Alset(AEI) - 2024 Q3 - Quarterly Report

Ownership and Equity Interests - Alset Inc. owns 85.7% of Alset International, which is traded on the Singapore Stock Exchange, and collectively owns 88.1% of HWH International Inc. [245] - Alset Inc. has minority ownership interests, including a 36.9% equity interest in American Pacific Financial, Inc., a 44.4% equity interest in DSS Inc., and a 48.7% equity interest in Value Exchange International Inc. [246] - The Company currently owns 21,179,275 shares of VEII, representing approximately 48.7% ownership [264] - The company received 70,426,832 shares of SHRG directly and 55,197,696 shares indirectly through its majority-owned subsidiaries, totaling 89,732 shares after a 1-for-1,400 reverse split, representing 29% of SHRG's issued and outstanding shares [265] Mergers, Acquisitions, and Stock Transactions - The merger between Alset Capital and HWH Nevada resulted in the issuance of 12,500,000 shares of New HWH common stock, with Alset International receiving 10,900,000 shares [250] - Alset Inc. converted $300,000 of HWH's debt into 476,190 shares of HWH's common stock, and Alset International Limited converted$3,501,759 of HWH's debt into 5,558,347 shares of HWH's common stock [253] - Alset Inc. entered into a Stock Purchase Agreement to purchase 6,500,000 shares of HWH International Inc. for $4,095,000, secured by a promissory note with a 5$214,174 due to the purchase price exceeding identifiable equity [257] - Hapi Metaverse converted $1,300,000 of the principal amount loaned to VEII into 7,344,632 shares of VEII's Common Stock and received warrants to purchase 36,723,160 shares at$0.1770 per share [261] - The company issued a $250,000 convertible loan to SHRG with a 10$250,000 convertible note from SHRG, convertible into 148,810 shares of SHRG common stock, along with warrants for 148,810 shares at $1.68 per share [267] - HWH International entered into a$250,000 convertible note with SHRG, convertible into 89,286 shares of SHRG common stock at an 8% interest rate [268] - The company plans to acquire New Energy Asia Pacific Inc. for $103,750,000, payable via a convertible promissory note with a 3$12.00 per share [272] Revenue and Financial Performance - The company's revenue for the three months ended September 30, 2024, was $4,960,711, a 401$990,199 in the same period in 2023 [280] - Revenue from the Real Estate segment for the three months ended September 30, 2024, was $4,539,699, a 538$711,634 in the same period in 2023 [280] - The company's net loss for the nine months ended September 30, 2024, was $6,994,516, compared to a net loss of$27,162,596 in the same period in 2023 [279] - The company had net income of $1,469,239 in the three months ended September 30, 2024 compared to a net loss of$17,026,008 in the same period of 2023 [297] - Gross margin increased from $409,140 to$2,010,887 in the three months ended September 30, 2023 and 2024, respectively [293] - Cost of revenues increased from $581,059 in the three months ended September 30, 2023 to$2,949,824 in the three months ended September 30, 2024 [291][292] - Operating expenses increased from $2,486,044 in the three months ended September 30, 2023 to$2,974,667 in the three months ended September 30, 2024 [294] Real Estate and Lot Sales - The sale of 142 single-family residential lots in Magnolia, Texas, is anticipated to generate approximately $7.4 million, with$3.8 million already realized from the sale of 70 lots [259] - The company expects to improve liquidity and financial position through continued lot sales to regional and national builders, with recent sales generating approximately $7.7 million [282][283] - Revenue from the lease of model houses in Montgomery County, Texas was$6,300 and $18,900 for the three and nine months ended September 30, 2024, respectively [285][286] - The company anticipates selling 142 single-family residential lots for approximately$7.4 million and 63 lots for approximately $3.3 million in the Lakes at Black Oak project [303] Cash Flow and Financing Activities - Cash decreased from$26,921,727 as of December 31, 2023 to $16,679,183 as of September 30, 2024 [299] - Net cash used in financing activities was$21,370,610 in the nine months ended September 30, 2024, compared to net cash provided of $3,408,560 in the same period in 2023 [307] - Repayment of$398,000 of note payable and $21,102,871 of HWH's shares contributed to the cash used in financing activities in the first nine months of 2024 [307] - The company borrowed$130,261 from a commercial loan in the first nine months of 2024 [307] - Proceeds from stock issuance of $3,433,921 contributed to the cash provided by financing activities in the first nine months of 2023 [307] Foreign Exchange and Market Risks - Foreign exchange rate changes on intercompany loans of approximately$26 million and $23 million on September 30, 2024 and December 31, 2023, respectively, caused significant fluctuations in foreign currency transaction gain or loss [309] - The company expects foreign exchange rate fluctuations to significantly impact results of operations in 2024 due to the intercompany loan balance remaining at approximately$26 million [309] - Inflation has not had a material impact on the company's results of operations for the nine months ended September 30, 2024 or the year ended December 31, 2023 [308] Business Segments and Revenue Sources - HWH World, the company's biohealth segment in South Korea, recognized $0 and$12,786 in revenue for the nine months ended September 30, 2024 and 2023, respectively [287] - Revenue from the Digital Transformation Technology segment was $0 and$28,094 for the nine months ended September 30, 2024 and 2023, respectively [288] - Revenue from other businesses, including financial services, food and beverage, and new ventures, was $421,012 and$1,176,260 for the three and nine months ended September 30, 2024, respectively [290] Regulatory and Reporting Considerations - The company is an "emerging growth company" and may take advantage of certain exemptions from reporting requirements under the JOBS Act [310] - The real estate business is subject to seasonal shifts in costs, which may impact expenses of subsidiary Alset EHome Inc [311] - The company is not required to provide quantitative and qualitative disclosures about market risk as a "smaller reporting company" [312] New Energy and Electric Vehicles - New Energy Asia Pacific has signed MOUs totaling $42 million in value for electric vehicles and charging stations, with plans to expand revenues significantly in the coming months [273]