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
112 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 June 30, 2022, additional interests we held, both directly and indirectly,
included a 41.3% equity interest in American Pacific Bancorp Inc., a 15.8%
equity interest in Holista CollTech Limited, a 45.2% equity interest in DSS Inc.
("DSS"), an 18% 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.
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.
4
The Company and its majority-owned subsidiary Alset International each own 45%
of the sole member of Alset Acquisition Sponsor, LLC, the sponsor of Alset
Capital, with the remaining 10% of the sole member of the sponsor owned by Alset
Investment Pte. Ltd., a company owned by the Company's Chairman, Chief Executive
Officer and largest stockholder, Chan Heng Fai.
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.
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 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
our Lakes at Black Oak project, an Alset EHome community.
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. 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.
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.
5
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.
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 112 homes in Montgomery and Harris Counties, Texas.
In forty-four of the 112 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 at 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.
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.
6
Results of Operations
Summary of Statements of Operations for the Three and Six Months Ended June 30,
2022 and 2021
Three- Months Ended Six-months Ended
June 30, June 30, June 30, June 30,
2022 2021 2022 2021
Revenue $ 926,340 $ 6,543,432 $ 2,878,577 $ 12,150,346
Operating Expenses $ 2,580,602 $ 11,219,462 $ 6,186,380 $ 17,232,634
Other Expenses $ 8,328,599 $ 70,212,030 $ 14,383,397 $ 79,161,996
Net Loss $ 9,982,861 $ 74,889,324 $ 17,913,314 $ 84,696,885
Revenue
The following tables set forth period-over-period changes in revenue for each of
our reporting segments:
Three Months Ended
June 30, Change
2022 2021 Dollars Percentage
Real Estate $ 650,810 $ 4,584,542 $ (3,933,732 ) -86 %
Biohealth 132,222 1,958,890 (1,826,668 ) -93 %
Digital Transformation Technology 7,701 - 7,701 100 %
Other 135,607 - 135,607 100 %
Total revenue $ 926,340 $ 6,543,432 $ (5,617,092 ) -86 %
Six Months Ended
June 30, Change
2022 2021 Dollars Percentage
Real Estate $ 1,924,916 $ 8,478,673 $ (6,553,757 ) -77 %
Biohealth 749,693 3,671,673 (2,921,980 ) -80 %
Digital Transformation Technology 7,701 - 7,701 100 %
Other 196,267 - 196,267 100 %
Total revenue $ 2,878,577 $ 12,150,346 $ (9,271,769 ) -76 %
Revenue was $926,340 and $6,543,543 for the three months ended June 30, 2022 and
2021, respectively. Revenue was $2,878,577 and $12,150,346 for the six months
ended June 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 six months of 2022 contributed to lower revenue in those periods. In
the first six 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 $141,575 in the three months ended June 30, 2021 to
$37,725 in the three months ended June 30, 2022. Income from the sale of FFBs,
decreased from $248,646 in the six months ended June 30, 2021 to $116,088 in the
six months ended June 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 $403,900 and $21,947 in the three months
ended June 30, 2022 and 2021, respectively. Revenue from rental business was
$636,482 and $21,947 in the six months ended June 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.
7
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 $132,222 and $1,958,890 in revenue in three
months ended June 30, 2022 and 2021, respectively. HWH World recognized $749,693
and $3,671,673 in revenue in six months ended June 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 generating revenue of $7,701 as of June 30, 2022.
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 June 30, 2022 and 2021, the revenue from other businesses
was $143,308 and $0, respectively, generated by a Singaporean café shop operated
by a subsidiary of the Company. In the six months ended June 30, 2022 and 2021,
the revenue from other businesses was $203,968 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
June 30, Change
2022 2021 Dollars Percentage
Real Estate $ 532,233 $ 2,510,369 $ (1,978,136 ) -79 %
Biohealth 53 97,581 (97,528 ) -100 %
Digital Transformation Technology 2,792 - 2,792 100 %
Other 15,705 - 15,705 100 %
Total Cost of Revenues $ 550,677 $ 2,607,950 $ (2,057,273 ) -77 %
Six Months Ended
June 30, Change
2022 2021 Dollars Percentage
Real Estate $ 1,625,942 $ 6,125,201 $ (4,499,259 ) -73 %
Biohealth 11,985 180,603 (168,618 ) -93 %
Digital Transformation Technology 2,792 - 2,792 100 %
Other 24,508 - 24,508 100 %
Total Cost of Revenues $ 1,665,227 $ 6,305,804 $ (4,640,577 ) -74 %
Cost of revenues decreased from $2,607,950 in the three months ended June 30,
2021 to $550,677 in the three months ended June 30, 2022. Cost of revenues
decreased from 6,305,804 in the six months ended June 30, 2021 to $1,665,227 in
the six months ended June 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 $3,935,482 to $375,663 in the three months ended
June 30, 2021 and 2022, respectively. The gross margin decreased from $5,844,542
to $1,213,350 in the six months ended June 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.
8
The following tables sets forth period-over-period changes in operating expenses
for each of our reporting segments.
Three Months Ended
June 30, Change
2022 2021 Dollars Percentage
Real Estate $ 784,192 $ 266,066 $ 518,126 195 %
Biohealth 289,904 1,064,102 (774,198 ) -73 %
Digital transformation technology 45,713 39,247 6,466 16 %
Other 910,116 7,242,097 (6,331,981 ) -87 %
Total operating expenses $ 2,029,925 $ 8,611,512 $ (6,581,587 ) -76 %
Six Months Ended
June 30, Change
2022 2021 Dollars Percentage
Real Estate $ 1,320,957 $ 625,555 $ 695,402 111 %
Biohealth 910,246 1,910,582 (1,000,336 ) -52 %
Digital transformation technology 159,976 69,375 90,601 131 %
Other 2,129,974 8,321,318 (6,191,344 ) -74 %
Total operating expenses $ 4,521,153 $ 10,926,830 $ (6,405,677 ) -59 %
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 June 30, 2022, the Company had other expense of
$8,328,599 compared to other expenses of $70,212,030 in the three months ended
June 30, 2021. In the six months ended June 30, 2022, the Company had other
expense of $14,383,397 compared to other expenses of $79,161,996 in the six
months ended June 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
$6,867,375 in the three months ended June 30, 2022, compared to $21,168,905 loss
in the three months ended June 30, 2021. Unrealized loss on securities
investment was $10,766,390 in the six months ended June 30, 2022, compared to
$30,703,914 loss in the six months ended June 30, 2021. Realized loss on
security investment was $2,918,668 the three months ended June 30, 2022,
compared to a gain of $555,206 in the three months ended June 30, 2021. Realized
loss on security investment was $6,355,451 the six months ended June 30, 2022,
compared to a gain of $296,961 in the six months ended June 30, 2021. Finance
costs were $2,879 the three months ended June 30, 2022, compared to costs of
$50,261,203 in the three months ended June 30, 2021. Finance costs were $450,887
the six months ended June 30, 2022, compared to costs of $50,844,071 in the six
months ended June 30, 2021.
Net Loss
In the three months ended June 30, 2022 the Company had net loss of $9,982,861
compared to net loss of $74,889,324 in the three months ended June 30, 2021. In
the six months ended June 30, 2022 the Company had net loss of $17,913,314
compared to net loss of $84,696,885 in the six months ended June 30, 2021.
Liquidity and Capital Resources
Our real estate assets have increased to $43,140,539 as of June 30, 2022 from
$40,515,380 as of December 31, 2021. This increase primarily reflects the
additional rental properties we purchased in first half of 2022. In the six
months ended June 30, 2022, we purchased three homes, which will be used in the
Company's rental business. Our rental properties assets were $25,831,478 as of
June 30, 2022. In the first six 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).
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Our cash has decreased from $56,061,309 as of December 31, 2021 to $41,326,946
as of June 30, 2022. Our liabilities decreased from $13,920,357 at December 31,
2021 to $3,906,248 at June 30, 2022. Our total assets have decreased to
$176,071,320 as of June 30, 2022 from $184,210,143 as of December 31, 2021
mainly due to decrease in cash.
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 Six Months Ended June 30, 2022 and 2021
Six Months Ended June 30,
2022 2021
Net cash used in operating activities $ (16,125,804 ) $ (10,649,851 )Net cash (used in) provided by investing activities $ (8,308,426 ) $ 2,234,619
Net cash provided by financing activities
$ 6,041,139 $ 43,898,095
Cash Flows from Operating Activities
Net cash used in operating activities was $16,125,804 in the first six months of
2022, as compared to net cash used in operating activities of $10,649,851 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 six
months of 2022.
Cash Flows from Investing Activities
Net cash used in investing activities was $8,308,426 in the first six months of
2022, as compared to net cash provided by investing activities of $2,234,619 in
the same period of 2021. In the six months ended June 30, 2022 we invested
$6,662,017 in marketable securities, $722,817 to purchase real estate properties
and $602,161 in real estate property improvements. In the six months ended June
30, 2021 we invested $758,208 in marketable securities and we received
approximately $2.5 million from the sale of Vivacitas Oncology to a related
party.
Cash Flows from Financing Activities
Net cash provided by financing activities was $6,041,139 in the six months ended
June 30, 2022, compared to net cash provided of $43,898,095 the six months ended
June 30, 2021. The increase in cash provided by financing activities in the
first six months of 2022 is primarily caused by the proceeds from stock issuance
of $6,213,000. Additionally, the Company repaid $171,861 to loan payable. During
the six months ended June 30, 2021, we received cash proceeds of $39,268,580
from stock issuance, $2,753,203 from exercise of subsidiary warrants, $280,000
from the sale of our GigWorld shares to individual investors and $5,545,495 from
a related party loan. The Company also distributed $1,151,500 to one minority
interest investor and repaid $2,102,400 of promissory note held by 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 six months ended June 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.
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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 June 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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ALSET INC. 
