International
In
the year ended December 31, 2021, Alset International issued 1,721,303,416 common shares through warrants exercise with exercise price
of approximately $0.04 per share and received $60,300,464 cash, which included approximately $58 million from Alset EHome International
to exercise its warrants to purchase Alset International common shares. The warrant exercise transactions between Alset EHome International
and Alset International were intercompany transactions and only affected change in non-controlling interest on the condensed consolidated
statements of stockholders’ equity. During the year ended December 31, 2021, the stock-based compensation expense of Alset International
was $73,292 with the issuance of 1,500,000 shares to an officer. In three months ended March 31, 2022 the Company purchased 6,137,800
shares of Alset International from the market. Due to this purchase the Company’s ownership of Alset International changed from
76.8% as of December 31, 2021 to 77.0% as of March 31, 2022.
Promissory
Note Converted into Shares
On
December 13, 2021 the Company entered into a Securities Purchase Agreement with Chan Heng Fai for the issuance and sale of a convertible
promissory note in favor of Chan Heng Fai, in the principal amount of $6,250,000. The note bears interest of 3% per annum and is due
on the earlier of December 31, 2024 or when declared due and payable by Chan Heng Fai. The note can be converted in part or whole into
common shares of the Company at the conversion price of $0.625 or into cash. The loan closed on January 26, 2022 after all closing conditions
were met. Chan Heng Fai opted to convert all of the amount of such note into 10,000,000 shares of the Company’s common stock, which
shares were issued on January 27, 2022.
10.
LEASE INCOME
The
Company generally rents its SFRs under lease agreements with a term of one year. Future minimum rental revenue under existing leases
on our properties at March 31, 2022 in each calendar year through the end of their terms are as follows:
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS
| | |
| | |
| 2022 | |
$ | 594,866 | |
| 2023 | |
| 90,575 | |
| 2024 | |
| 7,450 | |
| Total Future Receipts | |
$ | 692,891 | |
Property
Management Agreements
The
Company has entered into property management agreement with the property managers under which the property managers generally oversee
and direct the leasing, management and advertising of the properties in our portfolio, including collecting rents and acting as liaison
with the tenants. The Company pays its property managers a monthly property management fee for each property unit and a leasing fee.
For the three months ended March 31, 2022 and 2021, property management fees incurred by the property managers were $11,025 and $0, respectively.
For the three months ended March 31, 2022 and 2021, leasing fees incurred by the property managers were $25,790 and $0, respectively.
11.
ACCUMULATED OTHER COMPREHENSIVE INCOME
Following
is a summary of the changes in the balances of accumulated other comprehensive income, net of tax:
SCHEDULE
OF CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF TAX
| | |
Unrealized Gains and Losses on Security Investment | | |
Foreign Currency Translations | | |
Change in Minority Interest | | |
Total | |
| Balance at January 1, 2022 | |
$ | (90,031 | ) | |
$ | (367,895 | ) | |
$ | 799,572 | | |
$ | 341,646 | |
| | |
| | | |
| | | |
| | | |
| | |
| Other Comprehensive Income | |
| (7,027 | ) | |
| (499,967 | ) | |
| 459,069 | | |
| (47,925 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Balance at March 31, 2022 | |
$ | (97,058 | ) | |
$ | (867,862 | ) | |
$ | 1,258,641 | | |
$ | 293,721 | |
| | |
Unrealized Gains and Losses on Security Investment | | |
Foreign Currency Translations | | |
Change in Minority Interest | | |
Total | |
| Balance at January 1, 2021 | |
$ | (48,758 | ) | |
$ | 2,258,017 | | |
$ | (65,921 | ) | |
$ | 2,143,338 | |
| | |
| | | |
| | | |
| | | |
| | |
| Other Comprehensive Income | |
| (1,135 | ) | |
| (1,010,527 | ) | |
| (39,067 | ) | |
| (1,050,729 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Balance at March 31, 2021 | |
$ | (49,893 | ) | |
$ | 1,247,490 | | |
$ | (104,988 | ) | |
$ | 1,092,609 | |
12.
INVESTMENTS MEASURED AT FAIR VALUE
Financial
assets measured at fair value on a recurring basis are summarized below and disclosed on the condensed consolidated balance sheet as
of March 31, 2022 and December 31, 2021:
SCHEDULE
OF FINANCIAL ASSETS MEASURED AT FAIR VALUE ON A RECURRING BASIS
| |
| Amount
at | | |
| Fair
Value Measurement Using |
| Amount
at | |
| | |
| Cost | | |
| Level
1 | | |
| Level
2 | | |
| Level
3 | | |
| Fair
Value | |
| March 31, 2022 | |
| | | |
| | | |
| | | |
| | | |
| | |
| Assets | |
| | | |
| | | |
| | | |
| | | |
| | |
| Investment Securities- Fair Value | |
$ | 76,264,051 | | |
$ | 47,389,726 | | |
$ | - | | |
$ | - | | |
$ | 47,389,726 | |
| Investment Securities- Trading | |
| 2,387,149 | | |
| 2,397,169 | | |
| - | | |
| - | | |
| 2,397,169 | |
| Convertible Note Receivable | |
| 138,599 | | |
| - | | |
| - | | |
| 89,275 | | |
| 89,275 | |
| Warrants - American Premium Water | |
| - | | |
| - | | |
| - | | |
| 815,514 | | |
| 815,514 | |
| Warrants - AMRE | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total | |
$ | 78,789,799 | | |
$ | 49,786,895 | | |
$ | - | | |
$ | 904,789 | | |
$ | 50,691,684 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Investment Securities - Fair Value NAV as Practical Expedient | |
| | | |
| | | |
| | | |
| | | |
| 100,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total Investment in securities at Fair Value | |
| | | |
| | | |
| | | |
| | | |
| 50,791,684 | |
| | |
Amount
at | | |
Fair
Value Measurement Using | | |
Amount
at | |
| |
Cost | | |
Level
1 | | |
Level
2 | | |
Level
3 | | |
Fair
Value | |
| December
31, 2021 | |
| | |
| | |
| | |
| | |
| |
| Assets | |
| | |
| | |
| | |
| | |
| |
| Investment Securities-
Fair Value | |
$ | 72,000,301 | | |
$ | 25,320,694 | | |
$ | - | | |
$ | - | | |
$ | 25,320,694 | |
| Investment Securities- Trading | |
| 9,809,778 | | |
| 9,908,077 | | |
| - | | |
| - | | |
| 9,908,077 | |
| Convertible Note Receivable | |
| 138,599 | | |
| - | | |
| - | | |
| 98,398 | | |
| 98,398 | |
| Warrants - American Premium
Water | |
| 696,791 | | |
| - | | |
| - | | |
| 1,009,854 | | |
| 1,009,854 | |
| Warrants - AMRE | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total Investment in securities
at Fair Value | |
$ | 82,645,469 | | |
$ | 35,228,771 | | |
$ | - | | |
$ | 1,108,252 | | |
$ | 36,337,023 | |
Realized
loss on investment securities for the three months ended March 31, 2022 was $3,436,783 and realized loss on investment securities for
the three months ended March 31, 2021 was $258,245. Unrealized loss on securities investment was $3,899,015 and $9,535,009 in the three
months ended March 31, 2022 and 2021, respectively. These gains and losses were recorded directly to net income (loss). The change in
fair value of the convertible note receivable in the three months ended March 31, 2022 and 2021 was $9,123 and $1,987, respectively,
and was recorded in condensed consolidated statements of stockholders’ equity.
For
U.S. trading stocks, we use Bloomberg Market stock prices as the share prices to calculate fair value. For overseas stock, we use the
stock price from local stock exchange to calculate fair value. The following chart shows details of the fair value of equity security
investment at March 31, 2022 and December 31, 2021, respectively.
SCHEDULE OF FAIR VALUE OF EQUITY SECURITY INVESTMENT
| | |
Share price | | |
| | |
Market Value | | |
|
| | |
3/31/2022 | | |
Shares | | |
3/31/2022 | | |
Valuation |
| | |
| | |
| | |
| | |
|
| DSS (Related Party) | |
$ | 0.573 | | |
| 23,875,139 | | |
$ | 13,680,455 | | |
Investment in Securities at Fair Value |
| | |
| | | |
| | | |
| | | |
|
| AMBS (Related Party) | |
$ | 0.008 | | |
| 20,000,000 | | |
$ | 158,000 | | |
Investment in Securities at Fair Value |
| | |
| | | |
| | | |
| | | |
|
| Holista (Related Party) | |
$ | 0.025 | | |
| 43,626,621 | | |
$ | 1,111,173 | | |
Investment in Securities at Fair Value |
| | |
| | | |
| | | |
| | | |
|
| American Premium Water (Related Party) | |
$ | 0.002 | | |
| 354,039,000 | | |
$ | 531,059 | | |
Investment in Securities at Fair Value |
| | |
| | | |
| | | |
| | | |
|
| True Partner | |
$ | 0.112 | | |
| 62,122,908 | | |
$ | 6,981,617 | | |
Investment in Securities at Fair Value |
| | |
| | | |
| | | |
| | | |
|
| Value Exchange | |
$ | 0.230 | | |
| 6,500,000 | | |
$ | 1,495,000 | | |
Investment in Securities at Fair Value |
| | |
| | | |
| | | |
| | | |
|
| Alset Capital Acquisition - Common Stock (Related Party) | |
$ | 9.860 | | |
| 1,940,625 | | |
$ | 19,134,563 | | |
Investment in Securities at Fair Value |
| | |
| | | |
| | | |
| | | |
|
| Alset Capital Acquisition – Unit (Related Party) | |
$ | 10.080 | | |
| 426,375 | | |
$ | 4,297,860 | | |
Investment in Securities at Fair Value |
| | |
| | | |
| | | |
| | | |
|
| Trading Stocks | |
| | | |
| | | |
$ | 2,397,170 | | |
Investment in Securities at Fair Value |
| | |
| | | |
| | | |
| | | |
|
| | Total Level 1 Equity Securities | | |
$ | 49,786,896 | | |
|
| | |
| | | |
| | | |
| | | |
|
| Nervotech | |
| N/A | | |
| 1,666 | | |
$ | 37,045 | | |
Investment in Securities at Cost |
| Hyten Global | |
| N/A | | |
| 3,800 | | |
$ | 42,562 | | |
Investment in Securities at Cost |
| Ubeauty | |
| N/A | | |
| 3,600 | | |
$ | 19,609 | | |
Investment in Securities at Cost |
| | |
Total Equity Securities | | |
$ | 49,886,112 | | |
|
| | |
Share
price | | |
| | |
Market
Value | | |
|
| | |
12/31/2021 | | |
Shares | | |
12/31/2021 | | |
Valuation |
| | |
| | |
| | |
| | |
|
| DSS (Related Party) | |
$ | 0.672 | | |
| 19,888,262 | | |
$ | 13,364,912 | | |
Investment in Securities at Fair Value |
| | |
| | | |
| | | |
| | | |
|
| AMBS (Related Party) | |
$ | 0.016 | | |
| 20,000,000 | | |
$ | 328,000 | | |
Investment in Securities at Fair Value |
| | |
| | | |
| | | |
| | | |
|
| Holista (Related Party) | |
$ | 0.034 | | |
| 43,626,621 | | |
$ | 1,489,179 | | |
Investment in Securities at Fair Value |
| | |
| | | |
| | | |
| | | |
|
| American Premium Water (Related Party) | |
$ | 0.002 | | |
| 354,039,000 | | |
$ | 778,886 | | |
Investment in Securities at Fair Value |
| | |
| | | |
| | | |
| | | |
|
| True Partner | |
$ | 0.119 | | |
| 62,122,908 | | |
$ | 7,409,717 | | |
Investment in Securities at Fair Value |
| | |
| | | |
| | | |
| | | |
|
| Value Exchange | |
$ | 0.300 | | |
| 6,500,000 | | |
$ | 1,950,000 | | |
Investment in Securities at Fair Value |
| | |
| | | |
| | | |
| | | |
|
| Trading Stocks | |
| | | |
| | | |
$ | 9,908,077 | | |
Investment in Securities at Fair Value |
| | |
| | | |
| | | |
| | | |
|
| | Total Level 1 Equity Securities | | |
$ | 35,228,771 | | |
|
| | |
| | |
| | |
| | |
|
| Nervotech | |
| N/A | | |
| 1,666 | | |
$ | 37,045 | | |
Investment in Securities at Cost |
| Hyten Global | |
| N/A | | |
| 3,800 | | |
$ | 42,562 | | |
Investment in Securities at Cost |
| Ubeauty | |
| N/A | | |
| 3,600 | | |
$ | 19,609 | | |
Investment in Securities at Cost |
| | |
| Total Equity Securities | | |
$ | 35,327,987 | | |
|
DSS
convertible preferred stock
During
the three months ended March 31, 2021, Global BioMedical Pte Ltd. held 42,575 preferred stock of DSS which could convert to 6,570,216
common shares of DSS.
Sharing
Services Convertible Note
The
fair value of the Sharing Services Convertible Note under level 3 category as of March 31, 2022 and December 31, 2021 was calculated
using a Black-Scholes valuation model valued with the following weighted average assumptions:
SCHEDULE OF SIGNIFICANT INPUTS AND ASSUMPTIONS
| | |
March 31, 2022 | | |
December 31, 2021 | |
| | |
| | |
| |
| Dividend yield | |
| 0.00 | % | |
| 0.00 | % |
| Expected volatility | |
| 126.23 | % | |
| 138.85 | % |
| Risk free interest rate | |
| 3.25 | % | |
| 3.25 | % |
| Contractual term (in years) | |
| 0.51 | | |
| 0.76 | |
| Exercise price | |
$ | 0.15 | | |
$ | 0.15 | |
We
assumed dividend yield rate is 0.00% in Sharing Services. The volatility is based on the historical volatility of the Sharing Services’
common stock. Risk-free interest rates were obtained from U.S. Treasury rates for the applicable periods.
Changes
in the observable input values would likely cause material changes in the fair value of the Company’s Level 3 financial instruments.
A significant increase (decrease) in this likelihood would result in a higher (lower) fair value measurement.
The
table below provides a summary of the changes in fair value which are recorded as other comprehensive income (loss), including net transfers
in and/or out of all financial assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during
the three months ended March 31, 2022 and 2021:
SCHEDULE OF CHANGE IN FAIR VALUE
| | |
Total | |
| Balance at January 1, 2022 | |
$ | 1,108,252 | |
| Total losses | |
| (203,463 | ) |
| Balance at March 31, 2022 | |
$ | 904,789 | |
| | |
Total | |
| Balance at January 1, 2021 | |
$ | 66,978 | |
| Total losses | |
| (1,987 | ) |
| Balance at March 31, 2021 | |
$ | 64,991 | |
Vector
Com Convertible Bond
On
February 26, 2021, the Company invested approximately $88,599 in the convertible bond of Vector Com Co., Ltd (“Vector Com”),
a private company in South Korea. The interest rate is 2% per annum and maturity is two years. The conversion price is approximately
$21.26, per common share of Vector Com. As of March 31, 2022, the management estimated that the fair value of this note remained unchanged
from its initial purchase price.
Warrants
On
March 2, 2020 and October 29, 2021, the Company received warrants to purchase shares of AMRE, a related party private startup company,
in conjunction with the Company lending two $200,000 promissory notes. For further details on this transaction, refer to Note 8 - Related
Party Transactions, Note Receivable from a Related Party Company. As of March 31, 2022 and December 31, 2021, AMRE was a private
company. Based the management’s analysis, the fair value of the warrants was $0 as of March 31, 2022 and December 31, 2021. All
warrants were converted into common shares in March 2022.
On
July 17, 2020, the Company purchased 122,039,000 shares, approximately 9.99% ownership, and 1,220,390,000 warrants with an exercise price
of $0.0001 per share, from APW, for an aggregated purchase price of $122,039. During 2021, the Company exercised 232,000,000 of the warrants
to purchase 232,000,000 shares of APW for the total consideration of $232,000, leaving the balance of outstanding warrants of 988,390,000
at December 31, 2021. The Company did not exercise any warrants during three months ended March 31, 2022. We value APB warrants under
level 3 category through a Black Scholes option pricing model and the fair value of the warrants from APW was $815,514 as of March 31,
2022 and $1,009,854 as of December 31, 2021.
The
fair value of the APW warrants under level 3 category as of March 31, 2022 and December 31, 2021 was calculated using a Black-Scholes
valuation model valued with the following weighted average assumptions:
SCHEDULE OF SIGNIFICANT INPUTS AND ASSUMPTIONS
| | |
March 31,
2022 | | |
December 31,
2021 | |
| | |
| | |
| |
| Stock Price | |
$ | 0.0015 | | |
$ | 0.0022 | |
| Exercise price | |
| 0.001 | | |
| 0.001 | |
| Risk free interest rate | |
| 2.39 | % | |
| 1.48 | % |
| Annualized volatility | |
| 111.5 | % | |
| 186.5 | % |
| Year to maturity | |
| 8.31 | | |
| 8.58 | |
13.
COMMITMENTS AND CONTINGENCIES
Lots
Sales Agreement
On
November 23, 2015, SeD Maryland Development LLC completed the $15,700,000 acquisition of Ballenger Run, a 197-acre land sub-division
development located in Frederick County, Maryland. Previously, on May 28, 2014, the RBG Family, LLC entered into a $15,000,000 assignable
real estate sales contract with NVR, by which RBG Family, LLC would facilitate the sale of the 197 acres of Ballenger Run to NVR. On
December 10, 2014, NVR assigned this contract to SeD Maryland Development, LLC through execution of an assignment and assumption agreement
and entered into a series of lot purchase agreements by which NVR would purchase 443 subdivided residential lots from SeD Maryland Development,
LLC. On December 31, 2018, SeD Maryland entered into the Third Amendment to the Lot Purchase Agreement for Ballenger Run with NVR. Pursuant
to the Third Amendment, SeD Maryland will convert the 5.9 acre CCRC parcel to 36 lots (the 28 feet wide villa lot) and sell to NVR. SeD
Maryland pursued the required zoning approval to change the number of such lots from 85 to 121, which was approved in July 2019. Subsequently,
SeD Maryland Development signed Fourth Amendment to the Lot Purchase Agreement, pursuant to which NVR agreed to purchase all of the new
121 lots.
During
the three months ended on March 31, 2022 and 2021, NVR purchased 3 lots and 27 lots, respectively. Through March 31, 2022 and December
31, 2021, NVR had purchased a total of 479 and 476 lots, respectively.
As
part of the contract with NVR, upon establishment of FFB assessments on the lots, the Company is obligated to credit NVR with an amount
equal to one year of FFB assessment per each lot purchased by NVR. As of March 31, 2022 and December 31, 2021 the accrued balance due
to NVR was $189,475 and $188,125, respectively.
Leases
The
Company leases offices in Maryland, Singapore, Magnolia, Texas, Hong Kong and South Korea through leased spaces aggregating approximately
15,811 square feet, under leases expiring on various dates from April 2022 to March 2024. The leases have rental rates ranging from $2,265
to $21,500 per month. Our total rent expense under these office leases was $156,470 and $140,271 in the three months ended March 31,
2022 and 2021, respectively. The following table outlines the details of lease terms:
SCHEDULE OF OPERATING AND RENEWED LEASE TERMS RENTAL
| Office
Location |
|
Lease
Term as of December 31, 2021 |
| Singapore
- AI |
|
June
2021 to May 2022 |
| Singapore
– F&B |
|
October
2021 to October 2024 |
| Hong
Kong |
|
October
2020 to October 2022 |
| South
Korea |
|
August
2020 to August 2022 |
| Magnolia,
Texas, USA |
|
November
2021 to April 2022 |
| Bethesda,
Maryland, USA |
|
January
2021 to March 2024 |
The
Company adopted ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) to recognize a right-of-use asset and a lease liability
for all the leases with terms greater than twelve months. We elected the practical expedient to not recognize operating lease right-of-use
assets and operating lease liabilities for lease agreements with terms less than 12 months. Operating lease right-of-use assets and operating
lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement
date. As our leases do not provide a readily determinable implicit rates, we estimate our incremental borrowing rates to discount the
lease payments based on information available at lease commencement. Our incremental borrowings rates are 3.9% in 2022 and 2021, which
were used as the discount rates. The balances of operating lease right-of-use assets and operating lease liabilities as of March 31,
2022 were $502,552 and $513,651 respectively. The balances of operating lease right-of-use assets and operating lease liabilities as
of December 31, 2021 were $659,620 and $667,343, respectively.
The
table below summarizes future payments due under these leases as of March 31, 2022.
For
the Years Ended March 31:
SCHEDULE OF LEASE PAYMENTS
| | |
| | |
| 2022 | |
| 302,207 | |
| 2023 | |
| 185,111 | |
| 2024 | |
| 36,398 | |
| Total Minimum Lease Payments | |
| 523,716 | |
| Less: Effect of Discounting | |
| (10,065 | ) |
| Present Value of Future Minimum Lease Payments | |
| 513,651 | |
| Less: Current Obligations under Leases | |
| (168,145 | ) |
| Long-term Lease Obligations | |
$ | 345,506 | |
14.
DIRECTORS AND EMPLOYEES’ BENEFITS
Stock
Option plans AEI
The
Company previously reserved 500,000 shares of common stock under the Incentive Compensation Plan for high-quality executives and other
employees, officers, directors, consultants and other persons who provide services to the Company or its related entities. This plan
is meant to enable such persons to acquire or increase a proprietary interest in the Company in order to strengthen the mutuality of
interests between such persons and the Company’s shareholders, and providing such persons with performance incentives to expand
their maximum efforts in the creation of shareholder value. As of March 31, 2022 and December 31, 2021, there have been no options granted.
The reservation of shares under the Incentive Compensation Plan was cancelled in May of 2021.
Alset
International Stock Option plans
On
November 20, 2013, Alset International approved a Stock Option Plan (the “2013 Plan”). Employees, executive directors, and
non-executive directors (including the independent directors) are eligible to participate in the 2013 Plan.
The
following tables summarize stock option activity under the 2013 Plan for the three months ended March 31, 2021:
SCHEDULE OF OPTION ACTIVITY
| | |
Options for Common Shares | | |
Exercise Price | | |
Remaining Contractual Term (Years) | | |
Aggregate Intrinsic Value | |
| Outstanding as of January 1, 2021 | |
| 1,061,333 | | |
$ | 0.09 | | |
| 3.00 | | |
$ | - | |
| Vested and exercisable at January 1, 2021 | |
| 1,061,333 | | |
$ | 0.09 | | |
| 3.00 | | |
$ | - | |
| Granted | |
| - | | |
| - | | |
| | | |
| | |
| Exercised | |
| - | | |
| - | | |
| | | |
| | |
| Forfeited, cancelled, expired | |
| - | | |
| - | | |
| | | |
| | |
| Outstanding as of December 31, 2021 | |
| 1,061,333 | | |
$ | 0.09 | | |
| 2.00 | | |
$ | - | |
| Vested and exercisable at December 31, 2021 | |
| 1,061,333 | | |
$ | 0.09 | | |
| 2.00 | | |
$ | - | |
| Granted | |
| - | | |
| - | | |
| | | |
| | |
| Exercised | |
| - | | |
| - | | |
| | | |
| | |
| Forfeited, cancelled, expired | |
| - | | |
| - | | |
| | | |
| | |
| Outstanding as of March 31, 2022 | |
| 1,061,333 | | |
$ | 0.09 | | |
| 1.75 | | |
$ | - | |
| Vested and exercisable at March 31, 2022 | |
| 1,061,333 | | |
$ | 0.09 | | |
| 1.75 | | |
$ | - | |
15.
SUBSEQUENT EVENTS
On
April 8, 2022 the Company received confirmation from Small Business Administration that the PPP loan together with accrued interest was
fully forgiven.
On
April 11, 2022 the Company filed Registration Statement on Form S-3 using a “shelf” registration or continuous offering process.
Under this shelf registration process, the Company may, from time to time, sell any combination of the securities (common stock, preferred
stock, warrants, rights, units) described in the filed prospectus in one or more offerings up to a total aggregate offering price of
$75,000,000.
On
April 29, 2022 Chan Heng Fai paid back the overpayment made to him of $1,185,251 for the bonus paid to him in January 2022.