We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly update any forward looking-statements, whether as a result of new information, future events or otherwise.
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TABLE OF CONTENTS
| Item 1. Business. | 4 | |
| Item 1A. Risk Factors. | 9 | |
| Item 1B. | Unresolved Staff Comments. | |
| Item 2. Properties | ||
| Item 3. Legal Proceedings. | 18 | |
| Item 4. | Mine Safety Disclosure. | |
| PART II | ||
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. | |
| Item 6. | Selected Financial Data. | |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | |
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. | |
| Item 8. Financial Statements. | 23 | |
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. | 38 |
| Item 9A. Controls and Procedures. | 38 | |
| Item 9B. Other Information. | 39 | |
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections. | 39 | |
| Item 10. | Directors, Executive Officers and Corporate Governance. | |
| Item 11. Executive Compensation. | 43 | |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. | |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence. | |
| Item 14. | Principal Accounting Fees and Services. | |
| PART IV | ||
| Item 15. | Exhibits, Financial Statement | |
| Item 16. Form 10-K Summary | 49 | |
| SIGNATURES | 50 |
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PART I
Item 1. Business.
Business Description
Hapi Metaverse Inc., formerly Fragmented Industry Exchange Inc,known as GigWorld Inc. (the “Company” or “Group”), was incorporated in the State of Delaware on March 7, 2012 and established a fiscal year end of December 31.2012. The Company’s initial business plan was to be a financial acquisition intermediary which would serve buyers and sellers for companies that are in highly fragmented industries. The CompanyOur Board determined it was in the best interest of the shareholdersCompany to expand itsour business plan. On October 15, 2014, through a sale and purchase agreement, (the “Purchase Agreement”) the Company acquired all the issued and outstanding stock of HotApp BlockChain Pte. Ltd., formerly known as HotApps International Pte Ltd (the “HIP”(“HIP”) from Alset International Limited (“AIL”), formerly known as Singapore eDevelopment Limited (“SeD”).Limited. AIL is our former largest stockholder. HIP owned certain intellectual property relating to instant messaging for portable devices (the “HotApp”(referred to herein as the “HotApp Application”). On August 30, 2022, Alset International Limited entered into a stock purchase with its controlling stockholder, Alset Inc. (formerly known as Alset EHome International Inc.) in relation to the disposal of 505,341,376 shares of the Company’s common stock, representing approximately 99.69% of the total issued and paid-up share capital of the Company, to Alset Inc. After this transaction, Alset Inc. became our largest stockholder.
The HotApp Application is a cross-platform mobile application that incorporates instant messaging and ecommerce. It provides a messaging and calling services for HotApp users (text, photo, audio). HotAppThis application can be used on any mobile platform (i.e. IOS Online or Android).
In December of 2017, the Company’s name was changed from “HotApp International, Inc.” to “HotApp Blockchain Inc.” to reflect the Purchase Agreement,Board of Directors’ determination that it was in the best interest of the Company issued SED 1,000,000 sharesto expand its activities to include the development and commercialization of common stock and 13,800,000 sharesblockchain-related technologies.
In 2018, one of newly created convertible preferred stock. See Note 8 for further description.
We are focused on serving business-to-business (B2B) needs in e-commerce, collaboration and supply chains. We will help enterprises and community users to transform their business model with digital economy in a more effective manner. With our platform, users can discover and build their own communities and create valuable content. Our platform tools empower these communities to share their thoughts and words across multiple channels. As these communities grow, they provide the critical mass that attracts enterprises. Enterprises can in turn enhance the user experience with premium contents,content, all of which are facilitated by the transactions of every stakeholder via e-commerce.
Our technology platform consists of instant messaging systems, social media, e-commerce and payment systems, network marketing platforms and e-real estate. We are focused on business-to-business solutions such as enterprise messaging and workflow. We have successfully implemented several strategic platform developments for clients, including a mobile front-end solution for network marketing, a hotel e-commerce platform for Asia and a real estate agent management platform in China. We have also enhanced our technological capability from mobile application development to include blockchain architectural design, allowing mobile-friendly front-end solutions to integrate with software platforms. Our main digital assets at the present time are our applications. We continue to strengthen our technology architecture and develop Application Development Interface (API) for collaboration partners such as network marketing back end service providers. In addition we are continuing our development activities in blockchain in order to prepare for future client opportunities.
In January 2017, we entered into a revenue-sharing agreement with iGalen, a network marketing company selling health products (AIL, our former majority stockholder, was a significant stockholder of iGalen). Under the agreement, we customized a secure app for iGalen’s communication and management system. The app enables mobile friendly back-end access for iGalen Inc. members, among other functions. We are continuing to improve this secure app. In particular, we intend to utilize blockchain supply logistics to improve its functions (the original iGalen app did not utilize the latest distributed ledger technology). Once the improvements to this technology are completed, and initially utilized by iGalen, We intend to then attempt to sell similar services to other companies engaged in network marketing, as members of our management have a particular experience offering services to that industry and we believe our solutions are particularly suited to that industry’s needs. This app can be modified to meet the specific needs of any network marketing company. We believe that these technologies will, among other benefits, make it easier for network marketing companies to securely and effectively manage their systems of compensation. Our current plan is to commence sales of this technology in 2023.
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In February of 2021, the Company’s name was changed to “GigWorld Inc.”
The direct selling industry has been adopting gig economy practices and relying heavily on digital marketing technology in team development and customer engagement. We have positioned ourselves to serve the growing demand in the Markettransformation of the direct selling industry towards the gig economy.
The Group has relied significantly on AIL, our former majority stockholder, as its principal sources of funding during the period. AIL, and Our Opportunity
On April 8, 2021, the Company entered into a Securities Purchase Agreement with Value Exchange International, Inc., a Nevada corporation (“VEII”) pursuant to which the Company purchased 6.5 million restricted shares of VEII Common Stock from VEII for an aggregate purchase price of $650,000. The closing of the transaction occurred on April 12, 2021. Pursuant to this Securities Purchase Agreement, the Company was entitled to appoint one nominee to the Board of Directors of VEII. The Company appointed Mr. Lum Kan Fai as its nominee. Mr. Lum is the Vice Chairman of the Company’s Board of Directors. VEII is a provider of customer-centric technology solutions for the retail industry in Hong Kong and certain regions of China and Philippines. On October 17, 2022, the Company entered into a Stock Purchase Agreement (the “Agreement”) with Chan Heng Fai, who is the Chairman of the Company’s Board of Directors and the Chairman, Chief Executive Officer and largest stockholder of Alset Inc., the Company’s majority stockholder. Pursuant to the Agreement, the Company bought an aggregate of 7,276,163 shares of VEII. The Company presently owns approximately 38.1% of the total issued and outstanding shares of Value Exchange International Inc.
In July of 2021, the Company’s indirect subsidiary HotApp International Limited incorporated Smart Reward Express Limited (“Smart Reward”) in Hong Kong. Smart Reward plans to be principally engaged in the business of developing a platform allowing small and medium sized merchants to set-up their own reward program, with the aim of creating a loyalty exchange program for participating merchants.
HotApp International Limited is the owner of 50% of the issued and outstanding shares of Smart Reward. The remaining 50% of the issued and outstanding shares of Smart Reward are held by Value Exchange Int’l (China) Limited, a wholly-owned subsidiary of VEII.
According to a report from McKinsey in October of 2016, Global report, Independent Work: Choice, Necessity and the Gig Economy, 162 million people in Europe and the United States—or 20 to 30 percent of the working-age population - engage in some form of independent work.
The direct selling industry has been adopting gig economy practices and relying heavily on digital marketing technology in team development and customer engagement. We have positioned ourselves to serve the growing demand in the transformation of the direct selling industry towards the gig economy.
In March of 2023, the Company’s name was changed from “GigWorld Inc.” to “Hapi Metaverse Inc.” to reflect the Board of Directors’ determination that it was in the best interest of the Company to position itself as a Metaverse-as-a-Service (MaaS) provider, reflecting its latest strategy embracing Metaverse, A.I., and offline engagement for communities and brands.
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The Company’s consolidated financial statements include the financial position, results of operations and cash flows of the following entities as of December 31, 2022 and 2021, as follows:
| Attributable interest as of, | ||||||||||
| Name of subsidiary consolidated under Hapi Metaverse Inc. | State or other jurisdiction of incorporation or organization | December 31, 2022 | December 31, 2021 | |||||||
| % | % | |||||||||
| HotApp BlockChain Pte.Ltd. (f.k.a. HotApps International Pte. Ltd.) | Singapore | 100.0 | 100.0 | |||||||
| HotApp International Limited | Hong Kong | 100.0 | 100.0 | |||||||
| Gig Stablecoin Inc. (f.k.a. Crypto Exchange Inc.) | Nevada | 100.0 | 100.0 | |||||||
| HWH World Inc. | Delaware | 100.0 | 100.0 | |||||||
| HWH World Pte. Ltd. | Singapore | - | 100.0 | |||||||
| Smart Reward Express Limited | Hong Kong | 50.0 | * | 50.0 | * | |||||
| Hapi Cafe Limited | Hong Kong | 100.0 | ** | - | ||||||
| MOC HK Limited | Hong Kong | 100.0 | *** | - | ||||||
| Shenzhen Leyouyou Catering Management Co., Ltd. | People’s Republic of China | 100.0 | **** | - | ||||||
| Hapi Metaverse Inc. | Texas | 100.0 | ***** | - | ||||||
* Smart Reward Express Limited (“Smart Reward”) was incorporated in Hong Kong on July 13, 2021 with an issued and paid-up share capital of HK$10,000 comprising 10,000 ordinary shares.
Smart Reward plans to be principally engaged in the business of developing a platform allowing small and medium sized merchants to set-up their own reward program, with the aim of creating a loyalty exchange program for participating merchants.
HotApp International Limited is the owner of 50% of the issued and outstanding shares of Smart Reward. The remaining 50% of the issued and outstanding shares of Smart Reward are held by Value Exchange Int’l (China) Limited, a wholly-owned subsidiary of VEII.
HotApp International Limited holds 5,000 shares of Smart Reward, representing 50% of the total issued and outstanding shares of Smart Reward. HotApp International Limited is a wholly-owned subsidiary of HotApp BlockChain Pte. Ltd., which is a wholly-owned subsidiary of Hapi Metaverse Inc. The remaining 5,000 shares of Smart Reward, representing 50% of the total issued and outstanding shares of Smart Reward, are held by Value Exchange Int’l (China) Limited, a wholly-owned subsidiary of Value Exchange International Inc. Hapi Metaverse Inc. owns 38.1% and 18% of the total issued and outstanding shares of Value Exchange International Inc as of December 31, 2022 and December 31, 2021.
Accordingly, the Company in total holds more than 1.4 billion consumers in 2015, up 31.6% on the previous year according to eMarketer’s forecast for these services.
** Hapi Cafe Limited (“HCHK”) was incorporated in Kik, Viber acquired by Rakuten, other popular messaging applications such as TelegramHong Kong on July 5, 2022 with an issued and Snapchat with unique value proposition are gaining marketpaid-up share significantly.
HotApp BlockChain Pte. Ltd. is likely more scrutiny over security, different levelsthe owner of accessibility, communication channels, Office Automation100% of the issued and Customer Relationshipoutstanding shares of HCHK. This business was acquired on September 5, 2022.
*** MOC HK Limited (“MOC”) was incorporated in Hong Kong on February 16, 2020 with an issued and paid-up share capital of HK$10 comprising 10 ordinary shares. MOC plans to be principally engaged in the food and beverage business in Hong Kong.
Hapi Cafe Ltd. is the owner of 100% of the issued and outstanding shares of MOC. This business was acquired on October 5, 2022. And during the acquisition, a goodwill $60,343 had been generated for the Company.
**** Shenzhen Leyouyou Catering Management capabilities,Co., Ltd. (“HCCN”) was incorporated in People’s Republic of China on October 10, 2022. HCCN plans to be principally engaged in the food and access to enterprises’ back-end servers.
Hapi Cafe Ltd. is the owner HCCN. This business was acquired on October 10, 2022.
***** Hapi Metaverse Inc. was incorporated in Texas on November 28, 2022 with an issued and Line successfully monetizing their enterprise customers by providing targeted advertising and commercial functions to their vast rangepaid-up share capital of customers. We expect this space to continue growing as there is currently no unified model across various platforms, as user experience standards and methods of content distribution vary widely. We feel there is an opportunity between traditional consumer facing providers such as Facebook and WeChat, who already have an established architecture for their enterprise platforms, and enterprise customers who continue to look for alternative ways to service their clients.
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Our Plan of Operations and Growth Strategy
We believe that we have significant opportunities to further enhance the value we deliver to our Users.users. We intend to pursue the following growth strategy:
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| ● | identify solutions and licensing opportunities in accelerating the digital transformation for direct selling, affiliate marketing, travel membership and O2O (online-to-offline) eCommerce operations. |
Achieved and Target Milestones:
In 2022, we have achieved the following milestones:
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Over the next twelve months we plan to
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Our Business Model and User Monetization Plan
We plan to generate revenue through the following;
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Our User Acquisition, Retention and Engagement Approach
With the focus on attractingbeing a service provider, our key segment, and after the initial attraction, we retain these users within our ecosystem, and finally in the final phase convert these users as our own ambassadors as they share their success with HotApp, continuously supporting and growing our user base.
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Our Challenges
Our ability to execute our growth strategies is subject to risks and uncertainties, including those relating to our ability to:
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Please see “Risk Factors” and other information included in this report for a detailed discussion on the above and other challenges and risks.
Our Key Competitive Strengths
We believe building the following will provide us with some key competitive strengthens:
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Our Technology
Based on our core HotApp’stechnology infrastructure, engine, we are building up additional functions on top of this stable and scalable infrastructure. The system architecture is designed in modular form so that we continue to add new applications modules while we are growing our customer base. In addition, we shall also be able to incorporate third party application module effectively to continue building localized HotApp services.
Key aspects or strengths of our technology include:
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Regulatory Matters
We are subject to the laws and regulations of those jurisdictions in which we plan to conduct our services, includingprimarily the Peoples’ Republic of China (“PRC”)United States and certain countries in Asia, which are generally applicable to business operations, such as business licensing requirements, income taxes and payroll taxes. In general, the development and operation of our business is not subject to special regulatory and/or supervisory requirements. Please see “Risk Factors” and other information included in this report for further discussion on the above matters.
Employees and Employment Agreements
As the datebeginning of this filling,2022, we have 10 full-time staff which we intendhad no full time employees. We had four employees at the end of 2022, resulting from the Food and Beverage (“f&b”) business of MOC HK Limited. We expect to maintain our headcounts at current levels with moderate increases in the number of employees in line with business activities for the foreseeable future and if our financefinancing permits. The Company has employees under written contracts that provide for at will termination and include confidentiality clauses.
As of the date of this Report, we have not entered into any employment arrangement with any officers, except for our Chief Executive Officer, Lee Wang Kei. Mr. Lum Kan Fai on June 1, 2015 and Mr. Lum was appointedLee is paid $2,000 per month by HotApp International Limited, a subsidiary of the Company. Our largest stockholder, Alset Inc., has provided staff without charge to our Company. We intend to outsource many functions of our business for the Board of Directors and as Chief Technology Officer on June 16, 2015.
Insurance
We do not maintain property insurance, business interruption insurance or general third-party liability insurance, nor do we maintain product liability or key-man insuranceinsurance.
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Additional Information
The U.S. Securities and Exchange Commission maintains an internet website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the Commission. The periodic reports and other information that the Company files with the Commission are available for inspection on the Commission’s website free of charge as soon as reasonably practicable after they are electronically filed with or furnished to the Commission.
The Company maintains a website at https://www.hapimetaverse.com where you may also access these materials free of charge. We have included our website address as an inactive textual reference only and the information contained in, and that can be accessed through, our website is not incorporated into and is not part of this report on Form 10-K.
Item 1A. Risk Factors.
An investment in our common stock involves a high degree of risk. Investors should carefully consider the following factors and other information before deciding to invest in our Company. If any of the following risks actually occur, our business, financial condition, results of operations and prospects for growth would likely suffer. As a result, you could lose all or part of your investment.
Our business is subject to numerous risk factors, including the following:
RISKS RELATED TO OUR FINANCIAL CONDITION
There is substantial doubt about the company’sCompany’s ability to continue as a going concern.
The report of Rosenberg Rich Baker BermanGrassi & Company,Co., our independent registered public accounting firm, with respect to our consolidated financial statements atas of and for the year ended December 31, 20152022 contains an explanatory paragraph as to our potential inabilityability to continue as a going concern. As a result, this may adversely affect our ability to obtain new financing on reasonable terms or at all. Investors may be investingunwilling to invest in a company that will not have the funds necessary to continue to deploy its business strategies.
Failure to raise additional capital to fund future operations could harm our business and results of operations.
As reflected on our audited consolidated financial statements as of and for the year ended December 31, 20152022 contained herein, we have incurred net losses, net cash used in operating activitiesloss since inception, and have a working capital deficit of $146,153 at December 31, 2015.$2,076,017. We will require additional financing in order to maintain itsour corporate existence and to implement itsour business plans and strategy. The timing and amount of our capital requirements will depend on a number of factors, including our initial operational results, with respect to user acceptance of our HotApp product, the need for other expenditures, and competitive pressures. If additional funds are raised through the issuance of equity or convertible debt securities, the percentage ownership of our then-existing stockholders will likely be reduced significantly. We cannot make assurances that any financing will be available on terms favorable to us or at all. If adequate funds are not available on acceptable terms, our ability to fund our business strategy, ongoing operations, take advantage of unanticipated opportunities, or otherwise respond to competitive pressures could be significantly limited. Ourand in turn our business, financial condition and results of operations will be harmed by such limitations.
RISKS RELATED TO OUR BUSINESS
Management has identified a material weakness in the first quarterdesign and effectiveness of 2015. To date,our internal controls, which, if not remediated could affect the accuracy and timeliness of our financial reporting and result in misstatements in our consolidated financial statements.
In connection with the preparation of our Report on Form 10-K, an evaluation was carried out by management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of December 31, 2022. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
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During evaluation of disclosure controls and procedures as of December 31, 2022 conducted as part of our annual audit and preparation of our annual consolidated financial statements, management conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures and concluded that our disclosure controls and procedures were not effective. Management determined that at December 31, 2022, we had a material weakness that relates to the relatively small number of staff who have bookkeeping and accounting functions (this staff is provided by Alset Inc., our largest shareholder, at no cost to us). This limited number of staff prevents us from segregating duties within our internal control system.
This material weakness, which remained unremediated by the Company as of December 31, 2022, could result in a misstatement to the accounts and disclosures that would result in a material misstatement to our annual or interim consolidated financial statements that would not be prevented or detected. If we do not remediate the material weakness or if other material weaknesses are identified in the future, we may be unable to report our financial results accurately or to report them on a timely basis, which could result in the loss of investor confidence and have a limited user base and limited indications of commercial acceptability. While we believe thatmaterial adverse effect on our product will be commercially received, we cannot predict if our product will be a commercial success.
Our Company cannot predict if it can achieve profitable operations.
The Company has only had limited operations to date and requires significant additional financing to reach its projected milestones, which includesinclude further product development, product marketing and general overhead expenditures. While the Company considers its business to be highly prospective, nonetheless itIt may be difficult for the Company to attract funding necessary to reach its projected milestones. Moreover, even if it achieves its projected milestones, the Company cannot predict whether it will reach profitable operations.
The coronavirus or other adverse public health developments could have a material and adverse effect on our business operations, financial condition and results of operations.
In December 2019, a novel strain of coronavirus (COVID-19) was first identified in Wuhan, Hubei Province, China, and has since spread to a number of other countries, including the United States. The COVID-19 pandemic’s far-reaching impact on the global economy could negatively affect various aspects of our business. The extent to which the COVID-19 pandemic may impact our business will depend on future developments, which are highly uncertain and cannot be predicted.
The COVID-19 pandemic may adversely impact our potential to expand our business activities. The COVID-19 pandemic has impacted, and may continue to impact, the global supply of certain goods and services in ways that may impact the sale of products to consumers that we, or companies we may partner with, will attempt to make. The COVID-19 pandemic may prevent us from pursuing otherwise attractive opportunities.
In addition, the COVID-19 pandemic could directly impact the ability of our management and service providers to continue to work, and our ability to conduct our operations in a prompt and efficient manner. Our management has shifted to mostly working from home since March 2020, but this has had minimal impact on our operations to date. However our management’s ability to travel has been significantly limited, and limitations on the mobility of our management may slow down our ability to enter into new transactions and expand existing projects.
To date, we have not been required to expend significant resources related to employee health and safety matters related to the COVID-19 pandemic. We have a small management team, however, and the inability of any significant number of our management team to work due to illness or the illness of a family member could adversely impact our operations.
Our business is highly competitive. Competition presents an ongoing threat to the success of our business.
We face significant competition in every aspect of our business, including from companies that provide tools to facilitate the sharing of information, companies that enable marketers to display advertising and companies that provide development platforms for applications developers. We compete with companies that offer full-featured products that replicate the range of communications and related capabilities we provide. We also compete with companies that develop applications, particularly mobile applications, that provide social or other communications functionality, such as messaging, photo- and video-sharing and micro-blogging, and companies that provide web- and mobile-based information and entertainment products and services that are designed to engage users and capture time spent online and on mobile devices. In addition, we face competition from traditional, online, and mobile businesses that provide media for marketers to reach their audiences and/or develop tools and systems for managing and optimizing advertising campaigns.
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Most, if not all, of our current and potential competitors may have significantly greater resources or better competitive positions in certain product segments, geographic regions or user demographics than we do. These factors may allow our competitors to respond more effectively than us to new or emerging technologies and changes in market conditions.
Our competitors may develop products, features, or services that are similar to ours or that achieve greater acceptance, may undertake more far-reaching and successful product development efforts or marketing campaigns, or may adopt more aggressive pricing policies. Certain competitors could use strong or dominant positions in one or more markets to gain competitive advantage against us in our target market or markets. As a result, our competitors may acquire and engage users or generate revenue at the expense of our own efforts, which may negatively affect our business and financial results.
We believe that our ability to compete effectively depends upon many factors both within and beyond our control, including:
| ● | the popularity, usefulness, ease of use, performance, and reliability of our products compared to our |
| ● | the size and composition of our user base; |
| ● | the engagement of our users with our products and competing products; |
| ● | the timing and market acceptance of products, including developments and enhancements to our or our |
| ● | our ability to monetize our products; |
| ● | customer service and support efforts; |
| ● | acquisitions or consolidation within our industry, which may result in more formidable competitors; |
| ● | our ability to attract, retain, and motivate talented employees, particularly software engineers, designers, and product managers; |
| ● | our ability to cost-effectively manage and grow our operations; and |
| ● | our reputation and brand strength relative to those of our competitors. |
We are a development stage company and we may never generate significant revenues which could cause our business to fail.
We are a development stage company and we have not generated anylimited revenues as of the date of this Report. Since inception, the Company has incurred net lossesloss of $3,688,180$6,288,884 and has net working capital deficit of $146,153$2,076,017 at December 31, 2015.2022. We expect to operate with net lossesloss for the next financial year-ending December 31, 20162023 or longer. We cannot predict the extent of these future net losses, or when we may attain profitability, if at all. If we are unable to generate significant revenue or attain profitability, we will not be able to sustain operations and will have to curtail significantly or cease operations.
We have a limited operating history that investors can use to evaluate us, and the likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a small developing company.
We were incorporated in Delaware on March 7, 2012. We have no significant financial resources and have recorded minimal revenues.revenues in the year ended December 31, 2022. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a small developing company starting a new business enterprise and the highly competitive environment in which we will operate. Since we have a limited operating history, we cannot assure you that our business will be profitable or that we will ever generate sufficient revenues to meet our expenses and support our anticipated activities.
If we do not successfully develop new products and services, our business may be harmed.
Our business and operating results may be harmed if we fail to expand our various product and service offerings (either through internal product or capability development initiatives or through partnerships and acquisitions) in such a way that achieves widespread market acceptance or that generates significant revenue and gross profits to offset our operating and other costs. We cannot assure investors thatmay not successfully identify, develop and market new product and service offerings in a timely manner. If we will effectively manageintroduce new products and services, they may not attain broad market acceptance or contribute meaningfully to our growth.
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The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could harm our business.
We currently depend on the continued services and performance of our key personnel, including Mr. Chan Heng Fai, Lee Wang Kei and Mr. Lum Kan Fai. In addition, many of our key technologies and systems are custom-made for our business by our personnel. The loss of key personnel, including members of management, as well as key engineering, product development, marketing, and sales personnel, could disrupt our operations and have an adverse effect on our business.
Each of Mr. Chan, Mr. Lee and Mr. Lum are engaged in other business ventures, including other technology-related businesses. In order to successfully implement our ability to attract and retain the personnelbusinesses plans, we will need to maintain our competitive position. In particular, we intend to continue to hire a significant number of technical personnel in the foreseeable future, and we expect to face significant competition from other companies in hiring suchrecruit additional qualified personnel. Our ability to hire and retain qualified personnel could be impaired by any diminution of our reputation, decrease in compensation levels relative to our competitors, modifications of our compensation philosophy or competitor hiring programs. If we cannot attract, hire and retain qualified personnel, our business, financial condition and results of operations would be adversely affected.
We may incur significant costs to be a public company to ensure compliance with U.S. corporate governance and accounting requirements, and we may not be able to absorb such costs.
We may incur significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect these costs to approximateequal at least $50,000$107,000 per year, consisting of $25,000$10,000 in legal, $20,000$80,000 in audit and $5,000$17,000 for financial printing and transfer agent fees. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. We may not be able to cover these costs from our operationsoperations’ revenue and may need to raise or borrow additional funds. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. In addition, we may not be able to absorb these costs of being a public company which will negatively affect our business operations.
Alset Inc. owns a significant amount of the outstanding common stock of the Company and could take actions which other investors may deem as detrimental to investments for which there would be no remedy.
Alset Inc. beneficially owns approximately 98.17%99.693% of the outstanding common stock of our Company as of the date of this filing. Through this ownership, the shareholderthis stockholder has the ability to substantially influence theour board, our management, and our policies and business operations. In addition, the rights of the holders of our common stock will be subject to and may be adversely affected by, the rights of holders of any preferred stock that may be issued in the future. Because of the shareholdings of the shareholderthis majority ownership, Alset Inc. may cause the companyCompany to engage in business combinations without having to seeking shareholderother stockholders’ approval.
Such concentration of ownership also may have the effect of delaying or preventing a change in control, which may be to the benefit of this one shareholderstockholder but not in the interest of the other investors. Additionally, as investors oneminority stockholders would not be able to obtain the necessary shareholderstockholder vote to affect any change in the course of our business. This lackconcentration of shareholder control could prevent investorsminority stockholders from removing from theour Board of Directors any directors who aremay be perceived as not managing the company with sufficient skill to make it profitable, which could prevent us from becoming profitable.
We may face liability for information displayed on or accessible via our website, and for other content and commerce-related activities, which could reduce our net worth and working capital and increase our operatingcause us to suffer losses.
We could face claims for errors, defamation, negligence, or copyright or trademark infringement based on the nature and content of information displayed on or accessible via our website, which could adversely affect our financial condition. Even to the extent that claims made against us do not result in liability, we may incur substantial costs in investigating and defending such claims.
Our insurance, if any, may not cover all potential claims to which we aremight be exposed to or may not be adequate to indemnify us for all liabilities that we may be exposed.incur. Any imposition of liability that is not covered by insurance or is in excess of insurance coverage would reduce our net worth and working capital and increase our operatingcause us to suffer losses.
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If our costs and expenses are greater than anticipated and we are unable to raise additional working capital, we may be unable to fully fund our operations and to otherwise execute our business plan.
We do not currently have sufficient funds or any agreements for additional funds, for us to continue our business for the next 12 months. Should our costs and expenses prove to be greater than we currently anticipate, or should we change our current business plan in a manner that will increase or accelerate our anticipated costs and expenses, the depletion of our working capital would be accelerated. To the extent it becomes necessary to raise additional cash in the future as our current cash and working capital resources are depleted, we will seek to raise it through the public or private sale of debt or equity securities, funding from joint-venture or strategic partners, debt financing or short-term loans, or a combination of the foregoing. We may also may seek to satisfy indebtedness without any cash outlay through the private issuance of debt or equity securities. We currently do not have any binding commitments for, or readily available sources of, additional financing. We cannot give you any assurance that we will be able to secure the additional cash or working capital that we may require to continue our operations.
If we require additional capital and even if we are able to raise additional financing, we might not be able to obtain it on terms that are not unduly expensive or burdensome to the companyCompany or disadvantageous to our existing shareholders.
If we require additional capital and even if we are able to raise additional cash or working capital through the public or private sale of debt or equity securities, funding from joint-venture or strategic partners, debt financing or short-term loans, or the satisfaction of indebtedness without any cash outlay through the private issuance of debt or equity securities, the terms of such transactions may be unduly expensive or burdensome to the Company or disadvantageous to our existing shareholders.stockholders. For example, we may be forced to sell or issue our securities at significant discounts to market, or pursuant to onerous terms and conditions, including the issuance of preferred stock with disadvantageous dividend, voting or veto, board membership, conversion, redemption or liquidation provisions; the issuance of convertible debt with disadvantageous interest rates and conversion features; the issuance of warrants with cashless exercise features; the issuance of securities with anti-dilution provisions; and the grant of registration rights with significant penalties for the failure to quickly register. If we raise debt financing, we may be required to secure the financing with all of our business assets, which could be sold or retained by the creditor should we default in our payment obligations.
We may not timely and effectively scale and adapt our existing technology and network infrastructure to ensure that our services and solutions are accessible within an acceptable load time. Additionally, other catastrophic occurrences beyond our control could interfere with access to our services.
A key element to our continuedpotential growth is the ability of our users (whom we define as anyone who downloaddownloads and use)uses the app) in all geographies to access our services and solutions within acceptable load times. We may, in the future, experience service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, and denial of service, or fraud or security attacks. In some instances, we may not be able to identify the cause or causes of these website performance problems within an acceptable period of time. If our services are unavailable when users attempt to access them as quickly as usersthey expect, users may seek other services to obtain the information for which they are looking, and may not return to our use our services as often in the future, or at all. This would negatively impact our ability to attract new users and increase engagement of our existing users. We expect to continue to make significant investments to maintain and improve mobile application performance and to enable rapid releases of new features and products. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and operating results may be harmed.
Our systems are also vulnerable to damage or interruption from catastrophic occurrences such as earthquakes, floods, fires, power loss, telecommunication failures, terrorist attacks and other similar events. Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated problems could result in lengthy interruptions in our services.
We do not carry business interruption insurance sufficient to compensate us for the potentially significant losses, including the potential harm to the growth of our business that may result from interruptions in our serviceservices as a result of system failures.
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If our security measures are compromised, or if our websites are subject to attacks that degrade or deny the ability of members or customers to access our solutions, or if our member data is compromised, members and customers may curtail or stop to use of our solutions.
Our applicationapplications will involve the collection, processing, storage, sharing, disclosure and usage of members’ and customers’ information and communications, some of which may be private. We are vulnerable to computer viruses, break-ins, phishing attacks, attempts to overload our servers with denial-of-service or other attacks and similar disruptions from unauthorized use of our computer systems, any of which could lead to interruptions, delays, or website shutdowns, causing loss of critical data or the unauthorized disclosure or use of personally identifiable or other confidential information. If we experience compromises to our security that result in website performance or availability problems, the complete shutdown of our websites, or the loss or unauthorized disclosure of confidential information, such as credit card information, our members or customers may be harmed or lose trust and confidence in us, and decrease the use of our website and services or stop using our services in their entirety, and we would suffer reputational and financial harm.
In addition, we could be subject to regulatory investigations and litigation in connection with a security breach or related issue,issues, and we could also be liable to third parties for these types of breaches. Such litigation, regulatory investigations and our technical activities intended to prevent future security breaches are likely to require additional management resources and expenditures. If our security measures fail to protect this information adequately or we fail to comply with the applicable credit card association operating rules, we could be liable to both our customers for their losses, as well as the vendors under our agreements with them,them. In addition, we could be subject to fines and higher transaction fees, we could face regulatory action, and our customers and vendors could end their relationships with us, anyus. Any of whichthese developments could harm our business and financial results.
Public scrutiny of internet privacy and security issues may result in increased regulation and different industry standards, which could deter or prevent us from providing our current products and solutions to our members and customers, thereby harming our business.
The regulatory framework for privacy and security issues worldwide is evolving and is likely to remain in flux so for the foreseeable future. Practices regarding the collection, use, storage, display, processing, transmission and security of personal information by companies offering online services have recently come under increased public scrutiny. The U.S. government, including the White House, the Federal Trade Commission, the Department of Commerce and many state governments, are reviewing the need for greater regulation of the collection, use and storage of information concerning consumer behavior with respect to online services, including regulation aimed at restricting certain targeted advertising practices and collection and use of data from mobile devices. The FTC in particular has approved consent decrees resolving complaints and their resulting investigations into the privacy and security practices of a number of online, social media companies. Similar actions may also impact us directly.
Our business, including our ability to operate and expand internationally or on new technology platforms, could be adversely affected if legislation or regulations are adopted, interpreted, or implemented in a manner that is inconsistent with our current business practices and that may require changes to these practices, the design of our websites, mobile applications, products, features or our privacy policy. In particular, the success of our business is expected to be driven by our ability to responsibly use the data that our members share with us. Therefore, our business could be harmed by any significant change to applicable laws, regulations or industry standards or practices regarding the storage, use or disclosure of data our members choose to share with us, or regarding the manner in which the express or implied consent of consumers for such use and disclosure is obtained. Such changes may require us to modify our products and features, possibly in a material manner, and may limit our ability to develop new products and features that make use of the data that we collect aboutfrom our members.
We will rely on outside firms to host our servers and to provide telecommunication connections, and a failure of service by these providers could adversely affect our business and reputation.
We will rely upon third party providers to host oura number of our servers and provide telecommunication connections. In the event that these providers experience any interruption in operations or cease operations for any reason or if we are unable to agree on satisfactory terms for continued hosting relationships, we would be forced to enter into a relationship with other service providers or assume hosting responsibilities ourselves. If we are forced to switch hosting facilities, we may not be successful in finding an alternative service provider on acceptable terms or in hosting the computer server ourselves. We may also be limited in our remedies against these providers in the event of a failure of service. A failure or limitation of service or available capacity by any of these third partythird-party providers could adversely affect our business and reputation.
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Our products and internal systems rely on software that is highly technical, and if it contains undetected errors, our business could be adversely affected.
Our products and internal systems rely on software, including software developed or maintained internally and/or by third parties, that is highly technical and complex. In addition, our products and internal systems depend on the ability of such software to store, retrieve, process and manage immense amounts of data. The software on which we rely has contained, and may now or in the future contain, undetected errors, bugs or vulnerabilities. Some errors may only be discovered after the code has been released for external or internal use. Errors or other design defects within the software on which we rely may result in a negative experience for users and marketers who use our products, delay product introductions or enhancements, result in measurement or billing errors or compromise our ability to protect the data of our users and/or our intellectual property. Any errors, bugs or defects discovered in the software on which we rely could result in damage to our reputation, loss of users, loss of revenue or liability for damages, any of which could adversely affect our business and financial results.
A significant or prolonged economic downturn would have a material adverse effect on our results of operations.
Our results of operations are expected to affectbe affected by the level of business activity of our users, many of whom are expected to be businesses. These businesses, in turn, can be affected by general economic conditions and the level of economic activity in the industries and markets that they serve. On an aggregate basis, our clients may be less likely to hire as many senior executives or consultants during economic downturns and periods of economic uncertainty. To the extent our clients delay or reduce hiring senior executives or consultants due to an economic downturn or economic uncertainty, our results of operations will be adversely affected. A continued economic downturn or period of economic uncertainty and a decline in the level of business activity of our clients would have a material adverse effect on our business, financial condition and results of operations.
Any intellectual property rights we develop will be valuable and any inability to protect them could reduce the value of our products, services and brand.
Any trademarks, trade secrets, copyrights and other intellectual property rights that we develop will be important assets to us. There can be no assurance that the protections provided by these intellectual property rights will be adequate to prevent our competitors from misappropriating our technology or that our competitors will not independently develop technologies that are substantially equivalent or superior to our technology. There are events that are outside of our control that could pose a threat to our intellectual property rights. Additionally, protecting our intellectual property rights is costly and time consuming. Any increase in the unauthorized use of our intellectual property could make it more expensive to do business and harm our operating results.
We may be subject to intellectual property rights claims in the future, which may be costly to defend, could require the payment of damages and could limit our ability to use certain technologies in the future.
Companies in the Internet, technology and media industries own large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. As our product usage becomes more wide-spread, the possibility of intellectual property rights claims increases. Our technologies may not be able to withstand any third-party claims or rights against their use. Any intellectual property claims, with or without merit, could be time consuming, expensive to litigate or settle and could divert management resources and attention. An adverse determination also could prevent us from offering our products and services to others and may require that we procure substitute products or services for these members.
With respect to any intellectual property rights claim, we may have to pay damages or stop using technology found to be in violation of a third party’s rights. We may have to seek a license for the technology, which may not be available on reasonable terms and may significantly increase our operating expenses. The technology also may not be available for license to us at all. As a result, we also may be required to develop alternative non-infringing technology, which could require significant effort and expense. If we cannot license or develop technology for any infringing aspects of our business in the future, we may be forced to limit our product and service offerings and may be unable to compete effectively. Any of these results could harm our brand and operating results.
RISKS RELATED TO OUR COMMON STOCK
Once publicly trading, the application of the “penny stock” rules could adversely affect the market price of our common shares and increase your transaction costs to sell those shares.
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
| ● | that a broker or dealer approve a |
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In order to approve a person'sperson’s account for transactions in penny stocks, the broker or dealer must:
| ● | obtain financial information and investment experience objectives of the person; and |
| ● | make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. |
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:
| ● | sets forth the basis on which the broker or dealer made the suitability determination; and |
| ● | that the broker or dealer received a signed, written agreement from the investor prior to the transaction. |
Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
Disclosure also has to be made aboutconcerning the risks of investing in penny stocks in both public offerings and in secondary trading and aboutregarding the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
We do not expect to pay dividends in the future; any return on investment may be limited to the value of our common stock.
We do not currently anticipate paying cash dividends in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting it at such time as the boardBoard of directorsDirectors may consider relevant. Our current intention is to apply net earnings, if any, in the foreseeable future to increasing our capital base and development and marketing efforts. There can be no assurance that the companyCompany will ever have sufficient earnings to declare and pay dividends to the holders of our common stock, and in any event, a decision to declare and pay dividends is at the sole discretion of our Board of Directors. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if itsour stock price appreciates.
Our common stock price is likely to be highly volatile which may subject us to securities litigation thereby diverting our resources which may affect our profitability and results of operation.
Once listed, due to the nature of our companyCompany and its business, the market price for our common stock is expected to be limited and highly volatile. The following factors will add to our common stock price'sprice’s volatility:
| ● | the number of users of our |
| ● | actual or anticipated variations in our quarterly operating results; |
| ● | announcements of acquisitions; |
| ● | additions or departures of our key personnel; |
| ● | sales of our common |
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Some of these factors are beyond our control. These factors may decrease the market price of our common stock, regardless of our operating performance. In the past, plaintiffs have initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may be the target of similar litigation in the future. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.
In addition, as a result of the expected volatility inof our stock price, investors may be unable to resell their shares at a fair price or at a price lower than their entry price.
The trading market for our common stock may be limited.
If a market for our common stock develops, it is expected to be limited and thinly traded, and we can provide no assurance to investors that a more robust market will develop. If a market for our common stock does not develop, our shareholdersstockholders may not be able to resell the shares of our common stock they have purchased and they may lose all of their investment.
By issuing preferred stock, we may be able to delay, defer, or prevent a change of control.
Our Articles of Incorporation permitspermit us to issue, without approval from our stockholders, a total of 15,000,000 shares of preferred stock. Our Board of Directors can determine the rights, preferences, privileges and restrictions granted to, or imposed upon, the shares of preferred stock and to fix the number of shares constituting any series and the designation of such series. It is possible that our Board of Directors, in determining the rights, preferences and privileges to be granted when the preferred stock is issued, may include provisions that have the effect of delaying, deferring or preventing a change in control, discouraging bids for our common stock at a premium over the market price, or that adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock.
We have not voluntarily implemented various corporate governance measures, in the absence of which stockholders may have more limited protections against interested director transactions, conflicts of interests and similar matters.
We have not yet adopted any corporate governance measures and, since our securities are not yet listed on a national securities exchange, we are not required to do so. We have not adopted corporate governance measures such as an audit or other independent committees of our boardBoard of directorsDirectors as we presently do not have anyonly one independent directors.director. If we expand our board membership in future periods to include additional independent directors, we may seek to establish an audit and other committees of our boardBoard of directors.Directors. It is possible that if our Board of Directors included additional independent directors and if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions.
Securities analysts may not cover our common stock and this may have a negative impact on our common stock’s market price.
The trading market for our common stock in the future may depend on the research and reports that securities analysts publish about us or our business. We do not have any control over these analysts. There is no guarantee that securities analysts will cover our common stock. If securities analysts do not cover our common stock, the lack of research coverage may adversely affect our common stock’s market price, if any. If we are covered by securities analysts, and our stock is downgraded, our stock price would likely decline. If one or more of these analysts ceases to cover us or fails to publish regularly reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
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Since members of our operations in Chinaboard of directors are not residents of the United States and allcertain of our directors and officers resideassets are located outside of the United States.
Members of our operationssenior management team, including our Chief Executive Officer and Chief Financial Officer, have their primary residences and business offices in China. Our CEOAsia, and director resides,a portion of our assets and substantially alla substantial portion of the assets of that personthese directors are located outside the United States. As a result, it may be more difficult for you to bring an action against us orenforce a lawsuit within the United States against these individualsnon-U.S. residents than if they were residents of the United States. Also, it may be more difficult for you to enforce any judgment obtained in the United States in the event that you believe that your rights have been infringed under the securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of China may render you unable to enforce a judgment against our assets or the assets of a directors and officers.
Item 1B. Unresolved Staff Comments.
Not Applicable
Item 2. Properties
Our US office is located at 4800 Montgomery Lane, Suite 210, Bethesda MD 20814. We occupy one office at thethis location free of rent based on a month-to-month arrangement with onean affiliate of Alset Inc., the Company’s affiliates.
Item 3. Legal Proceedings.
The Company is not a party to any proceedings, and no such proceedings are known to be contemplated.
There are no material proceedings to which any director, officer or affiliate of the Company, or any beneficial owner of record of more than five percent of any class of voting securities of the Company, or any associate of any such director, office, affiliate of the Company, or security holder is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.
Item 4. Mine Safety Disclosure.
Not Applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Presently, there is no established public trading market for our shares of common stock. On June 9, 2015, the Financial Industry Regulatory Authority (“ FINRA ” ),FINRA”), cleared the Company’ sCompany’s request under Rule 15c2 - 1115c2-11 for an unpriced quotation on the OTC Bulletin Board and in OTC Link under the symbol HTPN. Since that time, through the date of this 10K,Annual Report, the Company has not had any trading in its stock.
Holders of Our Common Stock
As of the date of this filing, we had 34 shareholders106 stockholders of our common stock.
Dividends
Since inception we have not paid any dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock. Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our Board of Directors will have the discretion to declare and pay dividends in the future. Payment of dividends in the future will depend upon our earnings, capital requirements and other factors, which our Board of Directors may deem relevant.
Securities authorized for issuance under equity compensation plans
On July 30, 2018, the Company adopted an Equity Incentive Plan (the “Plan”). The Plan is intended to encourage ownership of our shares by employees, directors and certain consultants to the Company, in order to attract and retain such people, to induce them to work for the benefit of the Company. The Plan provides for the grant of options and/or other stock-based or stock-denominated awards. Subject to adjustment in accordance with the terms of the Plan, 50,000,000 shares of Common Stock of the Company have been reserved for issuance pursuant to awards under the Plan. The Plan will be administered by the Company’s Board of Directors. This Plan shall terminate ten (10) years from the date of its adoption by the Board of Directors. The Plan was approved by the stockholder holding a majority of the Company’s issued and outstanding shares of common stock.
Recent sales of unregistered securities; use of proceeds from registered securities
On December 20, 2018, the Board of Directors of AIL announced its intention to sell up to 3,200,000 shares of the Company to independent third parties at US$0.50 per share for an aggregate cash consideration of up to US$1,600,000. The purpose of this proposed sale was to raise funds to continue to support the general corporate and working capital of the Company, including but not limited to the operating costs of the Company. During 2021, AIL has sold 1,449,200 shares of the Company to independent third parties, and AIL owned 99.693% of the Company after such transactions. On August 30, 2022, Alset International Limited entered into a stock purchase with its controlling stockholder, Alset Inc. (formerly known as Alset EHome International Inc.) in relation to the disposal of 505,341,376 shares of the Company’s common stock, representing approximately 99.69% of the total issued and paid-up share capital of the Company, to Alset Inc. After this transaction, Alset Inc. became our largest stockholder.
Performance Graph
Not applicable to smaller reporting companies.
Purchases of Equity Securities by the issuer and affiliated purchasers
During the period covered by this report, the Company did not repurchase any shares of the Company’s common stock.
Item 6. Selected Financial Data.
Not applicable to smaller reporting companies.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 20152022 COMPARED TO
YEAR ENDED DECEMBER 31, 2014
Results of Operations
For the years ended December 31, 20152022 and 2014
Revenue
Revenue consists primarily of salarythe services rendered to customers in the amount of $28,143. The Company began generating revenue from a project providing AI chatbot services to Value Exchange Int’l (Hong Kong) Limited, a related company of the company and benefits. Expendituresa subsidiary of VEII located in Hong Kong, on a monthly basis in 2022. And revenue also generated from f&b business after acquired MOC on 5 October, 2022 was $41,772. Total revenues were $69,915 and $0, respectively, for the year ended December 31, 2022 and 2021.
Cost of revenue
Cost of revenue consists primarily of outside service fees incurred duringdirectly to the research phase are expensed as incurred. We expect our researchproject. Total cost of revenue for the year ended December 31, 2022 and development expenses to decrease as we streamline2021 were $9,151 and restructure our team, to further develop$0, respectively. And the platform, new featurescost from f&b revenue were $19,093 and services.$0 respectively, for the year ended December 31, 2022 and 2021, of which $4,821 and $0 were depreciation for leasehold improvement respectively. Total research and developmentcost of revenue for the years ended December 31, 20152022 and 20142021 were $1,322,159$28,244 and $220,215, respectively. The increase was due to the development of HotApp’s new features such as app-to-app calling and other functionalities for our mobile platform in 2015.
Operating Expenses
Operating expenses consist primarily of third partysalary and benefits, professional service providers.fees, consulting expenses and maintenance expenses of existing software framework. We expect to maintain our sales and marketingoperating expenses to decrease as we streamline our business.with moderate changes in line with business activities. Total sales and marketingoperating expenses for the years ended December 31, 20152022 and 20142021 were $442,122$411,562 and $37,660,$172,370, of which $1,524 and $277 were depreciation expenses and $16,894 and $0 were amortization of right-of-use assets, respectively. The increase was mainly due to the marketingincrease in consulting expenses incurred for the acquisitionexploration of new users for HotApp.
Other (Expenses) / Income
For the years ended December 31, 20152022 and 2014 were $1,272,8652021, we have incurred $62,677 and $327,171, respectively. Included in those amounts were $0 and $62,438 respectively, in general and administrative expenses of a related party. The increase from the prior period was due to business growth and cost to comply with our reporting obligations under US securities laws. For the years ended December 2015 and 2014, we incurred $60,068 and $0 relating to impairment of excess price over net assets.
Liquidity and Capital Resources
At December 31, 2015,2022, we had cash of $495,136$514,260 and a working capital deficit of $146,153. Cash had decreased$2,016,821. The increase in the working capital deficit during 2015 primarilythe year ended December 31, 2022 was due to operating losses incurredthe increase in 2015.
We had a total stockholders’ equitydeficit of $363,092$1,875,788 and an accumulated deficit of $3,688,180$6,288,884 as of December 31, 20152022 compared with a total stockholders’ deficit of $452,901$206,584 and an accumulated deficit of $672,083$4,560,449 as of December 31, 2014.2021. This difference is primarily due to the net loss incurred in 2015 andduring the Shareholder’s loan conversion.
For the year ended December 31, 2022, we recorded a net loss of $1,728,020, excluded loss from discontinued operations $648.
We had ($432,083) and $4,490,664 of net cash from financingused in operating activities of $402,687 for the yearsyear ended December 201531, 2022. We had a negative change of $1,540 due to prepaid expenses and 2014 respectively.
For the year ended December 31, 2014,2021, we recorded a net income of $1,106,794, excluded the Company issuedloss from discontinued operations $3,259.
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We had net cash used in operating activities of $201,492 for the year ended December 31, 2021. We had a Singapore Dollar denominated promissory note (the “Note”) for S$5,250,553.93 (equivalentnegative change of $1,300,000 due to $3,900,225 USD asunrealized (gain) on security investment, $523 due to prepaid expenses and $3,434 due to security deposit and other receivable and a negative change of exchange rate on$3,434 due to accounts payable and accrued expenses.
In the year ended December 28, 2014) to SED, its controlling shareholder. The Note is non-interest bearing31, 2022, we had net cash used in investing activities of $1,817,956. We had used $1,743,735 in the purchase of securities investment, used $70,523 in the acquisition of MOC and matures on July 25, 2015. The Note has no prepayment penalty. It can be extendedused $3,698 in the purchase of property and equipment. In the year ended December 31, 2021, we had net cash used in investing activities of $651,990. We had used $650,000 in the purchase of securities investment and used $1,990 in the purchase of property and equipment.
For the year ended December 31, 2022, we had net cash provided by mutual agreement upon 30 day written notice from the Company. The Note relates to three separate fundings by SED, US $185,725 (equivalent to about S$250,000) on October 16, 2014, US$50,000 on October 28, 2014 and US$3,714,500 (equivalent to about S$5,000,000) on December 26, 2014. The remaining US$1,275financial activities of $2,568,604, of which $2,568,604 was due to advances from shareholder of SED. The Note is reported withinrelated parties. For the caption “Loan from Shareholder” at US$3,900,225 and US$0 on the consolidated balance sheet as atyear ended December 31, 2014 and December 31, 2015 respectively. The decrease in Loan from Shareholder2021, we had net cash provided by financial activities of $893,589, of which $892,945 was principally due to the conversionadvances from related parties and $644 was due to subsidiary’s issuance of the Note into common stock of the Company (see below) offset by a payment on behalf of the Company for setting up HotApp International Limited by the Director.
We will need to raise additional capital through equity or debt financings. However, we cannot be certain that such capital (from SEDour largest shareholder or third party)parties) will be available to us or whether such capital will be available on a term that is acceptable to us. Any such financing likely would be dilutive to existing shareholdersstockholders and could result in significant financial and operating covenants that would negatively impact our business. If we are unable to raise sufficient additional capital on acceptable terms, we will have insufficient funds to operate our business and pursue our business plan.
Consistent with Section 144 of Delaware General Corporation Law, it is our current policy that all transactions between us and our officers, directors and their affiliates will be entered into only if such transactions are approved by a majority of the disinterested directors, are approved by vote of the stockholders, or are fair to us as corporation as of the time it is authorized, approved or ratified by the board. We will conduct an appropriate review of all related party transactions on an ongoing basis.
Critical Accounting Policies
Our discussion and analysis of the consolidated financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our consolidated financial statements, so we consider these to be our critical accounting policies. Because of the uncertainty inherent in these matters, actual results could differ from the estimates we use in applying the critical accounting policies. Certain of these critical accounting policies affect working capital account balances, including the policies for revenue recognition, allowance for doubtful accounts, inventory reserves and income taxes. These policies require that we make estimates in the preparation of our consolidated financial statements as of a given date.
Within the context of these critical accounting policies, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.
Revenue recognition
Accounting Standards Codification (“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. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. The Company recognizes revenueadopted this new standard on January 1, 2018 under the modified retrospective method to all contracts not completed as of January 1, 2018 and the adoption did not have a material effect on our consolidated financial statements but we expanded our disclosures related to contracts with customers below.
Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred,(or as) the sales price is fixedCompany transfers promised goods or determinable,services or catering service to its customers in amounts that reflect the consideration to which the Company expects to be entitled to in exchange for those goods or services or catering service, which occurs when (or as) the Company satisfies its contractual obligations and collectability is reasonably assured. The Group currently has no revenue but plans to derive its revenue from membership subscription services, offering the platform for mobile games developed by third parties and other services, including the usetransfers over control of the paid emoticons and mobile marketing services.
| 21 |
The Company began generating revenue from f&b business by providing quality catering service and a project providing services to Value Exchange Int’l (Hong Kong) Limited, a subsidiary of Value Exchange International, Inc.(“VEII”) located in Hong Kong, on a monthly basis in 2022. VEII is a related party of the Company. Upon receipt of purchase order from this customer, we issue the corresponding invoice and provide the service accordingly. Any payment received from this customer in advance is presented within other payables on the Company’s consolidated balance sheets.
Income taxes
Current income taxes are provided for in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Net operating loss carry forwards and credits are applied using enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that a portion of or all of the deferred tax assets will not be realized. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics.
The impact of the New EIT Law to our operations, specifically with respect to our tax residency. The New EIT Law specifies that legal entities organized outside of the PRC will be considered residents for PRCan uncertain income tax purposes if their “de facto management bodies” as “establishments that carry on substantial and overall management and control over the operations, personnel, accounting, properties, etc. of the Company.” Because of the uncertainties resulted from limited PRC guidanceposition on the issue,income tax return is recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it is uncertain whether our legal entities outside the PRC constitute residents under the New EIT Law. If one or morehas less than a 50% likelihood of our legal entities organized outside the PRC were characterized as PRC residents, the impact would adversely affect our results of operations.
Investment in Securities - related party
The Company entered into Securities Purchase Agreements with pursuant to which the Company purchased 6,500,000 and 7,276,163 shares of Value Exchange International, Inc., a Nevada corporation (“VEII”) on April 8, 2021 and October 17, 2022 respectively, which are recorded in fair value of $2,341,948 at the balance sheet. The updated standard is effectiveend of the year. $1,427,094 unrealized loss are recognized for us beginning on January 1, 2017. Wethe year 2022.
Off –Balance Sheet Arrangements
As of December 31, 2022, we do not expect the adoption of this guidance to have a significant effect on our consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
| 22 |
Item 8. Financial Statements.
HAPI METAVERSE INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2015
| 23 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Hapi Metaverse Inc.
Bethesda, Maryland
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of HotApp International,Hapi Metaverse Inc. and Subsidiaries, formerly known as GigWorld Inc. and Subsidiaries, (the Company) as of December 31, 20152022, and 2014,2021 and the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit),deficit, and cash flows for each of the years in the two year period ended December 31, 20152022, and 2014. HotApp International, Inc.’s management is responsible for thesethe related notes (collectively referred to as the consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully discussed in Note 1 to the consolidated financial statements, the Company has incurred netCompany’s significant accumulated operating losses net cash used in operating activities and has working capital of $146,153 at December 31, 2015 and 2014. These conditionsdeficit raise substantial doubt about its ability to continue as a going concern. Management'sManagement’s evaluation of the events and conditions, and management’s plans in regard to theseregarding those matters, are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
We did not identify any critical audit matters during the course of our audit of the financial statement as of and for the years ended December 31, 2022 and 2021.
GRASSI & CO., CPAs, P.C.
We have served as the Company’s auditor since 2022.
Jericho, New York
March 29, 2023
| 24 |
HAPI METAVERSE INC. (FORMERLY KNOWN AS OF DECEMBERGIGWORLD INC.)
Consolidated Balance Sheets
as of December 31, 2015 AND 2014
| 12/31/15 | 12/31/14 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 495,136 | $ | 4,009,884 | ||||
| Prepaid expenses | 26,492 | 5,661 | ||||||
| Deposits | 4,154 | 16,056 | ||||||
| TOTAL CURRENT ASSETS | 525,782 | 4,031,601 | ||||||
| Fixed assets, net | 192,308 | 79,400 | ||||||
| Excess purchase price over net assets | - | 60,068 | ||||||
| Deposits | 24,631 | - | ||||||
| TOTAL ASSETS | $ | 742,721 | $ | 4,171,069 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | 379,379 | $ | 191,719 | ||||
| Accrued taxes | 250 | 3,813 | ||||||
| Loan from shareholder | - | 4,428,438 | ||||||
| TOTAL CURRENT LIABILITIES | 379,629 | 4,623,970 | ||||||
| TOTAL LIABILITIES | 379,629 | 4,623,970 | ||||||
| STOCKHOLDERS' EQUITY (DEFICIT): | ||||||||
| Preferred stock, $0.0001 par value, 15,000,000 shares authorized, 13,800,000 issued and outstanding | 1,380 | 1,380 | ||||||
| Common stock, $.0001 par value, 500,000,000 shares authorized, 5,909,687 and 5,132,000 shares issued and outstanding, as of December 31, 2015 and 2014, respectively | 591 | 513 | ||||||
| Accumulated other comprehensive income (loss) | (152,719 | ) | 4,022 | |||||
| Additional paid-in capital | 4,202,020 | 213,267 | ||||||
| Accumulated deficit | (3,688,180 | ) | (672,083 | ) | ||||
| TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | 363,092 | (452,901 | ) | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ | 742,721 | $ | 4,171,069 | ||||
| December 31, 2022 | December 31, 2021 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 514,260 | $ | 245,780 | ||||
| Prepaid expenses and other receivable | 117,936 | 1,870 | ||||||
| Prepaid expenses and other receivable – related party | 2,802 | - | ||||||
| Inventory | 894 | - | ||||||
| Investment in Securities - related party | 2,341,948 | 1,950,000 | ||||||
| TOTAL CURRENT ASSETS | 2,977,840 | 2,197,650 | ||||||
| Property and Equipment, net | $ | 10,305 | $ | 1,713 | ||||
| Other non-current assets | 103 | 102 | ||||||
| Goodwill | 60,343 | - | ||||||
| Operating lease right-of-use assets, net | 129,478 | - | ||||||
| TOTAL ASSETS | $ | 3,178,069 | $ | 2,199,465 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | 24,601 | $ | 12,016 | ||||
| Accounts payable and accrued expenses – related party | 7,838 | - | ||||||
| Accrued taxes | 3,816 | 7,742 | ||||||
| Amount due to related parties | 4,886,507 | 2,383,698 | ||||||
| Operating lease liabilities-Current | 71,899 | - | ||||||
| Current liabilities of discontinued operations | - | 2,593 | ||||||
| TOTAL CURRENT LIABILITIES | 4,994,661 | 2,406,049 | ||||||
| NON-CURRENT LIABILITIES: | ||||||||
| Operating lease liabilities - Non-current | $ | 59,196 | $ | - | ||||
| TOTAL NON-CURRENT LIABILITIES | 59,196 | - | ||||||
| TOTAL LIABILITIES | $ | 5,053,857 | $ | 2,406,049 | ||||
| STOCKHOLDERS’ DEFICIT: | ||||||||
| Preferred stock, $ par value, shares authorized, issued and outstanding as of December 31, 2022 and 2021 | - | - | ||||||
| Common stock, $ par value, shares authorized, shares issued and outstanding, as of December 31, 2022 and 2021 | 50,690 | 50,690 | ||||||
| Additional paid-in capital | 4,679,498 | 4,604,191 | ||||||
| Accumulated other comprehensive loss | (315,241 | ) | (299,398 | ) | ||||
| Accumulated deficit | (6,288,884 | ) | (4,560,449 | ) | ||||
| TOTAL HAPI METAVERSEINC STOCKHOLDERS’ DEFICIT | (1,873,937 | ) | (204,966 | ) | ||||
| NON-CONTROLLING INTERESTS | (1,851 | ) | (1,618 | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | (1,875,788 | ) | (206,584 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 3,178,069 | $ | 2,199,465 | ||||
The accompanying notes to the consolidated financial statements are an integral part of these statements.
| 25 |
HAPI METAVERSE INC. (FORMERLY KNOWN AS GIGWORLD INC.)
CONSOLIDATED STATEMENTSTATEMENTs OF operations and COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 20152022 AND 2014
| Year Ended December 31, | ||||||||
| 2015 | 2014 | |||||||
| Operating expenses: | �� | |||||||
| Research and product development | 1,322,159 | 220,215 | ||||||
| Stock-based compensation | - | 8,250 | ||||||
| Sales and marketing | 442,122 | 37,660 | ||||||
| Depreciation | 37,633 | 4,182 | ||||||
| Impairment of intangible asset | 60,068 | - | ||||||
| General and administrative | 1,175,164 | 252,301 | ||||||
| General and administrative from a related party | - | 62,438 | ||||||
| Total operating expenses | 3,037,146 | 585,046 | ||||||
| Loss from operations | (3,037,146 | ) | (585,046 | ) | ||||
| Other income (expenses): | ||||||||
| Interest expense – related party | - | (4,067 | ) | |||||
| Interest income | 6 | 5 | ||||||
| Foreign exchange gain | 21,043 | - | ||||||
| Total other income (expenses) | 21,049 | (4,062 | ) | |||||
| Loss before taxes | (3,016,097 | ) | (589,108 | ) | ||||
| Income tax provision | - | - | ||||||
| Net loss applicable to common shareholders | $ | (3,016,097 | ) | $ | (589,108 | ) | ||
| Net loss per share - basic and diluted | $ | (0.55 | ) | $ | (0.14 | ) | ||
| Weighted number of shares outstanding - | ||||||||
| Basic and diluted | 5,496,341 | 4,318,096 | ||||||
| Comprehensive Income Loss: | ||||||||
| Net loss | $ | (3,016,097 | ) | $ | (589,108 | ) | ||
| Foreign currency translation gain (loss) | (156,741 | ) | 4,022 | |||||
| Total comprehensive loss | $ | (3,172,838 | ) | $ | (585,086 | ) | ||
| Year Ended December 31,2022 | Year Ended December 31,2021 | |||||||
| Revenues: | ||||||||
| Food & Beverage | $ | 41,772 | $ | - | ||||
| Services Rendered – related party | 28,143 | - | ||||||
| Total of Revenue | 69,915 | - | ||||||
| Cost of revenues | ||||||||
| Depreciation | $ | (4,821 | ) | $ | - | |||
| Others Cost of revenues | (23,423 | ) | - | |||||
| Total Cost of revenues | (28,244 | ) | - | |||||
| Gross profit | $ | 41,671 | $ | - | ||||
| Operating expenses: | ||||||||
| Depreciation | 1,524 | 277 | ||||||
| General and administrative | 410,038 | 172,093 | ||||||
| Total operating expenses | 411,562 | 172,370 | ||||||
| (Loss) from operations | (369,891 | ) | (172,370 | ) | ||||
| Other income (loss): | ||||||||
| Interest income | 11 | 7 | ||||||
| Other income | 3,065 | - | ||||||
| Dividend income | - | 32,500 | ||||||
| Interest expenses | (5 | ) | - | |||||
| Witholding Federal Tax | - | (7,800 | ) | |||||
| Foreign exchange gain (loss) | 62,677 | (45,543 | ) | |||||
| Unrealized (loss) gain on Securities Investment, related party | (1,427,094 | ) | 1,300,000 | |||||
| Gain on disposal of a subsidiary | 3,217 | - | ||||||
| Total other (loss) income | (1,358,129 | ) | 1,279,164 | |||||
| (Loss) Income before taxes | (1,728,020 | ) | 1,106,794 | |||||
| Income tax provision | - | - | ||||||
| Net (loss) income from Continuing Operations | $ | (1,728,020 | ) | $ | 1,106,794 | |||
| Net (loss) from Discontinuing Operations, Net of Tax | (648 | ) | (3,259 | ) | ||||
| Net (loss) attributable to Non-controlling interests | (233 | ) | (2,266 | ) | ||||
| Net (loss) income applicable to common shareholders | $ | (1,728,435 | ) | $ | 1,105,801 | |||
| Comprehensive (Loss) Income: | ||||||||
| Net (loss) income | $ | (1,728,668 | ) | $ | 1,103,535 | |||
| Foreign currency translation (loss) gain | (15,843 | ) | 78,963 | |||||
| Total comprehensive (loss) income | $ | (1,744,511 | ) | $ | 1,182,498 | |||
| Net income (loss) per share - basic and diluted | $ | (0.00 | ) | $ | 0.00 | |||
| Net income (loss) from discontinued operations per share - basic and diluted | (0.00 | ) | (0.00 | ) | ||||
| Weighted number of shares outstanding - | ||||||||
| Basic and diluted | 506,898,576 | 506,898,576 | ||||||
The accompanying notes to the consolidated financial statements are an integral part of these statements.
| 26 |
HAPI METAVERSE INC. (FORMERLY KNOWN AS GIGWORLD INC.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM JANUARY 1, 20142021 TO DECEMBER 31, 2015
| Preferred Stock | Common | Paid-In | Accumulated Other Comprehensive | Accumulated | Stockholders' Equity | |||||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | Capital | Income (Loss) | Deficit | (Deficit) | |||||||||||||||||||||||||
| Balance December 31, 2013 | - | $ | - | 3,967,000 | $ | 397 | $ | 57,953 | $ | - | $ | (82,975 | ) | $ | (24,625 | ) | ||||||||||||||||
| Issuance of common stock for services | 165,000 | 16 | 8,234 | 8,250 | ||||||||||||||||||||||||||||
| Acquisition and fair value allocation | 13,800,000 | 1,380 | 1,000,000 | 100 | 58,588 | 60,068 | ||||||||||||||||||||||||||
| Loan forgiveness shareholder | 88,492 | 88,492 | ||||||||||||||||||||||||||||||
| Net loss for period | (589,108 | ) | (589,108 | ) | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | 4,022 | - | 4,022 | |||||||||||||||||||||||||||||
| Balance December 31, 2014 | 13,800,000 | $ | 1,380 | 5,132,000 | $ | 513 | $ | 213,267 | $ | 4,022 | $ | (672,083 | ) | $ | (452,901 | ) | ||||||||||||||||
| Issuance of common stock (Debt Conversion) | 777,687 | 78 | 3,988,753 | 3,988,831 | ||||||||||||||||||||||||||||
| Net loss for period | (3,016,097 | ) | (3,016,097 | ) | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | (156,741) | - | (156,741) | |||||||||||||||||||||||||||||
| Balance December 31, 2015 | 13,800,000 | $ | 1,380 | 5,909,687 | $ | 591 | $ | 4,202,020 | $ | (152,719) | $ | (3,688,180 | ) | $ | 363,092 | |||||||||||||||||
Common Shares | Par Value | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Hapi Metaverse Inc Stockholders’ Deficit | Non- Interests | Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||
| Balance December 31, 2020 | 506,898,576 | $ | 50,690 | $ | 4,604,191 | $ | (378,361 | ) | $ | (5,666,250 | ) | $ | (1,389,730 | ) | $ | - | $ | (1,389,730 | ) | |||||||||||||
| Subsidiary’s issuance of stock | 644 | 644 | ||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | 1,105,801 | 1,105,801 | (2,266 | ) | 1,103,535 | |||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | 78,963 | - | 78,963 | 4 | 78,967 | ||||||||||||||||||||||||
| Balance December 31, 2021 | 506,898,576 | $ | 50,690 | $ | 4,604,191 | $ | (299,398 | ) | $ | (4,560,449 | ) | $ | (204,966 | ) | $ | (1,618 | ) | $ | (206,584 | ) | ||||||||||||
| Gain on purchase of Value Exchange Stock from related party | - | - | 75,307 | - | - | 75,307 | - | 75,307 | ||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | (1,728,435 | ) | (1,728,435 | ) | (233 | ) | (1,728,668 | ) | ||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | (15,843 | ) | - | (15,843 | ) | - | (15,843 | ) | |||||||||||||||||||||
| Balance December 31, 2022 | 506,898,576 | $ | 50,690 | $ | 4,679,498 | $ | (315,241 | ) | $ | (6,288,884 | ) | $ | (1,873,937 | ) | $ | (1,851 | ) | $ | (1,875,788 | ) | ||||||||||||
The accompanying notes to the consolidated financial statements are an integral part of these statements.
| 27 |
HAPI METAVERSE INC. (FORMERLY KNOWN AS GIGWORLD INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 20152022 AND 2014
| Year Ended December 31, | ||||||||
| 2015 | 2014 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Loss | $ | (3,016,097 | ) | $ | (589,108 | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Stock-based compensation | - | 8,250 | ||||||
| Depreciation | 37,633 | 4,182 | ||||||
| Impairment of excess purchase price over net assets | 60,068 | - | ||||||
| Change in operating assets and liabilities: | ||||||||
| Prepaid expenses | (20,831 | ) | (5,661 | ) | ||||
| Accrued interest | - | (1,831 | ) | |||||
| Accounts payable and accrued expenses | 187,660 | 183,719 | ||||||
| Accrued taxes payable | (3,563 | ) | 3,564 | |||||
| Security deposit and other assets | (12,729 | ) | (16,056 | ) | ||||
| Net cash used in operating activities | $ | (2,767,859 | ) | $ | (412,941 | ) | ||
| CASH FLOW FROM INVESTING ACTIVITIES: | ||||||||
| Acquisition of fixed assets | (150,541 | ) | (81,713 | ) | ||||
| Net cash used in investing activities | $ | (150,541 | ) | $ | (81,713 | ) | ||
| CASH FLOW FROM FINANCING ACTIVITIES: | ||||||||
| Net proceeds (repayments) from / to shareholder loan | (432,083 | ) | 4,423,164 | |||||
| Proceeds from revolving credit facility | - | 67,500 | ||||||
| Net cash (used in) provided by financing activities | $ | (432,083 | ) | $ | 4,490,664 | |||
| NET INCREASE (DECREASE) IN CASH | (3,350,483 | ) | 3,996,010 | |||||
| Effects of exchange rates on cash | (164,265 | ) | 13,318 | |||||
| CASH AND CASH EQUIVALENTS at beginning of period | 4,009,884 | 556 | ||||||
| CASH AND CASH EQUIVALENTS at end of period | $ | 495,136 | $ | 4,009,884 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | - | $ | - | ||||
| Income Taxes | $ | 3,564 | $ | - | ||||
| Supplemental schedule of non-cash investing and financing activities | ||||||||
| Shareholder loan forgiveness | $ | - | $ | 88,492 | ||||
| Shareholder loan converted into common stock | $ | 3,988,831 | $ | - | ||||
| Year Ended December 31,2022 | Year Ended December 31,2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net (Loss) Income from operation including non-controlling interests | $ | (1,728,668 | ) | $ | 1,103,535 | |||
| Adjustments to reconcile net (loss) income to cash used in operations: | ||||||||
| Depreciation | 6,345 | 277 | ||||||
| Amortization of operating lease right-of-use assets | 16,894 | - | ||||||
| Interest expenses - Lease | 1,641 | - | ||||||
| (Gain) on disposal of a subsidiary | (3,217 | ) | - | |||||
| Unrealized loss (gain) on securities investment | 1,427,094 | (1,300,000 | ) | |||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable-trade | (2,708 | ) | - | |||||
| Prepaid expenses | (1,540 | ) | (523 | ) | ||||
| Inventories | (894 | ) | - | |||||
| Security deposit, and other receivable | (114,620 | ) | (1,347 | ) | ||||
| Accounts payable, other payable and accrued expenses | 14,552 | (3,434 | ) | |||||
| Change in Operating Lease Liability | (16,923 | ) | - | |||||
| Net cash used in operating activities | $ | (402,044 | ) | $ | (201,492 | ) | ||
| Net cash used in discontinued operating activities | $ | (648 | ) | $ | - | |||
| Net cash used in Operating Activities | $ | (402,692 | ) | $ | (201,492 | ) | ||
| CASH FLOW FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | (3,698 | ) | (1,990 | ) | ||||
| Acquisition of MOC HK | (70,523 | ) | - | |||||
| Purchase of securities investment | (1,743,735 | ) | (650,000 | ) | ||||
| Net cash used in investing activities | $ | (1,817,956 | ) | $ | (651,990 | ) | ||
| CASH FLOW FROM FINANCING ACTIVITIES: | ||||||||
| Subsidiary’s issuance of stock | - | 644 | ||||||
| Advance from related parties | 2,568,604 | 892,945 | ||||||
| Net cash provided by financing activities | $ | 2,568,604 | $ | 893,589 | ||||
| NET INCREASE IN CASH | 347,956 | 40,107 | ||||||
| Effects of exchange rates on cash | (79,476 | ) | 47,616 | |||||
| CASH AND CASH EQUIVALENTS at beginning of year | 245,780 | 158,057 | ||||||
| CASH AND CASH EQUIVALENTS at end of year | $ | 514,260 | $ | 245,780 | ||||
The accompanying notes to the consolidated financial statements are an integral part of these statements.
| 28 |
HAPI METAVERSE INC. (FORMERLY KNOWN AS GIGWORLD INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. ORGANIZATION AND PRINCIPAL BUSINESS ACTIVITIES
Hapi Metaverse Inc., formerly Fragmented Industry Exchange Inc,GigWorld Inc. (the “Company” or “Group”) was incorporated in the State of Delaware on March 7, 2012 and established a fiscal year end of December 31. The Company’s initial business plan was to be a financial acquisition intermediary which would serve buyersis focused on serving business-to-business (B2B) needs in e-commerce, collaboration and sellers for companies that are in highly fragmented industries. social networking functions.
Going Concern
The Company determined it was in the best interest of the shareholders to expand its business plan. On October 15, 2014, through a sale and purchase agreement (the “Purchase Agreement”) the Company acquired all the issued and outstanding stock of HotApps International Pte Ltd (the “HIP”) from Singapore eDevelopment Limited (“SeD”). HIP owned certain intellectual property relating to instant messaging for portable devices (the “HotApp”). HotApp is a cross-platform mobile application that incorporates instant messaging and ecommerce. It provides a messaging and calling services for HotApp users (text, photo, audio). HotApp can be used on any mobile platform (i.e. IOS Online or Android).
Our majority shareholderstockholder has advised us not to depend solely on it for financing. We have increased our efforts to raise additional capital through equity or debt financings from other sources. However, we cannot be certain that such capital (from our shareholdersstockholders or third parties) will be available to us or whether such capital will be available on terms that are acceptable to us. Any such, financing likely would be dilutive to existing stockholders and could result in significant financial operating covenants that would negatively impact our business. If we are unable to raise sufficient additional capital on acceptable terms, we will have insufficient funds to operate our business or pursue our planned growth.
These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Basis of consolidation
The consolidated financial statements include all accounts of the GroupCompany 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.
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The Company’s consolidated financial statements include the financial statementsposition, results of Hotappoperations and cash flows of the following entities as of December 31, 2022 and 2021, as follows:
SCHEDULE FOR SUBSIDIARY’S CONSOLIDATION OF FINANCIAL STATEMENTS
| Attributable interest as of, | ||||||||||
| Name of subsidiary consolidated under Hapi Metaverse Inc. | State or other jurisdiction of incorporation or organization | December 31, 2022 | December 31, 2021 | |||||||
| % | % | |||||||||
| HotApp BlockChain Pte.Ltd. (f.k.a. HotApps International Pte. Ltd.) | Singapore | 100.0 | 100.0 | |||||||
| HotApp International Limited | Hong Kong | 100.0 | 100.0 | |||||||
| Gig Stablecoin Inc. (f.k.a. Crypto Exchange Inc.) | Nevada | 100.0 | 100.0 | |||||||
| HWH World Inc. | Delaware | 100.0 | 100.0 | |||||||
| HWH World Pte. Ltd. | Singapore | - | 100.0 | |||||||
| Smart Reward Express Limited | Hong Kong | 50.0 | * | 50.0 | * | |||||
| Hapi Café Limited | Hong Kong | 100.0 | ** | - | ||||||
| MOC HK Limited | Hong Kong | 100.0 | *** | - | ||||||
| Shenzhen Leyouyou Catering Management Co., Ltd. | People’s Republic of China | 100.0 | **** | - | ||||||
| Hapi Metaverse Inc. | Texas | 100.0 | ***** | - | ||||||
| * | Smart Reward Express Limited (“Smart Reward”) was incorporated in Hong Kong on July 13, 2021 with an issued and paid-up share capital of HK$10,000 comprising ordinary shares. |
Smart Reward plans to be principally engaged in the business of developing a platform allowing small and medium sized merchants to set-up their own reward program, with the aim of creating a loyalty exchange program for participating merchants.
HotApp International Limited is the owner of 50% of the issued and outstanding shares of Smart Reward. The remaining 50% of the issued and outstanding shares of Smart Reward are held by Value Exchange Int’l (China) Limited, a wholly-owned subsidiary of VEII.
HotApp International Limited holds 5,000 shares of Smart Reward, representing 50% of the total issued and outstanding shares of Smart Reward. HotApp International Limited is a wholly-owned subsidiary of HotApp BlockChain Pte. Ltd., which is a wholly-owned subsidiary of Hapi Metaverse Inc. The remaining 5,000 shares of Smart Reward, representing 50% of the total issued and outstanding shares of Smart Reward, are held by Value Exchange Int’l (China) Limited, a wholly-owned subsidiary of Value Exchange International Inc. Hapi Metaverse Inc. owns 38.1% and 18% of the total issued and outstanding shares of Value Exchange International Inc as of December 31, 2022 and its subsidiaries. All inter-company transactionsDecember 31, 2021.
Accordingly, the Company in total holds more than 50% of Smart Reward, and balances have been eliminated upon consolidation.Smart Reward is consolidated in the Company’s financial statements.
| ** | Hapi Cafe Limited (“HCHK”) was incorporated in Hong Kong on July 5, 2022 with an issued and paid-up share capital of HK$2 comprising ordinary shares. HCHK plans to be principally engaged in the food and beverage business in Hong Kong. |
HotApp BlockChain Pte. Ltd. is the owner of 100% of the issued and outstanding shares of HCHK. This business was acquired on September 5, 2022.
| *** | MOC HK Limited (“MOC”) was incorporated in Hong Kong on February 16, 2020 with an issued and paid-up share capital of HK$10 comprising ordinary shares. MOC plans to be principally engaged in the food and beverage business in Hong Kong Hapi Cafe Ltd. is the owner of 100% of the issued and outstanding shares of MOC. This business was acquired on October 5, 2022. And during the acquisition, a goodwill $60,343 had been generated for the Company. |
| **** | Shenzhen Leyouyou Catering Management Co., Ltd. (“HCCN”) was incorporated in People’s Republic of China on October 10, 2022. HCCN plans to be principally engaged in the food and beverage business in Mainland China. |
Hapi Cafe Ltd. is the owner HCCN. This business was acquired on October 10, 2022.
| ***** | Hapi Metaverse Inc. was incorporated in Texas on November 28, 2022 with an issued and paid-up share capital of $0.1 comprising ordinary shares. |
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Use of estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, and liabilities, and revenues, cost and expenses in the consolidated financial statements and accompanying notes. Significant accounting estimates reflected in the Group’s consolidated financial statements include revenue recognition, the useful lives and impairment of property and equipment, valuation allowance for deferred tax assets and share-based compensation.
Cash and cash equivalents
The Company considers all highly liquid investments which are unrestricted from withdrawal or use, or which have original maturitieswith a maturity of three months or less when purchased.
Leases
The Company follows Accounting Standards Update (“ASU”) 2016-02 (FASB ASC Topic 842) in accounting for its operating lease right-of-use assets and operating lease liabilities. At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange of a consideration. To assess whether a contract is or contains a lease, the Company assess whether the contract involves the use of an identified asset, whether it has the right to obtain substantially all the economic benefits from the use of the asset and whether it has the right to control the use of the asset. The right-of-use assets and related lease liabilities are recognized at the lease commencement date. The Company recognizes operating lease expenses on a straight-line basis over the lease term.
Right-of-use of assets
The right-of-use of asset is measured at cost, which comprises the amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and less any lease incentive received.
Lease liabilities
Lease liability is measured at the present value of the outstanding lease payments at the commencement date, discounted using the Company incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise mainly fixed lease payments.
Foreign currency risk
Because of its foreign operations, the Company holds cash in non-US dollars. As of December 31, 2015,31,2022, cash and cash equivalents of the Group includes, on an as converted basis to US dollars, $818,526, $653,305$359,266, and $385,975,$10,719, in Hong Kong Dollars (“HK$”), Reminbi (“RMB”) and Singapore Dollars (“S$”), respectively.
Investment Securities
Investments represent equity investments with readily determinable fair values.
The Company account for investments in equity securities that have readily determinable fair values are measured at fair value, with unrealized gains and losses from fair value changes recognized in net income in the consolidated statements of China, controlscomprehensive income.
Equipment
Property and equipment are recorded at cost, less depreciation. Repairs and maintenance are expensed as incurred. Expenditures incurred as a consequence of acquiring or using the conversionasset, or that increase the value or productive capacity of RMB into foreign currencies. The valueassets are capitalized (such as removal, and restoration costs). When property and equipment is retired, sold, or otherwise disposed of, the RMBasset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is subject to changesincluded in central government policies and to international economic and political developments affecting supply and demand inoperations. Depreciation is computed by the China Foreign Exchange Trading System market.
SCHEDULE OF ESTIMATED USEFUL LIVES OF ASSETS
| Computer equipment | 3 years | |||
| leasehold improvement | 3 years |
Concentrations
Financial instruments that potentially expose the Group to concentration of credit risk consist primarily of cash. Although the cash andat each particular bank in the United States is insured up to $250,000 by Federal Deposit Insurance Corporation (FDIC), the Group is exposed to risk due to its concentration of cash equivalents.in foreign countries. The Group places theirits cash with financial institutions with high-credit ratings and quality.
Fair value
Fair Value of Financial Instruments
The carrying value of cash, accounts payable and accrued liabilities, and short-term borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, net
| ● | Level 1 - quoted prices in active markets for identical assets and liabilities. | |
| ● | Level 2 - observable market-based inputs or unobservable inputs that are corroborated by market data; and | |
| ● | Level 3 - significant unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
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Revenue recognition
Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information about the nature, amount, timing and mobile marketing services.
Revenue is recognized when (or as) the Company transfers promised goods or services or catering service to its customers in amounts that reflect the consideration to which the Company expects to be entitled to in exchange for those goods or services, which occurs when (or as) the Company satisfies its contractual obligations and development expenses primarily consist of (i) salaries and benefits for research and development personnel, and (ii) office rental, general expenses and depreciation expenses associated with the research and development activities. The Company’s research and development activities primarily consisttransfers over control of the research and development of new features forpromised goods or services or catering service to its mobile platform and its self-developed mobile games. Expenditures incurred during the research phasecustomers. Costs to obtain or fulfill a contract are expensed as incurred.
The Company began generating revenue from f&b business by providing quality catering service and a project providing services to Value Exchange Int’l (Hong Kong) Limited, a subsidiary of Value Exchange International, Inc.(“VEII”) located in Hong Kong, on a monthly basis in 2022. VEII is a related party of the Company. Upon receipt of purchase order from this customer, we issue the corresponding invoice and provide the service accordingly. Any payment received from this customer in advance is presented within other payables on the Company’s consolidated balance sheets.
Income taxes
Current income taxes are provided for in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Net operating loss carry forwards and credits are applied using enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that a portion of or all of the deferred tax assets will not be realized. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics.
The impact of an uncertain income tax position on the income tax return is recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Interest and penalties on income taxes will be classified as a component of the provisions for income taxes. The Group did not recognize any income tax due to uncertain tax position or incur any interest and penalties related to potential underpaid income tax expenses for the years ended December 31, 20152022 or 2014,2021, respectively.
Foreign currency translation
Items included in the applicationconsolidated financial statements of each entity in the Group are measured using the currency of the New EIT Law to our operations, specifically with respect to our tax residency. The New EIT Law specifies that legal entities organized outside ofprimary economic environment in which the PRC will be considered residents for PRC income tax purposes if their “de facto management bodies” as “establishments that carry on substantial and overall management and control over the operations, personnel, accounting, properties, etc. of the Company.” Because of the uncertainties that have resulted from limited PRC guidance on the issue, it is uncertain whether our legal entities outside the PRC constitute residents under the New EIT Law. If one or more of our legal entities organized outside the PRC were characterized as PRC residents, the impact would adversely affect our results of operations.
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 and the PRCMainland China are maintained in their local currencies, the Singapore Dollar (S$), Hong Kong Dollar (HK$) and Renminbi ("RMB"Chinese Yuan (CN ¥), which are also the functional currencies of these entities.
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. Transactions in currencies other than the functional currency during the year are converted into functional currency at the applicable rates of exchange prevailing when the transactions occurred. Transaction gains and losses are recognized in the statementconsolidated statements of operations.
The Company’s entities with functional currency of Renminbi,Singapore Dollar, Hong Kong Dollar and Singapore Dollar,Chinese Yuan, 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. Revenues, expenses, 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).
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For the year ended December 31, 2015,2022, the Company recorded other comprehensive loss from a translation loss of $156,741$(15,843) in the consolidated financial statements.
Comprehensive income (loss)
Comprehensive income (loss) includes gains (losses) from foreign currency translation adjustments. Comprehensive income (loss) is reported in the consolidated statements of operations and comprehensive loss.
Basic lossearnings (loss) per share is computed by dividing net lossincome (loss) attributable to shareholdersstockholders by the weighted average number of shares outstanding during the period.
As of December 31, 2015,2022, there are no sharespotentially dilutive securities that were excluded from the computation of preferred stockdiluted EPS.
Non-controlling interests
Non-controlling interests represent the equity in a subsidiary not attributable, directly or indirectly, to owners of the Company, and are eligible for conversion into voting common stock.
On December 31, 2022 and 2021, the aggregate non-controlling interests in the Company were ($1,851) and ($1,618), respectively.
Recent accounting pronouncement
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements.
Note 3. ACQUISITION ACCOUNTING
Accrued expenses consisted of the issued and outstanding capital stock of HotApps International Pte. Ltd., a Singapore company (the “Subsidiary”) in exchange for the issuance of 1,000,000 shares of common stock and 13,800,000 shares of a newly created class of preferred stock. The acquisition was accounted for under the acquisition method of accounting in accordance with the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. Under the acquisition method of accounting, the total purchase price is allocated to the net tangible and intangible assets acquired and liabilities assumed of the Subsidiary based on their estimated fair values. Based upon the consideration that the Subsidiary was purchased by SED on August 27, 2014 for S$98,000 (in Singapore dollars), the Company has reflected the fair value of the purchase price to be S$98,000 or $78,244 based on the May 23, 2014 exchange rate. The excess purchase price over the net assets as of October 15, 2014 was $60,068.
SCHEDULE OF ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
| 2022 | 2021 | |||||||
| As of December 31, | ||||||||
| 2022 | 2021 | |||||||
| Continuing operations | ||||||||
| Accrued payroll | $ | 3,309 | $ | 321 | ||||
| Accrued professional fees | 18,905 | 8,592 | ||||||
| Other including receipt in advance from customer | 2,387 | 3,103 | ||||||
| Other including receipt in advance from customer – related party | 7,838 | - | ||||||
| Total | $ | 32,439 | $ | 12,016 | ||||
| Discontinued operations | ||||||||
| Accrued professional fees | $ | - | $ | 2,593 | ||||
| Total | $ | - | $ | 2,593 | ||||
Note 4. FIXED ASSETS,PROPERTY AND EQUIPMENT, NET
Property and Equipment, net consisted of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
| 2022 | 2021 | |||||||
| As of December 31, | ||||||||
| 2022 | 2021 | |||||||
| Cost | ||||||||
| Leasehold improvement | $ | 11,266 | $ | - | ||||
| Computer equipment | 5,685 | 1,990 | ||||||
| Total cost | $ | 16,951 | $ | 1,990 | ||||
| Less: accumulated depreciation # | $ | $ | - | |||||
| Leasehold improvement # | 4,840 | - | ||||||
| Computer equipment # | 1,806 | 277 | ||||||
| Total accumulated depreciation # | 6,646 | 277 | ||||||
| NBV at the end of year | ||||||||
| Leasehold improvement | 6,426 | - | ||||||
| Computer equipment | $ | 3,879 | $ | 1,713 | ||||
| Total NBV | $ | 10,305 | $ | 1,713 | ||||
| # | –Total of depreciation expenses charged for the year ended December 31, 2022 and 2021 were $6,345 and $277, respectively, of which $4,821 and $0 were booked under cost of revenue for the year ended December 31, 2022 and 2021, and $1,524 and $277 were booked under general and administrative expenses for the year ended December 31, 2022 and 2021. |
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| As of December 31, | ||||||||
| 2015 | 2014 | |||||||
| Computer equipment | $ | 69,002 | $ | 21,613 | ||||
| Office equipment | 20,787 | 13,455 | ||||||
| Furniture and fixtures | 46,916 | 48,514 | ||||||
| Motor vehicle | 97,418 | - | ||||||
| $ | 234,123 | $ | 83,582 | |||||
| Less: accumulated depreciation | (41,815 | ) | (4,182 | ) | ||||
| Fixed assets, net | $ | 192,308 | $ | 79,400 | ||||
Note 5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| As of December 31, | ||||||||
| 2015 | 2014 | |||||||
| Accrued payroll | $ | 196,401 | $ | 77,513 | ||||
| Accrued professional fees | 112,215 | 27,000 | ||||||
| Due to affiliates | - | 86,465 | ||||||
| Other | 71,763 | 741 | ||||||
| Total | $ | 379,379 | $ | 191,719 | ||||
The provision for income taxes for the years ended December 31, 20152022 and 2014,2021, was as follows (assuming a 15%follows:
SCHEDULE OF PROVISION FOR INCOME TAXES AND DEFERRED INCOME TAX ASSETS
| Domestic | Foreign | Total | Domestic | Foreign | Total | |||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||
| Domestic | Foreign | Total | Domestic | Foreign | Total | |||||||||||||||||||
| Loss from continuing operations, before income taxes | $ | (1,397,003 | ) | $ | (161,948 | ) | $ | (1,558,951 | ) | $ | 1,180,674 | $ | (77,139 | ) | $ | 1,103,535 | ||||||||
| Income tax at statutory rate | (293,371 | ) | (29,146 | ) | (322,517 | ) | 247,942 | (12,728 | ) | 235,214 | ||||||||||||||
| Items not taxable for tax purposes | 294,923 | (6,925 | ) | 287,998 | (273,000 | ) | (48,892 | ) | (321,892 | ) | ||||||||||||||
| Items not deductible for tax purposes | - | 41,703 | 41,703 | 18,828 | 2,634 | 21,462 | ||||||||||||||||||
| Change in valuation allowance | (1,552 | ) | (5,632 | ) | (7,184 | ) | 6,230 | 58,986 | 65,216 | |||||||||||||||
| Income tax expense | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
| Deferred income tax assets/(liabilities): | ||||||||||||||||||||||||
| Operating loss carry forwards | 160,550 | 920,374 | 1,080,924 | 191,699 | 879,418 | 1,071,118 | ||||||||||||||||||
| Fair value adjustment on investment | 299,690 | - | 299,690 | (273,000 | ) | - | (273,000 | ) | ||||||||||||||||
| Unrealized exchange (gain)/loss | (4,766 | ) | (7,952 | ) | (12,718 | ) | 17,190 | (7,264 | ) | 9,927 | ||||||||||||||
| Accumulated other comprehensive loss | - | (63,048 | ) | (63,048 | ) | - | - | - | ||||||||||||||||
| Total deferred (liabilities) assets | $ | 455,474 | $ | 849,374 | $ | 1,304,848 | $ | (64,110 | ) | $ | 872,155 | $ | 808,044 | |||||||||||
| Less: valuation allowance | (455,474 | ) | $ | (849,374 | ) | $ | (1,304,848 | ) | $ | 64,110 | $ | (872,155 | ) | $ | (808,044 | ) | ||||||||
| Total net deferred tax assets | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
On December 22, 2017, the Tax Cuts and Jobs Act was signed into legislation, lowering the corporate income tax rate to 21% effective January 1, 2018 and making many other significant changes to the US income tax rate):
| Year Ended December 31, | ||||||||
| 2015 | 2014 | |||||||
| Current Tax Provision: | ||||||||
| Federal-State | $ | - | $ | - | ||||
| Local | - | - | ||||||
| Total current tax provision | $ | - | $ | - | ||||
| Deferred Tax Provision: | ||||||||
| Loss carry-forwards | $ | (452,415 | ) | $ | (88,366 | ) | ||
| Change in valuation allowance | 452,415 | 88,366 | ||||||
| Total deferred tax provision | $ | - | $ | - | ||||
| The Company had deferred income tax assets as of December 31, 2015 and 2014 as follows: | ||||||||
| 2015 | 2014 | |||||||
| Loss carry-forwards | $ | 553,227 | $ | 100,812 | ||||
| Less - valuation allowance | (553,227 | ) | (100,812 | ) | ||||
| Total net deferred tax assets | $ | - | $ | - | ||||
The Company provided a valuation allowance equal to the deferred income tax assets for period ended December 31, 20152022 because it is not presently known whether future taxable income will be sufficient to utilize the loss carry-forwards.
As of December 31, 2015,2022, the Company had approximately $3,688,180$5,366,396 in tax loss carry-forwards that can be utilized in future periods to reduce taxable income, and expire by the year 2035.income. The Company did not identify any material uncertain tax positions. The Company did not recognize any interest or penalties for unrecognized tax benefits.
The federal income tax returns of the Company are subject to examination by the IRS, generally for three years after they are filed. The tax returns for the years ended December 31, 2015, 20142022, 2021 and 20132020 are still subject to examination by the taxing authorities.
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The Company is authorized to issue 500 million billion shares of common stock and million shares of preferred stock. The authorized share capital of the Company’s common stock was increased from million to billion on May 5, 2017. Both share types have a $0.0001$ par value. As of December 31, 20152022 and 2014,2021, the Company had issued and outstanding, 5,909,687 and 5,132,000 of common stock, respectively and 13,800,000 shares of preferred stock, respectively.
Common Shares:
Pursuant to the Purchase Agreement, dated October 15, 2014, the Company issued 165,000 shares of common stock to its legal counselAIL. Such amount represented 19% ownership in consideration of services rendered in connection with the preparation of the Company’s registration statement on Form S-1 and counsel’s agreement to defer fees in connection therewith.
On July 13, 2015, SEDAIL acquired 777,687 shares of the CompanyCompany’s common stock by converting outstanding loans made to the Company into common stock of the Company at a rate of $5.00$ per share (rounded to the nearest full share). After such transactions SEDAIL owned 98.17%98.17% of the Company.
On September 17, 2014,March 27, 2017, the Company entered into a lease agreementLoan Conversion Agreement with Allbest Property Management Pte LtdAIL, pursuant to which AIL agreed to convert $450,890 of debt owed by the Company to AIL into common shares at a conversion price of $0.0009. The captioned shares were issued on June 9, 2017, and AIL owned 99.979% of the Company after such transactions.
On December 20, 2018, the Board of Directors of AIL announced its intention to sell up to shares of the Company to independent third parties at US$ per share for 586 square feetan aggregate cash consideration of office spaceup to US$1,600,000. The purpose of this proposed sale was to raise funds to continue to support the general corporate and working capital of the Company, including but not limited to the operating costs of the Company. During 2021, AIL has sold shares of the Company to independent third parties, and AIL owned 99.693% of the Company after such transactions. On August 30, 2022, Alset International Limited entered into a stock purchase with its controlling stockholder, Alset Inc. (formerly known as Alset EHome International Inc.) in Singapore. relation to the disposal of shares of the Company’s common stock, representing approximately 99.69% of the total issued and paid-up share capital of the Company, to Alset Inc. After this transaction, Alset Inc. became our largest stockholder.
Preferred Shares:
Preferred Stock were issued as of December 31, 2022 and 2021.
On July 30, 2018, the Company adopted the Equity Incentive Plan (“The lease commenced on September 22, 2014Plan”). The Plan is intended to encourage ownership of shares by employees, directors and runs through June 30, 2017certain consultants to the Company in order to attract and retain such people, to induce them to work for the benefit of the Company. The Plan provides for the grant of options and/or other stock-based or stock-denominated awards. Subject to adjustment in accordance with monthly paymentsthe terms of $2,341.the Plan, shares of Common Stock of the Company have been reserved for issuance pursuant to awards under the Plan. The Plan will be administered by the Company’s Board of Directors. This Plan shall terminate ten (10) years from the date of its adoption by the Board of Directors. There have been no awards issued under the Plan as of December 31, 2022 and 2021.
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Note 8. INVESTMENT IN RELATED PARTY
In April of 2021, the Company was required to put up a security depositacquired shares of $6,894.Value Exchange International, Inc.’s common stock for an aggregate subscription price of $650,000. On October 20, 2014, the Company paid the prior tenant $12,099 in rent for the space through the commencement date of the new lease.
| 2016 | $ | 130,446 | ||
| 2017 | 68,208 | |||
| Total | $ | 198,654 | ||
SCHEDULE OF INVESTMENT
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| Fair Value Measurement Using | Amount at | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| December 31, 2022 | ||||||||||||||||
| Asset | ||||||||||||||||
| Investment Securities – Fair Value | $ | 2,341,948 | $ | - | $ | - | $ | 2,341,948 | ||||||||
| Total Investment in securities at Fair Value | $ | 2,341,948 | $ | - | $ | - | $ | 2,341,948 | ||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| Fair Value Measurement Using | Amount at | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| December 31, 2021 | ||||||||||||||||
| Asset | ||||||||||||||||
| Investment Securities – Fair Value | $ | 1,950,000 | $ | - | $ | - | $ | 1,950,000 | ||||||||
| Total Investment in securities at Fair Value | $ | 1,950,000 | $ | - | $ | - | $ | 1,950,000 | ||||||||
Note 10. SUBSEQUENT EVENT
Effective as of September 1, 2020, Chan Heng Fai resigned as the Group not to depend solely on financing from SeD for its continuous development and marketing activities. The Group has since increased its efforts to raise additional funds from other sources. Without certaintyActing Chief Executive Officer of new funding and in the face of intense competition in the mobile messaging and social media market in ChinaCompany, and the restCompany’s Board of Asia,Directors appointed Lee Wang Kei (“Nathan”) as the Group has streamlinedCompany’s Chief Executive Officer. Alset International Limited is the Company’s former majority stockholder. On August 30, 2022, Alset International Limited entered into a stock purchase with its controlling stockholder, Alset Inc. (formerly known as Alset EHome International Inc.) in relation to the disposal of shares of the Company’s common stock, representing approximately 99.69% of the total issued and restructured its operations by significantly reducing its developmentpaid-up share capital of the Company, to Alset Inc. After this transaction, Alset Inc. became our largest stockholder. Chan Heng Fai, the Chairman of the Company’s Board of Directors, is also the Chief Executive Officer and marketing personnelChairman of Alset Inc.’s Board, as well as marketing activities. Only criticalthe majority stockholder of Alset Inc. Lui Wai Leung Alan, the Company’s Chief Financial Officer, is also the Co-Chief Financial Officer of Alset Inc. Chan Heng Fai is compensated by Alset Inc. and essential developmentAlset International Limited. Lui Wai Leung Alan is compensated by Alset International Limited. Our Chief Executive Officer, Lee Wang Kei, is paid $2,000 per month by HotApp International Limited, a subsidiary of the Company. Alset Inc. has provided staff to our Company without charge since becoming our majority stockholder.
The Company sold one of its subsidiaries, HWH World Pte. Limited, to Health Wealth Happiness Pte. Ltd (a subsidiary of former majority stockholder Alset International Limited) for consideration of S$ on April 18, 2022. The Company has acquired a company, Hapi Cafe Limited, from Chan Heng Fai (the majority stockholder of Alset Inc.) for consideration of S$ on September 5, 2022. Hapi Cafe is a coffee shop chain initiative in China, Hong Kong and maintenance worksTaiwan consisting of a four-in-one concept, comprising a coffee shop, co-working place, travel, and metaverse show case. Hapi Metaverse technology will be utilized by the Hapi Cafe membership program.
The Company has a project with an affiliate (a subsidiary of Value Exchange International, Inc.) that commenced in 2022. Value Exchange International, Inc. provides IT services and solutions for customers in Asia, covering Helpdesk, Managed Operations, Systems Integration, and Consulting Services. The project has generated revenue of $28,143, a receivable including customer’s deposit and prepayment of $2,802 and a payable of $7,838 from the affiliate. As of December 31, 2022, the Company has an amount due to Alset Inc of $1,743,734, Alset International Limited of $2,506,676, an amount due to fellow subsidiaries of $631,838, an amount due to director of $4,158 plus an amount due to an associated company of Alset International Limited of $102. As of December 31, 2021, the Company had an amount due to Alset International Limited of $2,383,596 plus an amount due to an associated company of Alset International Limited of $102. The above amounts due to related parties were interest free and no repayment schedule and deadline have been adopted.
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Note 10. DISCONTINUED OPERATIONS
Director’s resolutions of HotApp Blockchain Pte Limited passed on April 18, 2022 for the disposal of its investments of shares in HWH World Pte. Limited, representing 100% of the share capital of HWH World Pte. Limited, for a consideration amount of S$. The shares were disposed to Health Wealth Happiness Pte. Ltd, a subsidiary of Alset International Limited.
The composition of assets and liabilities included in discontinued operations was as follows:
SCHEDULE OF ASSETS AND LIABILITIES DISCONTINUED OPERATIONS
| April 18, 2022 | December 31, 2021 | |||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | 3,217 | $ | 2,593 | ||||
| TOTAL CURRENT LIABILITIES | 3,217 | 2,593 | ||||||
| TOTAL LIABILITIES | $ | 3,217 | $ | 2,593 | ||||
The aggregate financial results of discontinued operations were as follows:
| Year Ended December 31, 2022 | Year Ended December 31, 2021 | |||||||
| Operating expenses: | ||||||||
| General and administrative | $ | 648 | $ | 3,259 | ||||
| Total operating expenses | 648 | 3,259 | ||||||
| Income (Loss) from operations | (648 | ) | (3,259 | ) | ||||
| Income (Loss) from discontinued operations | $ | (648 | ) | $ | (3,259 | ) | ||
Note 11. GOODWILL
The Company continually evaluates potential acquisitions that align with the Company’s plans, namely, starting the f&b business in Asia. Starting an f&b business in Hong Kong, China, and Taiwan can be an excellent opportunity due to the large consumer market, diverse food culture, high demand for international cuisine, favorable business environment, skilled labor force, and opportunities for growth. On October 4, 2022, The Company has completed its first f&b business acquisition of MOC HK Limited, a f&b business started in Hong Kong. The accompanying consolidated financial statements include the operations of the acquired entity from its acquisition date. The acquisition has been accounted for as a business combination. Accordingly, consideration paid by the Company to complete the acquisition is initially allocated to the acquired assets and liabilities assumed based upon their estimated acquisition date fair values. The recorded amounts for assets acquired and liabilities assumed are carried outprovisional and subject to change during the measurement period, which is up to 12 months from the acquisition date.
As a result of the acquisition of MOC, goodwill of $60,343 generated in a business combination represents the purchase price of $70,523 in excess of identifiable tangible and intangible assets. Goodwill and intangible assets that have an indefinite useful life are not amortized. Instead they are reviewed periodically for impairment.
The Company evaluates goodwill on an annual basis in the fourth quarter or more frequently if management believes indicators of impairment exist. Such indicators could include, but are not limited to (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If management concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, management conducts a quantitative goodwill impairment test. The impairment test involves comparing the fair value of the applicable reporting unit with its carrying value. The Company estimates the fair values of its reporting units using a combination of the income, or discounted cash flows, approach and the market approach, which utilizes comparable companies’ data. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The Company’s evaluation of goodwill completed during the year resulted in no impairment losses.
The table below reflects the Company’s estimates of the acquisition date fair value of the assets acquired and liabilities assumed for the 2022 acquisition
SCHEDULE OF FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
| MOC | ||||
| Purchase Price | ||||
| Cash | $ | 70,523 | ||
| Total purchase consideration | $ | 70,523 | ||
| Purchase Price Allocation | ||||
| Assets acquired | ||||
| Current assets | 32,700 | |||
| Property and Equipment, net | 11,266 | |||
| Operating lease right-of-use assets, net | 114,232 | |||
| Total assets acquired | 158,198 | |||
| Liabilities assumed: | ||||
| Current liabilities | (33,437 | ) | ||
| Operating lease liability | (114,232 | ) | ||
| Accrued taxes | (349 | ) | ||
| Total liabilities assumed | (148,018 | ) | ||
| Net assets acquired | 10,180 | |||
| Goodwill | 60,343 | |||
| Total purchase consideration | $ | 70,523 | ||
The following table summarizes changes in the carrying amount of goodwill for the years ended December 31, 2022
SCHEDULE OF GOODWILL
| Balance as of Balance of January 1, 2022 | $ | - | ||
| Acquisitions | 60,343 | |||
| Balance as of December 31, 2022 | $ | 60,343 |
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Note 12. LEASES
The Company has operating leases for its f&b stores and warehouse in Hong Kong . The related lease agreements do not contain any material residual value guarantees or material restrictive covenants. Since the Company’s leases do not provide an implicit rate that can be readily determined, management uses a discount rate based on the incremental borrowing rate. The Company’s weighted-average remaining lease term relating to its operating leases are 1.8 years, with a minimal crew. Itweighted-average discount rate of the 5.38%.
The current portion of operating lease liabilities and the non-current portion of operating lease liabilities are presented on the balance sheets. Total lease expenses amounted to $18,535 and $0 which was included in general and administrative expenses in the statements of operations for the years ended December 31, 2022 and 2021, respectively. Total cash paid for operating leases amounted to $16,994 and $0 for the years ended December 31, 2022 and ,2021, respectively. Supplemental balance sheet information related to operating leases was as follows (in $):
SCHEDULE OF SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED TO OPERATING LEASES
| December 31, 2022 | ||||
| Right-of-use assets | 129,478 | |||
| Lease liabilities - current | 71,899 | |||
| Lease liabilities - non-current | 59,196 | |||
| Total lease liabilities | 131,095 | |||
As of December 31, 2022, the aggregate future minimum rental payments under non-cancelable agreement are as follows (in $):
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS UNDER NON-CANCELABLE AGREEMENT
| Maturity of Lease Liabilities | Total | |||
| 2023 | 76,741 | |||
| 2024 | 60,265 | |||
| Total undiscounted lease payments | 137,006 | |||
| Less: Imputed interest | (5,911 | ) | ||
| Present value of lease liabilities | 131,095 | |||
Note 13. SUBSEQUENT EVENTS
On January 27, 2023, the Company and American Wealth Mining Corp. (“AWMC,” and together with the Company, the “Lenders”) entered into a Convertible Credit Agreement (the “Credit Agreement”) with Value Exchange International, Inc. (“Value Exchange”), a Nevada corporation. The Credit Agreement provides Value Exchange with a maximum credit line of $1,500,000 (“Maximum Credit Line”) with simple interest accrued on any advances of the money under the Credit Agreement at 8%. The principal amount of any advance of money under the Credit Agreement (each being referred to as an “Advance”) is due in a lump sum, balloon payment on the third annual anniversary of the date of the Advance (“Advance Maturity Date”). Accrued and unpaid interest on any Advance is due and payable on a semi-annual basis with interest payments due on the last business day of June and last business day of December of each year. A Lender may demand that any portion or all of the unpaid principal amount of any Advance as well as accrued and unpaid interest thereon may be paid by shares of Value Exchange Common Stock in lieu of cash payment.
Value Exchange must request Advances from the Lenders. Either Lender may elect to separately, fully fund the Advance, or both Lenders may jointly elect to fund the Advance based on Lenders’ agreement on the portion of the Advance to be funded by each Lender. Lenders may severally or jointly reject any request for an Advance and neither Lender has an obligation to fund any Advance under the Credit Agreement. Accordingly, the Company will maintain its manning leveldetermine how much to loan to Value Exchange pursuant to the Credit Agreement.
The Credit Agreement grants conversion rights to each Lender. Each Advance shall be convertible, in whole or in part, into shares of Value Exchange Common Stock at the option of the Lender who made that Advance (being referred to as a “Conversion”), at any time and operating costsfrom time to time, at a minimum levelprice per share equal the “Conversion Price” (as defined below). The Conversion Price for a Conversion shall be the average closing price of the Value Exchange Common Stock for the three (3) consecutive trading days prior to date of the Notice of Conversion. The Lenders shall also have certain conversion rights upon a change of control of Value Exchange, or a breach of the Credit Agreement by Value Exchange.
In the event that a Lender elects to convert any portion of an Advance into shares of Value Exchange Common Stock in lieu of cash payment in satisfaction of that Advance, then Value Exchange would issue to the Lender five (5) detachable warrants for each share of Value Exchange Common Stock issued in a Conversion (“Warrants”). Each Warrant will entitle the Lender to purchase one (1) share of Common Stock at a per-share exercise price equal to the Conversion Price. The exercise period of each Warrant will be five (5) years from date of issuance of the Warrant.
Our Chairman, Chan Heng Fai, and another member of our Board of Directors, Lum Kan Fai, are both members of the Board of Directors of Value Exchange. In addition to Mr. Chan, two other members of the Board of Directors of our majority stockholder, Alset Inc., are also members of the Board of Directors of Value Exchange (Mr. Wong Shui Yeung and Mr. Wong Tat Keung). The Company currently owns a total of shares (representing %) of Value Exchange.
On February 23, 2023, the Company and Alset Inc., a Texas corporation (NASDAQ: AEI) (“Alset”) entered into a Subscription Agreement (the “Subscription Agreement”). Pursuant to the Subscription Agreement, the Company has begun exploring optionsborrowed $1,400,000.00 (the “Loan Amount”) from Alset in exchange for a Convertible Promissory Note (the “Note”). The term of the Note is three years with simple interest at a rate of 8% percent per annum. Alset may require repayment upon 30 days’ notice. The Company shall be entitled to seek new funding before growing its business.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of our Report on Form 10-K, an evaluation was carried out by management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act) as of December 31, 2022. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
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During evaluation of disclosure controls and procedures as of December 31, 2022 conducted as part of our annual audit and preparation of our annual financial statements, management conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures and concluded that our disclosure controls and procedures were ineffective for those reasons set forth below.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for the preparation and fair presentation of the financial statements included in this annual report. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and reflect management’s judgment and estimates concerning effects of events and transactions that are accounted for or disclosed.
Management is also responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting includes those policies and procedures that pertain to our ability to record, process, summarize and report reliable data. Management recognizes that there are inherent limitations in the effectiveness of any internal control over financial reporting, including the possibility of human error and the circumvention or overriding of internal control. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement presentation. Further, because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.
In order to ensure that our internal control over financial reporting is effective, management regularly assesses controls and did so most recently for its financial reporting as of December 31, 2015.2022. This assessment was based on criteria for effective internal control over financial reporting described in the Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on this assessment, management has concluded that,In connection with management’s evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2015, we had a material weakness2022, management determined that relatesthe Company did not maintain effective controls over financial reporting due to the relatively small number of employees who have bookkeeping and accounting functions and therefore prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. The Company also noted the internallimited staff has limited USwith U.S. GAAP and SEC Reporting experience.
This annual report filed on Form 10-K does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
We continue taking steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this Annual Report on Form 10-K, we have not been able to completely remediate the material weaknesses identified above. To remediate such weaknesses, we plan to appoint qualified personnel to establish an audit committee with financial accounting, GAAP, and SEC experience.
Item 9B. Other Information.
None
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.
Not Applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Identification of directors and officers
The following table sets forth the name and age of officers and director as of the date hereof. Our executive officers are elected annually by our board of directors. Our executive officers hold their offices until they resign, are removed by the Board, or his successor is elected and qualified.
Directors and Executive Officers
| Name | Age | Position | |||
| Chan Heng Fai | 78 | Executive Chairman of the Board | |||
| Lee Wang Kei | 32 | Chief Executive Officer | |||
| Lum Kan Fai | 60 | ||||
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On October 21, 2014, the Company reported under Form 8-K the Sale & Purchase Agreement (“Purchase Agreement”) with Alset International Limited, formerly known as Singapore eDevelopment Limited, (“SED”), a Singapore exchange listed company, dated October 15, 2014. The Purchase Agreement also granted SEDAIL the right to nominate one member to the Company’s Board of Directors. On October 24, 2014, SED nominated, and the Company appointed Mr. Conn Flanigan and Mr. Chan Heng Fai as Directors
The mailing address for each of the Company.
Business Experience
Mr. Chan
has served as a Director since OctoberMr. Chan’s previous experiences include serving as Managing Chairman of ZH International Holdings Limited (formerly known as Heng Fai Enterprises Limited), an investment holding company listed on the HKSE, from 1992 to 2015. Mr. Chan was formerly the Managing Director of SingHaiyi Group Ltd., a property development, investment and management company listed on the Singapore Exchange Mainboard, from November 2003 to September 2013, and the Executive Chairman of China Gas Holdings Limited, a Hong Kong listed investor and operator of city gas pipeline infrastructure in China from 1997 to 2002. Mr. Chan served on the Board of RSI International Systems, Inc., the developer of RoomKeyPMS, a web based property management system, from June 2014 to February 2019.
Mr. Chan has also served as a director of Global Medical REIT Inc,Inc., a reportinghealthcare facility real estate company, underfrom December 2013 to July 2015. He was a director of American Housing REIT Inc. from October of 2013 to July of 2015. He served as a director of Skywest Ltd., a public Australian airline company from 2005 to 2006. Mr. Chan was a director of Global Med Technologies, Inc., a medical company engaged in the federal securities lawsdesign, development, marketing and an OTC-Pink listed public company.support information for management software products for healthcare-related facilities, from May 1998 until December 2005.
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Director Qualifications of Chan Heng Fai:
The board of directors appointed Mr. Flanigan receivedChan in recognition of his abilities to assist the Company in expanding its business and the contributions he can make to the Company’s strategic direction.
Mr. Lee has served as the Company’s Chief Executive Officer since September of 2020. Mr. Lee previously served as the Company’s Chief Executive Officer from December 2017 until August 2018 and served as the Company’s Chief Technology Officer from June 2017 until August 2018. Mr. Lee has served as a B.A. in International RelationsSystem Architect for the Company since August of 2015, where he has helped lead the Company’s software development, and from April of 2015 to July of 2015, Mr. Lee served as a Consultant to the UniversityCompany. Mr. Lee has served as Head of San Diego in 1990Development for DSS Asia Limited since August 2018. Prior to joining the Company, Mr. Lee served as Software Project Manager for Appcraft Asia from 2014-2015 and served as Software Architect for myFunboxx from 2012-2014.
Mr. Lum has served as a Juris Doctor Degreemember of the Company’s Board of Directors since June of 2015. Mr. Lum served as Chief Technology Officer (“CTO”) from June of 2015 until June of 2017. In June of 2017, the University of Denver Sturm College of Law in 1996.
Director Qualifications of Mr. Lum wasKan Fai:
The board of directors appointed Mr. Lum in recognition of his extensive knowledge in information technology business and his ability to assist in the Company’s continuous growth. He has over 30 years of technology business experience in multinational corporations.
Mr. Lui Wai Leung Alan has served as an Executive Director and Chief TechnologyFinancial Officer since May of 2016. Mr. Lui has been Chief Financial Officer of Singapore eDevelopmentAlset International Limited, (“SeD”).
Section 16(a) Beneficial Ownership Reporting Compliance
Not Applicable.
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Corporate Governance
Board of Directors
The varying business experience of each of our directors led to the conclusion that each such party should be a member of our Board of Directors. The minimum number of directors we are authorized to have is one and the maximum is eight. In no event may we have less than one director.
Directors on our Board of Directors are elected for one-year terms and serve until the next annual security holders’ meeting or until their death, resignation, retirement, removal, disqualification, or until a successor has been elected and qualified. All officers are appointed annually by the Board of Directors and serve at the discretion of the Board. Currently, directors receive no compensation for their services on our Board.
All directors will be reimbursed by us for any accountable expenses incurred in attending directorsdirectors’ meetings provided that we have the resources to pay these fees. We will consider applying for officers and directorsdirectors’ liability insurance at such time when we have the resources to do so.
Committees of the Board of Directors
Concurrent with having sufficient members and resources, our Board of Directors intends to establish an audit committee and a compensation committee. The audit committee will review the results and scope of the audit and other services provided by the independent auditors and review and evaluate the system of internal controls. The compensation committee will review and recommend compensation arrangements for the officers and employees. No final determination has yet been made as to the memberships of these committees or when we will have sufficient members to establish committees. We believe that we will need a minimum of three independent directors to have effective committee systems.
As of the date hereof, we have not established any Board committees.
Family Relationships
No family relationship exists between any director, executive officer, or any person contemplated to become such.
Director Independence
In light of the relationships between certain members of our Board and our majority stockholder, none of the members of our management can be deemed to be independent. Our board of directors has voluntarily adopted the corporate governance standards defining the independence of our directors imposed by the NASDAQ Capital Market’s requirements for independent directors serving onpursuant to Rule 5605(a)(2) of the Marketplace Rules of The NASDAQ Stock Market LLC.
Potential Conflicts
None of the members of our board of directors.
We will seek to add additional officer(s) and/or director(s) as and when the proper personnel are located and terms of employment are mutually negotiated and agreed, and we have sufficient capital resources and cash flow to make such offers.
We cannot provide assurances that our efforts to eliminate the potential impact of conflicts of interest will be effective.
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Involvement in Certain Legal Proceedings
None of our directors or executive officers has, during the past ten years:
| ● | |
| ● | been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences); |
| ● | been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, futures, commodities or banking activities; |
| ● | been found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; and |
| ● | been subject or a party to or any other disclosable event required by Item 401(f) of Regulation S-K. |
Code of Business Conduct and Ethics
We currently do not have a Code of Business Conduct and Ethics.
Item 11. Executive Compensation.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table presents summary information regarding the total compensation awarded to, earned by, or paid to each of the named executive officers for services rendered to us for the calendar years ended December 31, 20152022 and 2014.
Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||
| Chan Heng Fai, Chairman, CEO & President | 2015 | -- | -- | -- | -- | -- | ||||||||||||||||
| Conn Flanigan, Director, Secretary | 2015 | -- | -- | -- | -- | -- | ||||||||||||||||
Robert Trapp, Director, CFO (till June 16, 2015) | 2015 | -- | -- | -- | -- | -- | ||||||||||||||||
Lum Kan Fai, Director, CTO (from June 16, 2015) | 2015 | 105,805 | -- | -- | -- | 105,805 | ||||||||||||||||
Chew Sien Lup, CFO (from June 16, 2015) | 2015 | -- | -- | -- | -- | -- | ||||||||||||||||
| Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||
| Chan Heng Fai, Executive Chairman | 2022 | — | — | — | — | — | |||||||||||||||||
| Lee Wang Kei, CEO | 2022 | — | — | — | 24,000 | 24,000 | |||||||||||||||||
| Lum Kan Fai, Director, Vice Chairman | 2022 | — | — | — | — | — | |||||||||||||||||
| Sanjib Kalita (resigned on September 30, 2022) | 2022 | — | — | — | — | — | |||||||||||||||||
| Lui Wai Leung Alan, CFO | 2022 | — | — | — | — | — | |||||||||||||||||
| Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||
| Chan Heng Fai, Executive Chairman | 2021 | — | — | — | — | — | |||||||||||||||||
| Lee Wang Kei, CEO | 2021 | — | — | — | 24,000 | 24,000 | |||||||||||||||||
| Lum Kan Fai, Director, Vice Chairman | 2021 | — | — | — | — | — | |||||||||||||||||
| Sanjib Kalita | 2021 | — | — | — | — | — | |||||||||||||||||
| Lui Wai Leung Alan, CFO | 2021 | — | — | — | — | — | |||||||||||||||||
Other than as set forth in the table above, there has been no cash or non-cash compensation awarded to, earned by or paid to any of our officers and directors since inception. We do not currently have a stock option plan, non-equity incentive plan or pension plan.On July 30, 2018, the Company adopted the Equity Incentive Plan intended to encourage ownership of Shares by Employees and directors of and certain consultants to the Company in order to attract and retain such people, to induce them to work for the benefit of the Company.
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Director Compensation
Our directors will not receive a fee for attending each board of directors meeting or meeting of a committee of the board of directors. All directors will be reimbursed for their reasonable out-of-pocket expenses incurred in connection with attending board of director and committee meetings.
Employment Agreement
As of the date of this report, the Company has not currently haveentered into any employment agreementsarrangement with any director or officer, except for our officers and directors.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth certain information as of April 13, 2016March 29, 2023 with respect to the beneficial ownership of our common stock, the sole outstanding class of our voting securities, by (i) any person or group owning more than 5% of each class of voting securities, (ii) each director, (iii) each executive officer named in the Summary Compensation Table in the section entitled “Executive Compensation” above and (iv) all executive officers and directors as a group. As of April 13, 2016,March 29, 2023, we had 5,909,687506,898,576 shares of common stock issued and outstanding.
Beneficial ownership is determined under the rules of the Securities and Exchange Commission and generally includes voting or investment power over securities. Except in cases where community property laws apply or as indicated in the footnotes to this table, we believe that each stockholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the stockholder.
Shares of common stock subject to options or warrants that are currently exercisable or exercisable within 60 days of the date of this Form 10K10-K are considered outstanding and beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
| Name and Address (1) | Beneficially Owned | Percentage Owned | ||||||
| Greater than 5% Holders | ||||||||
| Alset Inc. (2) | 505,341,376 | 99.693 | % | |||||
| Officers and Directors | ||||||||
| Chan Heng Fai (3) | 505,341,376 | 99.693 | % | |||||
| Lee Wang Kei | 0 | 0 | % | |||||
| Lum Kan Fai | 0 | 0 | % | |||||
| Lui Wai Leung Alan | 0 | 0 | % | |||||
| All directors and officers as a group (4 persons) | ||||||||
| Name And Address (1) | Beneficially Owned | Percentage Owned | ||||||
| Singapore eDevelopment Limited (2) | 5,801,687 | 98.17 | % | |||||
| All directors and officers as a group (4 persons) | 0 | 0.0 | % | |||||
(1) | Unless otherwise stated, the address is 4800 Montgomery Lane, Suite 210, Bethesda MD 20814, the address of the Company |
| (2) | The address is: |
| (3) | Mr. Chan, as the Chief Executive Officer of Alset International Limited is deemed to be the beneficial owner of those shares owned by Alset International Limited. Alset International Limited’s majority stockholder is a subsidiary of Alset Inc., a Nasdaq-listed company. Mr. Chan is the Chairman and Chief Executive Officer of Alset Inc. Directly and through an entity he owns, Mr. Chan is the largest stockholder of Alset Inc. |
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Item 13. Certain Relationships and Related Transactions, and Director Independence.
AIL is the Company’s Chiefmajority stockholder. Chan Heng Fai, the Executive Officer (CEO)Chairman of the Company’s Board of Directors, is also the Chairman and Director is the Chief Executive Officer of SED. SEDAIL. In addition, Mr. Chan is also the Chairman, Chief Executive Officer and largest stockholder of Alset Inc., which is the majority shareholderstockholder of AIL. Lui Wai Leung Alan, the Company. The Company’s other two directors, one beingChief Financial Officer, is also the Chief Financial Officer are affiliated toof AIL and the CEO through other corporate organization where the CEO holds either a management or ownership position.Co-Chief Financial Officer of Alset Inc. As of the date of this report, the Company has not entered into any employment arrangement with any director or officer.
On December 31, 2014, the Company owed Singapore eDevelopmentAlset International Limited (SED)(AIL), its majority shareholder,stockholder, $4,428,438. This amount reflects a loan of $50,000 and the US equivalent of S$5,702,500. It also includes $32,574 in payments made by SEDAIL on behalf of the Company. On December 28, 2014, SEDAIL loaned the Company under a promissory note (the “Note”) that covered $3,988,831 (S$5,250,533.93). The Note is non-interest bearing and matures on June 25, 2015. The Note has no prepayment penalty. The other loans and expenses covered by SEDAIL for the benefit of the Company are not covered under a loan document.
On July 13, 2015, the Company entered into a Loan Conversion Agreement with SeD,AIL, pursuant to which SeDAIL converted outstanding loans made to the Company into common stock of the Company at a rate of $5.00 per share (rounded to the nearest full share). The total amount converted consists of outstanding principal in the amount of $5,250,554 Singapore Dollars or $3,888,437 USD as of exchange rate on July 10, 2015)2015, which amount was evidenced by a promissory note in favor of SeDAIL effective December 28, 2014 (“SeDAIL Promissory Note”). The principal amount of $3,888,437 was converted to common stock of the Company, and in exchange, SeDAIL received 777,687 shares of common stock of the Company. The other loans and expenses covered by SEDAIL for the benefit of the Company are not covered under a loan document.
On March 25, 2015, HotApp BlockChain Pte. Ltd., formerly known as HotApps International Pte LtdLtd. (“HIP”) acquired 100% of issued share capital in HotApp International Limited, a Hong Kong company, for a cash consideration of HK$1.00 from Mr. Chan Heng Fai, a substantial shareholderstockholder and the Company’s Executive DirectorChairman and former CEO. HotApp International Pte LtdLimited is a corporation incorporated in Hong Kong Special Administrative Region of the People’s Republic of China with a total issued share capital of HK$1.00 represented by one (1) issued share at HK$1.00 each. The consideration of the acquisition was based on the issued share capital of HotApp International Limited, which is principally engaged in the sales and marketing of mobile application. HotApp International Limited was dormant and has a net equity deficiency of HK$5,456 due to incorporation expenses as at the date of acquisition.
On January 25, 2017, the Company entered into an Agreement for Services with iGalen International Inc. (“iGalen”), a company specializing in dietary supplements, to provide iGalen with a mobile enterprise resource planning platform (“Mobile App”) for iGalen’s members. Under the terms of the agreement, iGalen, a U.S.-based network marketing company which was 53% owned by AIL, agreed to share 3% of its entire annual global revenue with the Company for the financial year ending December 31, 2017. In exchange, the Company assumed responsibility for maintaining and upgrading the Mobile App platform, as well as providing the required cloud infrastructure. The Company agreed to absorb the cost of development of the Mobile App, and agreed not to charge individual members for use of the Mobile App’s standard functions.
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On March 27, 2017, the Company entered into a Loan Conversion Agreement with AIL, pursuant to which AIL agreed to convert $450,890 of debt owed by the Company to AIL into 500,988,889 common shares at a conversion price of $0.0009. The captioned shares were issued on June 9, 2017, and AIL owned 99.979% of the Company after such transactions.
On December 20, 2018, the Board of Directors of AIL announced its intention to sell up to 3,200,000 shares of the Company to independent third parties at US$0.50 per share for an aggregate cash consideration of up to US$1,600,000. The purpose of this proposed sale was to raise funds to continue to support the general corporate and working capital of the Company, including but not limited to the operating costs of the Company. As of December 31, 2021, AIL has sold 1,449,200 shares of the Company to independent third parties, and AIL owned 99.693% of the Company after such transactions.
On March 27, 2017, AIL and the Company entered into a Preferred Stock Cancellation Agreement, by which AIL agreed to cancel its 13,800,000 shares of Perpetual Preferred Stock issued by the Company. On June 8, 2017, a Certificate of Retirement for 13,800,000 shares of the Perpetual Preferred Stock has been filed with the office of Secretary of State of the State of Delaware.
On October 25, 2018, HotApp BlockChain Pte. Ltd., formerly known as HotApps International Pte. Ltd. (“HIP”) entered into an Equity Purchase Agreement with DSS Asia Limited (“DSS Asia”), a Hong Kong subsidiary of DSS International Inc. (“DSS International”), pursuant to which HIP agreed to sell to DSS Asia all of the issued and outstanding shares of HotApps Information Technology Co. Ltd., also known as Guangzhou HotApps Technology Ltd. (“Guangzhou HotApps”). Guangzhou HotApps was a wholly owned subsidiary of HIP, which was primarily engaged in engineering work for software development, mainly voice over internet protocol. Guangzhou HotApps was also involved in a number of outsourcing projects, including projects related to real estate and lighting.
The parties to the Equity Purchase Agreement agreed that the purchase price for this transaction would be $100,000, which would be paid in the form of a two-year, interest free, unsecured, demand promissory note in the principal amount of $100,000, and that such note would be due and payable in full in two years. The closing of the Equity Purchase Agreement was subject to certain conditions; these conditions were met and the transaction closed on January 14, 2019.
Mr. Chan Heng Fai is the Executive Chairman and a Member of the Board of Directors of the Company. He is also the Chief Executive Officer and Chairman of Alset International Limited, the majority stockholder of the Company. Mr. Chan is the Chairman, Chief Executive Officer and largest stockholder of Alset Inc., Alset International Limited’s majority stockholder. Mr. Chan is also the Chief Executive Officer and Chairman of DSS International and a significant stockholder and Executive Chairman of the Board of DSS, Inc., which is the sole owner of DSS International. Lum Kan Fai, a member of the Board of Directors of the Company, is also an employee of DSS International.
Acquisition of Additional Value Exchange Securities
On October 17, 2022, the Company entered into a Stock Purchase Agreement (the “Agreement”) with Chan Heng Fai, who is the Chairman of the Company’s Board of Directors and the Chairman, Chief Executive Officer and largest stockholder of Alset Inc., the Company’s majority stockholder. Pursuant to the Agreement, the Company bought an aggregate of 7,276,163 shares of VEII for the following purchase prices: (i) $1,733,079.12 for 7,221,163 shares, representing a price of $.24 per share; (ii) $2,314 for 10,000 shares, representing a price of $.2314 per share; (iii) $5,015 for 25,000 shares, representing a price of $.2006 per share; and (iv) $3,326 for 20,000 shares, representing a price of $.1663 per share. Collectively, these purchases represent an aggregate purchase price of $1,743,734.12 for 7,276,163 shares of VEII. Such purchase prices were negotiated between the parties to the Agreement.
Mr. Chan and another member of our Board of Directors, Lum Kan Fai Vincent, are both members of the Board of Directors of VEII. In addition to Mr. Chan, two other members of the Board of Directors of Alset Inc. are also members of the Board of Directors of VEII (Mr. Wong Shui Yeung and Mr. Wong Tat Keung). Following the acquisitions of shares pursuant to the Agreement, the Company now owns a total of 13,776,163 shares of VEII.
Convertible Credit Agreement
On January 27, 2023, the Company and American Wealth Mining Corp. (“AWMC,” and together with the Company, the “Lenders”) entered into a Convertible Credit Agreement (the “Credit Agreement”) with VEII. The Credit Agreement provides VEII with a maximum credit line of $1,500,000 (“Maximum Credit Line”) with simple interest accrued on any advances of the money under the Credit Agreement at 8%. The principal amount of any advance of money under the Credit Agreement (each being referred to as an “Advance”) is due in a lump sum, balloon payment on the third annual anniversary of the date of the Advance (“Advance Maturity Date”). Accrued and unpaid interest on any Advance is due and payable on a semi-annual basis with interest payments due on the last business day of June and last business day of December of each year. A Lender may demand that any portion or all of the unpaid principal amount of any Advance as well as accrued and unpaid interest thereon may be paid by shares of VEII Common Stock in lieu of cash payment.
VEII must request Advances from the Lenders. Either Lender may elect to separately, fully fund the Advance, or both Lenders may jointly elect to fund the Advance based on Lenders’ agreement on the portion of the Advance to be funded by each Lender. Lenders may severally or jointly reject any request for an Advance and neither Lender has an obligation to fund any Advance under the Credit Agreement. Accordingly, the Company will determine how much to loan to VEII pursuant to the Credit Agreement.
The Credit Agreement grants conversion rights to each Lender. Each Advance shall be convertible, in whole or in part, into shares of VEII Common Stock at the option of the Lender who made that Advance (being referred to as a “Conversion”), at any time and from time to time, at a price per share equal the “Conversion Price” (as defined below). The Conversion Price for a Conversion shall be the average closing price of the VEII Common Stock for the three (3) consecutive trading days prior to date of the Notice of Conversion. The Lenders shall also have certain conversion rights upon a change of control of VEII, or a breach of the Credit Agreement by VEII.
In the event that a Lender elects to convert any portion of an Advance into shares of VEII Common Stock in lieu of cash payment in satisfaction of that Advance, then VEII would issue to the Lender five (5) detachable warrants for each share of VEII Common Stock issued in a Conversion (“Warrants”). Each Warrant will entitle the Lender to purchase one (1) share of Common Stock at a per-share exercise price equal to the Conversion Price. The exercise period of each Warrant will be five (5) years from date of issuance of the Warrant.
Loan from Alset Inc.
On February 23, 2023, the Company and Alset Inc., a Texas corporation (NASDAQ: AEI) (“Alset”) entered into a Subscription Agreement (the “Subscription Agreement”). Pursuant to the Subscription Agreement, the Company has borrowed $1,400,000.00 (the “Loan Amount”) from Alset in exchange for a Convertible Promissory Note (the “Note”). The term of the Note is three years with simple interest at a rate of 8% percent per annum. Alset may require repayment upon 30 days’ notice. The Company shall be entitled to repay all or any portion of the Loan Amount to Alset early and without penalty.
Alset Inc. is our largest stockholder. Our Chairman, Chan Heng Fai, is the Chairman, Chief Executive Officer and majority stockholder of Alset Inc. Our Chief Financial Officer, Lui Wai Leung Alan, is also the Co-Chief Financial Officer of Alset Inc.
We believe that the foregoing transactions were in our best interests. Consistent with Section 144 of the Delaware General Corporation Law, it is our current policy that all transactions between us and our officers, directors and their affiliates will be entered into only if such transactions are approved by a majority of the disinterested directors, are approved by vote of the stockholders or are fair to us as a corporation as of the time it is us at isthey were authorized, approved or ratified by the board. We will conduct an appropriate review of all related party transactions on an ongoing basis, and, where appropriate, we will utilize our audit committee for the review of potential conflicts of interest.
Except as set forth above, none of the following persons has any direct or indirect material interest in any transaction to which we are a party since our incorporation or in any proposed transaction to which we are proposed to be a party:
| (A) | Any of our directors or officers; | |
| (B) | Any proposed nominee for election as our director; | |
| (C) | Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our common stock; or | |
| (D) | Any relative or spouse of any of the foregoing persons, or any relative of such spouse, who has the same house as such person or who is a director or officer of any parent or subsidiary of our |
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Item 14. Principal Accounting Fees and Services.
The following table indicates the fees paid by us for services performed for the:the years ended December 31, 2022 and December 31, 2021:
| Year Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Audit Fees | $ | 61,650 | $ | 74,365 | ||||
| Audit-Related Fees | 15,413 | 0 | ||||||
| Tax Fees | 0 | 0 | ||||||
| All Other Fees | 0 | 0 | ||||||
| Total | $ | 77,063 | $ | 74,365 | ||||
Audit Fees. This category includes the aggregate fees billed for professional services rendered by the independent auditors during the years ended December 31, 2022 and December 31, 2021 for the audit of our financial statements and review of previous years’ Form 10-Qs.
Tax Fees. This category includes the aggregate fees billed for tax services rendered in the preparation of our federal and state income tax returns.
All Other Fees. This category includes the aggregate fees billed for all other services, exclusive of the fees disclosed above, rendered during the year ended December 31,2022 and December 31, 2021.
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| Year Ended December 31, | ||||||||
| 2015 | 2014 | |||||||
| Audit Fees | $ | 30,000 | $ | 25,000 | ||||
| Tax Fees | 3,500 | $ | - | |||||
| Total | $ | 33,500 | $ | 25,000 | ||||
PART IV
Item 15. Exhibits, Financial Statement Schedules.
| (a)(1) | List of Financial Statements included in Part II hereof: |
| (a)(2) | List of Financial Statement schedules included in Part IV hereof: |
None
| (a)(3) | Exhibits |
The following exhibits are incorporated into this Form 10-K Annual Report:
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| 101.INS* | Inline XBRL Instance Document | ||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | ||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | ||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| * | Filed with this document |
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HAPI METAVERSE INC. | |||
| Date: March 29, 2023 | By: | /s/ Lee Wang Kei | |
| Lee Wang Kei | |||
| Chief Executive Officer | |||
| (Principal Executive Officer) | |||
| Date: | By: | /s/ | Lui Wai Leung, Alan |
| Lui Wai Leung, Alan Chief Financial Officer | |||
| and Principal Accounting Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated and on the dates indicated.
| Signature | Title | Date | ||
| /s/ | Chief Executive Officer | |||
| Lee Wang Kei | (Principal Executive Officer) | |||
| /s/ Lui Wai Leung, Alan | Chief Financial Officer | March 29, 2023 | ||
| Lui Wai Leung, Alan | (Principal Financial Officer and Principal Accounting Officer) | |||
| /s/ Chan Heng Fai | Executive Chairman of the Board | March 29, 2023 | ||
| Chan Heng Fai | ||||
| Vice Chairman of the Board | March 29, 2023 | |||
| Lum Kan Fai |
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