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 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 offered. These include the three principal businesses that
have been the majority of our operations – real estate, digital transformation technology and biohealth – as well
as a fourth category consisting of certain other business activities. At the present time, our financial services activities are reported
under our other business activities. Our biohealth activities include the sale of consumer products.
2. GOING CONCERN
The
accompanying consolidated financial statements have been prepared on the basis that the Company is a going concern, which contemplates
the realization of assets and satisfaction of liabilities in the normal course of business. The Company has experienced losses from operations
over the past six months. As of and for the six months ended June 30, 2021, the Company had an accumulated deficit of $117,799,610
and a loss of $5,082,288
from operations.
As
a result, these conditions may raise substantial doubt regarding our ability to continue as a going concern twelve months from the date
of issuance of our consolidated financial statements. However, the Company expects to have high volume of cash in hand and strong
operating cash inflows for at least the next twelve months. As of June 30, 2021, the Company had cash $59,529,026
and restricted cash $7,396,111
compared to cash $24,965,946
and restricted cash $6,769,533
as of December 31, 2020. SeD Maryland Development
LLC has an $8
million credit line from Manufacturers and Traders
Trust Company (“M&T Bank”) and the loan balance with M&T Bank was $0
as of June 30, 2021. Management has evaluated
the conditions in relation to the Company’s ability to meet its obligations and plans to continue borrowing funds from third party
financial institutions in order to meet the operating cash requirements. As of June 30, 2021 and December 31, 2020, the loans
from related party were $5,989,374
and $2,534,281.
Funding the Company’s operations is our first priority, before repaying related party debtors. Therefore, available cash will be
used to fund the Company’s operations before related party debtor repayments. At the same time management will concurrently
work with the related party debtors on a plan to repay the related party loans, which are repayable on demand.
During
the six months ended June 30, 2021, the revenue from lot sales was approximately $8.5
million and revenue from our biohealth business
was approximately $3.7
million. Furthermore, the Company had not defaulted
on any principal and interest repayment on its loans and borrowings and had repaid one of its bank loans during the year.
As
a result of management’s plans, high volume cash in bank accounts, favorable cash revenue from real estate and biohealth operations
in six months ended on June 30, 2021, and availability of $8
million line of credit under M&T Bank loan
agreement, the Company believes the initial conditions which raised substantial doubt regarding the ability to continue as a going concern
have been alleviated. However, we cannot predict, with certainty, the outcome of our actions to generate liquidity and the failure
to do so could negatively impact our future operations.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation and Principles of Consolidation
The
Company’s 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, 2021 or any other interim periods or for any other future years. These unaudited 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, 2020 filed on April 14, 2021.
The
consolidated financial statements include all accounts of the Company and its majority owned and controlled subsidiaries. The Company
consolidates entities in which it owns more than
50% of the voting common stock and controls operations.
All intercompany transactions and balances among consolidated subsidiaries have been eliminated.
The
Company’s consolidated financial statements include the financial position, results of operations and cash flows of the following
entities as of June 30, 2021 and December 31, 2020, as follows:
Schedule
of Subsidiaries
|
|
|
|
|
Attributable
interest as of,
|
|
|
Name
of subsidiary consolidated under AEI
|
|
State
or other jurisdiction of incorporation or organization
|
|
June
30,
2021
|
|
|
December
31, 2020
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
|
|
Hengfai
International Pte. Ltd
|
|
Singapore
|
|
|
100
|
|
|
|
100
|
|
|
Hengfai
Business Development Pte. Ltd
|
|
Singapore
|
|
|
100
|
|
|
|
100
|
|
|
Heng
Fai Enterprises Pte. Ltd.
|
|
Singapore
|
|
|
-
|
|
|
|
100
|
|
|
Global
eHealth Limited
|
|
Hong
Kong
|
|
|
100
|
|
|
|
100
|
|
|
Alset
International Limited (f.k.a. Singapore eDevelopment Limited)
|
|
Singapore
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Singapore
Construction & Development Pte. Ltd.
|
|
Singapore
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Art
eStudio Pte. Ltd.
|
|
Singapore
|
|
|
36.4
|
*
|
|
|
29.1
|
*
|
|
Singapore
Construction Pte. Ltd.
|
|
Singapore
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Global
BioMedical Pte. Ltd.
|
|
Singapore
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Alset
Innovation Pte. Ltd. (f.k.a. SeD Investment Pte. Ltd.)
|
|
Singapore
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Health
Wealth Happiness Pte. Ltd.
|
|
Singapore
|
|
|
71.4
|
|
|
|
57.1
|
|
|
SeD
Capital Pte. Ltd.
|
|
Singapore
|
|
|
71.4
|
|
|
|
57.1
|
|
|
LiquidValue
Asset Management Pte. Ltd. (f.k.a. HengFai Asset Management Pte. Ltd.)
|
|
Singapore
|
|
|
76.6
|
|
|
|
46.9
|
*
|
|
SeD
Home Limited
|
|
Hong
Kong
|
|
|
71.4
|
|
|
|
57.1
|
|
|
SeD
Management Pte. Ltd. (f.k.a. SeD Reits Management Pte. Ltd.)
|
|
Singapore
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Global
TechFund of Fund Pte. Ltd.
|
|
Singapore
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Singapore
eChainLogistic Pte. Ltd.
|
|
Singapore
|
|
|
71.4
|
|
|
|
57.1
|
|
|
BMI
Capital Partners International Limited.
|
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Hong
Kong
|
|
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71.4
|
|
|
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57.1
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|
|
SeD
Perth Pty. Ltd.
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Australia
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|
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71.4
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|
|
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57.1
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|
|
SeD
Intelligent Home Inc. (f.k.a SeD Home International, Inc.)
|
|
United
States of America
|
|
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71.4
|
|
|
|
57.1
|
|
|
LiquidValue
Development Inc. (f.k.a. SeD Intelligent Home Inc.)
|
|
United
States of America
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Alset
EHome Inc. (f.k.a. Alset iHome Inc., SeD Home & REITs Inc. and SeD Home, Inc.)
|
|
United
States of America
|
|
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71.4
|
|
|
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57.1
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|
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SeD
USA, LLC
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|
United
States of America
|
|
|
71.4
|
|
|
|
57.1
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|
|
150
Black Oak GP, Inc.
|
|
United
States of America
|
|
|
71.4
|
|
|
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57.1
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|
|
SeD
Development USA Inc.
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|
United
States of America
|
|
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71.4
|
|
|
|
57.1
|
|
|
150
CCM Black Oak, Ltd.
|
|
United
States of America
|
|
|
71.4
|
|
|
|
57.1
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|
|
SeD
Texas Home, LLC
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|
United
States of America
|
|
|
71.4
|
|
|
|
57.1
|
|
|
SeD
Ballenger, LLC
|
|
United
States of America
|
|
|
71.4
|
|
|
|
57.1
|
|
|
SeD
Maryland Development, LLC
|
|
United
States of America
|
|
|
59.7
|
|
|
|
47.8
|
*
|
|
SeD
Development Management, LLC
|
|
United
States of America
|
|
|
60.7
|
|
|
|
48.6
|
*
|
|
SeD
Builder, LLC
|
|
United
States of America
|
|
|
71.4
|
|
|
|
57.1
|
|
|
GigWorld
Inc. (f.k.a. HotApp Blockchain Inc.)
|
|
United
States of America
|
|
|
71.2
|
|
|
|
57.0
|
|
|
HotApp
BlockChain Pte. Ltd. (f.k.a. HotApps International Pte. Ltd.)
|
|
Singapore
|
|
|
71.2
|
|
|
|
57.0
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|
|
HotApp
International Limited
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Hong
Kong
|
|
|
71.2
|
|
|
|
57.0
|
|
|
HWH
International, Inc.
|
|
United
States of America
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Health
Wealth & Happiness Inc.
|
|
United
States of America
|
|
|
71.4
|
|
|
|
57.1
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|
|
HWH
Multi-Strategy Investment, Inc.
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|
United
States of America
|
|
|
71.4
|
|
|
|
57.1
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|
|
SeD
REIT Inc.
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|
United
States of America
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Gig
Stablecoin Inc. (f.k.a. Crypto Exchange Inc.)
|
|
United
States of America
|
|
|
71.2
|
|
|
|
57.0
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|
|
HWH
World Inc.
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|
United
States of America
|
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|
71.2
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|
|
|
57.0
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HWH
World Pte. Ltd.
|
|
Singapore
|
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71.2
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|
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57.0
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|
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UBeauty
Limited
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Hong
Kong
|
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|
71.4
|
|
|
|
57.1
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|
|
WeBeauty
Korea Inc
|
|
Korea
|
|
|
71.4
|
|
|
|
57.1
|
|
|
HWH
World Limited
|
|
Hong
Kong
|
|
|
71.4
|
|
|
|
57.1
|
|
|
HWH
World Inc.
|
|
Korea
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Alset
BioHealth Pte. Ltd.
|
|
Singapore
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Alset
Energy Pte. Ltd.
|
|
Singapore
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Alset
Payment Inc.
|
|
United
States of America
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Alset
World Pte. Ltd.
|
|
Singapore
|
|
|
71.4
|
|
|
|
57.1
|
|
|
BioHealth
Water Inc.
|
|
United
States of America
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Impact
BioHealth Pte. Ltd.
|
|
Singapore
|
|
|
71.4
|
|
|
|
57.1
|
|
|
American
Home REIT Inc.
|
|
United
States of America
|
|
|
76.6
|
|
|
|
46.9
|
*
|
|
Alset
Solar Inc.
|
|
United
States of America
|
|
|
57.1
|
|
|
|
45.7
|
*
|
|
HWH
KOR Inc.
|
|
United
States of America
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Open
House Inc.
|
|
United
States of America
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Open
Rental Inc.
|
|
United
States of America
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Hapi
Cafe Inc. (Nevada)
|
|
United
States of America
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Global
Solar REIT Inc.
|
|
United
States of America
|
|
|
71.4
|
|
|
|
57.1
|
|
|
OpenBiz
Inc.
|
|
United
States of America
|
|
|
71.4
|
|
|
|
57.1
|
|
|
Hapi
Cafe Inc. (Texas)
|
|
United
States of America
|
|
|
100
|
|
|
|
100
|
|
|
HWH
(S) Pte. Ltd.
|
|
Singapore
|
|
|
71.4
|
|
|
|
-
|
|
|
American
Pacific Bancorp Inc.
|
|
United
States of America
|
|
|
86.4
|
|
|
|
-
|
|
|
HengFeng
Finance Limited
|
|
Hong
Kong
|
|
|
86.4
|
|
|
|
-
|
|
|
Decentralize
Finance Inc.
|
|
United
States of America
|
|
|
86.4
|
|
|
|
-
|
|
|
True
Partner International Limited
|
|
Hong
Kong
|
|
|
100
|
|
|
|
-
|
|
|
LiquidValue
Development Pte. Ltd.
|
|
Singapore
|
|
|
100
|
|
|
|
-
|
|
|
LiquidValue
Development Limited.
|
|
Hong
Kong
|
|
|
100
|
|
|
|
-
|
|
|
EPowerTech
Inc.
|
|
United
States of America
|
|
|
100
|
|
|
|
-
|
|
|
Alset
EPower Inc.
|
|
United
States of America
|
|
|
100
|
|
|
|
-
|
|
|
*
|
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 (“Alset
International”), 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 are 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 were under common control and is 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
discounted 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 June 30, 2021 and December
31, 2020.
Restricted
Cash
As
a condition to the loan agreement with the Manufacturers and Traders Trust Company (“M&T Bank”), the Company is required
to maintain a minimum of $2,600,000
in an interest-bearing account maintained by
the lender as additional security for the loans. These funds are required to remain as collateral for the loan until the loan
is paid off in full and the loan agreement is terminated. The Company also has an escrow account with M&T Bank to deposit a portion
of cash proceeds from lot sales. The funds in the escrow account are specifically used for the payment of the loan from
M&T Bank. These funds are required to remain in the escrow account for the loan payment until the loan agreement terminates.
As of June 30, 2021 and December 31, 2020, the total balance of these two accounts was $4,757,477
and $5,729,067,
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 June 30, 2021 and December 31, 2020, the account balance was $37,540
and $38,550,
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 June 30, 2021 and December 31, 2020, the cash balance
in these brokerage accounts was $2,601,096
and $1,001,916,
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
June 30, 2021 and December 31, 2020, the balance of account receivables was $1,180,881
and $1,366,194,
respectively. Approximately $1
million and $1.3
million of account receivables as of June 30,
2021 and December 31, 2020, 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 monthly 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 June 30, 2021 and December 31, 2020, 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 June 30, 2021 and December 31, 2020, inventory consisted
of finished goods from HWH World 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
Investments
represent equity investments with readily determinable fair values, equity-method investments, equity investments without readily determinable
fair values and debt 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 Ture 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 5.3%
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 six months ended June 30, 2021, the Company 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”), Document Securities Systems Inc. (“DSS”), OptimumBank
Holdings, Inc. (“OptimumBank”) 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.
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The
Company has significant influence over DSS. As of June 30, 2021 and December 31, 2020, the Company owned approximately 11.7%
of the common stock of DSS. 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.
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The
Company has significant influence over Holista as the Company and its CEO are the beneficial owner of approximately 16.8%
of the outstanding shares of Holista and our CEO held a position on Holista’s Board of Directors.
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The
Company has significant influence over OptimumBank. Our CEO is the beneficial owner of approximately 3.9%
of the outstanding shares of OptimumBank and holds a position on OptimumBank’s Board of Directors.
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The
Company has significant influence over APW as the Company is the beneficial owner of approximately 8.7%
of the common shares of APW and one officer from the Company holds a director position on APW’s Board of Directors.
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On
March 2, 2020, 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 a $200,000
promissory note. For further details on this
transaction, refer to Note 10 - Related Party Transactions, Note Receivable from a Related Party Company. As of June 30,
2021 and December 31, 2020, AMRE was a private company. Based on management’s analysis, the fair value of the AMRE warrants was
$0
as of June 30, 2021 and December 31, 2020.
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 10 - Related Party Transactions, Sale of Investment in Vivacitas to DSS.
Investment
Securities at Cost
Investments
in equity securities without readily determinable fair values are measured at cost minus impairment adjusted by observable price changes
in orderly transactions for the identical or a similar investment of the same issuer. These investments are measured at fair value on
a nonrecurring basis when there are events or changes in circumstances that may have a significant adverse effect. An impairment loss
is recognized in the consolidated statements of comprehensive income equal to the amount by which the carrying value exceeds the fair
value of the investment.
The
Company had an equity holding in Vivacitas Oncology Inc. (“Vivacitas”), a private company that is currently not listed on
an exchange. We measure 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 10 – Related Party Transactions.
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 20,000
shares, approximately 19%
ownership, from Hyten Global (Thailand) Co., Ltd (“Hyten”), a private company, at a purchase price of $42,562.
Hyten is a direct sales company in Thailand. The Company does not have significant influence over Hyten and applied ASC 321 and measured
Hyten 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.
During
the six months ended June 30, 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.
Investment
Securities under Equity Method Accounting
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 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 Company continues to report its share of equity method losses in the
statements of comprehensive income to the extent and as an adjustment to the carrying amount of its other investments in the investee.
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 1%
of American Medical REIT Inc. (“AMRE”) as of June 30, 2021, 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 to Note 10,
Related Party Transactions). On balance sheet, the prorate loss from AMRE was recorded as a liability, accumulated losses on equity
method investment. During three months ended June 30, 2021 and 2020, the investment losses from AMRE were $77,459
and $140,740,
respectively. During six months ended June 30, 2021 and 2020, the investment losses from AMRE were $102,306
and $140,740,
respectively. As of June 30, 2021 and December 31, 2020, the accumulated losses on equity method investment were $368,235
and $265,929,
respectively.
Sweet
Sense, Inc.
BioLife
Sugar, Inc. (“BioLife’), a subsidiary consolidated under Alset International, entered into a joint venture agreement on April
25, 2018 with Quality Ingredients, LLC (“QI”). The agreement created an entity called Sweet Sense, Inc. (“Sweet Sense”)
which is 50%
owned by BioLife and 50%
owned by QI. Management believes its 50%
investment represents significant influence over Sweet Sense and accounts for the investment under the equity method of accounting.
On
November 8, 2019, Impact BioMedical Inc., a subsidiary of the Company, purchased 50%
of Sweet Sense from QI for $91,000
and recorded a loss from acquisition of
$90,001.
As of November 8, 2019, the total investment in joint venture was equal to $91,000
and the proportionate losses totaled $90,001.
The transaction was not in the scope of ASC 805 Business Combinations since the acquisition was accounted for an asset purchase instead
of a business combination. As an asset acquisition, the Company recorded the transaction at cost and applied ASC 730 to expense in-process
research and development cost, the major cost of Sweet Sense. Consequently, Sweet Sense was an 81.8%
owned subsidiary of Impact BioMedical Inc. and therefore, was consolidated into the Company’s condensed consolidated financial
statements as of June 30, 2020. As a subsidiary of Impact BioMedical Inc., Sweet Sense was in the discontinued operations of Impact BioMedical
Inc. (See Note 13 Discontinued Operations).
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 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. Credas intends to develop and launch its maiden digital assets-based Exchange-Traded Product in the
fourth quarter of 2021 on the SIX Swiss Exchange, Switzerland’s principal stock exchange and one of Europe’s largest stock
exchanges.
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 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,
Inc. (“Sharing Services Convertible Note”), a company quoted on the US OTC market. The value of the convertible note was
estimated by management using a Black-Scholes valuation model. The fair value of the note was $29,069
and $66,978
on June 30, 2021 and December 31, 2020, 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 June 30, 2021, the Management estimated that the fair value of the note to be $88,599,
the initial transaction price.
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 $0.2
million and $3.7
million for the three months ended June 30,
2021 and 2020, respectively. The Company capitalized construction costs of approximately $1.4
million and $6.1
million for the six months ended June 30, 2021
and 2020, 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 and six months ended on June 30, 2021 and 2020.
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. On March 15, 2021 and May 11, 2021 Alset EHome, Inc. signed purchase
agreements to acquire 30 homes in Montgomery County, Texas. By June 30, 2021, all of the 30 homes were closed for an aggregate
purchase price of $6,825,907.
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 the six months ended on June 30, 2021.
Revenue
Recognition and Cost of Sales
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 a sales contract with the Company
before they take the lots. The prices and timeline are determined and agreed upon in the contract. The builders do the inspections to
make sure all conditions and requirements in contracts are met before purchasing the lots. A detailed breakdown of the five-step process
for the revenue recognition of the Ballenger project, which represented approximately 70%
and 99%,
respectively, of the Company’s revenue in the six months ended on June 30, 2021 and 2020, is as follows:
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Identify
the contract with a customer.
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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.
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Identify
the performance obligations in the contract.
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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.
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Determine
the transaction price.
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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.
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Allocate
the transaction price to performance obligations in the contract.
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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.
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Recognize
revenue when (or as) the entity satisfies a performance obligation.
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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,
the Company’s leases provide the tenant with one or more multi-year renewal options, including mostly the same terms and conditions
provided under the initial lease term, subject to rent increases
The
Company defers rental revenue related to lease payments received from tenants in advance of their due dates. These amounts are presented
within deferred revenues and other payables on the Company’s consolidated balance sheets.
Rental
revenue is subject to an evaluation for collectability on several factors, including payment history, the financial strength of the tenant
and any guarantors, historical operations and operating trends of the property, and current economic conditions. If our evaluation of
these factors indicates that it is not probable that we will recover substantially all of the receivable, rental revenue is limited to
the lesser of the rental revenue that would be recognized on a straight-line basis (as applicable) or the lease payments that have been
collected from the lessee. Differences between rental revenue recognized and amounts contractually due under the lease agreements are
credited or charged to straight-line rent receivable or straight-line rent liability, as applicable. For the six months ended June 30,
2021, 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 June 30, 2021
and 2020, we recognized revenue $and $from FFB assessment, respectively. During the
six months ended on June 30, 2021 and 2020, we recognized revenue $and $from FFB assessment, respectively.
Cost
of Sales
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.
Biohealth
Product
Direct Sales
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.
Annual
Membership
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, use 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 $2,919,283
and $2,867,226
at June 30, 2021 and December 31, 2020, respectively.
Other
Businesses
Remaining
performance obligations
As
of June 30, 2021 and December 31, 2020, there were no
remaining performance obligations or continuing
involvement, as all service obligations within the other business activities segment have been completed.
Foreign
currency
Functional
and reporting currency
Items
included in the financial statements of each entity in the Company are measured using the currency of the primary economic environment
in which the entity operates (“functional currency”). The financial statements of the Company are presented in U.S. dollars
(the “reporting currency”).
The
functional and reporting currency of the Company is the United States dollar (“U.S. dollar”). The financial records of the
Company’s subsidiaries located in Singapore, Hong Kong, Australia and South Korea are maintained in their local currencies, the
Singapore Dollar (S$), 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 $958,334
and $796,709
loss during the three months ended on June 30,
2021 and 2020, respectively. The Company recorded foreign exchange gain of $2,421,031
and $1,463,773
during the six months ended on June 30, 2021
and 2020, 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 Singapore Dollar, Hong Kong
Dollar, 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).
For
the three months ended on June 30, 2021, the Company recorded other comprehensive loss from foreign currency translation of $1,070,191
and a $626,872
gain in the three months ended June 30, 2020,
in accumulated other comprehensive loss. For the six months ended on June 30, 2021, the Company recorded other comprehensive loss from
foreign currency translation of $2,839,631
and a $1,047,149
loss in the six months ended June 30, 2020, 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 consolidated statements of operation and comprehensive income, and within equity in the Consolidated Balance Sheets, separately
from equity attributable to owners of the Company.
On
June 30, 2021 and December 31, 2020, the aggregate non-controlling interests in the Company were $28,114,184
and $38,023,260,
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 June 30, 2021 and December 31, 2020, the capitalized financing costs were $3,257,033
and $3,513,535,
respectively.
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 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.
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 June 30, 2021 and December 31, 2020,
uninsured cash and restricted cash balances were $63,973,230
and $25,752,637,
respectively.
For
the three months ended June 30, 2021, two customers accounted for approximately 97%,
and 3%
of the Company’s property and development revenue. For the three months ended June 30, 2020, two customers accounted for approximately
96%,
and 4%
of the Company’s property and development revenue. For the six months ended June 30, 2021, two customers accounted for approximately
97%,
and 3%
of the Company’s property and development revenue. For the six months ended June 30, 2020, two customers accounted for approximately
98%,
and 2%
of the Company’s property and development revenue.
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. At the present time, our financial services activities
are reported under our other business activities. Our biohealth revenues include the sale of consumer products. 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 six months
ended June 30, 2021 and 2020:
SCHEDULE
OF SEGMENT INFORMATION
|
|
|
Real
Estate
|
|
|
Digital
Transformation Technology
|
|
|
Biohealth
Business
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
Months Ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
8,478,673
|
|
|
$
|
-
|
|
|
$
|
3,671,673
|
|
|
$
|
-
|
|
|
$
|
12,150,346
|
|
|
Cost
of Sales
|
|
|
(6,125,201
|
)
|
|
|
-
|
|
|
|
(180,603
|
)
|
|
|
-
|
|
|
|
(6,305,804
|
)
|
|
Gross
Margin
|
|
|
2,353,472
|
|
|
|
-
|
|
|
|
3,491,070
|
|
|
|
-
|
|
|
|
5,844,542
|
|
|
Operating
Expenses
|
|
|
(625,555
|
)
|
|
|
(69,375
|
)
|
|
|
(1,910,582
|
)
|
|
|
(8,321,318
|
)
|
|
|
(10,926,830
|
)
|
|
Operating
Income (Loss)
|
|
|
1,727,917
|
|
|
|
(69,375
|
)
|
|
|
1,580,488
|
|
|
|
(8,321,318
|
)
|
|
|
(5,082,288
|
)
|
|
Other
Income (Expense)
|
|
|
(9,177
|
)
|
|
|
617,562
|
|
|
|
(28,743,495
|
)
|
|
|
(51,026,886
|
)
|
|
|
(79,161,996
|
)
|
|
Net
Income (Loss) Before Income Tax
|
|
|
1,718,740
|
|
|
|
548,187
|
|
|
|
(27,163,007
|
)
|
|
|
(59,348,204
|
)
|
|
|
(84,244,284
|
)
|
|
|
|
Real
Estate
|
|
|
Digital
Transformation Technology
|
|
|
Biohealth
Business
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
Months ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
5,001,794
|
|
|
$
|
-
|
|
|
$
|
29,202
|
|
|
$
|
-
|
|
|
$
|
5,030,996
|
|
|
Cost
of Sales
|
|
|
(3,992,926
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,992,926
|
)
|
|
Gross
Margin
|
|
|
1,008,868
|
|
|
|
-
|
|
|
|
29,202
|
|
|
|
-
|
|
|
|
1,038,070
|
|
|
Operating
Expenses
|
|
|
(502,928
|
)
|
|
|
(95,261
|
)
|
|
|
(213,800
|
)
|
|
|
(2,776,535
|
)
|
|
|
(3,588,524
|
)
|
|
Operating
Income (Loss)
|
|
|
505,940
|
|
|
|
(95,261
|
)
|
|
|
(184,598
|
)
|
|
|
(2,776,535
|
)
|
|
|
(2,550,454
|
)
|
|
Other
Income (Expense)
|
|
|
6,894
|
|
|
|
3
|
|
|
|
(17,208
|
)
|
|
|
2,853,730
|
|
|
|
2,843,419
|
|
|
Net
Income (Loss) Before Income Tax
|
|
|
512,834
|
|
|
|
(95,258
|
)
|
|
|
(201,806
|
)
|
|
|
77,195
|
|
|
|
292,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and Restricted Cash
|
|
$
|
9,842,218
|
|
|
$
|
154,738
|
|
|
$
|
3,251,622
|
|
|
$
|
53,676,559
|
|
|
$
|
66,925,137
|
|
|
Total
Assets
|
|
|
30,877,470
|
|
|
|
154,840
|
|
|
|
43,241,793
|
|
|
|
53,064,444
|
|
|
|
127,338,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and Restricted Cash
|
|
$
|
8,150,769
|
|
|
$
|
158,058
|
|
|
$
|
1,590,265
|
|
|
$
|
21,836,387
|
|
|
$
|
31,735,479
|
|
|
Total
Assets
|
|
|
28,954,484
|
|
|
|
158,160
|
|
|
|
524,603
|
|
|
|
78,076,498
|
|
|
|
107,713,745
|
|
|
|
6.
|
BUSINESS
UNDER COMMON CONTROL
|
Due
to the transactions with Chan Heng Fai on March 12, 2021 and acquisition of HengFeng Finance Limited (“HFL”) on April
21, 2021, transactions between entities under common control (for further details on these transactions, refer to Note 3 –
Summary of Significant Accounting Policies), the Company has disclosed the Consolidated Statement of Operations and Other Comprehensive
Income for the Six Months Ended on June 30, 2020 and Consolidated Balance Sheet as of December 31, 2020, to adjust the information on
a consolidated basis as follows:
SCHEDULE
OF ADJUSTMENT INFORMATION
Consolidated
Statement of Operations and Other Comprehensive Income for the Six Months Ended on June 30, 2020
|
|
|
As
Previously Reported
|
|
|
Acquisition
of APB and HFL under Common Control
|
|
|
Acquisition
of LVD Ltd under Common Control
|
|
|
As
Combined
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Estate
|
|
$
|
5,001,794
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,001,794
|
|
|
Biohealth
|
|
|
29,202
|
|
|
|
-
|
|
|
|
-
|
|
|
|
29,202
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,030,996
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,030,996
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
3,992,926
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,992,926
|
|
|
General
and Administrative
|
|
|
3,398,753
|
|
|
|
183,903
|
|
|
|
5,868
|
|
|
|
3,588,524
|
|
|
Total
Operating Expenses
|
|
|
7,391,679
|
|
|
|
183,903
|
|
|
|
5,868
|
|
|
|
7,581,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
From Operations
|
|
|
(2,360,683
|
)
|
|
|
(183,903
|
)
|
|
|
(5,868
|
)
|
|
|
(2,550,454
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
12,491
|
|
|
|
21,485
|
|
|
|
51
|
|
|
|
34,027
|
|
|
Interest
Expense
|
|
|
(140,516
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(140,516
|
)
|
|
Foreign
Exchange Transaction Gain
|
|
|
1,375,471
|
|
|
|
-
|
|
|
|
88,302
|
|
|
|
1,463,773
|
|
|
Unrealized
Gain (Loss) on Securities Investment
|
|
|
1,592,647
|
|
|
|
(31,259
|
)
|
|
|
98
|
|
|
|
1,561,486
|
|
|
Realized
Gain on Securities Investment
|
|
|
2,281
|
|
|
|
|
|
|
|
24,114
|
|
|
|
26,395
|
|
|
Loss
on Investment on Security by Equity Method
|
|
|
(140,740
|
)
|
|
|
|
|
|
|
|
|
|
|
(140,740
|
)
|
|
Finance
Costs
|
|
|
-
|
|
|
|
(4,890
|
)
|
|
|
-
|
|
|
|
(4,890
|
)
|
|
Other
Income
|
|
|
42,002
|
|
|
|
1,882
|
|
|
|
-
|
|
|
|
43,884
|
|
|
Total
Other Income (Expense), Net
|
|
|
2,743,636
|
|
|
|
(12,782
|
)
|
|
|
112,565
|
|
|
|
2,843,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Tax Expense from Continuing Operations
|
|
|
(114,653
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(114,653
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income (Loss) from Continuing operations
|
|
|
268,300
|
|
|
|
(196,685
|
)
|
|
|
106,697
|
|
|
|
178,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Discontinued Operations, Net of Tax
|
|
|
(361,385
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(361,385
|
)
|
|
Net
Income (Loss)
|
|
|
(93,085
|
)
|
|
|
(196,685
|
)
|
|
|
106,697
|
|
|
|
(183,073
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss Attributable to Non-Controlling Interest
|
|
|
(620,433
|
)
|
|
|
(12,588
|
)
|
|
|
-
|
|
|
|
(633,021
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income (Loss) Attributable to Common Stockholders
|
|
$
|
527,348
|
|
|
$
|
(184,097
|
)
|
|
$
|
106,697
|
|
|
$
|
449,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Comprehensive Loss, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
Gain on Securities Investment
|
|
|
516
|
|
|
|
-
|
|
|
|
-
|
|
|
|
516
|
|
|
Foreign
Currency Translation Adjustment
|
|
|
(1,047,149
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,047,149
|
)
|
|
Comprehensive
Income (Loss)
|
|
|
(1,139,718
|
)
|
|
|
(196,685
|
)
|
|
|
106,697
|
|
|
|
(1,229,706
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
Loss Attributable to Non-controlling Interests
|
|
|
(988,963
|
)
|
|
|
(12,588
|
)
|
|
|
-
|
|
|
|
(1,001,551
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
Income (Loss) Attributable to Common Stockholders
|
|
$
|
(150,755
|
)
|
|
$
|
(184,097
|
)
|
|
$
|
106,697
|
|
|
$
|
(228,155
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income (Loss) Per Share - Basic and Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
Operations
|
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
$
|
0.08
|
|
|
Discontinued
Operations
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(0.03
|
)
|
|
Net
Income Per Share
|
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Common Shares Outstanding - Basic and Diluted
|
|
|
9,880,967
|
|
|
|
|
|
|
|
|
|
|
|
9,880,967
|
|
Consolidated
Balance Sheet as of December 31, 2020
|
|
|
As
Previously Reported
|
|
|
Acquisition
of APB and HFL under Common Control
|
|
|
Acquisition
of LVD Ltd under Common Control
|
|
|
Eliminations
|
|
|
As
Combined
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
22,124,491
|
|
|
$
|
2,348,478
|
|
|
$
|
492,977
|
|
|
$
|
-
|
|
|
$
|
24,965,946
|
|
|
Restricted
Cash
|
|
|
6,769,533
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,769,533
|
|
|
Account
Receivables, Net
|
|
|
1,366,194
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,366,194
|
|
|
Other
Receivables
|
|
|
270,222
|
|
|
|
279,177
|
|
|
|
95,177
|
|
|
|
-
|
|
|
|
644,576
|
|
|
Note
Receivables - Related Party
|
|
|
624,986
|
|
|
|
24,583
|
|
|
|
-
|
|
|
|
-
|
|
|
|
649,569
|
|
|
Prepaid
Expenses
|
|
|
1,470,680
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,470,680
|
|
|
Inventory
|
|
|
90,068
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
90,068
|
|
|
Investment
in Securities at Fair Value
|
|
|
48,857,483
|
|
|
|
313,343
|
|
|
|
1,631
|
|
|
|
-
|
|
|
|
49,172,457
|
|
|
Investment
in Securities at Cost
|
|
|
280,516
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
280,516
|
|
|
Investment
in Securities on Equity Method
|
|
|
-
|
|
|
|
-
|
|
|
|
74,535
|
|
|
|
(74,535
|
)
|
|
|
-
|
|
|
Deposits
|
|
|
47,019
|
|
|
|
1,801
|
|
|
|
-
|
|
|
|
-
|
|
|
|
48,820
|
|
|
Total
Current Assets
|
|
|
81,901,192
|
|
|
|
2,967,382
|
|
|
|
664,320
|
|
|
|
(74,535
|
)
|
|
|
85,458,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Properties
under Development
|
|
|
20,505,591
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,505,591
|
|
|
Operating
Lease Right-Of-Use Asset
|
|
|
574,754
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
574,754
|
|
|
Deposit
|
|
|
249,676
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
249,676
|
|
|
Loan
Receivable
|
|
|
-
|
|
|
|
840,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
840,000
|
|
|
Property
and Equipment, Net
|
|
|
85,365
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
85,365
|
|
|
Total
Assets
|
|
$
|
103,316,578
|
|
|
$
|
3,807,382
|
|
|
$
|
664,320
|
|
|
$
|
(74,535
|
)
|
|
$
|
107,713,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
Payable and Accrued Expenses
|
|
$
|
1,553,132
|
|
|
$
|
118,133
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,671,226
|
|
|
Deferred
Revenue
|
|
|
2,867,226
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,867,226
|
|
|
Builder
Deposits
|
|
|
1,262,336
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,262,336
|
|
|
Operating
Lease Liability
|
|
|
381,412
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
381,412
|
|
|
Note
Payable
|
|
|
172,706
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
172,706
|
|
|
Note
Payable- Related Parties
|
|
|
1,526,208
|
|
|
|
184,250
|
|
|
|
823,823
|
|
|
|
-
|
|
|
|
2,534,281
|
|
|
Total
Current Liabilities
|
|
|
7,763,020
|
|
|
|
302,383
|
|
|
|
823,823
|
|
|
|
-
|
|
|
|
8,889,226
|
|
|
Long-Term
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Builder
Deposits
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Operating
Lease Liability
|
|
|
193,342
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
193,342
|
|
|
Notes
Payable
|
|
|
636,362
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
636,362
|
|
|
Total
Liabilities
|
|
|
8,592,724
|
|
|
|
302,383
|
|
|
|
823,823
|
|
|
|
-
|
|
|
|
9,718,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
8,570
|
|
|
|
47,756
|
|
|
|
-
|
|
|
|
(47,756
|
)
|
|
|
8,570
|
|
|
Additional
Paid in Capital
|
|
|
97,950,440
|
|
|
|
3,975,261
|
|
|
|
756,487
|
|
|
|
47,756
|
|
|
|
102,729,944
|
|
|
Accumulated
Deficit
|
|
|
(43,010,991
|
)
|
|
|
(993,296
|
)
|
|
|
(906,010
|
)
|
|
|
-
|
|
|
|
(44,910,297
|
)
|
|
Accumulated
Other Comprehensive Income (Loss)
|
|
|
2,153,318
|
|
|
|
-
|
|
|
|
(9,980
|
)
|
|
|
-
|
|
|
|
2,143,338
|
|
|
Total
Stockholders’ Equity
|
|
|
57,101,337
|
|
|
|
3,029,721
|
|
|
|
(159,503
|
)
|
|
|
-
|
|
|
|
59,971,555
|
|
|
Non-controlling
Interests
|
|
|
37,622,517
|
|
|
|
475,278
|
|
|
|
-
|
|
|
|
(74,535
|
)
|
|
|
38,023,260
|
|
|
Total
Stockholders’ Equity
|
|
|
94,723,854
|
|
|
|
3,504,999
|
|
|
|
(159,503
|
)
|
|
|
(74,535
|
)
|
|
|
97,994,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders’ Equity
|
|
$
|
103,316,578
|
|
|
$
|
3,807,382
|
|
|
$
|
664,320
|
|
|
$
|
(74,535
|
)
|
|
$
|
107,713,745
|
|
As
of June 30, 2021 and December 31, 2020, real estate assets consisted of the following:
SCHEDULE
OF REAL ESTATE ASSETS
|
|
|
June
30, 2021
|
|
|
December
31, 2020
|
|
|
|
|
|
|
|
|
|
|
Construction
in Progress
|
|
$
|
6,498,049
|
|
|
$
|
9,567,841
|
|
|
Land
Held for Development
|
|
|
9,781,674
|
|
|
|
10,937,750
|
|
|
Rental
Properties, net
|
|
|
6,810,685
|
|
|
|
-
|
|
|
Total
Real Estate Assets
|
|
$
|
23,090,408
|
|
|
$
|
20,505,591
|
|
|
|
Single
family residential properties
|
As
of June 30, 2021, the Company owns 30
Single Family Residential Properties (“SFRs”)
in Montgomery County, Texas. The Company’s aggregate investment in those SFRs was $6.8
million. Depreciation expense was $15,222
and $0
in three months ended June 30, 2021 and 2020, respectively.
Depreciation expense was $15,222
and $0
in six months ended June 30, 2021 and 2020, respectively.
The
following table presents the summary of our SRFs as of June 30, 2021:
SUMMARY
OF SINGLE FAMILY RESIDENTIAL PROPERTIES
|
|
|
Number
of Homes
|
|
|
Aggregate
investment
|
|
|
Average
Investment per Home
|
|
|
SFRs
|
|
|
30
|
|
|
$
|
6,825,907
|
|
|
$
|
227,530
|
|
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 June 30, 2021 and December 31, 2020, there were $541,349
and $1,262,336
held on deposit, respectively.
As
of June 30, 2021 and December 31, 2020, notes payable consisted of the following:
SCHEDULE
OF NOTES PAYABLE
|
|
|
June
30, 2021
|
|
|
December
31, 2020
|
|
|
M&T
Bank Loan, Net of Debt Discount
|
|
|
-
|
|
|
|
636,362
|
|
|
PPP
Loan
|
|
|
68,502
|
|
|
|
-
|
|
|
Australia
Loan
|
|
|
168,181
|
|
|
|
172,706
|
|
|
Total
notes payable
|
|
$
|
236,683
|
|
|
$
|
809,068
|
|
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 on LIBOR plus 375 basis points. SeD
Maryland Development LLC was also provided with a Letter of Credit (“L/C”) Facility in an aggregate amount of up to $900,000.
The L/C commission 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 June 30, 2021, 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
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 on 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.
The Company was in compliance with this covenant as of December 31, 2020.
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 six months ended
June 30, 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 may apply 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. At this
time, we are not in a position to quantify the portion of the PPP Term Note that will be forgiven. As of June 30, 2021, we owed
$68,502
to M&T Bank.
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 $35,276.
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 4.12%
to 4.86%
per annum for the six months ended June 30, 2021 and from 4.36%
to 5.57%
per annum for the six months ended June 30, 2020. 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.
|
|
10.
|
RELATED
PARTY TRANSACTIONS
|
Personal
Guarantees by Directors
As
of June 30, 2021 and December 31, 2020, 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.
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 the 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 consolidated
statement of stockholders’ equity.
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 June 30, 2021 and December 31, 2020, the outstanding balance was approximately
$836,198
and $823,823,
respectively.
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 six months ended June 30, 2021 and as of June 30, 2021 and December 31,
2020, the outstanding balance was $0
and $178,400,
respectively.
Chan
Heng Fai provided an interest-free, due on demand advance to SeD Perth Pty. Ltd. for its general operations. As of June 30, 2021
and December 31, 2020, the outstanding balance was $14,002
and $14,379,
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 six months ended June 30, 2021, the Company paid back $1,321,600
and as of
June 30, 2021 and December 31, 2020 the amount outstanding was $11,829
and $1,333,429,
respectively.
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 (“Alset
International”), 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 Partners Capital Holding
Limited (HKG: 8657) (“True Partners”), 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, Alset EHome International Inc., a Delaware corporation (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 shall be due and payable on May 14, 2022 and the Loan shall have no interest. As of June 30, 2021
the outstanding balance was $4,943,095.
Chan
Heng Fai provided an interest-free, due on demand advance to HengFeng Finance Limited for the general operations. As of June 30, 2021
and December 31, 2020, the outstanding balance was $184,250
and $0,
respectively.
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 June 30, 2021 and
2020, respectively. Company incurred expenses of $120,000
and $120,000
for the six months ended June 30, 2021 and 2020,
respectively, which were capitalized as part of Real Estate on the Company’s Consolidated Balance Sheet as the services relate
to property and project management. In June 2021, MacKenzie Equity Partners was granted an additional $60,000
bonus payment. On June 30, 2021 and December
31, 2020, the Company owed this related party $20,000
and $0,
respectively.
Consulting
Services
Chan
Tung Moe was engaged as a consultant by the Company through Pop Motion Consulting Pte. Ltd. Chan Tung Moe is the son of Chan Heng Fai,
the Chairman and CEO of our Company. In August of 2020, this consulting agreement was terminated, and Chan Tung Moe became an employee
of Alset International as Chief Development Officer. Chan Tung Moe was appointed as Executive Director of Alset International Limited
on December 11, 2020 and on March 1, 2021, he was appointed as Co-Chief Executive Officer of Alset International Limited. Chan Tung
Moe was appointed as Co-Chief Executive Officer of Alset EHome International on July 1, 2021.
The
Company incurred expense of $0
and $59,144
for the three months ended June 30, 2021 and
2020, respectively. The Company incurred expense of $0
and $118,288
for the six months ended June 30, 2021 and 2020,
respectively. As of June 30, 2021 and December 31, 2020, the Company owed Pop Motion a consulting fee of $0.
Notes
Receivable from Related Party Companies
On
March 2, 2020 LiquidValue Asset Management Pte. Ltd. (“LiquidValue”) received a $200,000
Promissory Note from American Medical REIT Inc.
(“AMRE”), a company which is less
than 1% owned by LiquidValue as of June
30, 2021. Chan Heng Fai and Chan Tung Moe from Alset International are directors of American Medical REIT Inc. The note carries interests
of 8%
and is payable
in two years. LiquidValue also received warrants
to purchase AMRE shares at the Exercise Price $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. As
of June 30, 2021 and December 31, 2020, the fair market value of the warrants was $0.
The Company accrued $21,366
and $13,431
interest income as of June 30, 2021 and December
31, 2020, respectively.
On
January 24, 2017, SeD Capital Pte Ltd, a 100% owned subsidiary of Alset International lent $350,000
to iGalen. The
term of the loan was two years, with
an interest rate of 3% per annum for the first of 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 June 30, 2021 and December 31, 2020, the outstanding principle was $350,000
and accrued interest was $70,291
and $61,555,
respectively.
As
of June 30, 2021, the Company provided advances for operation of $234,744
to Hyten, a direct sales company in Thailand
of which the Company holds approximately 19%
ownership. The Company provided advances for operation of $29,968
to APW, a related party company of which the
Company holds 8.7%
ownership.
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.
As of June 30, 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.
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 (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 “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 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 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 June 30, 2021 still
holds 808,363
Series B Warrants. During the month of
June, 2021, investors exercised 1,266,025
of Series A Warrants and 6,598
of Series B Warrants. As a result of the offering
and subsequent exercise notice received for the pre-funded units and warrants, the Company issued 8,389,324
common shares As a result of the offering and
subsequent exercise notice received for the pre-funded units and warrants, and the net proceeds to the Company were $39,268,580.
The
Company incurred approximately $88,848
in expenses related to the 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 2021 offering and warrants exercised as of June 30, 2021.
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
|
|
|
1,269,324
|
|
|
$
|
1,269
|
|
|
$
|
6,440,487
|
|
|
Offering
Expenses
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
(88,848
|
)
|
|
Total
|
|
|
8,389,324
|
|
|
$
|
8,389
|
|
|
$
|
39,268,580
|
|
On
June 30, 2021, there were 28,265,289
common shares issued and outstanding.
The
following table summarizes the warrant activity for the six months
ended June 30, 2021.
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, 2020
|
|
|
108,000
|
|
|
$
|
9.80
|
|
|
|
2.91
|
|
|
$
|
-
|
|
|
Warrants
Vested and exercisable at December 31, 2020
|
|
|
108,000
|
|
|
$
|
9.80
|
|
|
|
2.91
|
|
|
$
|
-
|
|
|
Granted
|
|
|
14,240,000
|
|
|
|
4.18
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(2,080,986
|
)
|
|
|
5.06
|
|
|
|
|
|
|
|
|
|
|
Forfeited,
cancelled, expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Warrants
Outstanding as of June 30, 2021
|
|
|
12,267,014
|
|
|
$
|
4.08
|
|
|
|
4.85
|
|
|
$
|
3,077,823
|
|
|
Warrants
Vested and exercisable at June 30, 2021
|
|
|
12,267,014
|
|
|
$
|
4.08
|
|
|
|
4.85
|
|
|
$
|
3,077,823
|
|
GigWorld
Inc. Sale of Shares
During
the six months ended, June 30, 2021, the Company sold 280,000
shares of GigWorld to international investors for the amount of
$280,000,
which was booked as addition paid-in capital. The Company held 505,381,376
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 six months ended, June 30, 2020, the Company sold 37,300
shares of GigWorld to international investors
for the amount of $32,300,
which was booked as addition paid-in capital. The Company held 500,821,889
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 six months ended June 30, 2021 and 2020, 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
six months ended June 30, 2021, SeD Maryland Development LLC Board approved the payment distribution plan to members and paid $1,151,500
in distribution to the minority shareholder.
During six months ended June 30, 2020, SeD Maryland Development LLC Board approved the payment distribution plan to members and paid
$197,400
in distribution to the minority shareholder.
Changes
of Ownership of Alset International
In
the six months ended June 30, 2021, Alset International issued 1,160,581,454
common shares through warrants exercise with
exercise price of approximately $0.03
per share and received $35,878,698
cash, which included approximately $33
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 consolidated statements of stockholders’ equity.
During the six months ended June 30, 2021, the stock-based compensation expense of Alset International was $73,292
with the issuance of 1,500,000
shares to an officer. The Company’s ownership
of Alset International changed from 57.1%
as of December 31, 2020 to 71.4%
as of June 30, 2021.
A
subsidiary Issuing Stock
In
March, 2020, American Pacific Bancorp. (which subsequently became
a majority-owned subsidiary of the Company) commenced a private offering of units of its securities. Each unit
was comprised of one share of its Class A Common Stock with par value of $0.01
per share and its one share of Series
A 5%
Cumulative Preferred Stock with a par value of $0.01
per share, at a subscription price of $6
per unit. The net proceeds from investors
from this private offering were $2,232,491
as of June 30, 2020.
12. 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 June 30, 2021 in each calendar year through the end of their terms are as follows:
SCHEDULE
OF FUTURE MINIMUM RENTAL PAYMENTS
|
|
|
|
|
|
|
2021
|
|
$
|
97,350
|
|
|
2022
|
|
|
75,403
|
|
|
Total
Future Receipts
|
|
$
|
172,753
|
|
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 property management fee of $90
per month per property unit and a leasing fee
equal to one month of each lease’s annual rent. For the three months ended June 30, 2021 and 2020, property management fees incurred
by the property managers were $2,740
and $0,
respectively. For the six months ended June 30, 2021 and 2020, property management fees incurred by the property managers were $2,740
and $0,
respectively. For the three months ended June 30, 2021 and 2020, leasing fees incurred by the property managers were $14,475
and $0,
respectively. For the six months ended June 30, 2021 and 2020, leasing fees incurred by the property managers were $14,475
and $0,
respectively.
13.
DISCONTINUED OPERATIONS
On
April 27, 2020, Global BioMedical Pte Ltd (“GBM”), one of our subsidiaries, entered into a share exchange agreement with
DSS BioHealth Security, Inc. (“DBHS”), a wholly owned subsidiary of Document Securities Systems Inc. (“DSS”),
pursuant to which, DBHS agreed to acquire all of the outstanding capital stock of Impact BioMedical Inc, a wholly owned subsidiary of
GBM, through a share exchange. It was agreed that the aggregate consideration to be issued to GBM for the Impact BioMedical shares would
be the following: (i) 483,334
newly issued shares of DSS common stock; and (ii) 46,868
newly issued shares of a new series of DSS perpetual convertible
preferred stock with a stated value of $46,868,000
($1,000
per share). The convertible preferred stock will be convertible
into shares of DSS common stock at a conversion price of $6.48
of preferred stock stated value per share of common stock,
subject to a 19.9%
beneficial ownership conversion limitation (a so-called “blocker”) based on the total issued outstanding shares of common
stock of DSS beneficially owned by GBM. Holders of the convertible preferred stock will have no voting rights, except as required by
applicable law or regulation, and no dividends will accrue or be payable on the convertible preferred stock. The holders of convertible
preferred stock will be entitled to a liquidation preference of $1,000
per share, and DSS will have the right to redeem all or
any portion of the then outstanding shares of convertible preferred stock, pro rata among all holders, at a redemption price per share
equal to such liquidation value per share.
Under
ASU 2014-08, a disposal transaction meets the definition of a discontinued operation if all of the following criteria are met:
|
|
1.
|
The
disposal group constitutes a component of an entity or a group of components of an entity.
|
|
|
|
|
|
|
2.
|
The
component of an entity (or group of components of an entity) meets the held-for-sale classification criteria, is disposed of by sale,
or is disposed of other than by sale (e.g., “by abandonment, in an exchange measured based on the recorded amount of the nonmonetary
asset relinquished, or in a distribution to owners in a spinoff”).
|
|
|
|
|
|
|
3.
|
The
disposal of a component of an entity (or group of components of an entity) “represents a strategic shift that has (or will
have) a major effect on an entity’s operations and financial results”.
|
Impact
BioMedical Inc and its subsidiaries have financial reporting. The transaction is a disposal by sale and has a major effect on our financial
results. Since it meets all of the test criteria set forth above, we have treated this disposal transaction as a discontinued operations
in our consolidated financial statements.
On
August 21, 2020, the transaction closed and Impact BioMedical Inc became a direct wholly owned subsidiary of DBHS. GBM received 483,334
shares of DSS common stock and 46,868
shares of DSS preferred stock, which preferred shares could
be converted to 7,232,716
common shares (however, any conversion will be subject
to the blocker GBM has agreed to, as described above). After this transaction, we held 500,001
shares of the common stock of DSS, representing 9.7%
of the outstanding common stock of DSS. Our CEO, Chan Heng Fai owned an additional 14.5%
of the common stock of DSS (not including any common or preferred shares we held) and is the executive chairman of the board of directors
of DSS. The Company has elected the fair value option for the DSS common stock that would otherwise be accounted for under the equity
method of accounting. ASC 820, Fair Value Measurement and Disclosures, defines the fair value of the financial assets. We value DSS common
stock under level 1 category through quoted prices and preferred stock under level 2 category through the value of the common shares
into which the preferred shares are convertible. The quoted price of DSS common stock was $6.95
as of August 21, 2020. The total fair value of DSS common
and preferred stocks GBM received as consideration for the disposal of Impact BioMedical was $53,626,548.
As of August 21, 2020, the net asset value of Impact BioMedical was $57,143.
The difference of $53,569,405
was recorded as additional paid in capital. We did not
recognize gain or loss from this transaction as it was a related party transaction.
During
the three months ended June 30, 2021 and 2020, the discontinued operation loss from Impact BioMedical Inc was $0
and $361,385,
respectively. During the six months ended June 30, 2021 and 2020 the discontinued operation loss from Impact BioMedical Inc was $0
and $361,385,
respectively.
On
October 16, 2020, GBM converted an aggregate of 4,293
shares of Series A Convertible Preferred Stock into 662,500
shares of the common stock of DSS. On May 25, 2021 and
again on June 21, 2021, GBM converted an aggregate of 42,575
shares of Series A Convertible Preferred Stock into 6,570,170
shares of the common stock of DSS. We now own approximately
11.8%
of the common stock of DSS, and our CEO, Chan Heng Fai, owns an additional 3.1%
of the common stock of DSS (not including any common shares we hold).
14. 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 THE BALANCES OF 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, 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Comprehensive Income
|
|
|
(25,663
|
)
|
|
|
(764,544
|
)
|
|
|
(343,225
|
)
|
|
|
(1,133,432
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30,
2021
|
|
$
|
(75,556
|
)
|
|
$
|
482,946
|
|
|
$
|
(448,213
|
)
|
|
$
|
(40,823
|
)
|
|
|
|
Unrealized
Gains and Losses on Security Investment
|
|
|
Foreign
Currency Translations
|
|
|
Change
in Minority Interest
|
|
|
Total
|
|
|
Balance
at January 1, 2020
|
|
$
|
(59,888
|
)
|
|
$
|
1,603,145
|
|
|
$
|
(84,968
|
)
|
|
$
|
1,458,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Comprehensive Income
|
|
|
(8,240
|
)
|
|
|
(1,094,810
|
)
|
|
|
-
|
|
|
|
(1,103,050
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March
31, 2020
|
|
$
|
(68,128
|
)
|
|
$
|
508,335
|
|
|
$
|
(84,968
|
)
|
|
$
|
355,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Comprehensive Income
|
|
|
8,147
|
|
|
|
389,413
|
|
|
|
(18,317
|
)
|
|
|
379,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30,
2020
|
|
$
|
(59,981
|
)
|
|
$
|
897,748
|
|
|
$
|
(103,285
|
)
|
|
$
|
734,482
|
|
15. INVESTMENTS MEASURED AT FAIR VALUE
Financial
assets measured at fair value on a recurring basis are summarized below and disclosed on the consolidated balance sheet as of June 30,
2021 and December 31, 2020:
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
|
|
|
June
30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
Securities- Fair Value
|
|
$
|
14,784,540
|
|
|
$
|
27,004,907
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
27,004,907
|
|
|
Investment
Securities- Trading
|
|
|
968,525
|
|
|
|
954,109
|
|
|
|
-
|
|
|
|
-
|
|
|
|
954,109
|
|
|
Convertible
Preferred Stock
|
|
|
42,889,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Convertible
Note Receivable
|
|
|
138,599
|
|
|
|
-
|
|
|
|
-
|
|
|
|
117,668
|
|
|
|
117,668
|
|
|
Warrants
- American Premium Water
|
|
|
860,342
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,048,747
|
|
|
|
2,048,747
|
|
|
Warrants
- AMRE
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Investment in securities at Fair Value
|
|
$
|
59,641,006
|
|
|
$
|
27,959,016
|
|
|
$
|
-
|
|
|
$
|
2,166,415
|
|
|
$
|
30,125,431
|
|
|
|
|
Amount
at
|
|
|
Fair
Value Measurement Using
|
|
|
Amount
at
|
|
|
|
|
Cost
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Fair
Value
|
|
|
December
31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities- Fair Value Option
|
|
$
|
7,404,911
|
|
|
$
|
10,549,102
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
10,549,102
|
|
|
Investment
securities- Trading
|
|
|
17,650
|
|
|
|
18,654
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,654
|
|
|
Convertible
preferred stock
|
|
|
42,889,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
37,675,000
|
|
|
|
37,675,000
|
|
|
Convertible
note receivable
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
66,978
|
|
|
|
66,978
|
|
|
Warrants
- American Premium Water
|
|
|
860,342
|
|
|
|
-
|
|
|
|
-
|
|
|
|
862,723
|
|
|
|
862,723
|
|
|
Warrants
- AMRE
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Stock
Options - Vivacitas
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Total
Investment in securities at Fair Value
|
|
$
|
51,221,903
|
|
|
$
|
10,567,756
|
|
|
$
|
-
|
|
|
$
|
38,604,701
|
|
|
$
|
49,172,457
|
|
Realized
gain on investment securities for the six months ended June 30, 2021
and 2020 was $296,961
and $26,395,
respectively. Unrealized loss on securities investment was $30,703,914
in the six months ended June 30, 2021
and unrealized gain on securities investment was $1,561,486
in the six months ended on June 30, 2020.
These gains and losses were recorded directly to net income (loss).
The change in fair value of the convertible note receivable in the six months ended June 30, 2021 and 2020 was $37,909
and $516,
respectively, and was recorded in 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 June 30, 2021 and December 31, 2020, respectively.
SCHEDULE
OF FAIR VALUE OF EQUITY SECURITY INVESTMENT
|
|
|
Share
price
|
|
|
|
|
|
Market
Value
|
|
|
|
|
|
|
6/30/2021
|
|
|
Shares
|
|
|
6/30/2021
|
|
|
Valuation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DSS
(Related Party)
|
|
$
|
1.790
|
|
|
|
7,732,671
|
*
|
|
$
|
13,841,481
|
|
|
Investment
in Securities at Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMBS
(Related Party)
|
|
$
|
0.008
|
|
|
|
20,000,000
|
|
|
$
|
150,000
|
|
|
Investment
in Securities at Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holista
(Related Party)
|
|
$
|
0.044
|
|
|
|
46,226,673
|
|
|
$
|
2,047,424
|
|
|
Investment
in Securities at Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American
Premium Water (Related Party)
|
|
$
|
0.007
|
|
|
|
122,039,000
|
|
|
$
|
817,661
|
|
|
Investment
in Securities at Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OptimumBank
(Related Party)
|
|
$
|
4.820
|
|
|
|
92,980
|
|
|
$
|
448,164
|
|
|
Investment
in Securities at Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
True
Partners
|
|
$
|
0.135
|
|
|
|
62,122,908
|
|
|
$
|
8,400,177
|
|
|
Investment
in Securities at Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
Exchange
|
|
$
|
0.200
|
|
|
|
6,500,000
|
|
|
$
|
1,300,000
|
|
|
Investment
in Securities at Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
Stocks
|
|
|
|
|
|
|
|
|
|
$
|
954,109
|
|
|
Investment
in Securities at Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Level 1 Equity Securities
|
|
|
$
|
27,959,016
|
|
|
|
|
Nervotech
|
|
|
N/A
|
|
|
|
1,666
|
|
|
$
|
37,826
|
|
|
Investment
in Securities at Cost
|
|
Hyten
Global
|
|
|
N/A
|
|
|
|
20,000
|
|
|
$
|
42,562
|
|
|
Investment
in Securities at Cost
|
|
K
Beauty
|
|
|
N/A
|
|
|
|
3,600
|
|
|
$
|
19,609
|
|
|
Investment
in Securities at Cost
|
|
|
|
|
Total
Equity Securities
|
|
|
$
|
28,059,013
|
|
|
|
|
|
|
Share
price
|
|
|
|
|
|
Market
Value
|
|
|
|
|
|
|
12/31/2020
|
|
|
Shares
|
|
|
12/31/2020
|
|
|
Valuation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DSS
(Related Party)
|
|
$
|
6.240
|
|
|
|
1,162,501
|
*
|
|
$
|
7,254,006
|
|
|
Investment
in Securities at Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMBS
(Related Party)
|
|
$
|
0.008
|
|
|
|
20,000,000
|
|
|
$
|
160,000
|
|
|
Investment
in Securities at Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holista
(Related Party)
|
|
$
|
0.055
|
|
|
|
46,226,673
|
|
|
$
|
2,565,469
|
|
|
Investment
in Securities at Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American
Premium Water (Related Party)
|
|
$
|
0.002
|
|
|
|
122,039,000
|
|
|
$
|
256,284
|
|
|
Investment
in Securities at Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OptimumBank
(Related Party)
|
|
$
|
3.370
|
|
|
|
92,980
|
|
|
$
|
313,343
|
|
|
Investment
in Securities at Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
Stocks
|
|
|
|
|
|
|
|
|
|
$
|
18,654
|
|
|
Investment
in Securities at Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Level 1 Equity Securities
|
|
|
$
|
10,567,756
|
|
|
|
|
Vivacitas
(Related Party)
|
|
|
N/A
|
|
|
|
2,480,000
|
|
|
$
|
200,128
|
|
|
Investment
in Securities at Cost
|
|
Nervotech
|
|
|
N/A
|
|
|
|
1,666
|
|
|
$
|
37,826
|
|
|
Investment
in Securities at Cost
|
|
Hyten
Global
|
|
|
N/A
|
|
|
|
20,000
|
|
|
$
|
42,562
|
|
|
Investment
in Securities at Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Equity Securities
|
|
|
$
|
10,848,272
|
|
|
|
|
*
|
Ratio
of 1-for-30 (the “Reverse Split”) was
effective at 5:01 p.m. Eastern Time on May 7, 2020 (the “Effective Time”)
|
DSS convertible
preferred stock
In six months
ended June 30, 2021 Global BioMedical Pte Ltd. converted 42,575
preferred stock of DSS into 6,570,170
common shares of DSS.
Sharing
Services Convertible Note
The
fair value of the Sharing Services Convertible Note under level 3 category as of June 30, 2021 and December 31, 2020 was calculated using
a Black-Scholes valuation model valued with the following weighted average assumptions:
SCHEDULE
OF SIGNIFICANT INPUTS AND ASSUMPTIONS
|
|
|
June
30,
2021
|
|
|
December
31,
2020
|
|
|
|
|
|
|
|
|
|
|
Dividend
yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
Expected
volatility
|
|
|
158.61
|
%
|
|
|
210.07
|
%
|
|
Risk
free interest rate
|
|
|
3.25
|
%
|
|
|
0.13
|
%
|
|
Contractual
term (in years)
|
|
|
1.26
|
|
|
|
11.76
|
|
|
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 and six months ended June 30, 2021 and 2020:
SCHEDULE
OF CHANGE IN FAIR VALUE
|
|
|
Total
|
|
|
Balance
at January 1, 2021
|
|
$
|
66,978
|
|
|
Total
losses
|
|
|
(1,987
|
)
|
|
Balance
at March 31, 2021
|
|
$
|
64,991
|
|
|
Total
losses
|
|
|
(35,922
|
)
|
|
Balance
at June 30, 2021
|
|
$
|
29,069
|
|
|
|
|
Total
|
|
|
Balance
at January 1, 2020
|
|
$
|
26,209
|
|
|
Total
losses
|
|
|
(12,599
|
)
|
|
Balance
at March 31, 2020
|
|
$
|
13,610
|
|
|
Total
gain
|
|
|
13,115
|
|
|
Balance
at June 30, 2020
|
|
$
|
26,725
|
|
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 June 30, 2021, the management estimated that the fair value of this note remained unchanged
from its initial purchase price
Warrants
On
March 2, 2020, the Company received warrants to purchase shares of AMRE, a related party private startup company, in conjunction with
the Company lending a $200,000
promissory note. For further details on this
transaction, refer to Note 10 Related Party Transactions, Note Receivable from a Related Party Company. As of June 30,
2021 and December 31, 2020, AMRE was a private company. Based the management’s analysis, the fair value of the warrants was $0
as of June 30, 2021 and December 31, 2020.
On
July 17, 2020, the Company purchased 122,039,000
shares, approximately 9.99%
ownership, and 122,039,000
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 $862,723
as of December 31, 2020 and $2,048,747
as of June 30, 2021.
The
fair value of the APW warrants under level 3 category as of June 30, 2021 and December 31, 2020 was calculated using a Black-Scholes
valuation model valued with the following weighted average assumptions:
SCHEDULE
OF SIGNIFICANT INPUTS AND ASSUMPTIONS
|
|
|
June
30, 2021
|
|
|
December
31, 2020
|
|
|
|
|
|
|
|
|
|
|
Stock
Price
|
|
$
|
0.0067
|
|
|
$
|
0.0021
|
|
|
Exercise price
|
|
|
0.001
|
|
|
|
0.001
|
|
|
Risk
free interest rate
|
|
|
1.40
|
%
|
|
|
0.88
|
%
|
|
Annualized
volatility
|
|
|
205.71
|
%
|
|
|
178.86
|
%
|
|
Year
to maturity
|
|
|
9.07
|
|
|
|
9.58
|
|
16. 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 June 30, 2021 and 2020, NVR purchased 31
lots and 19
lots, respectively. During the six months ended
on June 30, 2021 and 2020, NVR purchased 58
lots and 46
lots, respectively. Through June 30, 2021 and
December 31, 2020, NVR had purchased a total of 446
and 388
lots, 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 December 2020 to March 2024. The leases have rental rates ranging from $2,265
to $23,297
per month. Our total rent expense under these
office leases was $140,271 and
$85,558 in
the three months ended June 30, 2021 and 2020, respectively. Our total rent expense under these office leases was $272,985
and $171,116
in the six months ended June 30, 2021 and 2020,
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, 2020
|
|
Renewed
Lease term in 2021
|
|
Singapore
|
|
June
2020 to May 2021
|
|
June
2021 to May 2022
|
|
Hong
Kong
|
|
October
2020 to October 2022
|
|
|
|
South
Korea
|
|
August
2020 to August 2022
|
|
|
|
Magnolia,
Texas, USA
|
|
November
2019 to April 2021
|
|
May
2021 to October 2021
|
|
Bethesda,
Maryland, USA
|
|
August
2015 to December 2020
|
|
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 2021 and at a range from 0.5% to 4.5% per annum in 2020, which were
used as the discount rates. The balances of operating
lease right-of-use assets and operating lease liabilities as of June 30, 2021 were $728,828
and $741,915,
respectively. The balances of operating lease right-of-use assets and operating lease liabilities as of December 31, 2020 were $574,754
and $574,754,
respectively.
The
table below summarizes future payments due under these leases as of June 30, 2021.
For
the Years Ended December 31:
Schedule
of Lease Payments
|
|
|
|
|
|
|
2021
|
|
$
|
280,947
|
|
|
2022
|
|
|
361,405
|
|
|
2023
|
|
|
95,104
|
|
|
2024
|
|
|
24,430
|
|
|
Total
Minimum Lease Payments
|
|
|
761,886
|
|
|
Less:
Effect of Discounting
|
|
|
(19,971
|
)
|
|
Present
Value of Future Minimum Lease Payments
|
|
|
741,915
|
|
|
Less:
Current Obligations under Leases
|
|
|
(147,135
|
)
|
|
Long-term
Lease Obligations
|
|
$
|
594,780
|
|
17. DIRECTORS AND EMPLOYEES’ BENEFITS
Stock
Option plans AEI
The
Company reserves 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 June 30, 2021 and December 31,
2020, there have been no options granted.
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 six months ended June 30, 2021:
SCHEDULE
OF OPTION ACTIVITY
|
|
|
Options
for Common Shares
|
|
|
Exercise
Price
|
|
|
Remaining
Contractual Term (Years)
|
|
|
Aggregate
Intrinsic Value
|
|
|
Outstanding
as of December 31, 2020
|
|
|
1,061,333
|
|
|
$
|
0.09
|
|
|
|
3.00
|
|
|
$
|
-
|
|
|
Vested
and exercisable at December 31, 2020
|
|
|
1,061,333
|
|
|
$
|
0.09
|
|
|
|
3.00
|
|
|
$
|
-
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Forfeited,
cancelled, expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of
June 30, 2021
|
|
|
1,061,333
|
|
|
$
|
0.09
|
|
|
|
2.50
|
|
|
$
|
-
|
|
|
Vested
and exercisable at June 30, 2021
|
|
|
1,061,333
|
|
|
$
|
0.09
|
|
|
|
2.50
|
|
|
$
|
-
|
|
18. SUBSEQUENT EVENTS
Public
Offering
On
July 27, 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 “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.
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.
The
Company and its directors and executive officers also agreed that, for a period of one (1) year and ninety (90) days, respectively, after
the date of the offering, subject to certain limited exceptions, not to directly or indirectly, without the prior written consent of
the Underwriters, (a) offer, sell, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company
or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company; or (b) file or caused to
be filed any registration statement with the Securities and Exchange Commission (the “SEC”) relating to the offering of any
shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock
of the Company.
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.
The
net proceeds to the Company from the Offering were approximately $28.8
million, after deducting underwriting discounts
and commissions and the payment of other estimated offering expenses associated with the Offering that are payable by the Company. The
Company intends to use the net proceeds of the Offering for the following purposes: (i) to fund possible acquisitions of new companies
and additional properties; (ii) to fund the further development of properties, including services and infrastructure; (iii) to develop
rental opportunities at properties; (iv) to exercise warrants of our subsidiaries to accomplish the items in (i) – (iii); and (v)
for working capital and general corporate purposes.
A
registration statement on Form S-1 relating to the Offering was declared effective by the SEC on July 27, 2021.
As
of August 16, 2021 investors who purchased the pre-funded warrants in this offering exercised 6,461,800
warrants to purchase 6,461,800
shares of the Company’s common stock and
the Company received $64,618
from these exercises.
Series
A Warrants exercise
From
July 1, 2021 through August 16, 2021 investors who purchased Series A Warrants in the Company’s May 2021 offering exercised
warrants to purchase 98,000
shares of the Company’s common stock. The
Company received $496,860
from these exercises.