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
We are a diversified holding company principally engaged through our
subsidiaries in the development of EHome communities and other real estate,
financial services, digital transformation technologies, biohealth activities
and consumer products with operations in the United States, Singapore, Hong
Kong, Australia and South Korea. We manage our principal businesses primarily
through our 85.4% owned subsidiary, Alset International Limited, a public
company traded on the Singapore Stock Exchange. Through this subsidiary (and
indirectly, through other public and private U.S. and Asian subsidiaries), we
are actively developing real estate projects near Houston, Texas and in
Frederick, Maryland in our real estate segment. Recently, the Company expanded
its real estate portfolio to single family rental homes, and we currently own
132 homes that are rented or are available for rent. 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 biohealth segment includes the sale of consumer products.
As of September 30, 2022, additional interests we held, both directly and
indirectly, included a 41.3% equity interest in American Pacific Bancorp Inc., a
15.5% equity interest in Holista CollTech Limited, a 45.2% equity interest in
DSS Inc. ("DSS"), an 18.1% equity interest in Value Exchange International,
Inc., a 0.8% equity interest in American Premium Mining Corporation., and an
interest in Alset Capital Acquisition Corp. ("Alset Capital"). American Pacific
Bancorp Inc. is a financial network holding company. Holista CollTech Limited is
a public Australian company that produces natural food ingredients (ASX: HCT).
DSS is a multinational company operating businesses within nine divisions:
product packaging, biotechnology, direct marketing, commercial lending,
securities and investment management, alternative trading, digital
transformation, secure living, and alternative energy. DSS Inc. is listed on the
NYSE American (NYSE: DSS). Value Exchange International, Inc. is a provider of
information technology services for businesses, and is traded on the OTCQB
(OTCQB: VEII). American Premium Mining Corporation is a publicly traded company
that is engaged in crypto-mining (OTCPK: HIPH). Alset Capital is a newly
organized blank check company formed for the purpose of effecting a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization or
similar business combination with one or more businesses and is listed on the
Nasdaq (Nasdaq: ACAXU, ACAX, ACAXW and ACAXR).
Recent Developments
Sale of Securities of True Partner Limited
On January 18, 2022, the Company entered into a stock purchase agreement with DSS, Inc., pursuant to which the Company agreed to sell, through the transfer of subsidiary and otherwise, 62,122,908 shares of stock of True Partner Capital Holding Limited in exchange for 11,397,080 shares of the common stock of DSS. On February 28, 2022 the Company entered into a revised Stock Purchase Agreement with DSS, Inc., pursuant to which the Company has agreed to replace the January 18, 2022 agreement with a new agreement to sell a subsidiary holding 44,808,908 shares of stock of True Partner Capital Holding Limited, together with an additional 17,314,000 shares of True Partner Capital Holding Limited (for a total of 62,122,908 shares, representing all of our shares in such entity) in exchange for 17,570,948 shares of common stock of DSS (the "DSS Shares"). The issuance of the DSS Shares was subject to the approval of the NYSE American (on which the common stock of DSS is listed) and DSS's shareholders. The shareholders of DSS approved this transaction on May 17, 2022, and the transaction subsequently closed. 3 Purchase of Shares of DSS On January 25, 2022, the Company agreed to purchase 44,619,423 shares of DSS's common stock for a purchase price of $0.3810 per share, for an aggregate purchase price of $17,000,000. On February 28, 2022, the Company and DSS agreed to amend this stock purchase agreement. The number of shares of the common stock of DSS that the Company agreed to purchase was reduced to 3,986,877 shares for an aggregate purchase price of $1,519,000. Such acquisition of shares of DSS closed on March 9, 2022. Sale of Note to DSS On February 25, 2022, Alset International entered into an assignment and assumption agreement with DSS (the "Assumption Agreement") pursuant to which DSS agreed to purchase a convertible promissory note from Alset International. The note has a principal amount of $8,350,000 and had accrued but unpaid interest of $367,400 through May 15, 2022. The note was issued by American Medical REIT, Inc. The consideration paid for the note was 21,366,177 shares of DSS's common stock. The number of DSS shares issued as consideration was calculated by dividing $8,717,400, the aggregate of the principal amount and the accrued but unpaid interest under the Note, by $0.408 per share. The closing of the Assumption Agreement and the issuance of the DSS shares described above was subject to the approval of the NYSE American and DSS's shareholders. The shareholders of DSS approved this transaction on May 17, 2022. On July 12, 2022, Alset International entered into Amendment No. 1 to the Assumption Agreement. Amendment No. 1 revised the Assumption Agreement to remove an adjustment provision. On July 12, 2022, the transactions contemplated by the Assumption Agreement and Amendment No. 1 were consummated, Alset International assigned the Note to DSS, and DSS issued to Alset International 21,366,177 shares of DSS's common stock.
Purchase of Alset International shares
On January 17, 2022 the Company entered into a securities purchase agreement with Chan Heng Fai, pursuant to which the Company agreed to purchase from Chan Heng Fai 293,428,200 ordinary shares of Alset International for a purchase price of 29,468,977 newly issued shares of the Company's common stock. On February 28, 2022, the Company and Chan Heng Fai entered into an amendment to this securities purchase agreement pursuant to which the Company shall purchase these 293,428,200 ordinary shares of Alset International for a purchase price of 35,319,290 newly issued shares of the Company's common stock. The closing of this transaction with Mr. Chan is subject to approval of the Nasdaq and the Company's stockholders. These 293,428,200 ordinary shares of Alset International represent approximately 8.4% of the 3,492,713,362 total issued and outstanding shares of Alset International. The Company had a Special Meeting of Stockholders to vote on the approval of this transaction on June 6, 2022.
Initial Public Offering of Alset Capital Acquisition Corp.
On February 3, 2022 Alset Capital Acquisition Corp. ("Alset Capital"), a special
purpose acquisition company sponsored by the Company and certain affiliates,
closed its initial public offering of 7,500,000 units at $10 per unit. Each unit
consisted of one of Alset Capital's shares of Class A common stock, one-half of
one redeemable warrant and one right to receive one-tenth of one share of Class
A common stock upon the consummation of an initial business combination. Each
whole warrant entitles the holder thereof to purchase one share of Class A
common stock at a price of $11.50 per share. Only whole warrants are
exercisable. The underwriters exercised their over-allotment option in full for
an additional 1,125,000 units on February 1, 2022, which closed at the time of
the closing of the Offering. As a result, the aggregate gross proceeds of this
offering, including the over-allotment, were $86,250,000, prior to deducting
underwriting discounts, commissions, and other offering expenses.
4
On February 3, 2022, simultaneously with the consummation of Alset Capital's
initial public offering, Alset Capital consummated the private placement of
473,750 units (the "Private Placement Units") to the Sponsor, which amount
includes 33,750 Private Placement Units purchased by the Sponsor in connection
with the underwriters' exercise of the over-allotment option in full, at a price
of $10.00 per Private Placement Unit, generating gross proceeds of approximately
$4.7 million (the "Private Placement") the proceeds of which were placed in the
trust account. No underwriting discounts or commissions were paid with respect
to the Private Placement. The Private Placement Units are identical to the units
sold in the initial public offering, except that (a) the Private Placement Units
and their component securities will not be transferable, assignable or saleable
until 30 days after the consummation of Alset Capital's initial business
combination except to permitted transferees and (b) the warrants and rights
included as a component of the Private Placement Units, so long as they are held
by the Sponsor or its permitted transferees, will be entitled to registration
rights, respectively.
The Company and its majority-owned subsidiary Alset International together own the sole member of Alset Acquisition Sponsor, LLC, the sponsor of Alset Capital.
Alset Capital Acquisition Corp. Merger Agreement with HWH International Inc.
On September 9, 2022, Alset Capital entered into an agreement and plan of merger
(the "Merger Agreement") by and among Alset Capital, HWH International Inc., a
Nevada corporation ("HWH") and HWH Merger Sub Inc., a Nevada corporation and a
wholly owned subsidiary of Alset Capital ("Merger Sub"). Pursuant to the Merger
Agreement, a business combination between Alset Capital and HWH will be effected
through the merger of Merger Sub with and into HWH, with HWH surviving the
merger as a wholly owned subsidiary of Alset Capital (the "Merger"). HWH is an
indirect subsidiary of the Company through its subsidiary Alset International
Limited. The Merger has not closed as of the date of this Report and is subject
to the receipt of the required approval by the stockholders of Alset Capital,
the shareholder of HWH and the satisfaction of certain other customary closing
conditions.
Name Change
During a Special Meeting of Stockholders on June 6, 2022, the stockholders approved the reincorporation of the Company in Texas and the change of the Company's name to "Alset Inc." The management believes that such new name will more fully reflect its current business model.
Recent Business Developments in our Home Rental Business
Recently, the Company expanded its real estate portfolio to single family rental houses. During 2021 and early 2022, the Company, through its subsidiaries, acquired 132 homes in Montgomery and Harris Counties, Texas.
In approximately fifty of the 132 rental homes that were acquired, as part of our commitment to advancing smart and healthy sustainable living, we have installed Tesla PV solar panels and Powerwalls. We are reviewing plans to add solar panels and related technologies to the balance of the single-family rental homes, where feasible. In addition, we have added technologies at many of the single-family rental homes such as (i) smart solar, thermostat, and energy usage controls; (ii) smart lighting controls; (iii) smart locks and security; and (iv) smart home automation devices. We believe these and other technologies will be attractive to renters and we continue to build and pursue strategic, technological partnerships that will assist us as we expand our real estate business to include building homes for rent and building homes for sale in
the future. The Company has entered into a property management agreement with the property managers under which the property managers generally oversee and direct the leasing, management and advertising of the properties in our portfolio, including collecting rents and acting as liaison with the tenants. The Company pays its property managers a monthly property management fee per property unit and a leasing fee. Sale of Certain Lots
On October 28, 2022, 150 CCM Black Oak Ltd. (the "Seller"), a Texas Limited Partnership and an indirect, majority-owned subsidiary of the Company, entered into a Contract for Purchase and Sale and Escrow Instructions (the "Agreement") with Century Land Holdings of Texas, LLC, a Colorado limited liability company (the "Buyer"). Pursuant to the terms of the Agreement, the Seller has agreed to sell all of the approximately 242 single-family detached residential lots comprising a residential community in the city of Magnolia, Texas known as the "Lakes at Black Oak." The lots will be sold at a range of prices, and the Seller will also be entitled to receive a community enhancement fee for each lot sold. The aggregate purchase price and community enhancement fees are anticipated to be $12,881,000, however, such purchase price will be adjusted accordingly, if the total number of lots increases or decreases prior to the closing of the transactions contemplated by the Agreement. The closing of the transactions described in the Agreement depends on the satisfaction of certain conditions set forth therein. There can be no assurance that such closings will be completed on the terms outlined herein or at all. The Buyer has agreed to purchase the lots in stages, with an estimated closing date of December of 2022 for the first 132 lots to be acquired, with the remainder to be acquired through 2023. Prior to such closing dates, the Buyer shall have a thirty (30) day inspection period in which to inspect the properties and determine their suitability; during such inspection period, the Buyer may decline to proceed with the closing of these transactions. The Seller shall be required to develop and improve the property at the Seller's cost pursuant to certain development plans and government regulations prior
to the closings described above. 5
Purchase of Value Exchange International, Inc. Shares
On October 17, 2022, the Company's subsidiary GigWorld Inc. entered into a Stock
Purchase Agreement (the "Agreement") with Chan Heng Fai, who is the Chairman of
GigWorld's Board of Directors and our Chairman, Chief Executive Officer and
largest stockholder. Pursuant to the Agreement, GigWorld bought an aggregate of
7,276,163 shares of Value Exchange International, Inc. ("VEII"), a Nevada
corporation, for the following purchase prices: (i) $1,733,079.12 for 7,221,163
shares, representing a price of $.24 per share; (ii) $2,314 for 10,000 shares,
representing a price of $.2314 per share; (iii) $5,015 for 25,000 shares,
representing a price of $.2006 per share; and (iv) $3,326 for 20,000 shares,
representing a price of $.1663 per share. Collectively, these purchases
represent an aggregate purchase price of $1,743,734.12 for 7,276,163 shares of
VEII. Such purchase prices were negotiated between the parties to the Agreement.
Mr. Chan and another member of GigWorld's Board of Directors, Lum Kan Fai
Vincent, are both members of the Board of Directors of VEII. In addition to Mr.
Chan, two other members of our Board of Directors are also members of the Board
of Directors of VEII (Mr. Wong Shui Yeung and Mr. Wong Tat Keung). Following the
acquisitions of shares pursuant to the Agreement, the Company now owns a total
of 13,834,643 shares of VEII, representing 38.3% of VEII.
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. 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 2020 through the second quarter of 2022, we continued to sell lots at our Ballenger Run project (in Maryland) to NVR for the construction of single-family homes. At this time, all of the lots at Ballenger Run have been sold to NVR, however we continue to complete our development requirements under our agreements with NVR. We do not anticipate that the COVID-19 pandemic will have a material impact on the timing of the completion of our remaining tasks at Ballenger Run. 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 this trend, should it continue, will encourage interest
in some of our projects.
The COVID-19 pandemic could impact the ability to conduct our operations in a prompt and efficient manner. In 2020, we experienced a slowdown in the construction of a clubhouse at the Ballenger Run project, which was completed behind schedule. We believe this delay was caused in part by policies requiring lower numbers of contractors working in indoor space. The infrastructure design, engineering and construction for the Black Oak project, and other planned projects, could be impacted by the COVID-19 pandemic in the future. In addition, we believe the COVID-19 pandemic could continue to have an impact on supply chains and commodities in the future, which may impact our real estate business by causing increased costs and longer project durations. The COVID-19 pandemic may adversely impact the timeliness of local government in granting required approvals. Accordingly, the COVID-19 pandemic may cause the completion of important stages in our real estate projects to be delayed. Other Business Activities The COVID-19 pandemic may adversely impact our potential to expand our business activities in ways that are difficult to assess or predict. The COVID-19 pandemic continues to evolve. The COVID-19 pandemic has impacted, and may continue to impact, the global supply of certain goods and services in ways that may impact the sale of products to consumers that we, or companies we may invest in or partner with, will attempt to make. The COVID-19 pandemic may prevent us from pursuing otherwise attractive opportunities. 6 COVID-19 pandemic has impacted our operations in South Korea; since the start of the pandemic, the South Korean government has at various times placed certain restrictions on business meetings to reduce the spread of COVID-19. Such restrictions have impacted our ability to recruit potential affiliate sales personnel, and to introduce products to a larger audience. Impact on Staff
Most of our U.S. staff works out of our Bethesda, Maryland office.
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 and our staff's travel between the U.S. and non-U.S. offices was significantly limited until earlier this year. The COVID-19 pandemic also impacted the frequency with which our management would otherwise travel to the Black Oak project in 2020 and 2021; 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, 2022 and 2021
Three- Months Ended Nine-months Ended
September 30, September 30, September 30, September 30,
2022 2021 2022 2021
Revenue $ 721,905 $ 4,795,567 $ 3,600,482 $ 16,945,913
Operating Expenses $ 2,792,917 $ 4,743,985 $ 8,979,297 $ 21,976,619
Other Expenses $ 11,163,538 $ 8,126,066 $ 25,546,935 $ 87,293,906
Net Loss $ 13,081,391 $ 8,074,484 $ 30,994,705 $ 92,771,369
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Revenue
The following tables set forth period-over-period changes in revenue for each of our reporting segments:
Three Months Ended
September 30, Change
2022 2021 Dollars Percentage
Real Estate $ 569,791 $ 3,547,396 $ (2,977,605 ) -84 %
Biohealth 22,154 1,248,171 (1,226,017 ) -98 %Digital Transformation Technology 6,365 -
6,365 100 %
Other 123,595 - 123,595 100 %
Total revenue $ 721,905 $ 4,795,567 $ (4,073,662 ) -85 %
Nine Months Ended
September 30, Change
2022 2021 Dollars Percentage
Real Estate $ 2,494,707 $ 12,026,069 $ (9,531,362 ) -79 %
Biohealth 771,847 4,919,844 (4,147,997 ) -84 %Digital Transformation Technology 14,066 -
14,066 100 % Other 319,862 - 319,862 100 % Total revenue $ 3,600,482 $ 16,945,913 $ (13,345,431 ) -79 % Revenue was $721,905 and $4,795,567 for the three months ended September 30, 2022 and 2021, respectively. Revenue was $3,600,482 and $16,945,913 for the nine months ended September 30, 2022 and 2021, respectively. The decrease in property sales from the Ballenger Project and direct sales from our indirect subsidiary HWH World in the first nine months of 2022 contributed to lower revenue in those periods. In the first nine months of 2022 the last three homes in Ballenger Project were sold. In this project, builders are required to purchase a minimum number of lots based on their applicable sale agreements. We collect revenue 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
project lots, decreased from $182,813 in the three months ended September 30,
2021 to $9,968 in the three months ended September 30, 2022. Income from the
sale of FFBs, decreased from $431,458 in the nine months ended September 30,
2021 to $126,055 in the nine months ended September 30, 2022. The decrease is a
result of the decreased sale of properties to homebuyers in 2022.
In the second quarter of 2021, the Company started renting homes to tenants.
Revenue from this rental business was $569,792 and $133,302 in the three months
ended September 30, 2022 and 2021, respectively. Revenue from rental business
was $1,206,273 and $155,249 in the nine months ended September 30, 2022 and
2021, respectively. The Company expects that the revenue from this business will
continue to increase as we acquire more rental houses and successfully rent
them.
In recent years, the Company expanded its biohealth segment to the Korean market
through one of the subsidiaries of Health Wealth Happiness Pte. Ltd., HWH World
Inc ("HWH World"). HWH World operates based on a direct sale model of health
supplements. HWH World recognized $22,154 and $1,248,171 in revenue in three
months ended September 30, 2022 and 2021, respectively. HWH World recognized
$771,847 and $4,919,844 in revenue in nine months ended September 30, 2022 and
2021, respectively. The decrease in revenue from HWH World is caused mainly by
decreased sales of annual memberships, as management is in the process of
reorganizing its business model in South Korea.
In June 2022 the Company's subsidiary GigWorld Inc., operating under our Digital
Transformation Technology segment, started providing services to its customer in
Hong Kong, who is a related party to the Company, generating revenue of $6,365
and $14,066 in the three and nine months ended September 30, 2022, respectively.
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The category described as "Other" includes corporate and financial services and new venture businesses. "Other" includes certain costs that are not allocated to the reportable segments, primarily consisting of unallocated corporate overhead costs, including administrative functions not allocated to the reportable segments from global functional expenses. The financial services and new venture businesses are small and diversified, and accordingly they are not separately addressed as one independent category. In the three months ended September 30, 2022 and 2021, the revenue from other businesses was $123,595 and $0, respectively, generated by a Singaporean café shop operated by a subsidiary of the Company. In the nine months ended September 30, 2022 and 2021, the revenue from other businesses was $319,862 and $0, respectively, generated by this Singaporean café shop. Operating Expenses
The following tables sets forth period-over-period changes in cost of revenues for each of our reporting segments:
Three Months Ended
September 30, Change
2022 2021 Dollars Percentage
Real Estate $ 254,972 $ 2,166,497 $ (1,911,525 ) -88 %
Biohealth 500,946 37,904 463,042 1,222 %Digital Transformation Technology 1,782 -
1,782 100 %
Other 55,669 - 55,669 100 %
Total Cost of Revenues $ 813,369 $ 2,204,401 $ (1,391,032 ) -63 %
Nine Months Ended
September 30, Change
2022 2021 Dollars Percentage
Real Estate $ 1,880,914 $ 8,291,698 $ (6,410,784 ) -77 %
Biohealth 512,931 218,507 294,424 135 %Digital Transformation Technology 4,574 -
4,574 100 % Other 80,177 - 80,177 100 % Total Cost of Revenues $ 2,478,596 $ 8,510,205 $ (6,031,609 ) -71 % Cost of revenues decreased from $2,204,401 in the three months ended September 30, 2021 to $813,369 in the three months ended September 30, 2022. Cost of revenues decreased from 8,510,205 in the nine months ended September 30, 2021 to $2,478,596 in the nine months ended September 30, 2022. The decrease is a result of the decrease in sales in the Ballenger Run project and HWH World sales. Capitalized construction expenses, finance costs and land costs are allocated to sales. We anticipate the total cost of revenues to increase as revenue increases.
The gross margin decreased from $2,591,166 to negative $99,165 in the three months ended September 30, 2021 and 2022, respectively. The gross margin decreased from $8,435,708 to $1,121,886 in the nine months ended September 30, 2021 and 2022, respectively. The decrease of gross margin was caused by the decrease in sales in the Ballenger Run project and HWH World sales.
The following tables sets forth period-over-period changes in operating expenses for each of our reporting segments.
Three Months Ended
September 30, Change
2022 2021 Dollars Percentage
Real Estate $ 667,366 $ 275,681 $ 391,685 142 %
Biohealth 311,416 1,540,570 (1,229,154 ) -80 %
Digital transformation technology 95,788 104,219 (8,431 ) -8 %
Other 904,978 619,114 285,864 46 %
Total operating expenses $ 1,979,548 $ 2,539,584 $ (560,036 ) -22 %
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Nine Months Ended
September 30, Change
2022 2021 Dollars Percentage
Real Estate $ 1,988,323 $ 901,236 $ 1,087,087 121 %
Biohealth 587,051 3,451,152 (2,864,101 ) -83 %Digital transformation technology 255,764 173,594
82,170 47 % Other 3,669,563 8,940,432 (5,270,869 ) -59 % Total operating expenses $ 6,500,701 $ 13,466,414 $ (6,965,713 ) -52 % The increase of operating expenses of real estate in 2022 compared with 2021 was mostly caused by the increase in sales and rental related expenses. Decrease in expenses in our biohealth business is caused by the decreased commission payments to our distributors, which is connected to decreased sales. Other Income (Expense)
In the three months ended September 30, 2022, the Company had other expense of $11,163,538 compared to other expenses of $8,126,066 in the three months ended September 30, 2021. In the nine months ended September 30, 2022, the Company had other expense of $25,546,935 compared to other expenses of $87,293,906 in the nine months ended September 30, 2021. The change in realized and unrealized loss on securities investments and finance costs are the primary reasons for the volatility in these two periods. Unrealized loss on securities investment was $11,006,833 in the three months ended September 30, 2022, compared to $5,268,531 loss in the three months ended September 30, 2021. Unrealized loss on securities investment was $21,773,223 in the nine months ended September 30, 2022, compared to $35,972,445 loss in the nine months ended September 30, 2021. Realized loss on security investment was $145,122 the three months ended September 30, 2022, compared to a loss of $2,515,949 in the three months ended September 30, 2021. Realized loss on security investment was $6,500,573 the nine months ended September 30, 2022, compared to a loss of $2,218,988 in the nine months ended September 30, 2021. Finance gain was $887 in the three months ended September 30, 2022, compared to costs of $27,798 in the three months ended September 30, 2021. Finance costs were $450,000 the nine months ended September 30, 2022, compared to costs of $50,871,869 in the nine months ended September 30, 2021. Net Loss In the three months ended September 30, 2022 the Company had net loss of $13,081,391 compared to net loss of $8,074,484 in the three months ended September 30, 2021. In the nine months ended September 30, 2022 the Company had net loss of $30,994,705 compared to net loss of $92,771,369 in the nine months ended September 30, 2021.
Liquidity and Capital Resources
Our real estate assets have increased to $51,583,814 as of September 30, 2022
from $40,515,380 as of December 31, 2021. This increase primarily reflects the
additional rental properties we purchased in first nine months of 2022. In the
nine months ended September 30, 2022, we purchased twenty-three homes, which
will be used in the Company's rental business. Our rental properties assets were
$31,485,036 as of September 30, 2022. In the first nine months of 2022, one of
the Company's subsidiaries sold two plots of land it owns in Australia (which
had been planned to be part of the SeD Perth project).
Our cash has decreased from $56,061,309 as of December 31, 2021 to $22,605,541
as of September 30, 2022. Our liabilities decreased from $13,920,357 at December
31, 2021 to $5,104,600 at September 30, 2022. Our total assets have decreased to
$164,664,506 as of September 30, 2022 from $184,210,143 as of December 31, 2021
mainly due to decrease in cash.
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The management believes that the available cash in bank accounts and favorable
cash revenue from real estate projects are sufficient to fund our operations for
at least the next 12 months.
Summary of Cash Flows for the Nine Months Ended September 30, 2022 and 2021
Nine Months Ended September 30,
2022 2021 Net cash used in operating activities $ (28,331,829 ) $ (6,485,979 ) Net cash used in investing activities $ (15,031,318 ) $ (28,743,359 ) Net cash provided by financing activities $ 5,996,133 $ 77,237,040
Cash Flows from Operating Activities
Net cash used in operating activities was $28,331,829 in the first nine months of 2022, as compared to net cash used in operating activities of $6,485,979 in the same period of 2021. The payment of accrued bonus due to director of $3,614,749 contributed to the decrease of cash in operating activities in the first nine months of 2022.
Cash Flows from Investing Activities
Net cash used in investing activities was $15,031,318 in the first nine months of 2022, as compared to net cash used in investing activities of $28,743,359 in the same period of 2021. In the nine months ended September 30, 2022 we invested $8,479,968 in marketable securities, $6,057,493 to purchase real estate properties and $1,082,225 in real estate property improvements. In the nine months ended September 30, 2021 we invested $19,308,318 in marketable securities, $11,081,491 to purchase real estate properties and $327,603 in promissory notes of a related party. At the same time, we received approximately $2.5 million from the sale of Vivacitas Oncology to a related party and $840,000 from the repayment of promissory note from related party.
Cash Flows from Financing Activities
Net cash provided by financing activities was $5,996,133 in the nine months ended September 30, 2022, compared to net cash provided of $77,237,040 in the nine months ended September 30, 2021. The increase in cash provided by financing activities in the first nine months of 2022 is primarily caused by the proceeds from stock issuance of $6,213,000. Additionally, the Company repaid $216,867 to loan payable. During the nine months ended September 30, 2021, we received cash proceeds of $73,157,884 from stock issuance, $2,975,194 from exercise of subsidiary warrants, $280,000 from the sale of our GigWorld shares to individual investors and $68,502 from a loan. The Company also distributed $1,398,250 to one minority interest investor and borrowed $5,545,195 from related parties.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures. Impact of Inflation We believe that inflation has not had a material impact on our results of operations for the nine months ended September 30, 2022 or the year ended December 31, 2021. Our current and anticipated costs in our real estate and other business lines have increased due to recent inflation, including projected costs of materials and salaries, and such increases may be significant as we engage in additional operations. We cannot assure you that future inflation will not have an adverse impact on our operating results and financial condition. 11
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 Singapore to the United States and which were approximately $43 million and $43 million on September 30, 2022 and December 31, 2021, respectively, are the reason for the significant fluctuation of foreign currency transaction Gain or Loss on the Condensed Consolidated Statements of Operations and Other Comprehensive Loss. Because the intercompany loan balances between Singapore and United States will remain at approximately $43 million over the next year, we expect this fluctuation of foreign exchange rates to still significantly impact the results of operations in 2022, 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. 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 the 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.
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