UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2020
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________to _________
001-39732
Commission File Number
Alset EHome International Inc.
(Exact name of registrant as specified in its charter)
| NEVADA | 83-1079861 | |
| State or other jurisdiction of incorporation or organization | (I.R.S. Employer Identification No.) |
| 4800 Montgomery Lane, Suite 210, Bethesda, Maryland | 20814 | |
| (Address of principal executive offices) | (Zip Code) |
301-971-3940
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
| Common Stock, $0.001 par value | AEI | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐[X] No ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒[X] No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | Accelerated filer | ||
| Non-accelerated filer | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐[ ] No ☒
As of December 29, 2020,May 24, 2021, there were
Table of Contents
| F-1 | |
Item 1. Consolidated Financial Statements (Unaudited) | |
| F-1 | |
| F-2 | |
| F-3 | |
F-5 – F-33 | |
| 2 | |
Part I. FinancialFinancial Information
Alset EHome International Inc.
September 30, 2020 | December 31, 2019 | |
| Assets: | ( Unaudited) | |
| Current Assets: | ||
| Cash | $8,754,202 | $2,774,587 |
| Restricted Cash | 4,235,274 | 4,447,678 |
| Account Receivables, Net | 56,191 | 170,442 |
| Other Receivables | 369,888 | 681,677 |
| Note Receivables - Related Parties | 209,398 | - |
| Prepaid Expenses | 1,902,079 | 145,186 |
| Inventory | 63,455 | 116,698 |
| Investment in Securities at Fair Value | 59,745,321 | 3,015,698 |
| Investment in Securities at Cost | 236,756 | 200,128 |
| Investment in Securities at Equity Method | 2,245 | - |
| Deposits | 50,539 | 48,717 |
| Current Assets from Discontinued Operations | - | 139,431 |
| Total Current Assets | 75,625,348 | 11,740,242 |
| Real Estate | ||
| Properties under Development | 24,990,366 | 23,884,704 |
| Operating Lease Right-Of-Use Asset | 546,519 | 146,058 |
| Deposit | 234,134 | 21,491 |
| Property and Equipment, Net | 77,663 | 80,285 |
| Total Assets | $101,474,030 | $35,872,780 |
| Liabilities and Stockholders' Equity: | ||
| Current Liabilities: | ||
| Accounts Payable and Accrued Expenses | $4,812,881 | $3,995,001 |
| Advance from Related Party | 710,524 | - |
| Accrued Interest - Related Parties | 33,828 | 834,536 |
| Deferred Revenue | 3,046,687 | 258,594 |
| Builder Deposits | 1,661,303 | 890,069 |
| Operating Lease Liability | 339,849 | 58,865 |
| Notes Payable | 228,468 | 157,105 |
| Notes Payable- Related Parties | 160,000 | 410,000 |
| Accumulated Losses on Equity Method Investment | 231,418 | - |
| Income Tax Payable | 249,698 | 420,327 |
| Current Liabilities From Discontinued Operations | - | 7,021 |
| Total Current Liabilities | 11,474,656 | 7,031,518 |
| Long-Term Liabilities: | ||
| Builder Deposits | 147,444 | 1,555,200 |
| Operating Lease Liability | 202,038 | 91,330 |
| Note Payable, Net of Debt Discount | 619,329 | - |
| Notes Payable - Related Parties | 2,056,183 | 4,971,401 |
| Total Liabilities | 14,499,650 | 13,649,449 |
| Stockholders' Equity: | ||
| Preferred Stock, $0.001 par value; 5,000,000 shares authorized, none issued | ||
| Common Stock, $0.001 par value; 20,000,000 shares authorized; | ||
| 6,400,000 shares issued and outstanding on September 30, 2020 | ||
| and 10,001,000 shares issued and outstanding on December 31, 2019 | 6,400 | 10,001 |
| Additional Paid In Capital | 94,053,568 | 54,263,717 |
| Accumulated Deficit | (49,803,606) | (40,494,115) |
| Accumulated Other Comprehensive Income | 1,045,584 | 1,468,269 |
| Total Stockholders' Equity | 45,301,946 | 15,247,872 |
| Non-controlling Interests | 41,672,434 | 6,975,459 |
| Total Stockholders' Equity | 86,974,380 | 22,223,331 |
| Total Liabilities and Stockholders' Equity | $101,474,030 | $35,872,780 |
(Unaudited)
| March 31, 2021 | December 31, 2020 | |||||||
| (As Combined) | ||||||||
| Assets: | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 20,368,692 | $ | 24,465,923 | ||||
| Restricted Cash | 8,636,391 | 6,769,533 | ||||||
| Account Receivables, Net | 1,062,278 | 1,366,194 | ||||||
| Other Receivables | 687,120 | 644,576 | ||||||
| Note Receivables - Related Parties | 669,561 | 649,569 | ||||||
| Prepaid Expenses | 2,894,258 | 1,470,680 | ||||||
| Inventory | 8,956 | 90,068 | ||||||
| Investment in Securities at Fair Value | 52,164,652 | 49,172,457 | ||||||
| Investment in Securities at Cost | 99,997 | 280,516 | ||||||
| Deposits | 25,528 | 47,019 | ||||||
| Total Current Assets | 86,617,433 | 84,956,535 | ||||||
| Real Estate | ||||||||
| Rental Properties | 2,161,680 | - | ||||||
| Properties under Development | 18,104,033 | 20,505,591 | ||||||
| Operating Lease Right-Of-Use Asset | 722,507 | 574,754 | ||||||
| Deposit | 271,167 | 249,676 | ||||||
| Loan Receivable - Related Parties | 840,000 | 840,000 | ||||||
| Property and Equipment, Net | 81,169 | 85,365 | ||||||
| Total Assets | $ | 108,797,989 | $ | 107,211,921 | ||||
| Liabilities and Stockholders’ Equity: | ||||||||
| Current Liabilities: | ||||||||
| Accounts Payable and Accrued Expenses | $ | 2,388,448 | $ | 1,670,320 | ||||
| Accrued Interest - Related Parties | 41,239 | - | ||||||
| Deferred Revenue | 3,430,893 | 2,867,226 | ||||||
| Builder Deposits | 928,565 | 1,262,336 | ||||||
| Operating Lease Liability | 51,686 | 381,412 | ||||||
| Notes Payable | 238,935 | 172,706 | ||||||
| Notes Payable - Related Parties | 14,837,252 | 2,350,031 | ||||||
| Total Current Liabilities | 21,917,018 | 8,704,031 | ||||||
| Long-Term Liabilities: | ||||||||
| Operating Lease Liability | 684,875 | 193,342 | ||||||
| Note Payable, Net of Discount | 651,034 | 636,362 | ||||||
| Total Liabilities | 23,252,927 | 9,533,735 | ||||||
| Stockholders’ Equity: | ||||||||
| Preferred Stock, $0.001 par value; 5,000,000 shares authorized, none issued and outstanding | ||||||||
| Common Stock, $0.001 par value; 20,000,000 shares authorized; 8,580,000 and 8,570,000 shares issued and outstanding on March 31, 2021 and December 31, 2020, respectively | 8,580 | 8,570 | ||||||
| Additional Paid In Capital | 101,799,367 | 102,339,666 | ||||||
| Accumulated Other Comprehensive Income | 1,092,609 | 2,143,338 | ||||||
| Accumulated Deficit | (51,029,349 | ) | (44,793,713 | ) | ||||
| Total Alset EHome International Stockholders’ Equity | 51,871,207 | 59,697,861 | ||||||
| Non-controlling Interests | 33,673,855 | 37,980,325 | ||||||
| Total Stockholders’ Equity | 85,545,062 | 97,678,186 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 108,797,989 | $ | 107,211,921 | ||||
See accompanying notes to condensed consolidated unaudited financial statements.
Alset EHome International Inc. and Subsidiaries
Condensed Consolidated Statements of OperationsOperations and Other Comprehensive LossIncome (Loss
For the Three and Nine Months Ended September 30,March 31, 2021 and 2020 and 2019
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||
2020 | 2019 | 2020 | 2019 | |
| Revenue | ||||
| Property Sales | $2,146,992 | $4,938,017 | $7,148,786 | $21,509,197 |
| Biohealth Product Sales | 1,931 | 360,351 | 31,133 | 1,406,951 |
| Others | - | 8,495 | - | 28,350 |
| Total Revenue | 2,148,923 | 5,306,863 | 7,179,919 | 22,944,498 |
| Operating Expenses | ||||
| Cost of Sales | 1,616,377 | 4,130,484 | 5,609,303 | 19,177,800 |
| General and Administrative | 798,186 | 1,445,678 | 4,196,939 | 4,330,751 |
| Impairment of Real Estate | - | - | - | 3,938,769 |
| Total Operating Expenses | 2,414,563 | 5,576,162 | 9,806,242 | 27,447,320 |
| Loss From Continuing Operations | (265,640) | (269,299) | (2,626,323) | (4,502,822) |
| Other Income (Expense) | ||||
| Interest Income | 2,504 | 16,440 | 14,995 | 44,021 |
| Interest Expense | (19,825) | (86,347) | (160,341) | (286,805) |
| Gain on Disposal of Subsidiary | - | - | - | 299,255 |
| Gain on Deconsolidation | 53,200,752 | - | 53,200,752 | - |
| Loss on Consolidation | (21,909,596) | (21,909,596) | ||
| Foreign Exchange Transaction Gain (Loss) | (415,203) | 757,068 | 960,268 | 438,608 |
| Unrealized (Loss) Gain on Securities Investment | (43,761,763) | 507,727 | (42,169,116) | (146,470) |
| Loss on Investment on Security by Equity Method | (52,392) | - | (193,132) | (30,166) |
| Other Income | 8,563 | 2,887 | 52,847 | 38,993 |
| Total Other Income (Expense) | (12,946,960) | 1,197,775 | (10,203,323) | 357,436 |
| Net (Loss) Income from Continuing Operations Before Income Taxes | (13,212,600) | 928,476 | (12,829,646) | (4,145,386) |
| Income Tax Expense from Continuing Operations | (74,106) | - | (188,759) | - |
| Net (Loss) Income from Continuing Operations | (13,286,706) | 928,476 | (13,018,405) | (4,145,386) |
| Loss from Discontinued Operations, Net of Tax | (56,053) | (128,554) | (417,438) | (388,931) |
| Net Loss | (13,342,758) | 799,922 | (13,435,843) | (4,534,317) |
| Net (Loss) Income Attributable to Non-Controlling Interest | (3,505,919) | 36,181 | (4,126,352) | (1,437,202) |
| Net (Loss) Income Attributable to Common Stockholders | $(9,836,839) | $763,741 | $(9,309,491) | $(3,097,115) |
| Other Comprehensive Income (Loss), Net | ||||
| Unrealized Gain on Securities Investment | 29,123 | (53,681) | 29,639 | (36,747) |
| Foreign Currency Translation Adjustment | 462,064 | (584,561) | (585,085) | (325,518) |
| Comprehensive Loss | (12,851,571) | 161,680 | (13,991,289) | (4,896,582) |
| Comprehensive Loss Attributable to Non-controlling Interests | (3,276,947) | (160,972) | (4,190,100) | (1,549,106) |
| Comprehensive Income (Loss) Attributable to Common Stockholders | $(9,574,624) | $322,652 | $(9,801,189) | $(3,347,476) |
| Net Income (Loss) Per Share - Basic and Diluted | ||||
| Continuing Operations | $(1.53) | $0.08 | $(1.07) | $(0.31) |
| Discontinued Operations | $(0.01) | $- | $(0.03) | $(0.00) |
| Net (Loss) Income Per Share | $(1.54) | $0.08 | $(1.10) | $(0.31) |
| Weighted Average Common Shares Outstanding - Basic and Diluted | 6,400,000 | 10,001,000 | 8,712,081 | 10,001,000 |
| 2021 | 2020 | |||||||
| Revenue | (As Combined) | |||||||
| Property Sales | $ | 3,894,131 | $ | 2,954,389 | ||||
| Biohealth Product Sales | 1,712,783 | 10,782 | ||||||
| Total Revenue | 5,606,914 | 2,965,171 | ||||||
| Operating Expenses | ||||||||
| Cost of Sales | 3,697,854 | 2,383,703 | ||||||
| General and Administrative | 2,312,505 | 1,001,850 | ||||||
| Inventory Written Off | - | 2,009 | ||||||
| Total Operating Expenses | 6,010,359 | 3,387,562 | ||||||
| Operating Losses From Operations | (403,445 | ) | (422,391 | ) | ||||
| Other Income (Expense) | ||||||||
| Interest Income | 30,632 | 19,415 | ||||||
| Interest Expense | (53,582 | ) | (60,931 | ) | ||||
| Foreign Exchange Transaction Gain | 1,462,697 | 2,260,482 | ||||||
| Unrealized (Loss) Gain on Securities Investment | (9,535,009 | ) | 458,422 | |||||
| Realized Loss on Securities Investment | (258,245 | ) | - | |||||
| Loss on Investment on Security by Equity Method | (24,847 | ) | - | |||||
| Finance Costs | (582,868 | ) | (4,903 | ) | ||||
| Other Income | 11,256 | 5,471 | ||||||
| Total Other (Expense) Income, Net | (8,949,966 | ) | 2,677,956 | |||||
| Net (Loss) Income Before Income Taxes | (9,353,411 | ) | 2,255,565 | |||||
| Income Tax | (451,337 | ) | - | |||||
| Net (Loss) Income | (9,804,748 | ) | 2,255,565 | |||||
| Net (Loss) Income Attributable to Non-Controlling Interest | (3,569,112 | ) | 636,703 | |||||
| Net (Loss) Income Attributable to Common Stockholders | $ | (6,235,636 | ) | $ | 1,618,862 | |||
| Other Comprehensive Loss, Net | ||||||||
| Unrealized Loss on Securities Investment | (1,987 | ) | (12,599 | ) | ||||
| Foreign Currency Translation Adjustment | (1,769,440 | ) | (1,674,021 | ) | ||||
| Comprehensive (Loss) Income | (11,576,175 | ) | 568,945 | |||||
| Comprehensive (Loss) Income Attributable to Non-controlling Interests | (4,328,924 | ) | 53,133 | |||||
| Comprehensive (Loss) Income Attributable to Common Stockholders | $ | (7,247,251 | ) | $ | 515,812 | |||
| Net (Loss) Income Per Share - Basic and Diluted | $ | (0.73 | ) | $ | 0.16 | |||
| Weighted Average Common Shares Outstanding - Basic and Diluted | 8,572,222 | 10,001,000 | ||||||
See accompanying notes to condensed consolidated unaudited financial statements.
Alset EHome International Inc.
Condensed Consolidated Statements of Stockholders’ Equity
Preferred Stock | Common Stock | ||||||||
Shares | Par Value $0.001 | Shares | Par Value $0.001 | Additional Paid in Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Non-Controlling Interests | Total Stockholders Equity | |
| Balance at January 1, 2020 | 10,001,000 | $10,001 | $54,263,717 | $1,468,269 | $(40,494,115) | $6,975,459 | $22,223,331 | ||
| Subsidiary's Issuance of Stock | 96,042 | 50,811 | 146,853 | ||||||
| Proceeds from Selling Subsidiary Equity | 3,270 | 1,730 | 5,000 | ||||||
| Change in Unrealized Loss on Investment | (8,240) | (4,359) | (12,599) | ||||||
| Foreign Currency Translations | (1,094,810) | (579,211) | (1,674,021) | ||||||
Distribution to Non-Controlling Shareholder | (197,400) | (197,400) | |||||||
| Net Income | 1,447,666 | 567,985 | 2,015,651 | ||||||
| Balance at March 31, 2020 | 10,001,000 | $10,001 | $54,363,029 | $365,219 | $(39,046,449) | $6,815,015 | $22,506,815 | ||
| Cancellation of Outstanding Stock | (3,601,000) | (3,601) | 3,601 | - | |||||
| Subsidiary's Issuance of Stock | 1,262,990 | 770,156 | 2,033,146 | ||||||
| Change in Minority Interest | (445,936) | (18,317) | 464,253 | - | |||||
| Proceeds from Selling Subsidiary Equity | 16,959 | 10,341 | 27,300 | ||||||
| Change in Unrealized Gain on Investment | 8,147 | 4,968 | 13,115 | ||||||
| Foreign Currency Translations | 389,413 | 237,459 | 626,872 | ||||||
| Net Loss | (920,318) | (1,188,418) | (2,108,736) | ||||||
| Balance at June 30, 2020 | 6,400,000 | $6,400 | $55,200,643 | $744,462 | $(39,966,767) | $7,113,774 | $23,098,512 | ||
| Subsidiary's Issuance of Stock | 5,494,373 | 5,270,464 | 10,764,837 | ||||||
| Proceeds from Selling Subsidiary Equity | 74,008 | 70,992 | 145,000 | ||||||
| Change in Minority Interest | (989,342) | 50,420 | (394,507) | (1,333,429) | |||||
| Stock Exchange with Related Party | 34,273,886 | 32,877,145 | 67,151,031 | ||||||
| Change in Unrealized Gain on Investment | 14,865 | 14,258 | 29,123 | ||||||
| Foreign Currency Translations | 235,837 | 226,227 | 462,064 | ||||||
| Net Loss | $(9,836,839) | $(3,505,919) | $(13,342,758) | ||||||
| Balance at September 30, 2020 | 6,400,000 | $6,400 | $94,053,568 | $1,045,584 | $(49,803,606) | $41,672,434 | $86,974,380 | ||
For the NineThree Months Ended September 30, 2019
(Unaudited)
Preferred Stock | Common Stock | ||||||||
Shares | Par Value $0.001 | Shares | Par Value $0.001 | Additional Paid in Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Non-Controlling Interests | Total Stockholders Equity | |
| Balance at January 1, 2019 | 10,001,000 | $10,001 | $53,717,424 | $1,582,788 | $(35,263,650) | $9,155,051 | $29,201,614 | ||
| Proceeds from Selling Subsidiary Equity | 127,508 | 56,992 | 184,500 | ||||||
| Change in Unrealized Gain on Investment | 11,681 | 5,221 | 16,902 | ||||||
| Foreign Currency Translations | 74,262 | 33,194 | 107,456 | ||||||
| Net Income | 344,151 | 50,766 | 394,917 | ||||||
| Balance at March 31, 2019 | 10,001,000 | $10,001 | $53,844,932 | $1,668,731 | $(34,919,499) | $9,301,224 | $29,905,389 | ||
| Proceeds from Selling Subsidiary Equity | 10,367 | 4,633 | 15,000 | ||||||
| Change in Unrealized Gain on Investment | 22 | 10 | 32 | ||||||
| Foreign Currency Translations | 104,762 | 46,825 | 151,587 | ||||||
Distribution to Non-Controlling Shareholder | (740,250) | (740,250) | |||||||
| Net Loss | (4,205,007) | (1,524,149) | (5,729,156) | ||||||
| Balance at June 30, 2019 | 10,001,000 | $10,001 | $53,855,299 | $1,773,515 | $(39,124,506) | $7,088,293 | $23,602,602 | ||
| Proceeds from Selling Subsidiary Equity | 20,733 | 9,267 | 30,000 | ||||||
| Change in Unrealized Loss on Investment | (37,099) | (16,582) | (53,681) | ||||||
| Foreign Currency Translations | (403,990) | (180,571) | (584,561) | ||||||
| Net Income | 763,741 | 36,181 | 799,922 | ||||||
�� | |||||||||
| Balance at September 30, 2019 | 10,001,000 | $10,001 | $53,876,032 | $1,332,426 | $(38,360,765) | $6,936,588 | $23,794,282 | ||
| Preferred Stock | Common Stock | Additional | Accumulated Other | Total Alset EHome International | Non- | Total | ||||||||||||||||||||||||||||||||||
| Shares | Par Value $0.001 | Shares | Par Value $0.001 | Paid in Capital | Comprehensive Income | Accumulated Deficit | Stockholders’ Equity | Controlling Interests | Stockholders’ Equity | |||||||||||||||||||||||||||||||
| Balance at January 1, 2021 (As Combined) | 8,570,000 | $ | 8,570 | $ | 102,339,666 | $ | 2,143,338 | $ | (44,793,713 | ) | $ | 59,697,861 | $ | 37,980,325 | $ | 97,678,186 | ||||||||||||||||||||||||
| Issuance of Stock for Services | - | - | 10,000 | 10 | 60,890 | - | - | 60,900 | - | 60,900 | ||||||||||||||||||||||||||||||
| Transactions under Common Control | - | - | - | - | (57,190,499 | ) | - | - | (57,190,499 | ) | - | (57,190,499 | ) | |||||||||||||||||||||||||||
| Sale of Vivacitas to Related Party | - | - | - | - | 2,279,872 | - | - | 2,279,872 | - | 2,279,872 | ||||||||||||||||||||||||||||||
| Purchase Stock of True Partner from Related Party | - | - | - | - | 3,274,060 | - | - | 3,274,060 | - | 3,274,060 | ||||||||||||||||||||||||||||||
| Beneficial Conversion Feature | - | - | - | - | 50,770,192 | - | - | 50,770,192 | - | 50,770,192 | ||||||||||||||||||||||||||||||
| Subsidiary’s Issuance of Stock | - | - | - | - | 46,099 | - | - | 46,099 | 34,677 | 80,776 | ||||||||||||||||||||||||||||||
| Proceeds from Selling Subsidiary Equity | - | - | - | - | 142,675 | - | - | 142,675 | 107,325 | 250,000 | ||||||||||||||||||||||||||||||
| Change in Non-Controlling Interest | - | - | - | - | 76,412 | (39,067 | ) | - | 37,345 | (37,345 | ) | - | ||||||||||||||||||||||||||||
| Change in Unrealized Gain on Investment | - | - | - | - | - | (1,135 | ) | - | (1,135 | ) | (852 | ) | (1,987 | ) | ||||||||||||||||||||||||||
| Foreign Currency Translations | - | - | - | - | - | (1,010,527 | ) | - | (1,010,527 | ) | (758,913 | ) | (1,769,440 | ) | ||||||||||||||||||||||||||
| Distribution to Non-Controlling Shareholders | - | - | - | - | - | - | - | - | (82,250 | ) | (82,250 | ) | ||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | (6,235,636 | ) | (6,235,636 | ) | (3,569,112 | ) | (9,804,748 | ) | ||||||||||||||||||||||||||
| Balance at March 31, 2021 | 8,580,000 | $ | 8,580 | $ | 101,799,367 | $ | 1,092,609 | $ | (51,029,349 | ) | $ | 51,871,207 | $ | 33,673,855 | $ | 85,545,062 | ||||||||||||||||||||||||
Alset EHome International Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
For the Three Months Ended March 31, 2020
(Unaudited)
| Preferred Stock | Common Stock | Additional | Accumulated Other | Total Alset EHome International | Non- | Total | ||||||||||||||||||||||||||||||||||
| Shares | Par Value $0.001 | Shares | Par Value $0.001 | Paid in Capital | Comprehensive Income | Accumulated Deficit | Stockholders’ Equity | Controlling Interests | Stockholders’ Equity | |||||||||||||||||||||||||||||||
| Balance at January 1, 2020 (As Combined) | 10,001,000 | $ | 10,001 | $ | 57,924,795 | $ | 1,458,289 | $ | (41,973,373 | ) | $ | 17,419,712 | $ | 7,024,783 | $ | 24,444,495 | ||||||||||||||||||||||||
| Subsidiary’s Issuance of Stock | - | - | - | - | 1,929,765 | - | - | 1,929,765 | 302,726 | 2,232,491 | ||||||||||||||||||||||||||||||
| Proceeds from Selling Subsidiary Equity | - | - | - | - | 3,270 | - | - | 3,270 | 1,730 | 5,000 | ||||||||||||||||||||||||||||||
| Change in Unrealized Loss on Investment | - | - | - | - | - | (8,240 | ) | - | (8,240 | ) | (4,359 | ) | (12,599 | ) | ||||||||||||||||||||||||||
| Foreign Currency Translations | - | - | - | - | - | (1,094,810 | ) | - | (1,094,810 | ) | (579,211 | ) | (1,674,021 | ) | ||||||||||||||||||||||||||
| Distribution to Non-Controlling Shareholders | - | - | - | - | - | - | - | (197,400 | ) | (197,400 | ) | |||||||||||||||||||||||||||||
| Net Income | - | - | - | - | - | - | 1,626,062 | 1,626,062 | 629,502 | 2,255,564 | ||||||||||||||||||||||||||||||
| Balance at March 31, 2020 (As Combined) | 10,001,000 | $ | 10,001 | $ | 59,857,830 | $ | 355,239 | $ | (40,347,311 | ) | $ | 19,875,760 | $ | 7,177,771 | $ | 27,053,530 | ||||||||||||||||||||||||
See accompanying notes to condensed consolidated unaudited financial statements.
Alset EHome International Inc. and Subsidiaries
Condensed Consolidated Statements of CashCash Flows
For the NineThree Months Ended September 30,March 31, 2021 and 2020 and 2019
(Unaudited)
2020 | 2019 | |
| Cash Flows from Operating Activities | ||
| Net Loss from Continuing Operations | $(13,018,405) | $(4,145,386) |
| Adjustments to Reconcile Net Loss from Continuing Operations to Net Cash Provided (Used in) by Operating Activities: | ||
| Depreciation | 15,225 | 20,697 |
| Amortization of Right -Of - Use Asset | 182,120 | 55,726 |
| Amortization of Debt Discount | 9,217 | - |
| Gain on Disposal of Subsidiary | - | (299,255) |
| Share-based Compensation | 1,584,412 | - |
| Foreign Exchange Transaction Gain | (960,268) | (438,608) |
| Unrealized Loss on Securities Investment | 42,169,116 | 146,470 |
| Loss on Equity Method Investment | 193,132 | - |
| Gain from Deconsolidation | (53,200,752) | |
| Loss from Consolidation | 21,909,596 | |
| Impairment of Real Estate | - | 3,938,769 |
| Changes in Operating Assets and Liabilities | ||
| Real Estate | (544,419) | 12,565,198 |
| Trade Receivables | 454,109 | (125,855) |
| Prepaid Expense | (1,801,795) | 9,542 |
| Deferred Revenue | 2,747,121 | (36,467) |
| Inventory | 55,486 | (21,253) |
| Accounts Payable and Accrued Expenses | 1,534,838 | (1,130,721) |
| Accrued Interest - Related Parties | (788,748) | 275,245 |
| Operating Lease Liability | (221,838) | (62,707) |
| Builder Deposits | (636,522) | (1,340,086) |
| Income Tax Payable | (170,630) | - |
| Net Cash (Used in) Provided by Continuing Operating Activities | (489,005) | 9,411,309 |
| Net Cash Used in Discontinued Operating Activities | (522,435) | (446,409) |
| Net Cash (Used in) Provided by Operating Activities | (1,011,440) | 8,964,900 |
| Cash Flows From Investing Activities | ||
| Purchase of Fixed Assets | (10,133) | - |
| Proceeds from Global Opportunity Fund Liquidation | 301,976 | - |
| Purchase of Investments | (158,667) | - |
| Promissory Note to Related Party | (200,000) | - |
| Net Cash Provided by (Used in) Continuing Investing Activities | (66,824) | - |
| Net Cash from Discontinued Investing Activities | - | (36,000) |
| Net Cash Provided by (Used in) Investing Activities | (66,824) | (36,000) |
| Cash Flows From Financing Activities | ||
| Proceeds from Exercise of Subsidiary Warrants | 10,764,837 | - |
| Proceeds from Sale of Subsidiary Shares | 177,300 | 229,500 |
| Borrowings | 738,783 | - |
| Financing Fee | (82,062) | - |
| Repayments of Note Payable | (250,000) | (13,899) |
| Distribution to Minority Shareholder | (197,400) | (740,250) |
| Repayment to Notes Payable - Related Parties | (4,450,572) | (2,507,840) |
| Net Cash Provided by (Used in) Continuing Financing Activities | 6,700,886 | (3,032,489) |
| Net Cash Provided by Discontinued Financing Activities | - | - |
| Net Cash Provided by (Used in) Financing Activities | 6,700,886 | (3,032,489) |
| Net Increase in Cash and Restricted Cash | 5,622,622 | 5,896,411 |
| Effects of Foreign Exchange Rates on Cash | 35,858 | 9,287 |
| Cash and Restricted Cash - Beginning of Year | 7,330,996 | 5,508,198 |
| Cash and Restricted Cash- End of Period | $12,989,476 | $11,413,896 |
| Supplementary Cash Flow Information | ||
| Cash Paid for Interest | $13,843 | $4,663 |
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||
| Amortization of Debt Discount Capitalized | $- | $381,823 |
| Stock Acquired by disposal of a Subsidiary | $67,208,173 | $- |
| 2021 | 2020 | |||||||
| (As Combined) | ||||||||
| Cash Flows from Operating Activities | ||||||||
| Net Income (Loss) from Operations | $ | (9,804,748 | ) | $ | 2,255,565 | |||
| Adjustments to Reconcile Net Income (Loss) to Net Cash Used in Operating Activities: | ||||||||
| Depreciation | 7,873 | 5,942 | ||||||
| Amortization of Right -Of - Use Asset | 81,013 | 70,671 | ||||||
| Amortization of Debt Discount | 553,961 | - | ||||||
| Shared-based Compensation | 134,192 | - | ||||||
| Foreign Exchange Transaction Gain | (1,462,697 | ) | (2,296,128 | ) | ||||
| Unrealized Loss (Gain) on Securities Investment | 9,548,251 | (458,426 | ) | |||||
| Loss on Equity Method Investment | 24,847 | - | ||||||
| Changes in Operating Assets and Liabilities | ||||||||
| Real Estate | 441,764 | 15,952 | ||||||
| Account Receivables | 203,816 | 342,575 | ||||||
| Prepaid Expense | (1,458,620 | ) | (40,805 | ) | ||||
| Trading Securities | (2,452,754 | ) | ||||||
| Inventory | 77,709 | (20,590 | ) | |||||
| Accounts Payable and Accrued Expenses | 596,355 | 231,421 | ||||||
| Accrued Interest - Related Parties | 41,239 | 19,634 | ||||||
| Deferred Revenue | 563,667 | 50,270 | ||||||
| Operating Lease Liability | (66,954 | ) | (73,668 | ) | ||||
| Builder Deposits | (333,771 | ) | (285,010 | ) | ||||
| Net Cash Used in Operating Activities | (3,304,857 | ) | (182,597 | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of Fixed Assets | (3,767 | ) | (1,386 | ) | ||||
| Proceeds from Global Opportunity Fund Liquidation | - | 303,349 | ||||||
| Purchase of Investment Securities | (108,208 | ) | - | |||||
| Sales of Investment Securities to Related Party | 2,480,000 | - | ||||||
| Promissory Note to Related Party | (15,489 | ) | (200,000 | ) | ||||
| Net Cash Provided by Investing Activities | 2,352,536 | 101,963 | ||||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from Exercise of Subsidiary Warrants | 7,484 | - | ||||||
| Proceeds from Sale of Subsidiary Shares | 250,000 | 2,210,491 | ||||||
| Borrowing from PPP Loan | 68,502 | - | ||||||
| Distribution to Non-controlling Interest Shareholders | (82,250 | ) | (197,400 | ) | ||||
| Net Proceeds from (Repayment to) Notes Payable - Related Parties | (1,200,000 | ) | 17,501 | |||||
| Net Cash (Used in) Provided by Financing Activities | (956,264 | ) | 2,030,592 | |||||
| Net Increase in Cash and Restricted Cash | (1,908,585 | ) | 1,949,958 | |||||
| Effects of Foreign Exchange Rates on Cash | (321,788 | ) | (39,411 | ) | ||||
| Cash and Restricted Cash - Beginning of Year | 31,235,456 | 8,039,433 | ||||||
| Cash and Restricted Cash- End of Period | $ | 29,005,083 | $ | 9,949,980 | ||||
| Supplementary Cash Flow Information | ||||||||
| Cash Paid for Interest | $ | 6,627 | $ | 4,181 | ||||
| Cash Paid for Taxes | $ | 451,410 | $ | - | ||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||||||||
| Unrealized Gain on Investment | $ | (1,987 | ) | $ | - | |||
| Initial Recognition of ROU / Lease Liability | $ | 256,928 | $ | - | ||||
| Acquiring True Partner Stock | $ | 10,003,689 | $ | - | ||||
| Sales of Investment in Vivacitas to Related Party | $ | 2,279,872 | $ | - | ||||
| Transactions under Common Control | $ | 57,190,499 | $ | - | ||||
| Beneficial Conversion Feature | $ | (50,770,192 | ) | $ | - | |||
See accompanying notes to condensed consolidated unaudited financial statements.
| NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Nature of Operations
Alset EHome International Inc. (the “Company” or “HFE”“AEI”), formerly known as HF Enterprises Inc., was incorporated in the State of Delaware on March 7, 2018 and 1,000 shares of common stock was issued to Chan Heng Fai, the founder, Chairman and Chief Executive Officer of the Company. HFEAEI is a diversified holding company principally engaged in property development, digital transformation technology and biohealth and other related business activitiesbusinesses with operations in the United States, Singapore, Hong Kong, Australia and South Korea. The Company manages its principal businesses primarily through its subsidiary, Alset International Limited (“Alset International”, f.k.a. Singapore eDevelopment Limited), a company publicly traded on the Singapore Stock Exchange.
The Company has four operating segments based on the products and services offered. These include our three principal businesses – property development, digital transformation technology and biohealth – as well as a fourth category consisting of certain other business activities.
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation and Principles of Consolidation
The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and following the requirements of the Securities and Exchange Commission ("SEC"(“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These interim financial statements have been prepared on the same basis as the Company'sCompany’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the Company'sCompany’s financial information. These interim results are not necessarily indicative of the results to be expected for the year ending December 31, 20202021 or any other interim periodperiods or for any other future year.years. These unaudited condensed consolidated financial statements should be read in conjunction with the Company'sCompany’s audited consolidated financial statements and the notes thereto included in the Company’s Form 10-K for the year ended December 31, 2019, in Form S-1 as2020 filed with the SEC on November 11, 2020.
The balance sheet as of December 31, 2019 has been derived from audited financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements.
The Company's condensedCompany’s consolidated financial statements include the financial position, results of operations and cash flows of the following entities as of
| Attributable interest | ||||||||||
| as of, | ||||||||||
| Name of subsidiary consolidated under HFE | State or other jurisdiction of incorporation or organization | September 30, 2020 | December 31, 2019 | |||||||
| % | % | |||||||||
| Hengfai International Pte. Ltd | Singapore | 100 | 100 | |||||||
| Hengfai Business Development Pte. Ltd | Singapore | 100 | 100 | |||||||
| Heng Fai Enterprises Pte. Ltd. | Singapore | 100 | 100 | |||||||
| Global eHealth Limited | Hong Kong | 100 | 100 | |||||||
| Alset International Inc. (f.k.a. Singapore eDevelopment Limited) | Singapore | 51.04 | 65.4 | |||||||
| Singapore Construction & Development Pte. Ltd. | Singapore | 51.04 | 65.4 | |||||||
| Art eStudio Pte. Ltd. | Singapore | 26.03 | * | 33.36 | * | |||||
| Singapore Construction Pte. Ltd. | Singapore | 51.04 | 65.4 | |||||||
| Global BioMedical Pte. Ltd. | Singapore | 51.04 | 65.4 | |||||||
| Alset Innovation Pte. Ltd. (f.k.a. SeD Investment Pte. Ltd.) | Singapore | 51.04 | 65.4 | |||||||
| Health Wealth Happiness Pte. Ltd. | Singapore | 51.04 | 65.4 | |||||||
| iGalen International Inc. | United States of America | 27.05 | * | 34.38 | * | |||||
| iGalen Inc. (f.k.a iGalen USA LLC) | United States of America | 27.05 | * | 34.38 | * | |||||
| SeD Capital Pte. Ltd. | Singapore | 51.04 | 65.4 | |||||||
| LiquidValue Asset Management Pte. Ltd. (f.k.a. HengFai Asset Management Pte. Ltd.) | Singapore | 41.85 | * | 53.6 | ||||||
| SeD Home Limited | Hong Kong | 51.04 | 65.4 | |||||||
| SeD Reits Management Pte. Ltd. | Singapore | 51.04 | 65.4 | |||||||
| Global TechFund of Fund Pte. Ltd. | Singapore | 51.04 | 65.4 | |||||||
| Singapore eChainLogistic Pte. Ltd. | Singapore | 51.04 | 65.4 | |||||||
| BMI Capital Partners International Limited. | Hong Kong | 51.04 | 65.4 | |||||||
| SeD Perth Pty. Ltd. | Australia | 51.04 | 65.4 | |||||||
| SeD Intelligent Home Inc. (f.k.a SeD Home International, Inc.) | United States of America | 51.04 | 65.4 | |||||||
| LiquidValue Development Inc. (f.k.a. SeD Intelligent Home Inc.) | United States of America | 51.03 | 65.39 | |||||||
| Alset iHome Inc. (f.k.a. SeD Home & REITs Inc. and SeD Home, Inc.) | United States of America | 51.03 | 65.39 | |||||||
| SeD USA, LLC | United States of America | 51.03 | 65.39 | |||||||
| 150 Black Oak GP, Inc. | United States of America | 51.03 | 65.39 | |||||||
| SeD Development USA Inc. | United States of America | 51.03 | 65.39 | |||||||
| 150 CCM Black Oak, Ltd. | United States of America | 51.03 | 65.39 | |||||||
| SeD Texas Home, LLC | United States of America | 51.03 | 65.39 | |||||||
| SeD Ballenger, LLC | United States of America | 51.03 | 65.39 | |||||||
| SeD Maryland Development, LLC | United States of America | 42.64 | * | 54.63 | ||||||
| SeD Development Management, LLC | United States of America | 43.38 | * | 55.58 | ||||||
| SeD Builder, LLC | United States of America | 51.03 | 65.39 | |||||||
| HotApp Blockchain Inc. | United States of America | 50.95 | 65.39 | |||||||
| HotApps International Pte. Ltd. | Singapore | 50.95 | 65.39 | |||||||
| HotApp International Limited | Hong Kong | 50.95 | 65.39 | |||||||
| HWH International, Inc. | United States of America | 51.04 | 65.4 | |||||||
| Health Wealth & Happiness Inc. | United States of America | 51.04 | 65.4 | |||||||
| HWH Multi-Strategy Investment, Inc. | United States of America | 51.04 | 65.4 | |||||||
| SeDHome Rental Inc | United States of America | 51.03 | 65.39 | |||||||
| SeD REIT Inc. | United States of America | 51.03 | 65.39 | |||||||
| Crypto Exchange Inc | United States of America | 50.95 | 65.39 | |||||||
| HWH World Inc. | United States of America | 50.95 | 65.39 | |||||||
| HWH World Pte. Ltd. | Singapore | 50.95 | 65.39 | |||||||
| UBeauty Limited | Hong Kong | 51.04 | 65.4 | |||||||
| WeBeauty Korea Inc | Korea | 51.04 | 65.4 | |||||||
| HWH World Limited | Hong Kong | 51.04 | 65.4 | |||||||
| HWH World Inc. | Korea | 51.04 | 65.4 | |||||||
| Alset BioHealth Pte. Ltd. | Singapore | 51.04 | - | |||||||
| Alset Energy Pte. Ltd. | Singapore | 51.04 | - | |||||||
| Alset Payment Inc. | United States of America | 51.04 | - | |||||||
| Alset World Pte. Ltd. | Singapore | 51.04 | - | |||||||
| BioHealth Water Inc. | United States of America | 51.04 | - | |||||||
| Impact BioHealth Pte. Ltd. | Singapore | 51.04 | - | |||||||
| American Home REIT Inc. | United States of America | 41.85 | * | - | ||||||
| Alset Solar Inc. | United States of America | 40.83 | * | - | ||||||
| Attributable interest as of, | ||||||||||
| Name of subsidiary consolidated under AEI | State or other jurisdiction of incorporation or organization | March 31, 2021 | December 31, 2020 | |||||||
| % | % | |||||||||
| Hengfai International Pte. Ltd | Singapore | 100 | 100 | |||||||
| Hengfai Business Development Pte. Ltd | Singapore | 100 | 100 | |||||||
| Heng Fai Enterprises Pte. Ltd. | Singapore | - | 100 | |||||||
| Global eHealth Limited | Hong Kong | 100 | 100 | |||||||
| Alset International Inc. (f.k.a. Singapore eDevelopment Limited) | Singapore | 57.1 | 57.1 | |||||||
| Singapore Construction & Development Pte. Ltd. | Singapore | 57.1 | 57.1 | |||||||
| Art eStudio Pte. Ltd. | Singapore | 29.1 | * | 29.1 | * | |||||
| Singapore Construction Pte. Ltd. | Singapore | 57.1 | 57.1 | |||||||
| Global BioMedical Pte. Ltd. | Singapore | 57.1 | 57.1 | |||||||
| Alset Innovation Pte. Ltd. (f.k.a. SeD Investment Pte. Ltd.) | Singapore | 57.1 | 57.1 | |||||||
| Health Wealth Happiness Pte. Ltd. | Singapore | 57.1 | 57.1 | |||||||
| SeD Capital Pte. Ltd. | Singapore | 57.1 | 57.1 | |||||||
| LiquidValue Asset Management Pte. Ltd. (f.k.a. HengFai Asset Management Pte. Ltd.) | Singapore | 64.8 | 46.9 | * | ||||||
| SeD Home Limited | Hong Kong | 57.1 | 57.1 | |||||||
| SeD Management Pte. Ltd. (f.k.a. SeD Reits Management Pte. Ltd.) | Singapore | 57.1 | 57.1 | |||||||
| Global TechFund of Fund Pte. Ltd. | Singapore | 57.1 | 57.1 | |||||||
| Singapore eChainLogistic Pte. Ltd. | Singapore | 57.1 | 57.1 | |||||||
| BMI Capital Partners International Limited. | Hong Kong | 57.1 | 57.1 | |||||||
| SeD Perth Pty. Ltd. | Australia | 57.1 | 57.1 | |||||||
| SeD Intelligent Home Inc. (f.k.a SeD Home International, Inc.) | United States of America | 57.1 | 57.1 | |||||||
| LiquidValue Development Inc. (f.k.a. SeD Intelligent Home Inc.) | United States of America | 57.1 | 57.1 | |||||||
| Alset EHome Inc. (f.k.a. Alset iHome Inc., SeD Home & REITs Inc. and SeD Home, Inc.) | United States of America | 57.1 | 57.1 | |||||||
| SeD USA, LLC | United States of America | 57.1 | 57.1 | |||||||
| 150 Black Oak GP, Inc. | United States of America | 57.1 | 57.1 | |||||||
| SeD Development USA Inc. | United States of America | 57.1 | 57.1 | |||||||
| 150 CCM Black Oak, Ltd. | United States of America | 57.1 | 57.1 | |||||||
| SeD Texas Home, LLC | United States of America | 57.1 | 57.1 | |||||||
| SeD Ballenger, LLC | United States of America | 57.1 | 57.1 | |||||||
| SeD Maryland Development, LLC | United States of America | 47.7 | * | 47.8 | * | |||||
| SeD Development Management, LLC | United States of America | 48.5 | * | 48.6 | * | |||||
| SeD Builder, LLC | United States of America | 57.1 | 57.1 | |||||||
| GigWorld Inc. (f.k.a. HotApp Blockchain Inc.) | United States of America | 56.9 | 57.0 | |||||||
| HotApp BlockChain Pte. Ltd. (f.k.a. HotApps International Pte. Ltd.) | Singapore | 56.9 | 57.0 | |||||||
| HotApp International Limited | Hong Kong | 56.9 | 57.0 | |||||||
| HWH International, Inc. | United States of America | 57.1 | 57.1 | |||||||
| Health Wealth & Happiness Inc. | United States of America | 57.1 | 57.1 | |||||||
| HWH Multi-Strategy Investment, Inc. | United States of America | 57.1 | 57.1 | |||||||
| SeDHome Rental Inc | United States of America | 57.1 | 57.1 | |||||||
| SeD REIT Inc. | United States of America | 57.1 | 57.1 | |||||||
| Gig Stablecoin Inc. (f.k.a. Crypto Exchange Inc.) | United States of America | 56.9 | 57.0 | |||||||
| HWH World Inc. | United States of America | 56.9 | 57.0 | |||||||
| HWH World Pte. Ltd. | Singapore | 56.9 | 57.0 | |||||||
| UBeauty Limited | Hong Kong | 57.1 | 57.1 | |||||||
| WeBeauty Korea Inc | Korea | 57.1 | 57.1 | |||||||
| HWH World Limited | Hong Kong | 57.1 | 57.1 | |||||||
| HWH World Inc. | Korea | 57.1 | 57.1 | |||||||
| Alset BioHealth Pte. Ltd. | Singapore | 57.1 | 57.1 | |||||||
| Alset Energy Pte. Ltd. | Singapore | 57.1 | 57.1 | |||||||
| Alset Payment Inc. | �� | United States of America | 57.1 | 57.1 | ||||||
| Alset World Pte. Ltd. | Singapore | 57.1 | 57.1 | |||||||
| BioHealth Water Inc. | United States of America | 57.1 | 57.1 | |||||||
| Impact BioHealth Pte. Ltd. | Singapore | 57.1 | 57.1 | |||||||
| American Home REIT Inc. | United States of America | 64.8 | 46.9 | * | ||||||
| Alset Solar Inc. | United States of America | 45.7 | * | 45.7 | * | |||||
| HWH KOR Inc. | United States of America | 57.1 | 57.1 | |||||||
| Open House Inc. | United States of America | 57.1 | 57.1 | |||||||
| Open Rental Inc. | United States of America | 57.1 | 57.1 | |||||||
| Hapi Cafe Inc. (Nevada) | United States of America | 57.1 | 57.1 | |||||||
| Global Solar REIT Inc. | United States of America | 57.1 | 57.1 | |||||||
| OpenBiz Inc. | United States of America | 57.1 | 57.1 | |||||||
| Hapi Cafe Inc. (Texas) | United States of America | 100 | 100 | |||||||
| HWH (S) Pte. Ltd. | Singapore | 57.1 | - | |||||||
| American Pacific Bancorp Inc. | United States of America | 86.44 | - | |||||||
| Hengfeng Finance Limited | Hong Kong | 86.44 | - | |||||||
| Decentralize Finance Inc. | United States of America | 86.44 | - | |||||||
| True Partner International Limited | Hong Kong | 100 | - | |||||||
| LiquidValue Development Pte. Ltd. | Singapore | 100 | - | |||||||
| LiquidValue Development Limited. | Hong Kong | 100 | - |
*Although the Company indirectly holds percentage of shares of these entities less than 50%, the subsidiaries of the Company directly hold more than 50% of shares of these entities, and therefore, they are still consolidated into the Company.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates made by management include, but are not limited to, allowance for doubtful accounts, valuation of real estate assets, allocation of development costs and capitalized interest to sold lots, fair value of the investments, the valuation allowance of deferred taxes, and contingencies. Actual results could differ from those estimates.
In our property development business, land acquisition costs are allocated to each lot based on the area method, the size of the lot compared to the total size of all lots in the project. Development costs and capitalized interest are allocated to lots sold based on the total expected development and interest costs of the completed project and allocating a percentage of those costs based on the selling price of the sold lot compared to the expected sales values of all lots in the project.
If allocation of development costs and capitalized interest based on the projection and relative expected sales value is impracticable, those costs could also be allocated based on area method, the size of the lot compared to the total size of all lots in the project.
Transactions between Entities under Common Control
On March 12, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with Chan Heng Fai, the founder, Chairman and Chief Executive Officer of the Company, for four proposed transactions, consisting of (i) purchase of certain warrants (the “Warrants”) to purchase 1,500,000,000 shares of Alset International Limited (“Alset International”), which was valued at $28,363,966; (ii) purchase of all of the issued and outstanding stock of LiquidValue Development Pte Ltd. (“LVD”), which was valued at $173,395; (iii) purchase of 62,122,908 ordinary shares in True Partner Capital Holding Limited (HKG: 8657) (“True Partner”), which was valued at $6,729,629; and (iv) purchase of 4,775,523 shares of the common stock of American Pacific Bancorp Inc. (“APB”), which was valued at $28,653,138. The total amount of above four transactions was $63,920,129, payable on the Closing Date by the Company, in the convertible promissory notes (“Alset CPNs”), which, subject to the terms and conditions of the Alset CPNs and the Company’s shareholder approval, shall be convertible into shares of the Company’s common stock (“AEI Common Stock”), par value $0.001 per share, at the conversion price of AEI’s Stock Market Price. AEI’s Stock Market Price shall be $5.59 per share, equivalent to the average of the five closing per share prices of AEI’s Common Stock preceding January 4, 2021 as quoted by Bloomberg L.P. The above four acquisitions from Chan Heng Fai are transactions between entities under common control.
The common control transactions resulted in the following basis of accounting for the financial reporting periods:
| ● | The acquisitions of the Warrants and True Partner stock were accounted for prospectively as of March 12, 2021 and they did not represent a change in reporting entity. | |
| ● | The acquisitions of LVD and APB were under common control and is consolidated in accordance with ASC 850-50. The consolidated financial statements were retrospectively adjusted for the acquisition of LVD and APB, and the operating results of LVD and APB as of January 1, 2020 for comparative purposes. |
AEI stock price was $10.03 on March 12, 2021, the commitment date. The Beneficial Conversion Feature (“BCF”) intrinsic value was $50,770,192 for the four convertible promissory notes and was recorded as debt discount of convertible notes after these transactions. The debt discount attributable to the BCF is amortized over period from issuance to the date that the debt becomes convertible using the effective interest method. If the debt is converted, the discounted is amortized to finance cost in full immediately. As of March 31, 2021, the promissory notes net of debt discount were $13,695,853 and accrued interest was $41,239. During the three months ended on March 31, 2021, the amortized debt discount recorded as finance cost was $545,916.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less at the date of acquisition to be cash equivalents. Cash and cash equivalents include cash on hand and at the bank and short-term deposits with financial institutions that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in values. There were no cash equivalents as of September 30, 2020March 31, 2021 and December 31, 2019.
Restricted Cash
As a condition to the loan agreement with the Manufacturers and Traders Trust Company (“M&T Bank”), the Company is required to maintain a minimum of $2,600,000 in an interest-bearing account maintained by the lender as additional security for the loans. The fund is required to remain as collateral for the loan until the loan is paid off in full and the loan agreement is terminated. The Company also has an escrow account with M&T Bank to deposit a portion of cash proceeds from lot sales. The fund in the escrow account is specifically used for the payment of the loan from M&T Bank. The fund is required to remain in the escrow account for the loan payment until the loan agreement terminates. As of September 30, 2020March 31, 2021 and December 31, 2019,2020, the total balance of these two accounts was $4,106,497$8,099,097 and $4,229,149,$5,729,067, respectively.
As a condition to the loan agreement with National Australian Bank Limited in conjunction with the Perth project, an Australian real estate development project, the Company is required to maintain Australian Dollar 50,000, in a non-interest-bearing account. As of September 30, 2020March 31, 2021 and December 31, 2019,2020, the account balance was $35,710$38,043 and $35,068,$38,550, respectively. These funds will remain as collateral for the loans until paid in full.
The Company puts money into brokerage accounts specifically for previous construction costs incurred in land development. Of this amount, $1,650,000 will remain on deposit in the District’s Capital Projects Fund for the benefitequity investment. As of 150 CCM Black Oak Ltd and will be released upon receipt of the evidence of: (a) the execution of a purchase agreement between 150 CCM Black Oak Ltd and a home builder with respect to the Black Oak development and (b) the completion, finishing and readying for home construction of at least 105 unfinished lots in the Black Oak development. After entering the purchase agreement with Houston LD, LLC, the above requirements were met. The amount of the deposit will be released to the Company by presenting the invoices paid for land development. After releasing funds to the Company, the amount on deposit was $0 and $90,394 on September 30, 2020March 31, 2021 and December 31, 2019, respectively.
Account Receivables and Allowance for Doubtful Accounts
Account receivables is stated at amounts due from buyers, contractors, and all third parties, net of an allowance for doubtful accounts. As of March 31, 2021 and December 31, 2020, the balance of account receivables was $1,062,278 and $1,366,194, respectively. Approximately $0.9 million and $1.3 million of account receivables as of March 31, 2021 and December 31, 2020, respectively, was from DSS with a merchant agreement, under which the Company uses DSS credit card platform to collect money from our direct sales.
The Company monitors its accounts receivableaccount receivables balances on a monthly basis to ensure that they are collectible. On a quarterly basis, the Company uses its historical experience to estimate its allowance for doubtful accounts receivable.account receivables. The Company’s allowance for doubtful accounts represents an estimate of the losses expected to be incurred based on specifically identified accounts as well as nonspecific amount, when determined appropriate. Generally, the amount of the allowance is primarily decided by division management’s historical experience, the delinquency trends, the resolution rates, the aging of receivables, the credit quality indicators and financial health of specific customers. As of September 30, 2020March 31, 2021 and December 31, 2019,2020, the allowance was $0.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method and includes all costs in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. As of September 30, 2020March 31, 2021 and December 31, 2019,2020, inventory consisted of finished goods from iGalen Inc and HWH World Inc. The Company continuously evaluates the need for reserve for obsolescence and possible price concessions required to write-down inventories to net realizable value.
Investment Securities
Investment Securities at Fair Value
The Company holds investments in equity securities with readily determinable fair values, equity investments without readily determinable fair values, investments accounted for under the equity method, and investments at cost.
Prior to the adoption of Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, investments in equity securities were classified as either 1) available-for-sale securities, stated at fair value, and unrealized holding gains and losses, net of related tax effects, were recorded directly to accumulated other comprehensive income (loss) or 2) trading securities, stated at fair value, and unrealized holding gains and losses, net of related tax benefits, were recorded directly to net income (loss). With the adoption of ASU 2016-01 on January 1, 2018, investments in equity securities are still stated at fair value, quoted by market prices, but all unrealized holding gains and losses are credited or charged to net income (loss) based on fair value measurement as the respective reporting date.
The Company accounts for certain of its investments in equity securities in accordance with ASU 2016-01 Financial Instruments—Overall (Subtopic 825- 10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). In accordance with ASU 2016-01, the Company records all equity investments with readily determinable fair values at fair value calculated by the publicly traded stock price at the close of the reporting period. Amarantus BioScience Holdings (“AMBS”) and Ture Partner Capital Holding Limited (“True Partner”) are publicly traded companies. The Company does not have significant influence over AMBS and True Partner, as the Company is the beneficial owner of approximately 5.4% of the common shares of AMBS and 15.5% of True Partner. The stock’s fair value is determined by quoted stock prices.
The Company has elected the fair value option for the equity securities noted below that would otherwise be accounted for under the equity method of accounting. Amarantus BioScience Holdings (“AMBS”), Holista CollTech Limited (“Holista”), Document Securities Systems Inc. (“DSS”), Alset InternationalOptimumBank Holdings, Inc. (“OptimumBank”) and American Premium Water Corp (“APW”) are publicly traded companies and fair value is determined by quoted stock prices. The Company has significant influence but does not have a controlling interest in these investments, and therefore, the Company’s investment could be accounted for under the equity method of accounting or elect fair value accounting.
| ● | The Company has significant influence over DSS. As of March 31, 2021 and December 31, 2020, the Company owned the common stock of DSS and 42,575 shares of preferred stock, which could covert to 6,570,216 common shares, subject to a 19.9% beneficial ownership conversion limitation (a so-called “blocker”) based on the total issued outstanding shares of common stock of DSS beneficially owned by Global BioMedical Pte Ltd (“GBM”), one of our subsidiaries. Our CEO is a Stockholder and the Chairman of the Board of Directors of DSS. Chan Tung Moe, the son of Chan Heng Fai, is also a director of DSS. | |
| ● | The Company has significant influence over Holista as the Company and its CEO are the beneficial owner of approximately 16.8% of the outstanding shares of Holista and our CEO holds a position on Holista’s Board of Directors. | |
| ● | The Company has significant influence over OptimumBank. Our CEO is the beneficial owner of approximately 3.9% of the outstanding shares of OptimumBank and holds a position on OptimumBank’s Board of Directors. | |
| ● | The Company has significant influence over APW as the Company is the beneficial owner of approximately 8.7% of the common shares of APW and one officer from the Company holds a director position on APW’s Board of Directors. |
The Company invested $50,000 in a convertible promissory note of Sharing Services, Inc. (“Sharing Services Convertible Note”), a company quoted on the US OTC market. The value of the convertible note was estimated by management using a Black-Scholes valuation model.
The fair value of the note wasOn February 26, 2021, the Company invested approximately $88,599 in the convertible note of Vector Com Co., Ltd (“Vector Com”), a private company in South Korea. The interest rate is 2% per annum and maturity is two years. The conversion price is approximately $21.26, per common share of Vector Com. As of March 31, 2021, the Management estimated that the fair value of the note to be $88,599, the initial transaction price.
On March 2, 2020, the Company received warrants to purchase shares of American Medical REIT Inc. (“AMRE”), a related party private startup company, in conjunction with the Company lending a $200,000 promissory note.note. For further details on this transaction, refer to Note 8 - Related Party Transactions, Note Receivable from a Related Party Company. Company. As of March 31, 2021 and December 31, 2020, AMRE was a private company. Based on management’s analysis, the fair value of the AMRE warrants and the stock option was $0 as of March 31, 2021 and December 31, 2020.
The Company holdsheld a stock option to purchase 250,000 shares of Vivacitas common stock at $1 per share at any time prior to the date of a public offering.offering by Vivacitas. As of September 30, 2020 and December 31, 2019, both AMRE and2020, Vivacitas werewas a private companies.company. Based on management’s analysis, the fair value of the warrants and theVivacitas stock option was $0 as of September 30, 2020 and December 31, 2019.
In the first quarter of 2021, the Company subsidiaries established a portfolio of trading securities. The objective is to generate profits on short-term differences in market prices. During the three months ended March 31, 2021, the Company incurred approximately $4.6 million in purchase of trading securities, received approximately $1.9 million for sale and Note 12 – Investments Measured at Fair Value.
Investment Securities at Cost
The Company hashad an equity holding in Vivacitas Oncology Inc. (“Vivacitas”), a private company that is currently not listed on an exchange. Vivacitas was acquired after the adoption of ASU 2016-01. The Company applied ASC 321, Investments – Equity Securities, and elected the measurement alternative for equity investments that do not have readily determinable fair values and do not qualify for the practical expedient in ASC 820 to estimate fair value using the NAV per share. Under the alternative, we measure Vivacitas at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.
On September 8, 2020, the Company acquired 1,666 shares, approximately 1.45% ownership, from Nervotec Pte Ltd (“Nervotec”), a private company, at the purchase price of $36,628.$37,826. The Company applied ASC 321 and measured Nervotec at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.
On September 30, 2020, the Company acquired 20,000 shares, approximately 19% ownership, from Hyten Global (Thailand) Co., Ltd (“Hyten”), a private company, at a purchase price of $42,562. Hyten is a direct sales company in Thailand. The Company does not have significant influence over Hyten and applied ASC 321 and measured Hyten at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.
In the first quarter of 2021, the Company invested $19,609 in K Beauty Research Lab Co., Ltd (“K Beauty”) for 18% ownership. K Beauty was established for sourcing, developing and producing variety of Korea-made beauty products as well as Korea - originated beauty contents for the purpose of distribution to HWH’s membership distribution channel.
There has been no indication of impairment or changes in observable prices via transactions of similar securities and investments are still carried at cost.
Investment Securities under Equity Method Accounting
American Medical REIT Inc.
LiquidValue Asset Management Pte. Ltd. (“LiquidValue”), a subsidiary of the Company owns 36.1% of American Medical REIT Inc. (“AMRE”), a startup REIT company concentrating on medical real estate. AMRE acquires state-of-the-art, purpose-built healthcare facilities and leases them to leading clinical operators with dominant market share under secure triple net leases. AMRE targets hospitals (both Critical Access and Specialty Surgical), Physician Group Practices, Ambulatory Surgical Centers, and other licensed medical treatment facilities. Chan Heng Fai, our CEO, is the executive chairman and director of AMRE. LiquidValue did not invest equity but provided a loan to AMRE (For(for further details on this transaction, refer to Note 8,9, Related Party Transactions). On balance sheet, the prorate loss from AMRE was recorded as a liability, accumulated losses on equity method investment. During three months ended September 30,March 31, 2021 and 2020, and 2019, the investment losses from AMRE were $52,392 and $0, respectively. During nine months ended September 30, 2020 and 2019, the investment losses from AMRE were $193,132$24,847 and $0, respectively. As of September 30, 2020,March 31, 2021 and December 31, 2019,2020, the accumulated losses on equity method investment were $231,418$290,776 and $0,$265,929, respectively.
BioLife Sugar, Inc. (“BioLife’), a subsidiary consolidated under Alset International, entered into a joint venture agreement on April 25, 2018 with Quality Ingredients, LLC (“QI”). The agreement created an entity called Sweet Sense, Inc. (“Sweet Sense”) which is 50% owned by BioLife and 50% owned by QI. Management believes its 50% investment represents significant influence over Sweet Sense and accounts for the investment under the equity method of accounting.
Real estate assets are recorded at cost, except when real estate assets are acquired that meet the definition of a business combination in accordance with Financial Accounting Standards Board (“FASB”) ASC 805 - “Business Combinations”,which acquired assets are recorded at fair value. Interest, property taxes, insurance and other incremental costs (including salaries) directly related to a project are capitalized during the construction period of major facilities and land improvements. The capitalization period begins when activities to develop the parcel commence and ends when the asset constructed is completed. The capitalized costs are recorded as part of the asset to which they relate and are reduced when lots are sold.
The Company capitalized construction costs of $2,763,068approximately $1.2 million and $1,464,998$2.4 million for the three months ended September 30,March 31, 2021 and 2020, and 2019, respectively. The Company capitalized interest and finance expenses from third-party borrowings of $0 and $514,985 for the nine months ended September 30, 2020 and 2019, respectively. The Company capitalized construction costs of $8,898,329 and $5,023,396 for the nine months ended September 30, 2020 and 2019, respectively.
The Company’s policy is to obtain an independent third-party valuation for each major project in the United States as part of our assessment of identifying potential triggering events for impairment. Management may use the market comparison method to value other relatively small projects, such as the project in Perth, Australia. In addition to the annual assessment of potential triggering events in accordance with ASC 360 – Property Plant and Equipment (“ASC 360”), the Company applies a fair value basedvalue-based impairment test to the net book value assets on an annual basis and on an interim basis if certain events or circumstances indicate that an impairment loss may have occurred.
The Company incurred a loss of approximately $1.5 million from this sale and recognized a real estate impairment of approximately $1.5 million for the year ended December 31, 2018.
Properties under development
Properties under development are properties being constructed for sale in the ordinary course of business, rather than to be held for the Company’s own use, rental or capital appreciation.
Rental Properties
Rental properties are recorded atacquired with the intent to be rented to tenants. On March 15, 2021 Alset EHome, Inc. signed twenty separate Purchase Agreements, to acquire 20 homes in Montgomery County, Texas. On March 31, 2021, the first batch of 10 homes was closed with the purchase cost less depreciation. Repairs and maintenanceof $2,161,680. All of these purchased homes are expensed as incurred. Expenditures incurred as a consequenceproperties of acquiring or using the asset, or that increase the value or productive capacity of assets are capitalized (such as removal, and restoration costs). When property and equipment is retired, sold, or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Depreciation is computed by the straight-line method (after considering their respective estimated residual values) over the estimated useful lives of the respective assets as follows:
Revenue Recognition and Cost of Sales
ASC 606 - Revenue from Contracts with Customers (" (“ASC 606"606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity'sentity’s contracts to provide goods or services to customers. The Company adopted this new standard on January 1, 2018 under the modified retrospective method. The adoption of this new standard did not have a material effect on our financial statements.
In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services. The provisions of ASC 606 include a five-step process by which the determination of revenue recognition, depicting the transfer of goods or services to customers in amounts reflecting the payment to which the Company expects to be entitled in exchange for those goods or services. ASC 606 requires the Company to apply the following steps:
(1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, performance obligations are satisfied.
The following represents the Company’s revenue recognition policies by Segments:
Property Development
Property Sales
The Company'sCompany’s main business is land development. The Company purchases land and develops it for building into residential communities. The developed lots are sold to builders (customers) for the construction of new homes. The builders enter a sales contract with the Company before they take the lots. The prices and timeline are determined and agreed upon in the contract. The builders do the inspections to make sure all conditions and requirements in contracts are met before purchasing the lots. A detailed breakdown of the five-step process for the revenue recognition of the Ballenger and Black Oak projects, which represented approximately 99%69% and 94%100%, respectively, of the Company’s revenue in the ninethree months ended on September 30,March 31, 2021 and 2020, and 2019, is as follows:
| ● | Identify the contract with a customer. |
The Company has signed agreements with the builders for developing the raw land to ready to build lots. The contract has agreed upon prices, timelines, and specifications for what is to be provided.
| ● | Identify the performance obligations in the contract. |
Performance obligations of the Company include delivering developed lots to the customer, which are required to meet certain specifications that are outlined in the contract. The customer inspects all lots prior to accepting title to ensure all specifications are met.
| ● | Determine the transaction price. |
The transaction price per lot is fixed and specified in the contract. Any subsequent change orders or price changes are required to be approved by both parties.
| ● | Allocate the transaction price to performance obligations in the contract. |
Each lot or a group of lots is considered to be a separate performance obligation, for which the specified price in the contract is allocated to.
| ● | Recognize revenue when (or as) the entity satisfies a performance obligation. |
The builders do the inspections to make sure all conditions/requirements are met before taking title of lots. The Company recognizes revenue at a point in time when title is transferred. The Company does not have further performance obligations or continuing involvement once title is transferred.
Sale of the Front Foot Benefit Assessments
We have established a front foot benefit (“FFB”) assessment on all of the NVR lots. This is a 30-year annual assessment allowed in Frederick County which requires homeowners to reimburse the developer for the costs of installing public water and sewer to the lots. These assessments become effective as homes are settled, at which time we can sell the collection rights to investors who will pay an upfront lump sum, enabling us to more quickly realize the revenue.revenue more quickly. The selling prices range from $3,000 to $4,500 per home depending on the type of the home. Our total revenue from the front foot benefit assessment is approximately $1 million. To recognize revenue of FFB assessment, both our and NVR’s performance obligation have tomust be satisfied. Our performance obligation is completed once we complete the construction of water and sewer facility and close the lot sales with NVR, which inspects these water and sewer facility prior to close lot sales to ensure all specifications are met. NVR’s performance obligation is to sell homes they build to homeowners. Our FFB revenue is recognized on quarterly basis after NVR closes sales of homes to homeowners. The agreement with these FFB investors is not subject to amendment by regulatory agencies and thus our revenue from FFB assessment is not either. During the nine months ended on September 30, 2020 and 2019, we recognized revenue $169,349 and $365,645 from FFB assessment, respectively. During the three months ended on September 30,March 31, 2021 and 2020, and 2019, we recognized revenue $54,147$107,071 and $129,031$40,322 from FFB assessment, respectively.
Cost of Sales
Land acquisition costs are allocated to each lot based on the area method, the size of the lot comparing to the total size of all lots in the project. Development costs and capitalized interest are allocated to lots sold based on the total expected development and interest costs of the completed project and allocating a percentage of those costs based on the selling price of the sold lot compared to the expected sales values of all lots in the project.
If allocation of development costs and capitalized interest based on the projection and relative expected sales value is impracticable, those costs could also be allocated based on area method, the size of the lot comparing to the total size of all lots in the project.
Biohealth
Product Direct Sales
The Company’s net sales consist of product sales. The Company'sCompany’s performance obligation is to transfer its products to its third-party independent distributors (“Distributors”). The Company generally recognizes revenue when product is shipped to its Distributors.
The Company’s Distributors may receive distributor allowances, which are comprised of discounts, rebates and wholesale commission payments from the Company. Distributor allowances resulting from the Company’s sales of its products to its Distributors are recorded against net sales because the distributor allowances represent discounts from the suggested retail price.
In addition to distributor allowances, the Company compensates its sales leader Distributors with leadership incentives for services rendered, relating to the development, retention, and management of their sales organizations. Leadership Incentivesincentives are payable based on achieved sales volume, which are recorded in general and administrative expenses. The Company recognizes revenue when it ships products. The Company receives the net sales price in cash or through credit card payments at the point of sale.
If a Distributor returns a product to the Company on a timely basis, theyhe/she may obtain a replacement product from the Company for such returned products. In addition, the Company maintains a buyback program pursuant to which it will repurchase products sold to a Distributor who has decided to leave the business. Allowances for product returns, primarily in connection with the Company’s buyback program, are provided at the time the sale is recorded. This accrual is based upon historical return rates for each country and the relevant return pattern, which reflects anticipated returns to be received over a period of up to 12 months following the original sale.
Annual Membership
The Company collects an annual membership fee from its Distributors. The fee is fixed, paid in full at the time of joining the membership and non-refundable. The membership provides the member access to purchase products at a discount, use to certain back officeback-office services, receive commissions for signing up new members, and attend corporate events. The Company recognizes revenue associated with the membership over the period of the membership. Before the membership fee is recognized as revenue, it is recorded as deferred revenue. Deferred revenue relating to membership was $3,046,687$3,430,893 and $258,594$2,867,226 at September 30, 2020March 31, 2021 and December 31, 2019.
Other Businesses
Remaining performance obligations
As of September 30, 2020March 31, 2021 and December 31, 2019,2020, there were no remaining performance obligations or continuing involvement, as all service obligations within the other business activities segment have been completed.
Foreign currency
Functional and reporting currency
Items included in the financial statements of each entity in the Company are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The financial statements of the Company are presented in U.S. dollars (the “reporting currency”).
The functional and reporting currency of the Company is the United States dollar (“U.S. dollar”). The financial records of the Company’s subsidiaries located in Singapore, Hong Kong, Australia and South Korea are maintained in their local currencies, the Singapore Dollar (S$), Hong Kong Dollar (HK$), Australian Dollar (“AUD”) and South Korean Won (“KRW”), which are also the functional currencies of these entities.
Transactions in foreign currencies
Transactions in currencies other than the functional currency during the yearperiods are converted into functional currency at the applicable rates of exchange prevailing when the transactions occurred. Transaction gains and losses are recognized in the statement of operations.
The majority of the Company’s foreign currency transaction gains or losses come from the effects of foreign exchange rate changes on the intercompany loans between Singapore entities and U.S. entities. The Company recorded $960,268 gain on foreign exchange during the nine months ended on September 30, 2020gain of $1,462,697 and a $438,608 gain during the nine months ended on September 30, 2019. The Company recorded foreign exchange loss of $415,203 and $757,068 gain$2,260,482 during the three months ended on September 30,March 31, 2021 and 2020, and 2019, respectively. The foreign currency transactional gains and losses are recorded in operations.
Translation of consolidated entities’ financial statements
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the rates of exchange ruling at the balance sheet date. The Company’s entities with functional currency of Singapore Dollar, Hong Kong Dollar, AUD and KRW, translate their operating results and financial positions into the U.S. dollar, the Company’s reporting currency. Assets and liabilities are translated using the exchange rates in effect on the balance sheet date. Revenue, expense, gains and losses are translated using the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of comprehensive income (loss).
For the ninethree months ended on September 30, 2020,March 31, 2021, the Company recorded other comprehensive loss from foreign currency translation of $585,085,$1,769,440 and a $325,518 loss in the nine months ended September 30, 2019, in accumulated other comprehensive loss. The Company recorded other comprehensive gain from translation of $462,064 and $584,561$1,674,021 loss in the three months ended September 30,March 31, 2020, and 2019, respectively.
Non-controlling interests
Non-controlling interests represent the equity in subsidiary not attributable, directly or indirectly, to owners of the Company, and are presented separately in the consolidated statements of operation and comprehensive income, and within equity in the Consolidated Balance Sheets, separately from equity attributable to owners of the Company.
On September 30, 2020March 31, 2021 and December 31, 2019,2020, the aggregate non-controlling interests in the Company were $41,672,434$33,673,855 and $6,975,459$37,980,325, respectively.
Capitalized Financing Costs
Financing costs, such as loan origination fee, administration fee, interests and other related financing costs, should be capitalized and recorded on the balance sheet if these financing activities are directly associated with the development of real estates.
Capitalized Financing Costs are allocated to lots sold based on the total expected development and interest costs of the completed project and allocating a percentage of those costs based on the selling price of the sold lot compared to the expected sales values of all lots in the project. If the allocation of capitalized financing costs based on the projection and relative expected sales value is impracticable, those costs could also be allocated based on an area method, which uses the size of the lots compared to the total project area and allocates costs based on their size.
As of March 31, 2021 and December 31, 2020, the capitalized financing costs were $3,348,112 and $3,513,535, respectively.
Beneficial Conversion Features
The Company evaluates the conversion feature for whether it was beneficial as described in ASC 470-30. The intrinsic value of a beneficial conversion feature inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the convertible note payable. This discount is amortized over the period from the date of issuance to the date the note is due using the effective interest method. If the note payable is retired prior to the end of its contractual term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the shares of common stock at the commitment date to be received upon conversion.
Recent Accounting Pronouncements
Accounting pronouncement not yet adopted
In FebruaryJune 2016, the FASB issued ASU No. 2016-02, Leases2016-13, “Financial Instruments - Credit Losses (Topic 842)326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-02”2016-13”) which supersedes ASC Topic 840, Leases.. ASU 2016-022016-13 requires lesseesfinancial assets measured at amortized cost to recognize a right-of-use assetbe presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years, and a lease liability on their balance sheets for all the leases with terms greater than twelve months. Based on certain criteria, leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the income statement. For leasesmodified retrospective approach is required, with a termcumulative-effect adjustment to retained earnings as of twelve months or less, a lesseethe beginning of the first reporting period in which the guidance is permittedeffective. In November of 2019, the FASB issued ASU 2019-10, which delayed the implementation of ASU 2016-13 to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 20192022 for emerging growth companies, and interim periods within those years, with early adoption permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements” that allows entities to apply the provisions of the new standard at the effective date (e.g. January 1, 2019), as opposed to the earliest period presented under the modified retrospective transition approach (January 1, 2017) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The modified retrospective approach includes a number of optional practical expedients primarily focused on leases that commenced before the effective date of Topic 842, including continuing to account for leases that commence before the effective date in accordance with previous guidance, unless the lease is modified. The new leasing standard presents dramatic changes to the balance sheets of lessees. Lessor accounting is updated to align with certain changes in the lessee model and the new revenue recognition standard. The standard had a material impact on the Company’s condensed consolidated balance sheets, but did not have an impact on its condensed consolidated statements of operations. The most significant impact was the recognition of right-of-use assets and lease liabilities for operating leases. As a lessor of one home, this standard does not have material impact on the Company. The balances of operating lease right-of-use assets and operating lease liabilities as of September 30, 2020 were $546,519 and $541,887, respectively. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As our leases do not provide a readily determinable implicit rate, we estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. The operating lease right-of-use asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The lease term includes options to extend or terminate when we are reasonably certain the option will be exercised. In general, we are not reasonably certain to exercise such options. We recognize lease expense for minimum lease payments on a straight-line basis over the lease term. We elected the practical expedient to not recognize operating lease right-of-use assets and operating lease liabilities for lease agreements with terms less than 12 months.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of Reference Rate Reform on Financial Reporting. The amendments in this Update provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The Company’s line of credit agreement provides procedures for determining a replacement or alternative rate in the event that LIBOR is unavailable. The amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of ASU 2020-04 on its future consolidated financial statements.
| CONCENTRATIONS |
The Company maintains cash balances at various financial institutions in different countries. These balances are usually secured by the central banks’ insurance companies. At times, these balances may exceed the insurance limits. As of March 31, 2021 and December 31, 2020, uninsured cash and restricted cash balances were $26,238,531 and $25,752,637, respectively.
For the three months ended March 31, 2021, two customers accounted for approximately 97%, and 3% of the Company’s property and development revenue. For the three months ended March 31, 2020, two customers accounted for approximately 99%, and 1% of the Company’s property and development revenue.
| 4. | SEGMENTS |
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision–making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision-maker is the CEO. The Company operates in and reports four business segments: property development, digital transformation technology, biohealth, and other business activities. The Company’s reportable segments are determined based on the services they perform and the products they sell, not on the geographic area in which they operate. The Company’s chief operating decision maker evaluates segment performance based on segment revenue. Costs excluded from segment income (loss) before taxes and reported as “Other” consist of corporate general and administrative activities which are not allocable to the four reportable segments.
The following table summarizes the Company’s segment information for the following balance sheet dates presented, and for the ninethree months ended September 30,March 31, 2021 and 2020:
| Property Development | Digital Transformation Technology | Biohealth Business | Other | Total | ||||||||||||||||
| Three Months Ended March 31, 2021 | ||||||||||||||||||||
| Revenue | $ | 3,894,131 | $ | - | $ | 1,712,783 | $ | - | $ | 5,606,914 | ||||||||||
| Cost of Sales | (3,614,832 | ) | - | (83,022 | ) | - | (3,697,854 | ) | ||||||||||||
| Gross Margin | 279,299 | - | 1,629,761 | - | 1,909,060 | |||||||||||||||
| Operating Expenses | (359,489 | ) | (30,128 | ) | (846,480 | ) | (1,076,408 | ) | (2,312,505 | ) | ||||||||||
| Operating Income (Loss) | (80,190 | ) | (30,128 | ) | 783,281 | (1,076,408 | ) | (403,445 | ) | |||||||||||
| Other Income (Expense) | (9,873 | ) | (36,471 | ) | (8,371,117 | ) | (532,505 | ) | (8,949,966 | ) | ||||||||||
| Net Income (Loss) Before Income Tax | (90,063 | ) | (66,599 | ) | (7,587,836 | ) | (1,608,913 | ) | (9,353,411 | ) | ||||||||||
| Property Development | Digital Transformation Technology | Biohealth Business | Other | Total | ||||||||||||||||
| Three Months ended March 31, 2020 | ||||||||||||||||||||
| Revenue | $ | 2,954,389 | $ | - | $ | 10,782 | $ | - | $ | 2,965,171 | ||||||||||
| Cost of Sales | (2,380,820 | ) | - | (2,883 | ) | - | (2,383,703 | ) | ||||||||||||
| Gross Margin | 573,569 | - | 7,899 | - | 581,468 | |||||||||||||||
| Operating Expenses | (277,056 | ) | (18,228 | ) | (132,791 | ) | (575,784 | ) | (1,003,859 | ) | ||||||||||
| Operating Income (Loss) | 296,513 | (18,228 | ) | (124,892 | ) | (575,784 | ) | (422,391 | ) | |||||||||||
| Other Income (Expense) | 7,539 | (92,477 | ) | 193 | 2,762,701 | 2,677,956 | ||||||||||||||
| Net Income (Loss) Before Income Tax | 304,052 | (110,705 | ) | (124,699 | ) | 2,186,917 | 2,255,565 | |||||||||||||
| March 31, 2021 | ||||||||||||||||||||
| Cash and Restricted Cash | $ | 9,842,218 | $ | 154,738 | $ | 3,251,622 | $ | 15,756,505 | $ | 29,005,083 | ||||||||||
| Total Assets | 30,877,470 | 154,840 | 43,241,793 | 34,523,886 | 108,797,989 | |||||||||||||||
| December 31, 2020 | ||||||||||||||||||||
| Cash and Restricted Cash | $ | 8,150,769 | $ | 158,058 | $ | 1,590,265 | $ | 21,336,364 | $ | 31,235,456 | ||||||||||
| Total Assets | 28,954,484 | 158,160 | 524,603 | 77,574,674 | 107,211,921 | |||||||||||||||
| F-17 |
| 5. | BUSINESS UNDER COMMON CONTROL |
Due to the transactions with Chan Heng Fai on March 12, 2021, transactions between entities under common control (for further details on these transactions, refer to Note 2 – Summary of Significant Accounting Policies), the Company has disclosed the Consolidated Statement of Operations and Other Comprehensive Income for the Three Months Ended on March 31, 2020 and 2019:
Consolidated Statement of Operations and Other Comprehensive Income for the Three Months Ended on March 31, 2020
| As Previously Reported | Acquisition of APB under Common Control | Acquisition of LVD Ltd under Common Control | As Combined | |||||||||||||
| Revenue | ||||||||||||||||
| Property Sales | $ | 2,954,389 | $ | - | $ | - | $ | 2,954,389 | ||||||||
| Biohealth Product Sales | 10,782 | - | - | 10,782 | ||||||||||||
| 2,965,171 | - | - | 2,965,171 | |||||||||||||
| Operating Expenses | ||||||||||||||||
| Cost of Sales | 2,383,703 | - | - | 2,383,703 | ||||||||||||
| General and Administrative | 920,124 | 81,226 | 500 | 1,001,850 | ||||||||||||
| Research and Development | 2,009 | - | - | 2,009 | ||||||||||||
| Total Operating Expenses | 3,305,836 | 81,226 | 500 | 3,387,562 | ||||||||||||
| Loss From Operations | (340,665 | ) | (81,226 | ) | (500 | ) | (422,391 | ) | ||||||||
| Other Income (Expense) | ||||||||||||||||
| Interest Income | 7,810 | 11,580 | 25 | 19,415 | ||||||||||||
| Interest Expense | (60,931 | ) | - | - | (60,931 | ) | ||||||||||
| Foreign Exchange Transaction Gain (Loss) | 2,118,952 | - | 141,530 | 2,260,482 | ||||||||||||
| Unrealized Gain (Loss) on Securities Investment | 484,362 | (26,034 | ) | 94 | 458,422 | |||||||||||
| Finance Costs | - | (4,890 | ) | (13 | ) | (4,903 | ) | |||||||||
| Other Income | 5,471 | - | - | 5,471 | ||||||||||||
| Total Other Income (Expense), Net | 2,555,664 | (19,344 | ) | 141,636 | 2,677,956 | |||||||||||
| Net Income (Loss) Before Income Taxes | 2,214,999 | (100,570 | ) | 141,136 | 2,255,565 | |||||||||||
| Income Tax | - | - | - | - | ||||||||||||
| Net Income (Loss) | 2,214,999 | (100,570 | ) | 141,136 | 2,255,565 | |||||||||||
| Net Income (Loss) Attributable to Non-Controlling Interest | 643,139 | (6,436 | ) | - | 636,703 | |||||||||||
| Net Income (Loss) Attributable to Common Stockholders | $ | 1,571,860 | $ | (94,134 | ) | $ | 141,136 | $ | 1,618,862 | |||||||
| Other Comprehensive Loss, Net | ||||||||||||||||
| Unrealized Loss on Securities Investment | (12,599 | ) | - | - | (12,599 | ) | ||||||||||
| Foreign Currency Translation Adjustment | (1,674,021 | ) | - | - | (1,674,021 | ) | ||||||||||
| Comprehensive Income (Loss) | 528,379 | (100,570 | ) | 141,136 | 568,945 | |||||||||||
| Comprehensive Income (Loss) Attributable to Non-controlling Interests | 59,569 | (6,436 | ) | - | 53,133 | |||||||||||
| Comprehensive Income (Loss) Attributable to Common Stockholders | $ | 468,810 | $ | (94,134 | ) | $ | 141,136 | $ | 515,812 | |||||||
| Net Income Per Share - Basic and Diluted | $ | 0.16 | $ | 0.16 | ||||||||||||
| Weighted Average Common Shares Outstanding - Basic and Diluted | 10,001,000 | 10,001,000 | ||||||||||||||
Property Development | Digital Transformation Technology | Biohealth Business | Other | Discontinued Operations | Total | |
| Nine Months Ended September 30, 2020 | ||||||
| Revenue | $7,148,786 | $- | $31,133 | $- | $- | $7,179,919 |
| Cost of Sales | (5,603,164) | - | (6,139) | - | - | (5,609,303) |
| Gross Margin | 1,545,622 | - | 24,994 | - | - | 1,570,616 |
| Operating Expenses | (634,254) | (87,972) | (388,083) | (3,086,630) | (416,950) | (4,613,889) |
| Operating Income (Loss) | 911,368 | (87,972) | (363,089) | (3,086,630) | (416,968) | (3,043,273) |
| Other Income (Expense) | (2,646) | 115 | (10,211,916) | 11,123 | (488) | (10,203,812) |
Net Income (Loss) Before Income Tax | 908,722 | (87,857) | (10,575,005) | (3,075,507) | (417,438) | (13,247,085) |
Property Development | Digital Transformation Technology | Biohealth Business | Other | Discontinued Operations | Total | |
| Nine Months ended September 30, 2019 | ||||||
| Revenue | $21,509,197 | $- | $1,406,951 | $28,350 | $- | $22,944,498 |
| Cost of Sales | (18,819,865) | - | (357,935) | - | - | (19,177,800) |
| Gross Margin | 2,689,332 | - | 1,049,016 | 28,350 | - | 3,766,698 |
| Operating Expenses | (4,598,112) | (193,959) | (1,780,026) | (1,697,423) | (358,534) | (8,628,054) |
| Operating Income (Loss) | (1,908,780) | (193,959) | (731,010) | (1,669,073) | (358,534) | (4,861,356) |
| Other Income (Expense) | 34,433 | 296,726 | 31,151 | (4,874) | (30,397) | 327,039 |
Net Income (Loss) Before Income Tax | (1,874,347) | 102,767 | (699,859) | (1,673,947) | (388,931) | (4,534,317) |
| September 30, 2020 | ||||||
| Cash and Restricted Cash | $5,079,010 | $62,422 | $1,386,513 | $6,461,531 | $- | $12,989,476 |
| Total Assets | 30,540,913 | 162,524 | 61,572,898 | 9,197,695 | - | 101,474,030 |
| December 31, 2019 | ||||||
| Cash and Restricted Cash | $5,439,318 | $55,752 | $388,670 | $1,338,525 | $108,731 | $7,330,996 |
| Total Assets | 29,857,615 | 155,854 | 948,931 | 4,770,949 | 139,431 | 35,872,780 |
| F-18 |
Consolidated Balance Sheet as of December 31, 2020
| As Previously Reported | Acquisition of APB under Common Control | Acquisition of LVD Ltd under Common Control | Eliminations | As Combined | ||||||||||||||||
| Assets: | ||||||||||||||||||||
| Current Assets: | ||||||||||||||||||||
| Cash | $ | 22,124,491 | $ | 1,848,455 | $ | 492,977 | $ | - | $ | 24,465,923 | ||||||||||
| Restricted Cash | 6,769,533 | - | - | - | 6,769,533 | |||||||||||||||
| Account Receivables, Net | 1,366,194 | - | - | - | 1,366,194 | |||||||||||||||
| Other Receivables | 270,222 | 279,177 | 95,177 | - | 644,576 | |||||||||||||||
| Note Receivables - Related Party | 624,986 | �� | 24,583 | - | - | 649,569 | ||||||||||||||
| Prepaid Expenses | 1,470,680 | - | - | - | 1,470,680 | |||||||||||||||
| Inventory | 90,068 | - | - | - | 90,068 | |||||||||||||||
| Investment in Securities at Fair Value | 48,857,483 | 313,343 | 1,631 | - | 49,172,457 | |||||||||||||||
| Investment in Securities at Cost | 280,516 | - | - | - | 280,516 | |||||||||||||||
| Investment in Securities on Equity Method | - | - | 74,535 | (74,535 | ) | - | ||||||||||||||
| Deposits | 47,019 | - | - | - | 47,019 | |||||||||||||||
| Total Current Assets | 81,901,192 | 2,465,558 | 664,320 | (74,535 | ) | 84,956,535 | ||||||||||||||
| Real Estate | ||||||||||||||||||||
| Properties under Development | 20,505,591 | - | - | - | 20,505,591 | |||||||||||||||
| Operating Lease Right-Of-Use Asset | 574,754 | - | - | - | 574,754 | |||||||||||||||
| Deposit | 249,676 | - | - | - | 249,676 | |||||||||||||||
| Loan Receivable | - | 840,000 | - | - | 840,000 | |||||||||||||||
| Property and Equipment, Net | 85,365 | - | - | - | 85,365 | |||||||||||||||
| Total Assets | $ | 103,316,578 | $ | 3,305,558 | $ | 664,320 | $ | (74,535 | ) | $ | 107,211,921 | |||||||||
| Liabilities and Stockholders’ Equity: | ||||||||||||||||||||
| Current Liabilities: | ||||||||||||||||||||
| Accounts Payable and Accrued Expenses | $ | 1,553,132 | $ | 117,188 | $ | - | $ | - | $ | 1,670,320 | ||||||||||
| Deferred Revenue | 2,867,226 | - | - | - | 2,867,226 | |||||||||||||||
| Builder Deposits | 1,262,336 | - | - | - | 1,262,336 | |||||||||||||||
| Operating Lease Liability | 381,412 | - | - | - | 381,412 | |||||||||||||||
| Note Payable | 172,706 | - | - | - | 172,706 | |||||||||||||||
| Note Payable- Related Parties | 1,526,208 | - | 823,823 | - | 2,350,031 | |||||||||||||||
| Total Current Liabilities | 7,763,020 | 117,188 | 823,823 | - | 8,704,031 | |||||||||||||||
| Long-Term Liabilities: | ||||||||||||||||||||
| Builder Deposits | - | - | - | - | - | |||||||||||||||
| Operating Lease Liability | 193,342 | - | - | - | 193,342 | |||||||||||||||
| Notes Payable | 636,362 | - | - | - | �� | 636,362 | ||||||||||||||
| Total Liabilities | 8,592,724 | 117,188 | 823,823 | - | 9,533,735 | |||||||||||||||
| Stockholders’ Equity: | ||||||||||||||||||||
| Common Stock | 8,570 | 47,756 | - | (47,756 | ) | 8,570 | ||||||||||||||
| Additional Paid In Capital | 97,950,440 | 3,584,982 | 756,487 | 47,756 | 102,339,666 | |||||||||||||||
| Accumulated Deficit | (43,010,991 | ) | (876,712 | ) | (906,010 | ) | - | (44,793,713 | ) | |||||||||||
| Accumulated Other Comprehensive Income | 2,153,318 | - | (9,980 | ) | - | 2,143,338 | ||||||||||||||
| Total Stockholders’ Equity | 57,101,337 | 2,756,027 | (159,503 | ) | - | 59,697,861 | ||||||||||||||
| Non-controlling Interests | 37,622,517 | 432,343 | - | (74,535 | ) | 37,980,325 | ||||||||||||||
| Total Stockholders’ Equity | 94,723,854 | 3,188,370 | (159,503 | ) | (74,535 | ) | 97,678,186 | |||||||||||||
| Total Liabilities and Stockholders’ Equity | $ | 103,316,578 | $ | 3,305,558 | $ | 664,320 | $ | (74,535 | ) | $ | 107,211,921 | |||||||||
| 6. | REAL ESTATE ASSETS |
As of September 30, 2020March 31, 2021 and December 31, 2019,2020, real estate assets consisted of the following:
September 30, 2020 | December 31, 2019 | |
| Construction in Progress | $12,298,889 | $9,601,364 |
| Land Held for Development | 12,691,477 | 14,283,340 |
| Total Real Estate Assets | $24,990,366 | $23,884,704 |
March 31, 2021 | December 31, 2020 | |||||||
| Construction in Progress | $ | 7,465,347 | $ | 9,567,841 | ||||
| Land Held for Development | 10,638,686 | 10,937,750 | ||||||
| Rental Properties | 2,161,680 | - | ||||||
| Total Real Estate Assets | $ | 20,265,713 | $ | 20,505,591 | ||||
| BUILDER DEPOSITS |
September 30, 2020 | December 31, 2019 | |
| Computer Equipment | $181,559 | $175,992 |
| Furniture and Fixtures | 62,328 | 52,798 |
| Vehicles | 90,929 | 90,929 |
| Subtotal | 334,816 | 319,719 |
| Accumulated Depreciation | (257,153) | (239,434) |
| Total | $77,663 | $80,285 |
In November 2015, SeD Maryland Development, LLC (“SeD Maryland”) entered into lot purchase agreements with NVR, Inc. (“NVR”) relating to the sale of single-family home and townhome lots to NVR in the Ballenger Run Project. The purchase agreements were amended three times thereafter. Based on the agreements, NVR is entitled to purchase 479 lots for a price of approximately $64,000,000, which escalates 3% annually after June 1, 2018.
As part of the agreements, NVR was required to give a deposit in the amount of $5,600,000. Upon the sale of lots to NVR, 9.9% of the purchase price is taken as payback of the deposit. A violation of the agreements by NVR would cause NVR to forfeit the deposit. On January 3, 2019 and April 28, 2020, NVR gave SeD Maryland two more deposits in the amounts of $100,000 and $220,000, respectively, based on the 3rd Amendment to the Lot Purchase Agreement. On September 30, 2020 March 31, 2021 and December 31, 2019,2020, there were $1,808,747$928,565 and $2,445,269$1,262,336 held on deposit, respectively.
| 8. | NOTES PAYABLE |
As of September 30, 2020March 31, 2021 and December 31, 2019,2020, notes payable consisted of the following:
September 30, 2020 | December 31, 2019 | |
| Union Bank Loan | - | - |
| M&T Bank Loan, Net of Debt Discount | 619,329 | - |
| PPP Loan | 68,502 | - |
| Australia Loan | 159,966 | 157,105 |
Total notes payable | $847,797 | $157,105 |
| March 31, 2021 | December 31, 2020 | |||||||
| M&T Bank Loan, Net of Debt Discount | 651,034 | 636,362 | ||||||
| PPP Loan | 68,502 | - | ||||||
| Australia Loan | 170,433 | 172,706 | ||||||
| Total notes payable | $ | 889,969 | $ | 809,068 | ||||
On November 23, 2015, SeD Maryland entered into a Revolving Credit Note with the Union Bank in the original principal amount of $8,000,000 (the “Revolving Credit Note”). During the term of the loan, cumulative loan advances may not exceed $26,000,000. The line of credit bears interest at LIBOR plus 3.8% with a floor rate of 4.5%. The interest rate at December 31, 2018 was 6.125%. Beginning December 1, 2015, interest only payments were due on the outstanding principal balance. The entire unpaid principal and interest sum was due and payable on November 22, 2018, with the option of one twelve-month extension period. The loan is secured by a deed of trust on the property, $2,600,000 of collateral cash, and a Limited Guaranty Agreement with SeD Ballenger. The Company also had an $800,000 letter of credit from the Union Bank. The letter of credit was due on November 22, 2018 and bore interest at 15%. In September 2017, SeD Maryland Development LLC and the Union Bank modified the Revolving Credit Note, which increased the original principal amount from $8,000,000 to $11,000,000 and extended the maturity date of the loan and letter of credit to December 31, 2019. Accordingly, this change in terms of the Union Bank Loan was accounted for as a modification in accordance withASC 470 – Debt.
On April 17, 2019, SeD Maryland Development LLC entered into a Development Loan Agreement with Manufacturers and Traders Trust Company (“M&T Bank”) in the principal amount not to exceed at any one time outstanding the sum of $8,000,000, with a cumulative loan advance amount of $18,500,000. The line of credit bears interest rate on LIBOR plus 375 basis points. SeD Maryland Development LLC was also provided with a Letter of Credit (“L/C”) Facility in an aggregate amount of up to $900,000. The L/C commission will be 1.5% per annum on the face amount of the L/C. Other standard lender fees will apply in the event L/C is drawn down. The loan is a revolving line of credit. The L/C Facility is not a revolving loan, and amounts advanced and repaid may not be re-borrowed. Repayment of the Loan Agreement is secured by $2,600,000 collateral fund and a Deed of Trust issued to the Lender on the property owned by SeD Maryland. As of September 30, 2020,March 31, 2021, the outstanding balance of the revolving loan was $0. As part of the transaction, the Company incurred loan origination fees and closing fees in the amount of $381,823 and capitalized it into construction in process.
On June 18, 2020, Alset iHomeEHome Inc. (“Alset iHome”EHome”), a wholly-ownedwholly owned subsidiary of LiquidValue Development Inc., entered into a Loan Agreement with Manufacturers and Traders Trust Company (the “Lender”).
Pursuant to the Loan Agreement, the Lender provided a non-revolving loan to Alset iHomeEHome in an aggregate amount of up to $2,990,000 (the “Loan”).
During the transaction,year ended December 31, 2020 Alset EHome borrowed $664,810 from M&T Bank, incurring at the Company incurredsame time a loan origination fees and closing fees in the amount of $61,679 which was recorded as loan discount and isare to be amortized over the term of the loan. Alset EHome didn’t borrow any additional funds in three months ended on March 31, 2021. In the three months ended March 31, 2021 and 2020, Alset EHome expensed $6,627 and $0, respectively, in interest on this loan and recorded $8,045 and $0, respectively, of amortization expense. As of
Paycheck Protection Program Loan
On April 6, 2020,February 11, 2021, the Company entered into a termfive year note with M&T Bank with a principal amount of $68,502 pursuant to the Paycheck Protection Program (“PPP Term Note”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan is evidenced by a promissory note. The PPP Term Note bears interest at a fixed annual rate of 1.00%, with the first tensixteen months of principal and interest deferred.deferred or until we apply for the loan forgiveness. The PPP Term Note may be accelerated upon the occurrence of an event of default.
The PPP Term Note is unsecured and guaranteed by the United States Small Business Administration. The Company appliedmay apply to M&T Bank for forgiveness of the PPP loan.
Australia Loan
On January 7, 2017, SeD Perth Pty Ltd (“SeD Perth”) entered into a loan agreement with National Australian Bank Limited (the “Australia Loan”) for the purpose of funding land development. The loan facility provides SeD Perth with access to funding of up to approximately $460,000 and matures on December 31, 2018. The Australia Loan is secured by both the land under development and a pledged deposit of $35,276. This loan is denominated in AUD. Personal guarantees amounting to approximately $500,000 have been provided by our CEO, Chan Heng Fai and by Rajen Manicka, the CEO of Holista CollTech and Co-founder of iGalen Inc. The interest rate on the Australia Loan is based on the
weighted average interest rates applicable to each of the business markets facility components as defined within the loan agreement, ranging from| 9. | RELATED PARTY TRANSACTIONS |
Personal Guarantees by Directors
As of both September 30, 2020March 31, 2021 and December 31, 2019,2020, a director of the Company had provided personal guarantees amounting to approximately $5,500,000$500,000, to secure external loans from financial institutions for HFEAEI and the consolidated entities.
| F-21 |
Sale of HotApp BlockchainInvestment in Vivacitas to DSS Asia
On October 25, 2018, HIP,March 18, 2021, the Company sold equity investment in Vivacitas, a wholly-owned subsidiary of HotApp Blockchain, Inc., entered into an equity purchase agreement (the “HotApps Purchase Agreement”) with DSS Asia, a Hong Kong subsidiary of DSS International, pursuantU.S.-based biopharmaceutical company, equaling 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, a wholly-owned subsidiary of HIP. Guangzhou HotApps is primarily engaged in engineering work for software development, as well as, a number of outsourcing projects related to real estate and lighting. Chan Heng Fai is the CEO of DSS Asia and DSS International. For further details on this transaction, refer to Note 11 – Discontinued Operations.
Notes Payable
Chan Heng Fai provided interest-free, due on demand advance to HFELiquidValue Development Pte. Ltd. and its subsidiary LiquidValue Development Limited of approximately $815,381 for the general operations. On
Chan Heng Fai provided interest-free, due on demand advance to Alset EHome International for the general operations. On March 31, 2021 and December 31, 2020, the outstanding balance was $178,400.
Chan Heng Fai provided an interest-free, due on demand advance to SeD Perth Pty. Ltd. for its general operations. On March 31, 2021 and December 31, 2020, the outstanding balance was $14,190 and $14,379, respectively.
On August 20, 2020, the Company acquired 30,000,000 common shares from Chan Heng Fai in exchange for a two-year non-interest bearing note of $1,333,429. On September 30,March 31, 2021 and December 31, 2020 the amount outstanding was $1,333,429.
On March 8, March 27 and April 23, 2019, iGalen borrowed additional monies of $150,000, $30,000 and $50,000, respectively, from Rajen Manicka, total $230,000 (the “2019 Rajen Manicka Loan”). The 2019 Rajen Manicka Loan is interest free, not tradable, unsecured, and repayable on demand. As of September 30, 2020 and December 31, 2019, the total outstanding principal balance of the loans was $531,030 and $546,397, respectively, and was included in the Notes Payable – Related Parties balance on the Company’s Condensed Consolidated Balance Sheets. During the nine months ended September 30, 2020 and 2019,12, 2021, the Company incurred $13,185 and $8,084 of interest expense, respectively. During the three months ended September 30, 2020 and 2019, the Company incurred $4,411 and $0 of interest expense, respectively. The Company accrued interest of $0 and $0 at September 30, 2020 and December 31, 2019, respectively
| F-22 |
Management Fees
MacKenzie Equity Partners, owned by Charles MacKenzie, a Director of the Company'sCompany’s subsidiary LiquidValue Development, has had a consulting agreement with the Company since 2015. Per the terms of the agreement, as amended on January 1, 2018, the Company pays a monthly fee of $15,000 with an additional $5,000 per month due upon the close of the sale to Houston LD, LLC. Since January of 2019, the Company has paid a monthly fee of $20,000 for these consulting services. The Company incurred expenses of $180,000$60,000 and $180,000$60,000 for the ninethree months ended September 30,March 31, 2021 and 2020, and 2019, respectively, which were capitalized as part of Real Estate on the Company’s Consolidated Balance Sheet as the services relate to property and project management. The Company incurred expenses of $60,000 and $60,000 for the three months ended September 30, 2020 and 2019, respectively. As of September 30, 2020,March 31, 2021, and December 31, 2019 2020 the Company owed $20,000 and $0 respectively, to this entity.
Consulting service with Rajen Manicka was terminated on December 31, 2019.
Chan Tung Moe thewas engaged as a consultant engaged withby the Company through Pop Motion Consulting Pte. Ltd., Chan Tung Moe is the son of Chan Heng Fai, a directorthe Chairman and the CEO of theour Company. In August of 2020, this consulting agreement was terminated, and Chan Tung Moe became an employee of Alset International as Chief Development Officer. Chan Tung Moe was appointed as Executive Director of Alset International Limited on December 11, 2020 and on March 1, 2021, he was appointed as Co-Chief Executive Officer of Alset International Limited.
The Company incurred expense of $140,758 for the nine months ended September 20, 2020$0 and 2019, respectively. The Company incurred expense of $22,470$57,931 for the three months ended September 30,March 31, 2021 and 2020, and 2019, respectively. As of September 30, 2020March 31, 2021 and December 2019,31, 2020, the Company owed Pop Motion a consulting fee of $0 and $118,288, respectively.
On February 1, 2017, the Company invested $300,000 in Global Opportunity Fund (“Fund”), a mutual fund registered in the Cayman Islands and Chan Heng Fai is one of the directors of this fund. This Fund was closed during November 2019 and is being liquidated. LiquidValue Asset Management Pte. Ltd., one of the subsidiaries of the Company, is the investment manager of the Fund and receives a management fee from the Fund at 2% per annum of the aggregated net asset value of the investments and a performance fee of 20%. As of December 31, 2019, the Company recorded a receivable $307,944 from the Global Opportunity Fund. In the nine months ended on September 30, 2020 and 2019, the management fee and performance fee charged to the Fund were $0 and $4,425, respectively. In the three months ended on September 30, 2020 and 2019, the management fee and performance fee charged to the Fund were $0 and $1,386, respectively. On September 30, 2020 and December 31, 2019, the Fund owed accrued management and performance fee receivable $0 and $15,484 respectively. On January 23, 2020, the Company received $307,944 as a result of the liquidation of Global Opportunity Fund.
On March 2, 2020 LiquidValue Asset Management Pte. Ltd. (“LiquidValue”) received a $200,000 Promissory Note from American Medical REIT Inc. (“AMRE”), a company which is 36.1% owned by LiquidValue. Chan Heng Fai and Chan Tung Moe and Alan Lui from Alset International are directors of American Medical REIT Inc. The note carries interests of 8% and is payable in two years. LiquidValue also received warrants to purchase AMRE shares at the Exercise Price $5.00 per share. The amount of the warrants equals to the note principle divided by the Exercise Price. If AMRE goes to IPO in the future and IPO price is less than $10.00 per share, the Exercise price shall be adjusted downward to fifty percent (50%) of the IPO price. As of September 30,March 31, 2021 and December 31, 2020, the fair market value of the warrants was $0. The Company accrued $17,431 and $13,431 interest income as of March 31, 2021 and December 31, 2020, respectively.
On January 24, 2017, SeD Capital Pte Ltd, a 100% owned subsidiary of Alset International lent $350,000 to iGalen. The term of the loan was two years, with an interest rate of 3% per annum for the first of year and 5% per annum for the second year. The expiration term was renewed as due on demand after two years with 5% per annum interest rate. As of March 31, 2021 and December 31, 2020, the outstanding principle was $350,000 and accrued interest was $62,058 and $61,555, respectively.
As of March 31, 2021, the Company provided advances for operation of $10,104 to Hyten, a direct sales company in Thailand of which the Company holds approximately 19% ownership. The Company provided advances for operation of $29,968 to APW, a related party company of which the Company holds 8.7% ownership.
Loan to Employees
On November 24, 2020, American Pacific Bancorp. Inc. lent $560,000 to Chan Tung Moe, an officer of one of the subsidiaries of the Company and son of Chan Heng Fai, Chairman and Chief Executive Officer of the Company, bearing interest at 6%, with a maturity date of November 23, 2023. This loan is secured by DSS
| 10. | EQUITY |
The Company is authorized to issue 20,000,000 common shares and 5,000,000 preferred shares, both at a par value $0.001 per share. AtAs of December 31, 2019,2020, there were 10,001,0008,570,000 common shares issued and outstanding.
On January 19, 2021, the Company issued 10,000 shares of ourits common stock as compensation for public relations services at a fair value of $60,900.
On March 31, 2021, there were 8,580,000 common shares issued and outstanding.
On November 23, 2020, under the terms of the Underwriting Agreement, the Company issued to the treasuryAegis Capital Corp a warrant (the “Representative’s Warrant”) to purchase an aggregate of our company, and Chan Heng Fai surrendered 1,000108,000 shares of our common stockstock. The Representative’s Warrant is exercisable at a per share price of $9.80 and is exercisable at any time and from time to time, in whole or in part, during the treasurythree-year period commencing from the date of our company, and all such shares were cancelled. No consideration was exchanged in connection withissuance. Following table summarizes the surrender ofwarrant activity for the shares. As a result, the total number of outstanding shares of our common stock at September 30, 2020 was reduced to 6,400,000 shares from 10,001,000 shares.
Warrant for | Remaining Contractual | Aggregate | ||||||||||||||
Common Shares | Exercise Price | Term (Years) | Intrinsic Value | |||||||||||||
| Outstanding as of December 31, 2020 | 108,000 | $ | 9.80 | 2.95 | $ | - | ||||||||||
| Vested and exercisable at December 31, 2020 | 108,000 | $ | 9.80 | 2.95 | $ | - | ||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited, cancelled, expired | - | - | ||||||||||||||
| Outstanding as of March 31, 2021 | 108,000 | $ | 9.80 | 2.70 | $ | 191,160 | ||||||||||
| Vested and exercisable at March 31, 2021 | 108,000 | $ | 9.80 | 2.70 | $ | 191,160 | ||||||||||
GigWorld Inc. Sale of Shares
From January to September, 2020,March, 2021, the Company sold 207,300250,000 shares of HotApp BlockchainGigWorld to international investors withfor the amount of $177,300,$250,000, which was booked as addition paid-in capital. The Company held 505,976,376505,551,376 shares of the total outstanding shares 506,898,576 before the sale. After the sale, the Company still owns approximately 99% of HotApp Blockchain’sGigWorld’s total outstanding shares.
From January to September, 2019,March, 2020, the Company sold 361,50010,000 shares of HotApp BlockchainGigWorld to international investors withfor the amount of $229,500,$5,000, which was booked as addition paid-in capital. The Company held 506,262,076506,223,676 shares of the total outstanding shares 506,898,576 before the sale. After the sale, the Company still owns approximately 99% of HotApp Blockchain’sGigWorld’s total outstanding shares.
During the three months ended March 31, 2021 and 2020, the sales of GigWorld’s shares were de minimis compared to its outstanding shares and did not change the minority interest.
Distribution to Minority Shareholder
During three months ended on March 31, 2021, SeD Maryland Development LLC Board approved the payment distribution plan to September,members and paid $82,250 in distribution to the minority shareholder. During three months ended on March 31, 2020, SeD Maryland Development LLC Board approved the payment distribution plan to members and paid $197,400 in distribution to the minority shareholder. From January to September, 2019, SeD Maryland Development LLC Board approved
Changes of Ownership of Alset International
In the payment distribution plan to members and paid $740,250 in distribution to the minority shareholder.
September
30, 2020.A subsidiary Issuing Stock
During the three and nine months ended
| 11. | ACCUMULATED OTHER COMPREHENSIVE INCOME |
Following is a summary of the changes in the balances of accumulated other comprehensive income, net of tax:
Unrealized Gains and Losses on Security Investment | Foreign Currency Translations | Change in Minority Interest | Total | |
| Balance at January 1, 2020 | $(59,888) | $1,613,125 | $(84,968) | $1,468,269 |
| Other Comprehensive Income | (8,240) | (1,094,810) | - | (1,103,050) |
| Balance at March 31, 2020 | $(68,128) | $518,315 | $(84,968) | $365,219 |
| Other Comprehensive Income | 8,147 | 389,413 | (18,317) | 379,243 |
| Balance at June 30, 2020 | $(59,981) | $907,728 | $(103,285) | $744,462 |
| Other Comprehensive Income | 14,865 | 235,837 | 50,420 | 301,122 |
| Balance at September 30, 2020 | $(45,116) | $1,143,565 | $(52,865) | $1,045,584 |
Unrealized Gains and Losses on Security Investment | Foreign Currency Translations | Total | |
| Balance at January 1, 2019 | $(23,779) | $1,606,567 | $1,582,788 |
| Other Comprehensive Income | 11,681 | 74,262 | 85,943 |
| Balance at June 30, 2019 | $(12,098) | $1,680,829 | $1,668,731 |
| Other Comprehensive Income | 22 | 104,762 | 104,784 |
| Balance at June 30, 2019 | $(12,076) | $1,785,591 | $1,773,515 |
| Other Comprehensive Income | (37,099) | (403,990) | (441,089) |
| Balance at September 30, 2019 | $(49,175) | $1,381,601 | $1,332,426 |
| Unrealized Gains and Losses on Security Investment | Foreign Currency Translations | Change in Minority Interest | Total | |||||||||||||
| Balance at January 1, 2021 | $ | (48,758 | ) | $ | 2,258,017 | $ | (65,921 | ) | $ | 2,143,338 | ||||||
| Other Comprehensive Income | (1,135 | ) | (1,010,527 | ) | (39,067 | ) | (1,050,729 | ) | ||||||||
| Balance at March 31, 2021 | $ | (49,893 | ) | $ | 1,247,490 | $ | (104,988 | ) | $ | 1,092,609 | ||||||
| Unrealized Gains and Losses on Security Investment | Foreign Currency Translations | Change in Minority Interest | Total | |||||||||||||
| Balance at January 1, 2020 | $ | (59,888 | ) | $ | 1,603,145 | $ | (84,968 | ) | $ | 1,458,289 | ||||||
| Other Comprehensive Income | (8,240 | ) | (1,094,810 | ) | - | (1,103,050 | ) | |||||||||
| Balance at March 31, 2020 | $ | (68,128 | ) | $ | 508,335 | $ | (84,968 | ) | $ | 355,239 | ||||||
September 30, | December 31, | |
2020 | 2019 | |
Assets Cash | ||
Assets Cash | $- | $108,731 |
| Prepaid Expense | - | 30,700 |
| Total Asset | $- | $139,431 |
| Liabilities | ||
| Accounts Payable | $- | $7,021 |
Total Liabilities | $- | $7,021 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||
2020 | 2019 | 2020 | 2019 | |
| Revenue | $- | $- | $- | $- |
| Operating Expense | ||||
| Research & Development | 45,617 | 79,457 | 246,915 | 260,671 |
| General & Administration | 10,280 | 31,648 | 170,035 | 94,153 |
| Total Operating Expense | 55,897 | 111,105 | 416,950 | 354,824 |
| Other Expense | 138 | 17,449 | 488 | 30,395 |
Loss from Discontinued Operations | $(56,053) | $(128,554) | $(417,438) | $(385,219) |
Nine Months Ended on September 30, 2020 | Nine Months Ended on September 30, 2019 | |
| Operating | $(522,435) | $(470,902) |
| Investing | - | (36,000) |
| Financing | - | - |
| Net Change in Cash | $(522,435) | $(506,902) |
| INVESTMENTS MEASURED AT FAIR VALUE |
Financial assets measured at fair value on a recurring basis are summarized below and disclosed on the consolidated balance sheet as of September 30, 2020March 31, 2021 and December 31, 2019:
Fair Value Measurement Using | |||||
Amount at Cost | Level 1 | Level 2 | Level 3 | Amount at Fair Value | |
| September 30, 2020 | |||||
| Assets | |||||
| Investment securities- Fair Value Option | $3,457,056 | $4,787,454 | $- | $- | $4,787,454 |
| Investment securities- Trading | 16,016 | 15,758 | - | - | 15,758 |
| Convertible preferred stock | 63,849,002 | - | - | 54,864,632 | 54,864,632 |
| Convertible note receivable | 50,000 | - | - | 77,477 | 77,477 |
| Warrants - American Premium Water | - | - | - | - | - |
| Warrants - AMRE | - | - | - | - | - |
| Stock Options - Vivacitas | - | - | - | - | - |
| Total Investment in securities at Fair Value | $67,372,074 | $4,803,212 | $- | $54,942,109 | $59,745,321 |
Fair Value Measurement Using | |||||
Amount at Cost | Level 1 | Level 2 | Level 3 | Amount at Fair Value | |
| December 31, 2019 | |||||
| Assets | |||||
| Investment securities- Fair Value Option | $3,457,056 | $2,973,582 | $- | $- | $2,973,582 |
| Investment securities- Trading | 16,016 | 15,907 | - | - | 15,907 |
| Convertible note receivable | 50,000 | - | - | 26,209 | 26,209 |
| Stock Option - Vivacitas | - | - | - | - | - |
| Total Investment in securities at Fair Value | $3,523,072 | $2,989,489 | $- | $26,209 | $3,015,698 |
| Amount at | Fair Value Measurement Using | Amount at | ||||||||||||||||||
| Cost | Level 1 | Level 2 | Level 3 | Fair Value | ||||||||||||||||
| March 31, 2021 | ||||||||||||||||||||
| Assets | ||||||||||||||||||||
| Investment Securities- Fair Value | $ | 14,134,540 | $ | 17,923,989 | $ | - | $ | - | $ | 17,923,989 | ||||||||||
| Investment Securities- Trading | 2,457,162 | 2,468,809 | - | - | 2,468,809 | |||||||||||||||
| Convertible Preferred Stock | 42,889,000 | - | - | 29,430,000 | 29,430,000 | |||||||||||||||
| Convertible Note Receivable | 138,599 | - | - | 153,590 | 153,590 | |||||||||||||||
| Warrants - American Premium Water | 860,342 | - | - | 2,188,264 | 2,188,264 | |||||||||||||||
| Warrants - AMRE | - | - | - | - | - | |||||||||||||||
| Total Investment in securities at Fair Value | $ | 60,479,643 | $ | 20,392,798 | $ | - | $ | 31,771,854 | $ | 52,164,652 | ||||||||||
| Amount at | Fair Value Measurement Using | Amount at | ||||||||||||||||||
| Cost | Level 1 | Level 2 | Level 3 | Fair Value | ||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||
| Assets | ||||||||||||||||||||
| Investment securities- Fair Value Option | $ | 7,404,911 | $ | 10,549,102 | $ | - | $ | - | $ | 10,549,102 | ||||||||||
| Investment securities- Trading | 17,650 | 18,654 | - | - | 18,654 | |||||||||||||||
| Convertible preferred stock | 42,889,000 | - | - | 37,675,000 | 37,675,000 | |||||||||||||||
| Convertible note receivable | 50,000 | - | - | 66,978 | 66,978 | |||||||||||||||
| Warrants - American Premium Water | 860,342 | - | - | 862,723 | 862,723 | |||||||||||||||
| Warrants - AMRE | - | - | - | - | - | |||||||||||||||
| Stock Options - Vivacitas | - | - | - | - | - | |||||||||||||||
| Total Investment in securities at Fair Value | $ | 51,221,903 | $ | 10,567,756 | $ | - | $ | 38,604,701 | $ | 49,172,457 | ||||||||||
Unrealized loss on investment securities for the nine months ended September 30, 2020 and 2019 was $42,169,116 and $146,470, respectively. Unrealized loss on investment securities for three months ended September 30, March 31, 2021 and 2020 was $43,761,763$1,987 and unrealized gain on investment securities for the three months ended September 30, 2019$12,599, respectively. was $507,727.
These losses were recorded directly to net income (loss).
For U.S. trading stocks, we use Bloomberg Market stock prices as the share prices to calculate fair value. For overseas stock, we use the stock price from local stock exchange to calculate fair value. The following chart shows details of the fair value of equity security investment at
Share price | Market Value | |||
9/30/2020 | Shares | 9/30/2020 | Valuation | |
| DSS (Related Party) | $4.560 | 500,001* | $2,280,005 | Investment in Securities at Fair Value |
| AMBS (Related Party) | $0.011 | 20,000,000 | $222,000 | Investment in Securities at Fair Value |
| Holista (Related Party) | $0.043 | 46,226,673 | $1,980,350 | Investment in Securities at Fair Value |
| American Premium Water (Related Party) | $0.003 | 122,039,000 | $305,100 | Investment in Securities at Fair Value |
| Others | $15,758 | Investment in Securities at Fair Value | ||
| Total Level 1 Equity Securities | $4,803,213 | |||
| Vivacitas (Related Party) | N/A | 2,480,000 | $200,128 | Investment in Securities at Cost |
| Nervotech | N/A | 1,666 | $36,628 | Investment in Securities at Cost |
| Total Equity Securities | $5,039,969 | |||
| Share price | Market Value | |||||||||||||
| 3/31/2021 | Shares | 3/31/2021 | Valuation | |||||||||||
| DSS (Related Party) | $ | 3.610 | 1162501 | * | $ | 4,196,629 | Investment in Securities at Fair Value | |||||||
| AMBS (Related Party) | $ | 0.011 | 20,000,000 | $ | 228,000 | Investment in Securities at Fair Value | ||||||||
| Holista (Related Party) | $ | 0.049 | 46,226,673 | $ | 2,285,838 | Investment in Securities at Fair Value | ||||||||
| American Premium Water (Related Party) | $ | 0.008 | 122,039,000 | $ | 1,025,128 | Investment in Securities at Fair Value | ||||||||
| OptimumBank (Related Party) | $ | 3.870 | 92,980 | $ | 359,833 | Investment in Securities at Fair Value | ||||||||
| True Partners | $ | 0.158 | 62,122,908 | $ | 9,828,563 | Investment in Securities at Fair Value | ||||||||
| Trading Stocks | $ | 2,468,809 | Investment in Securities at Fair Value | |||||||||||
| Total Level 1 Equity Securities | $ | 20,392,798 | ||||||||||||
| Nervotech | N/A | 1,666 | $ | 37,826 | Investment in Securities at Cost | |||||||||
| Hyten Global | N/A | 20,000 | $ | 42,562 | Investment in Securities at Cost | |||||||||
| K Beauty | N/A | 3,600 | $ | 19,609 | Investment in Securities at Cost | |||||||||
| Total Equity Securities | $ | 20,492,795 | ||||||||||||
| Share price | Market Value | |||||||||||||
| 12/31/2020 | Shares | 12/31/2020 | Valuation | |||||||||||
| DSS (Related Party) | $ | 6.240 | 1,162,501 | * | $ | 7,254,006 | Investment in Securities at Fair Value | |||||||
| AMBS (Related Party) | $ | 0.008 | 20,000,000 | $ | 160,000 | Investment in Securities at Fair Value | ||||||||
| Holista (Related Party) | $ | 0.055 | 46,226,673 | $ | 2,565,469 | Investment in Securities at Fair Value | ||||||||
| American Premium Water (Related Party) | $ | 0.002 | 122,039,000 | $ | 256,284 | Investment in Securities at Fair Value | ||||||||
| OptimumBank (Related Party) | $ | 3.370 | 92,980 | $ | 313,343 | Investment in Securities at Fair Value | ||||||||
| Trading Stocks | $ | 18,654 | Investment in Securities at Fair Value | |||||||||||
| Total Level 1 Equity Securities | $ | 10,567,756 | ||||||||||||
| Vivacitas (Related Party) | N/A | 2,480,000 | $ | 200,128 | Investment in Securities at Cost | |||||||||
| Nervotech | N/A | 1,666 | $ | 37,826 | Investment in Securities at Cost | |||||||||
| Hyten Global | N/A | 20,000 | $ | 42,562 | Investment in Securities at Cost | |||||||||
| Total Equity Securities | $ | 10,848,272 | ||||||||||||
* Ratio of 1-for-30 (the “Reverse Split”) was effective at 5:01 p.m. Eastern Time on May 7, 2020 (the “Effective Time”)
Share price | Market Value | |||
12/31/2019 | Shares | 12/31/2019 | Valuation | |
| DSS (Related Party) | $0.301 | 500,000 | $150,500 | Investment in Securities at Fair Value |
| AMBS (Related Party) | $0.013 | 20,000,000 | $262,000 | Investment in Securities at Fair Value |
| Holista (Related Party) | $0.055 | 46,226,673 | $2,561,082 | Investment in Securities at Fair Value |
| Others | $15,907 | Investment in Securities at Fair Value | ||
| Total Level 1 Equity Securities | $2,989,489 | |||
| Vivacitas (Related Party) | N/A | 2,480,000 | $200,128 | Investment in Securities at Cost |
| Total Equity Securities | $3,189,617 | |||
DSS convertible preferred stock
The DSS convertible preferred stock under level 3 category was valued through a Monte Carlo simulation model.on Option Pricing Method (OPM) in determining the fair value. As of September 30, 2020,March 31, 2021, the Company held 46,84842,575 shares of DSS convertible preferred stock, which could convert to 7,232,7166,570,216 common shares, with fair market value $54,864,632.of $29,430,000. As of December 31, 2020, the Company held 42,575 shares of DSS convertible preferred stock, which could convert to 6,570,216 common shares, with fair market value $37,675,000. The Monte Carlo model uses certain assumptions. The significant inputs and assumptions utilized are as follows:
As of September 30, | As of August 21, | |
2020 | 2020 | |
| Stock price | $4.52 | $6.88 |
| Risk-free rate | 0.16% | 0.16% |
| Annualized volatility | 60.00% | 60.00% |
| Forecast horizon in years | 3.00 | 3.00 |
| Trading steps per year | 52.00 | 52.00 |
| Probability of call (annual) | 10.00% | 10.00% |
| As of March 31, | As of December 31, | |||||||
| 2021 | 2020 | |||||||
| Stock price | $ | 4.22 | $ | 6.24 | ||||
| Risk-free rate | 1.64 | % | 0.93 | % | ||||
| Volatility | 109.67 | % | 113.69 | % | ||||
| Expected Exit Date | March 24, 2023 | December 31, 2023 | ||||||
| Dividend Yield | 0.00 | 0.00 | ||||||
The selected stock prices represent the close market bid price of DSS on the valuation date.
Sharing Services Convertible Note
The fair value of the Sharing Services Convertible Note under level 3 category as of September 30, 2020March 31, 2021 and December 31, 20192020 was calculated using a Black-Scholes valuation model valued with the following weighted average assumptions:
September 30, 2020 | December 31, 2019 | |
| Dividend yield | 0.00% | 0.00% |
| Expected volatility | 221.69% | 159.88% |
| Risk free interest rate | 0.13% | 1.61% |
| Contractual term (in years) | 2.01 | 2.76 |
| Exercise price | $0.15 | $0.15 |
March 31, 2021 | December 31, 2020 | |||||||
| Dividend yield | 0.00 | % | 0.00 | % | ||||
| Expected volatility | 210.07 | % | 210.07 | % | ||||
| Risk free interest rate | 3.25 | % | 0.13 | % | ||||
| Contractual term (in years) | 1.51 | 1.76 | ||||||
| Exercise price | $ | 0.15 | $ | 0.15 | ||||
We assumed dividend yield rate is 0.00% in Sharing Services. The volatility is based on the historical volatility of the Sharing Services’ common stock. Risk -freeRisk-free interest rates were obtained from U.S. Treasury rates for the applicable periods.
Changes in the observable input values would likely cause material changes in the fair value of the Company’s Level 3 financial instruments. A significant increase (decrease) in this likelihood would result in a higher (lower) fair value measurement.
The table below provides a summary of the changes in fair value, including net transfers in and/or out of all financial assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the ninethree months ended September 30, 2020March 31, 2021 and 2019:
| Total | ||||
| Balance at January 1, 2021 | $ | 66,978 | ||
| Total losses | (1,987 | ) | ||
| Balance at March 31, 2021 | $ | 64,991 | ||
| Total | ||||
| Balance at January 1, 2020 | $ | 26,209 | ||
| Total losses | (12,599 | ) | ||
| Balance at March 31, 2020 | $ | 13,610 | ||
Vector Com Convertible Bond
On February 26, 2021, the Company invested approximately $88,599 in the convertible bond of Vector Com Co., Ltd (“Vector Com”), a private company in South Korea. The interest rate is 2% per annum and maturity is two years. The conversion price is approximately $21.26, per common share of Vector Com. As of March 31, 2021, the Management estimated that the fair value of the note to be $88,599, the initial transaction price.
Warrants
On March 2, 2020, the Company received warrants to purchase shares of AMRE, a related party private startup company, in conjunction with the Company lending a $200,000 promissory note. For further details on this transaction, refer to Note 89 Related Party Transactions, Note Receivable from a Related Party Company. The Company holds a stock option to purchase 250,000 shares of Vivacitas common stock at $1 per share at any time prior to the date of public offering. As of September 30, 2020March 31, 2021 and December 31, 2019, both2020, AMRE and Vivacitas werewas a private companies.company. Based the management’s analysis, the fair value of the warrants and the stock option werewas $0 as of September 30, 2020March 31, 2021 and December 31, 2019.2020.
On July 17, 2020, the Company purchased 122,039,000 shares, approximately 9.99% ownership, and 122,039,000 warrants with an exercise price of $0.0001 per share, from APW, for an aggregated purchase price of $122,039. Based on the management’s analysis,We value APW warrants under level 3 category through a Black-Scholes option pricing model and the fair value of the warrants from APW was $0were $862,723 as of September 30, 2020.
The fair value of the APW warrants under level 3 category as of March 31, 2021 and July 17, 2020 was calculated using a Black-Scholes valuation model valued with the following weighted average assumptions:
| March 31, 2021 | December 31, 2020 | |||||||
| Stock Price | $ | 0.0084 | $ | 0.0021 | ||||
| Exercise price | 0.001 | 0.001 | ||||||
| Risk free interest rate | 1.74 | % | 0.88 | % | ||||
| Annualized volatility | 232.10 | % | 178.86 | % | ||||
| Year to maturity | 9.32 | 9.58 | ||||||
| 13. | COMMITMENTS AND CONTINGENCIES |
Lots Sales Agreement
On November 23, 2015, SeD Maryland Development LLC completed the $15,700,000 acquisition of Ballenger Run, a 197-acre land sub-division development located in Frederick County, Maryland. Previously, on May 28, 2014, the RBG Family, LLC entered into a $15,000,000 assignable real estate sales contract with NVR, by which RBG Family, LLC would facilitate the sale of the 197 acres of Ballenger Run to NVR. On December 10, 2014, NVR assigned this contract to SeD Maryland Development, LLC through execution of an assignment and assumption agreement and entered into a series of lot purchase agreements by which NVR would purchase 443 subdivided residential lots from SeD Maryland Development, LLC. Through December 31, 2019, NVR has purchased 123 lots. In the nine months ended on September 30, 2020, NVR purchased 72 additional lots.
Through the three months ended on March 31, 2021 and 2020, NVR purchased 27 lots and 27 lots, respectively. Through March 31, 2021 and December 31, 2020, NVR had purchased a total of 415 and 388 lots, respectively.
Leases
The Company leases offices in Maryland, pursuedSingapore, Magnolia, Texas, Hong Kong and South Korea through leased spaces aggregating approximately 15,811 square feet, under leases expiring on various dates from December 2020 to March 2024. The leases have rental rates ranging from $2,265 to $23,297 per month. Our total rent expense under these office leases was $140,271 and $85,558 in the required zoning approvalthree months ended March 31, 2021 and 2020, respectively. The following table outlines the details of lease terms:
| Office Location | Lease Term as of December 31, 2020 | Renewed Lease term in 2021 | ||
| Singapore | June 2020 to June 2021 | |||
| Hong Kong | October 2020 to October 2022 | |||
| South Korea | August 2020 to August 2022 | |||
| Magnolia, Texas, USA | November 2019 to April 2021 | May 2021 to October 2021 | ||
| Bethesda, Maryland, USA | August 2015 to December 2020 | January 2021 to March 2024 |
The Company adopted ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) to changerecognize a right-of-use asset and a lease liability for all the number of such lots from 85leases with terms greater than twelve months. We elected the practical expedient to 121, which was approved in July 2019.
The table below summarizes future payments due to 150 CCM Black Oak Ltd, respectively.
For the Years Ended December 31:
| 2021 | $ | 341,827 | ||
| 2022 | 292,830 | |||
| 2023 | 95,104 | |||
| 2024 | 24,430 | |||
| Total Minimum Lease Payments | 754,191 | |||
| Less: Effect of Discounting | (17,630 | ) | ||
| Present Value of Future Minimum Lease Payments | 736,561 | |||
| Less: Current Obligations under Leases | (51,686 | ) | ||
| Long-term Lease Obligations | 684,875 |
| 14. | DIRECTORS AND EMPLOYEES’ BENEFITS |
Stock Option plans HFE
The Company reserves 500,000 shares of common stock under the Incentive Compensation Plan for high-quality executives and other employees, officers, directors, consultants and other persons who provide services to the Company or its related entities. This plan is meant to enable such persons to acquire or increase a proprietary interest in the Company in order to strengthen the mutuality of interests between such persons and the Company’s shareholders, and providing such persons with performance incentives to expand their maximum efforts in the creation of shareholder value. As of September 30, 2020March 31, 2021 and December 31, 2019,2020, there have been no options granted.
Alset International Stock Option plans
On November 20, 2013, Alset International approved a Stock Option Plan (the “2013 Plan”). Employees, executive directors, and non-executive directors (including the independent directors) are eligible to participate in the 2013 Plan.
The following tables summarize stock option activity under the 2013 Plan for the ninethree months ended September 30, 2020:
Options for | Remaining Contractual | Aggregate | ||
Common Shares | Exercise Price | Term (Years) | Intrinsic Value | |
| Outstanding as of December 31, 2019 | 1,061,333 | $0.09 | 4.00 | $- |
| Granted | - | - | ||
| Exercised | - | - | ||
| Forfeited, cancelled, expired | - | - | ||
| Outstanding as of September 30, 2020 | 1,061,333 | $0.09 | 3.25 | $- |
| Vested and exercisable at September 30, 2020 | 1,061,333 | $0.09 | 3.25 | $- |
Options for | Remaining Contractual | Aggregate | ||||||||||||||
Common Shares | Exercise Price | Term (Years) | Intrinsic Value | |||||||||||||
| Outstanding as of January 1, 2020 | 1,061,333 | $ | 0.09 | 4.00 | $ | - | ||||||||||
| Vested and exercisable at January 1, 2020 | 1,061,333 | $ | 0.09 | 4.00 | $ | - | ||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited, cancelled, expired | - | - | ||||||||||||||
| Outstanding as of December 31, 2020 | 1,061,333 | $ | 0.09 | 3.00 | $ | - | ||||||||||
| Vested and exercisable at December 31, 2020 | 1,061,333 | $ | 0.09 | 3.00 | $ | - | ||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited, cancelled, expired | - | - | ||||||||||||||
| Outstanding as of March 31, 2021 | 1,061,333 | $ | 0.09 | 2.75 | $ | - | ||||||||||
| Vested and exercisable at March 31, 2021 | 1,061,333 | $ | 0.09 | 2.75 | $ | - | ||||||||||
| 15. | SUBSEQUENT EVENTS |
Purchase of Shares of Value Exchange International, Inc.
The Company evaluatedhas entered into a securities purchase agreement dated April 5, 2021 with Value Exchange International, Inc. (“Value Exchange International”) in connection with the eventspurchase of 6,500,000 shares of Value Exchange International’s common stock for an aggregate subscription price of $650,000. The acquisition of 6,500,000 shares of Value Exchange International’s common stock was completed on April 12, 2021.
Ownership of Alset International
On April 8, 2021, the Company exercised its warrants to purchase 139,834,471 shares of Alset International at an exercise price of Singapore $0.04. On May 12, 2021, Chan Heng Fai exercised warrants to purchase 76,925,000 shares of Alset International at an exercise price of Singapore $0.048. On May 14 and transactions subsequent17, 2021, the Company exercised its warrants to September 30, 2020, the balance sheet date, throughpurchase 943,531,983 shares of Alset International at an exercise price of Singapore $0.048. Total outstanding shares of Alset International were 2,931,951,400 after these issuances. The Company holds 2,094,516,748 shares of Alset International, approximately 71.4% ownership.
Acquisition of HengFeng Finance Limited
On October 15, 2020, the date the consolidated financial statements were availableCompany’s subsidiary, American Pacific Bancorp (“APB”), entered into an acquisition agreement to be issued.
| F-31 |
Joint Venture with Novum
On April 20, 2021 on of Company’s indirect subsidiaries, SeD Capital Pte. Ltd. (“COVID-19”SeD Capital”), which has spreadentered into joint venture agreement with digital asset management firm Novum Alpha Pte Ltd (“Novum”). Pursuant to over 200 countries, including United States. COVID-19 was declared a global pandemic in March, 2020 and worldwide mitigation and measures were recommended. The impactthis agreement, SeD Capital will own 50% of the outbreak is evolvingissued and is adversely affecting global economic activities and contributes to significant instability in financial markets. While the impact related to current situation cannot be estimated at this time, it is possible that changespaid-up capital in the fair valuesjoint venture company, Credas Capital Pte Ltd (“Credas”) with the remaining 50% shareholding stake held by Novum. Credas intends to develop and launch its maiden digital assets-based Exchange-Traded Product in the fourth quarter of various investments could materially adversely affect our future financial statements.
Distribution to Minority Shareholders
On November 26, 2020,April 30, 2021, the Board of Managers of SeD Maryland Development LLC (the 83.55% owned subsidiary of the Company which owns the Company’s Ballenger Project) authorized the payment of distributions to its members in the amount of $64,502$3,000,000. Accordingly, the minority member of SeD Maryland Development LLC received a distribution in the amount of $493,500, with the remainder being distributed to a subsidiary of the Company, which is eliminated upon consolidation.
Amendment to Authorized Shares and Designation of Preferred Shares
On May 3, 2021, the holder of a majority of the issued and outstanding shares of common stock of the Company, by written consent, approved and adopted an amendment to our Third Amended and Restated Certificate of Incorporation (the “Amendment”) to increase the number of authorized shares of the Company’s common stock from the PPP Loan was forgiven by the United States Small Business AdministrationTwenty Million (20,000,000) common shares to Two Hundred and was recorded as other income. At suchFifty Million (250,000,000) common shares and its preferred shares from Five Million (5,000,000) to Twenty Five Million (25,000,000). As of filing date, the PPP loan balance was $4,000.
On November 23, 2020,May 3, 2021, the Company entered intofiled an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp., as representativeamendment to its Articles of Incorporation which sets forth the rights and preferences of the underwriters (“Aegis”), pursuant to which the Company agreed to sellSeries A Convertible Preferred Stock. Pursuant to the underwritersSeries A Designation, 6,380 shares of the Company’s preferred stock was designated Series A Preferred Stock. Holders of the Series A Preferred Stock shall be entitled to receive dividends equal, on an as-if-converted basis, to and in a firm commitment underwritten public offering (the “Offering”) an aggregate of 2,160,000the same form as dividends actually paid on shares of the Company’s common stock par value $0.001 per share (“Common Stock”) when, as and if paid on shares of Common Stock. Each holder of outstanding Series A Preferred Stock is entitled to vote equal to the number of whole shares of Common Stock into which each share of the Series A Preferred Stock is convertible. Holders of Series A Preferred Stock are entitled, upon liquidation of the Company, to receive the same amount that a holder of Series A Preferred Stock would receive if the Series A Preferred Stock were fully converted into Common Stock.
On May 12, 2021 the Company filed a Certificate of Designation which sets forth the rights and preferences of the Series B Preferred Stock. Pursuant to the Series B Designation, 2,132 shares of the Company’s preferred stock was designated Series B Preferred Stock. Holders of the Series B Preferred Stock shall be entitled to receive dividends equal, on an as-if-converted basis, to and in the same form as dividends actually paid on shares of the Company’s common stock par value $0.001 per share (“Common Stock”) when, as and if paid on shares of Common Stock. Each holder of outstanding Series B Preferred Stock is entitled to vote equal to the number of whole shares of Common Stock into which each share of the Series B Preferred Stock is convertible. Holders of Series B Preferred Stock are entitled, upon liquidation of the Company, to receive the same amount that a holder of Series B Preferred Stock would receive if the Series B Preferred Stock were fully converted into Common Stock.
Loan and Exchange Agreement with the CEO, Chan Heng Fai
On May 3, 2021, the Company entered into a Loan and Exchange Agreement with its Chief Executive Officer, Chan Heng Fai pursuant to which Chan Heng Fai loaned the Company his shares of Common Stock of the Company by exchanging 6,380,000 shares of common stock which he owned for an aggregate of 6,380 shares of the Company’s newly designated Series A Convertible Preferred Stock.
On May 12, 2021, Company entered into an Exchange Agreement with Chan Heng Fai, effective May 13, 2021, pursuant to which he exchanged $13,000,000 in principal amount under a $28,363,966 convertible promissory note (the “Note”) in exchange for 2,132 shares of the Company’s newly designated Series B Preferred Stock.
| F-32 |
Public Offering
On May 10, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement���) with Aegis Capital Corp., as the sole book-running manager and representative of the underwriters named therein (the “Underwriters”), relating to an underwritten public offering (the “Offering”) of (i) 4,700,637 common units (the “Common Units”), at a price to the public of $5.07 per Common Unit, with each Common Unit consisting of (a) one share of common stock, par value $0.001 per share (the “Common Stock”), at(b) one Series A warrant (the “Series A Warrant” and collectively, the “Series A Warrants”) to purchase one share of Common Stock with an initial public offeringexercise price of $7.00$5.07 per share. Aegis haswhole share, exercisable until the fifth anniversary of the issuance date, and (c) one Series B warrant (the “Series B Warrant” and collectively, the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase one-half share of Common Stock with an initial exercise price of $6.59 per whole share, exercisable until the fifth anniversary of the issuance date and (ii) 1,611,000 pre-funded units (the “Pre-funded Units”), at a 60-dayprice to the public of $5.06 per Pre-funded Unit, with each Pre-funded Unit consisting of (a) one pre-funded warrant (the “Pre-funded Warrant” and collectively, the “Pre-funded Warrants”) to purchase one share of Common Stock, (b) one Series A Warrant and (c) one Series B Warrant. The shares of Common Stock, the Pre-funded Warrants, and the Warrants were offered together, but the securities contained in the Common Units and the Pre-funded Units were issued separately.
The Company also granted the Underwriters a 45-day over-allotment option to purchase up to an808,363 additional 324,000 shares of Common Stock at $6.475 per share.and/or up to 808,363 additional Series A Warrants to purchase 808,363 shares of Common Stock, and/or up to 808,363 additional Series B warrants to purchase 404,181 shares of Common Stock. The Offering, including the partial exercise of the Underwriters’ over-allotment option to purchase 808,363 Series A Warrants and 808,363 Series B Warrants, closed on November 27, 2020.
The Offering wasCompany paid the Company’s initial public offering andUnderwriters an underwriting discount equal to 6.5% of the shares began trading on The Nasdaq Capital Market on November 24, 2020 under the symbol “HFEN.” The shares were offered by the Company pursuant to a registration statement on Form S-1, as amended (File No. 333-235693), filed with the Securities and Exchange Commission (the “Commission”), which was declared effective by the Commission on November 12, 2020 (the “Registration Statement”). Aegis acted as lead book-running manager forgross proceeds of the Offering and Westpark Capital, Inc. acted as co-manager.
The net proceeds to the Company from the Offering were approximately $29.2 million, excluding the proceeds, if any, from the exercise of the Warrants and the Pre-funded Warrants sold in the Offering, and after deducting underwriting discounts and commissions and the underwriting discount, underwriters’ feespayment of other estimated offering expenses associated with the Offering that are payable by the Company.
Note Payable Related Party
On May 14, 2021, Alset EHome International Inc., a Delaware corporation (the “Company”), borrowed S$7,395,472 Singapore Dollars (equal to approximately $5,557,371 U.S. Dollars) from the Company’s Chairman, Chief Executive Officer and expenses and other expensesmajor stockholder, Chan Heng Fai. The unpaid principal amount of the offering, were approximately $12.7 million. The Company anticipates usingLoan shall be due and payable on May 14, 2022 and the net proceeds from the Offering primarily to fund possible acquisitions of new companies and properties, and for working capital and other general corporate purposes.Loan shall have no interest.
| F-33 |
Item 2. Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may”, “will”, “expect”, “believe”, “anticipate”, “estimate” or “continue” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include by are not limited to economic conditions generally and in the industries in which we may participate, competition within our chosen industry, including competition from much larger competitors, technological advances and failure to successfully develop business relationships.
Business Overview
Alset EHome International Inc. is a fast-growing diversified holding company principally engaged through our subsidiaries in property development, digital transformation technology and biohealth activities with operations in theis United States, Singapore, Hong Kong Australia and South Korea. We manage our three principal businesses primarily through our subsidiary Alset International Limited (“Alset International”), which is a public company traded on the Singapore Stock Exchange and in which we own a 51.04% equity interest. Through this subsidiary (and indirectly, through other public and private U.S. and Asian subsidiaries), we are actively developing two significant real estate projects near Houston, Texas and in Frederick, Maryland in our property development segment. We have designed applications for enterprise messaging and e-commerce software platforms in the United States and Asia in our digital transformation technology business unit. Our recent foray into the biohealth segment includes research to treat neurological and immune-related diseases, nutritional chemistry to create a natural sugar alternative, research regarding innovative products to slow the spread of disease, and natural foods and supplements.
Financial Impact of the COVID-19 Pandemic
Real Estate Projects
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’s far-reaching impact on the global economy could negatively affect various aspects of our business, including demand for real estate. From March through SeptemberDecember 2020, we continued to sell lots at our Ballenger Run project (in Maryland) for the construction of town homes to NVR. To date, salesSales of such town homes byto NVR are upwere at the same level in 2020 compared to the first ninethree months of 2019.2021 as in the first three months of 2020. In first quarter of 2021 and 2020 we sold 27 lots to NVR. Such town homes are often solda first home that generally did not require buyers to first-time home buyers, who do not have to worry about selling theirsell an existing homes.home. We believe low interest rates have encouraged home sales. Many buyers opted to see home models at the project virtually. This technology allowed them to ask questions to sales staff and see the town homes.
We have received strong indications that buyers and renters across the country are expressing interest in moving from more densely populated urban areas to the suburbs. We believe that our Ballenger Run project is well suited and positioned to accommodate those buyers. Our latest phase for sale at Ballenger Run, involving single-family homes, has seen a high number of interested potential buyers signing up for additional information and updates on home availability.
The COVID-19 pandemic could impact the ability of our staff and contractors to continue to work, and our ability to conduct our operations in a prompt and efficient manner. To date, we experienced a slowdown in the construction of a clubhouse at the Ballenger Run project, which had beenwas completed behind the original schedule. ThisWe believe this delay was caused in part by policies requiring lower numbers of contractors working indoors.
The COVID-19 pandemic may adversely impact the timeliness of local government in granting real estate permits and licenses required for various development projects.approvals. Accordingly, the COVID-19 pandemic may cause the completion of important stages in our real estate projects to be delayed.
| 2 |
Impact on Staff
Most of our U.S. staff works out of our Bethesda, Maryland office. At our office in Texas, we received a 50% rent abatement for the month of May 2020.
Our U.S. staff has shifted to mostly working from home since March 2020, but this has had a minimal impact on our operations to date. Our staff in Singapore and Hong Kong has been able to work from home when needed with minimal impact on our operations, however our staff’s ability to travel between our Hong Kong and Singapore offices has been significantly limited, and our staff’s travel between the U.S. and non-U.S. offices has been suspended since March 2020. The COVID-19 pandemic has also impacted the frequency with which our management would otherwise travel to the Black Oaks project; however, we have a contractor in Texas providing supervision of the project. Management continues to regularly supervise the Ballenger Run project. Limitations on the mobility of our management and staff may slow down our ability to enter into new transactions and expand existing projects.
We have not reduced our staff in connection with the COVID-19 pandemic. To date, we did not have to expend significant resources related to employee health and safety matters related to the COVID-19 pandemic. We have a small staff, however, and the inability of any significant number of our staff to work due to illness or the illness of a family member could adversely impact our operations.
Matters that May or Are Currently Affecting Our Business
In addition to the matters described above, the primary challenges and trends that could affect or are affecting our financial results include:
● Our ability to improve our revenue through cross-selling and revenue-sharing arrangements among our diverse group of companies;
● Our ability to identify complementary businesses for acquisition, obtain additional financing for these acquisitions, if and when needed, and profitably integrate them into our existing operation;
● Our ability to attract competent, skilled technical and sales personnel for each of our businesses at acceptable compensation levels to manage our overhead; and
● Our ability to control our operating expenses as we expand each of our businesses and product and service offerings.
Results of Operations
Summary of Statements of Operations for the Three and Nine Months Ended September 30,March 31, 2021 and 2020 and 2019
| Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Revenue | $ | 5,606,914 | $ | 2,965,171 | ||||
| Operating Expenses | 6,010,359 | 3,387,562 | ||||||
| Other Income (Expense) | (8,949,966 | ) | 2,677,956 | |||||
| Net (Loss) Income | $ | (9,804,748 | ) | $ | 2,255,565 | |||
| 3 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||
2020 | 2019 | 2020 | 2019 | |
| Revenue | $2,148,923 | $5,306,863 | $7,179,919 | $22,944,498 |
| Operating Expenses | 2,414,563 | 5,576,162 | 9,806,242 | 27,447,320 |
| Other Income (Expense) | (12,946,960) | 1,197,775 | (10,203,324) | 357,436 |
| Loss from Discontinued Operations | (56,053) | (128,554) | (417,438) | (388,931) |
Net Loss | $(13,342,758) | $799,922 | $(13,435,844) | $(4,534,317) |
Revenue
The following tables sets forth period-over-period changes in revenue for each of our reporting segments:
Three Months Ended September 30, | Change | |||
2020 | 2019 | Dollars | Percentage | |
| Property development | $2,146,992 | $4,938,017 | $(2,791,025) | (57%) |
| Biohealth | 1,931 | 360,351 | (358,420) | (99%) |
| Digital transformation technology | - | - | - | - |
| Other | - | 8,495 | (8,495) | (100%) |
Total revenue | $2,148,923 | $5,306,863 | $(3,157,940) | (60%) |
Nine Months Ended September 30, | Change | |||
2020 | 2019 | Dollars | Percentage | |
| Property development | $7,148,786 | $21,509,197 | $(14,360,411) | (67%) |
| Biohealth | 31,133 | 1,406,951 | (1,375,818) | (98%) |
| Digital transformation technology | - | - | - | - |
| Other | - | 28,350 | (28,350) | (100%) |
Total revenue | $7,179,919 | $22,944,498 | $(15,764,579) | (69%) |
| Three Months Ended March 31, | Change | |||||||||||||||
| 2021 | 2020 | Dollars | Percentage | |||||||||||||
| Property development | $ | 3,894,131 | $ | 2,954,389 | $ | 939,742 | 32 | % | ||||||||
| Biohealth | 1,712,783 | 10,782 | 1,702,001 | 15,786 | % | |||||||||||
| Digital transformation technology | - | - | - | - | ||||||||||||
| Other | - | - | - | - | ||||||||||||
| Total revenue | $ | 5,606,914 | $ | 2,965,171 | $ | 2,641,743 | 89 | % | ||||||||
Revenue was $2,148,923$5,606,914 and $5,306,863$2,965,171 for the three months ended September 30,March 31, 2021 and 2020, and 2019, respectively, reflecting a decrease of $3,157,940 or 60%. Revenue was $7,179,919 for the nine months ended September 30, 2020, compared to $22,944,498 for the nine months ended September 30, 2019, reflecting a decrease of $15,764,579 or 69%.respectively. An increase in property sales from the Ballenger Project and first sale of a section of Black Oak Projectdirect sales from HWH World in the first quarter of 20192021 contributed to higher revenue in that period. Pursuant to a lot purchase agreement dated July 3, 2018, 150 CCM Black Oak Ltd sold 124 lots located in the Company’s Black Oak project to Houston LD, LLC for a total purchase price of $6,175,000 in January 2019. For our Ballenger Project, builders are required to purchase a minimum number of lots based on their applicable sale agreements. We collect revenue only from the sale of lots to builders. We are not involved in the construction of homes at the present time.
Income from the sale of Front Foot Benefits (“FFBs”), assessed on Ballenger Run project lots, increased from $40,322 in the three months ended March 31, 2020 to $107,071 in the three months ended March 31, 2021. The increase is a mixed result of the increased sale of properties to homebuyers in the first quarter of 2021 and sale of FFBs of a higher value.
Revenues from our biohealth segment comes primarilyin the first quarter of 2020 come from the direct sales by iGalen Inc. (formerly known as iGalen USA, LLC), which is 100% owned by iGalen International Inc., Alset International’s 53%-owned subsidiary. On December 30, 2020 Alset International’s ownership of which is owned by AlsetiGalen International was sold to one of the directors of iGalen International. During the three months ended on September 30,March 31, 2020, and 2019, the revenue from iGalen was $1,331 and $360,351, respectively, reflecting a decrease of $359,020 or almost 100%. During the nine months ended September 30, 2020 and 2019, the revenue from iGalen Inc. was $30,533 and $1,406,951, respectively, reflecting a decrease of $1,376,418 or 98%. The decrease was mainly due to slow sales of current products and delay of the new product’s promotion.
In October 2019,recent years, the Company expanded its biohealth segment to Korean market through one of the subsidiaries of Health Wealth Happiness Pte. Ltd., HWH World Inc (“HWH World”). HWH World, similarly to iGalen Inc., operates based on a direct sale model of health supplements. HWH World is at the beginning stage of operations recognized only approximately $600$1,702,001 and $0 in revenue in nine months ended September 30, 2020.
Operating Expenses
The following tables sets forth period-over-period changes in cost of sales for each of our reporting segments:
Three Months Ended September 30, | Change | |||
2020 | 2019 | Dollars | Percentage | |
| Property development | $1,610,238 | $4,090,759 | $(2,480,521) | (61%) |
| Biohealth | 6,139 | 39,725 | (33,586) | �� (85%) |
| Digital transformation technology | - | - | - | - |
| Other | - | - | - | - |
Total Cost of Sales | $1,616,377 | $4,130,484 | $(2,514,107) | (61%) |
Nine Months Ended September 30, | Change | |||
2020 | 2019 | Dollars | Percentage | |
| Property development | $5,603,164 | $18,819,865 | $(13,216,701) | (70%) |
| Biohealth | 6,139 | 357,935 | (351,796) | (98%) |
| Digital transformation technology | - | - | - | - |
| Other | - | - | - | - |
Total cost of sales | $5,609,303 | $19,177,800 | $(13,568,497) | (71%) |
| Three Months Ended March 31, | Change | |||||||||||||||
| 2021 | 2020 | Dollars | Percentage | |||||||||||||
| Property development | $ | 3,614,832 | $ | 2,380,820 | $ | 1,234,012 | 52 | % | ||||||||
| Biohealth | 83,022 | 2,883 | 80,139 | 2,780 | % | |||||||||||
| Digital transformation technology | - | - | - | - | ||||||||||||
| Other | - | - | - | - | ||||||||||||
| Total Cost of Sales | $ | 3,697,854 | $ | 2,383,703 | $ | 1,314,151 | 55 | % | ||||||||
Cost of sales decreasedincreased from $4,130,848$2,380,820 in the three months ended September 30, 2019March 31, 2020 to $1,616,377$3,614,832 in the three months ended September 30, 2020, reflecting a decrease of $2,514,107 or 61%,March 31, 2021, as a result of the decreaseincrease in sales in the Ballenger Run project. Cost of sales decreased from $19,177,800 in the nine months ended September 30, 2019 to $5,609,303 in the nine months ended September 30, 2020, reflecting a decrease of $13,568,497 or 71%, as a result of the decrease in sales in the Ballenger Run and Black Oak projects. Capitalized construction expenses, finance costs and land costs are allocated to sales. We anticipate the total cost of sales to increase as revenue increases.
The gross margin decreasedincreased from $1,176,379$581,468 to $532,546$1,909,060 in the three months ended September 30, 2019March 31, 2020 and 2020, respectively, reflecting a decrease of $643,833 or 55%.2021, respectively. The gross margin decreased from $3,766,698 to $1,570,616 in the nine months ended September 30, 2019 and 2020, respectively, reflecting a decrease of $2,196,082 or 58%. The decreaseincrease of gross margin was caused by the decreaseincrease of gross margin of Ballenger Run project,HWH World, mostly due to the decreaseincrease in the sales. The gross margin from sale of Black Oak section one lots was approximately $0 after real estate impairment of $1.5 million was recorded in 2018.
The following tables sets forth period-over-period changes in operating expenses for each of our reporting segments.
Three Months Ended September 30, | Change | |||
2020 | 2019 | Dollars | Percentage | |
| Property development | $131,326 | $170,831 | $(39,505) | (23%) |
| Biohealth | 174,283 | 571,591 | (397,308) | (70%) |
| Digital transformation technology | (7,289) | 34,969 | (42,258) | (121%) |
| Other | 499,866 | 672,133 | (172,267) | (26%) |
| Discontinued Operations | 55,897 | 111,105 | (55,208) | (50%) |
| Total operating expenses | $854,083 | $1,560,629 | $(706,860) | (45%) |
Nine Months Ended September 30, | Change | |||
2020 | 2019 | Dollars | Percentage | |
| Property development | $634,254 | $4,598,112 | $(3,963,858) | (86%) |
| Biohealth | 388,083 | 1,780,026 | (1,391,943) | (78%) |
| Digital transformation technology | 87,972 | 193,959 | (105,987) | (55%) |
| Other | 3,086,630 | 1,697,423 | 1,389,207 | 82% |
| Discontinued Operations | 416,950 | 358,534 | 58,416 | 16% |
| Total operating expenses | $4,613,889 | $8,628,054 | $(4,014,165) | (47%) |
| Three Months Ended March 31, | Change | |||||||||||||||
| 2021 | 2020 | Dollars | Percentage | |||||||||||||
| Property development | $ | 359,489 | $ | 277,056 | $ | 82,433 | 30 | % | ||||||||
| Biohealth | 846,480 | 132,791 | 713,689 | 537 | % | |||||||||||
| Digital transformation technology | 30,128 | 18,228 | 11,900 | 65 | % | |||||||||||
| Other | 1,076,408 | 575,784 | 500,624 | 87 | % | |||||||||||
| Total operating expenses | $ | 2,312,505 | $ | 1,003,859 | $ | 1,308,646 | 130 | % | ||||||||
The decreaseincrease of operating expenses of property development in 20202021 compared with 20192020 was mostly caused by the recognitionincrease of $3.9 million impairmentsales related expenses. Increase in the first half of 2019. The decrease of research and development expense in biohealth segment because of the discontinued operations was the main reason of decrease of operating expenses in our biohealth segment in 2020 compared with 2019. The increase expense in other segment was mostly duebusiness is caused by the increased commission payments to the issuance of Alset International’s stock for performance award program at the expense of $1,564,376 in second quarter of 2020.
Other Income (Expense)
In the three months ended September 30, 2020,March 31, 2021, the Company had other expense of $12,946,960$8,949,966 compared to other income of $1,197,775$2,677,956 in the three months ended September 30, 2019, reflecting an increase in other expense of $14,144,735 or 1,181%. In the nine months ended September 30, 2020, the Company had other expense of $10,203,323 compared to other income of $357,436 in the nine months ended September 30, 2019, reflecting an increase in other expense of $10,560,759 or 2,955%.March 31, 2020. The change in unrealized gain (loss) on securities investment and on foreign exchange transactions are the primary reasons for the volatility in these two periods. Unrealized loss on securities investment was $42,169,116 and $43,761,763 during nine and$9,535,009 in three months ended on September 30, 2020, respectively. Unrealized loss on security investment was $146,470 during the nine months ended on September 30, 2019; unrealized gain on security investment was $507,727 during the three months ended on September 30, 2019. Foreign exchange transaction loss was $415,203 in the three months ended September 30, 2020, comparedMarch 31, 2021, comparing to $757,068$458,422 gain in the three months ended September 30, 2019.March 31, 2020. Foreign exchange transaction gain was $960,268$1,462,697 in the nine months ended September 30, 2020, compared to $438,608 gain in the nine months ended September 30, 2019.
Net Income (Loss)
In the discontinued operation loss from Impact BioMedical Inc was $56,053 and $128,554, respectively. During the ninethree months ended September 30, 2020, the discontinued operation loss from Impact BioMedical Inc was $417,438 and $385,219, respectively.
Liquidity and Capital Resources
Our real estate assets under development have increaseddecreased to $24,990,366$20,265,713 as of September 30, 2020March 31, 2021 from $23,884,704$20,505,591 as of December 31, 2019.2020. This increasedecrease primarily reflects an increase in sales of lots and a higher increase in costs of sales than in the capitalized costs related to the construction in progress and impairment recorded on the Black Oak project thanprogress. On March 31, 2021, we purchased 10 homes, which will be used in the cost of sales. Company’s rental business.
Our cash has increaseddecreased from $2,774,587$24,465,923 as of December 31, 20192020 to $8,754,202$20,368,692 as of September 30, 2020.March 31, 2021. Our liabilities increased from $13,649,449$9,533,735 at December 31, 20192020 to $14,499,650$23,252,927 at September 30, 2020.March 31, 2021. Our total assets have increased to $101,474,030$108,797,989 as of September 30, 2020March 31, 2021 from $35,872,780$107,211,921 as of December 31, 20192020 mainly due to the increase in cash and investments in securities.
During the year ended on December 31, 2017, Chan Heng Fai provided non-interest loans in the aggregate amount of $7,156,680 for the general operations of the Company. The loans are interest free, not tradable, unsecured, and repayable on demand. On October 15, 2018, a formal lending agreement between Alset International and Chan Heng Fai was executed. Under the agreement, Chan Heng Fai provided a lending credit limit of approximately $10 million for Alset International with an interest rate of 6% per annum for the outstanding amount of the loan, which commenced retroactively from January 1, 2018. The loans are still not tradable, unsecured and repayable on demand. As of September 30, 2020 and December 31, 2019, the outstanding principal balance of the Related Party Loan was $0 and $4,246,604, respectively. Interest started to accrue on January 1, 2018 at 6% per annum. During the nine months ended September 30, 2020 and 2019, the interest expenses were $129,566 and $268,847, respectively. During the three months ended on September 30, 2020 and 2019, the interest expenses were $6,334 and $68,482, respectively. As of September 30, 2020 and December 31, 2019, the accrued interest total was $0 and $822,405, respectively.
Nine Months Ended September 30, | ||
2020 | 2019 | |
| Net cash provided by (used in) operating activities | $(1,011,440) | $8,964,900 |
| Net cash used in investing activities | $(66,824) | $(36,000) |
Net cash provided by (used in) financing activities | $6,700,886 | $(3,032,489) |
| Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Net cash used in operating activities | $ | (3,304,857 | ) | $ | (182,597 | ) | ||
| Net cash provided by investing activities | $ | 2,352,536 | $ | 101,963 | ||||
| Net cash provided by (used in) financing activities | $ | (956,264 | ) | $ | 2,030,592 | |||
Cash Flows from Operating Activities
Net cash used in operating activities was $1,011,440$3,304,857 in the first ninethree months of 2020,2021, as compared to net cash provided byused in operating activities of $8,964,900$182,597 in the same period of 2019, reflecting an increase in the cash used2020. The higher prepayments and purchase of $9,976,340 or 111%. The lower sales and more property development expensestrading securities for investment purposes explained the increased cash flow used in operating activities. We received approximately $9.2 million from salesactivities in the Ballenger Run project and invested approximately $2.4 million in land development projectsfirst three months of both Ballenger Run and Black Oak during the nine months ended September 30, 2020.
Cash Flows from Investing Activities
Net cash used inprovided by investing activities was $66,824$2,352,536 in the first ninethree months of 2020,2021, as compared to net cash used inprovided by investing activities of $36,000$101,963 in the same period of 2019, reflecting an increase of $30,824 or 86%.2020. In the ninethree months ended September 30,March 31, 2021 we invested $108,208 in securities and received approximately $2.5 million from the sale of Vivacitas Oncology to a related party. In the three months ended March 31, 2020, we received $301,976$303,349 from the liquidation of Global Opportunity Fund. We also invested $200,000 in a promissory note of a related party and spent $158,667 on purchase of investments.
Cash Flows from Financing Activities
Net cash provided byused in financing activities was $6,700,886$956,264 in the ninethree months ended September 30, 2020,March 31, 2021, comparing to $3,032,489 net cash used inprovided of $2,030,592 the ninethree months ended September 30, 2019, reflecting anMarch 31, 2020. The increase in cash provided of $9,733,375 or 321%. Such increaseused in cash provided by financing activities is primarily caused by the increase in cash used to repay related party note payable. During the three months ended March 31, 2021, we received cash proceeds of $7,484 from the exercise of subsidiary warrants.warrants, $250,000 from the sale of our GigWorld shares to individual investors and $68,502 from a loan. The Company also distributed $82,250 to one minority interest investor and repaid $1,200,000 of promissory note held by related parties. During the ninethree months ended September 30,March 31, 2020, we received cash proceeds of $10,764,837$2,210,491 from the exerciseissuance of subsidiary warrants, $177,300 from the sale of our HotApp shares to individual investors and $738,783 fromstock through a loan. The Company alsosubsidiary’s private placement, distributed $197,400 to one minority interest investor and repaid $4,450,572 of promissory note held by related parties and $250,000 held by third party. During the nine months ended September 30, 2019, we received cash proceeds of $229,500borrowed $17,501 from the sale of our HotApp shares to individual investors, distributed $740,250 to one minority interest investor, repaid the remaining $13,899 back to the Union Bank loan and repaid approximately $2.5 million of related party loans.
Off-Balance Sheet Arrangements
We do not have three property development projects. Ballenger Run and Black Oak projectsany off-balance sheet arrangements that are the major projects. The following tables show our forecasts of the phases of the developments and costs for each phase of development:
Impact of Inflation
We believe that inflation has not had a material impact on our results of operations for the ninethree months ended September 30, 2020March 31, 2021 or the year ended December 31, 2019.2020. We cannot assure you that future inflation will not have an adverse impact on our operating results and financial condition.
Impact of Foreign Exchange Rates
The effect of foreign exchange rate changes on the intercompany loans (under ASC 830), which mostly consist of loans from our corporate entities in Singapore to the ones in the United States and which were approximately $36.2$27.1 million and $41.1$24.8 million on September 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, are the reason for the significant fluctuation of foreign currency transaction Gain or Loss on the Consolidated Statements of Operations and Other Comprehensive Income. Because the intercompany loan balances between our companies in Singapore and United States will remain at approximately $40$25 million over the next year, we expect this fluctuation of foreign exchange rates to still significantly impact the results of operations in 2020,2021, especially given that the foreign exchange rate may and is expected to be volatile. If the amount of intercompany loan is lowered in the future, the effect will also be reduced. However, at this moment, we do not expect to repay the intercompany loans in the short term.
Emerging Growth Company Status
We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of these exemptions until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of this exemption.
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Seasonality
The real estate business is subject to seasonal shifts in costs as certain work is more likely to be performed at certain times of year. This may impact the expenses of Alset EHome Inc. from time to time. In addition, should we commence building homes, we are likely to experience periodic spikes in sales as we commence the sales process at a particular location.
Item 3. QuantitativeQuantitative and Qualitative Disclosures about Market Risk
As a “smaller reporting company” as defined by Item 10(f)(1) of Regulation S-K, the Company is not required to provide the information required by this Item.
Item 4. ControlsControls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officers, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officers, concluded that our disclosure controls and procedures are not effective as of September 30, 2020March 31, 2021 to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officers, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in the Company’s Internal Controls Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the quarterly period ended September 30, 2020March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PartPart II. Other Information
Item 1. Legal ProceedingLegal Proceeding
Not Applicable for the period covered by this report.
Item 1A. Risk FactorsRisk Factors
Not applicable to smaller reporting companies.
Item 2.Unregistered Unregistered Sales of Equity Securities and Use of Proceeds
The Company has not sold any unregistered shares during the period covered by this Report or through May 24, 2021; however, on January 19, 2021, the Company issued 10,000 shares of its common stock for public relations services. Such securities were not registered under the Securities Act of 1933 and were issued pursuant to the exemption under Section 4(2) of the Securities Act.
On May 3, 2021, the Company entered into a Loan and Exchange Agreement with its Chairman and Chief Executive Officer, Chan Heng Fai pursuant to which Chan Heng Fai loaned the Company his shares of Common Stock of the Company by exchanging 6,380,000 shares of common stock which he owned for an aggregate of 6,380 shares of the Company’s newly designated Series A Convertible Preferred Stock. Such securities were not registered under the Securities Act of 1933 and were issued pursuant to the exemption under Section 3(a)(9) of the Securities Act.
On May 12, 2021, Company entered into an Exchange Agreement with our Chairman and Chief Executive Officer Chan Heng Fai, effective May 13, 2021, pursuant to which Chan Heng Fai exchanged $13,000,000 in principal amount under a $28,363,966 convertible promissory note in exchange for 2,132 shares of the Company’s newly designated Series B Preferred Stock. Such securities were not registered under the Securities Act of 1933 and were issued pursuant to the exemption under Section 3(a)(9) of the Securities Act.
On May 10, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp., as the sole book-running manager and representative of the underwriters named therein (the “Underwriters”), relating to an underwritten public offering (the “Offering”) of (i) 4,700,637 common units (the “Common Units”), at a price to the public of $5.07 per Common Unit, with each Common Unit consisting of (a) one share of common stock, par value $0.001 per share (the “Common Stock”), (b) one Series A warrant (the “Series A Warrant” and collectively, the “Series A Warrants”) to purchase one share of Common Stock with an initial exercise price of $5.07 per whole share, exercisable until the fifth anniversary of the issuance date, and (c) one Series B warrant (the “Series B Warrant” and collectively, the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase one-half share of Common Stock with an initial exercise price of $6.59 per whole share, exercisable until the fifth anniversary of the issuance date and (ii) 1,611,000 pre-funded units (the “Pre-funded Units”), at a price to the public of $5.06 per Pre-funded Unit, with each Pre-funded Unit consisting of (a) one pre-funded warrant (the “Pre-funded Warrant” and collectively, the “Pre-funded Warrants”) to purchase one share of Common Stock, (b) one Series A Warrant and (c) one Series B Warrant. The shares of Common Stock, the Pre-funded Warrants, and the Warrants were offered together, but the securities contained in the Common Units and the Pre-funded Units were issued separately. The Offering was made pursuant to the Company’s registration statement on Form S-1 (File Number 333-255757), which was declared effective on May 10, 2021.
The Company also granted the Underwriters a 45-day over-allotment option to purchase up to 808,363 additional shares of Common Stock and/or up to 808,363 additional Series A Warrants to purchase 808,363 shares of Common Stock, and/or up to 808,363 additional Series B warrants to purchase 404,181 shares of Common Stock. The Offering, including the partial exercise of the Underwriters’ over-allotment option to purchase 808,363 Series A Warrants and 808,363 Series B Warrants, closed on May 13, 2021.
The net proceeds to the Company from the Offering was approximately $29.2 million, excluding the proceeds, if any, from the exercise of the Warrants and the Pre-funded Warrants sold in the Offering, and after deducting underwriting discounts and commissions and the payment of other estimated offering expenses associated with the Offering that are payable by the Company. On May 17, 2021, the Company paid S$37,894,063.20 Singapore Dollars (equal to approximately $28,475,719 U.S. Dollars) received from the Offering to exercise warrants to purchase 789,459,650 shares of Alset International Limited at an exercise price of S$.048 Singapore Dollars (equal to approximately $.036 U.S. Dollars) per share. The proceeds have been received by Alset International Limited.
Item 3.Defaults Defaults Upon Senior Securities
None.
Item 4.Mine Mine Safety Disclosures
Not Applicable.
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The following documents are filed as a part of this report:
* Filed herewith.
** Furnished herewith.
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SIGNATURESSIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| By: | /s/ Chan Heng Fai | ||
Chan Heng Fai Chairman of the Board and Chief Executive Officer | |||
| (Principal Executive Officer) | |||
| By: | /s/ Rongguo Wei | ||
Rongguo Wei Co-Chief Financial Officer | |||
| (Principal Financial and Accounting Officer) |
| By: | /s/ Lui Wai Leung Alan | ||
Lui Wai Leung Alan Co-Chief Financial Officer | |||
| (Principal Financial and Accounting Officer) |
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