HWH International(HWH) - 2024 Q2 - Quarterly Report

Financial Performance - Total revenue for the three months ended June 30, 2024, was $334,882, a 71.5% increase from $195,198 in the same period of 2023[79] - Total revenue for the six months ended June 30, 2024, was $620,992, up 57.0% from $395,760 in the same period of 2023[79] - Net loss for the three months ended June 30, 2024, was $403,641, compared to a net loss of $62,935 in the same period of 2023[81] - Net loss for the six months ended June 30, 2024, was $1,740,160, contrasting with a net income of $108,914 in the same period of 2023[81] Cost and Expenses - Cost of revenue increased from $73,620 in the three months ended June 30, 2023, to $169,969 in the same period of 2024[84] - Operating expenses rose from $582,466 to $654,740 in the three months ended June 30, 2023, and 2024, respectively[85] - Other income decreased significantly from $552,660 in the three months ended June 30, 2023, to $86,186 in the same period of 2024[86] Membership and Business Model - The company has 9,811 founding members, with a cap of 10,000, who will enjoy continuous membership benefits[77] - The company plans to implement a new yearly subscription-based membership model, with exclusive discounts and passive income opportunities for members[77] - Hapi Cafés are positioned as integral to the business model, with locations opened in Seoul and Singapore, and plans for further expansion[78] Cash Flow and Assets - Cash decreased from $1,159,201 as of December 31, 2023, to $821,353 as of June 30, 2024, while total assets dropped from $23,710,684 to $3,068,280 in the same timeframe[87] - The Company utilized $1,129,040 in operating activities for the six months ended June 30, 2024, a decrease from $1,379,468 in the same period of 2023[88] - Net cash provided by investing activities was $20,554,734 for the six months ended June 30, 2024, down from $69,023,066 in the same period of 2023[88] Financing and Support - The Company entered into a Credit Facility Agreement with Alset Inc. providing a maximum credit line of $1,000,000 at a simple interest rate of 3% per annum[87] - The Company has obtained letters of financial support from Alset International Limited and Alset Inc. to provide additional funding as needed for the next twelve months[87] Foreign Exchange and Growth Classification - The fluctuation of foreign exchange rates is expected to impact the results of operations in 2024, particularly concerning intercompany loans between Singapore and South Korea, which were approximately $2.7 million as of June 30, 2024[97] - The Company is classified as an "emerging growth company" and intends to take advantage of certain exemptions from various reporting requirements applicable to other public companies[98] - The company is classified as a smaller reporting company and is not required to provide certain market risk disclosures[100] Internal Controls and Reporting - The company is not currently required to maintain an effective system of internal controls as defined by Section 404 of the Sarbanes-Oxley Act[100] - Management determined that the company did not maintain effective controls over financial reporting due to limited staff with U.S. GAAP and SEC reporting experience, constituting a material weakness[100] - To remediate the identified weaknesses, the company plans to appoint additional qualified personnel with financial accounting, GAAP, and SEC experience[100] - The internal control assessment was based on the criteria described in the Internal Control Integrated Framework issued by COSO[100] - The company's internal control over financial reporting may vary over time due to changes in conditions[100] - The prospectus does not include an attestation report from the registered public accounting firm regarding internal control over financial reporting[100] - The management's report was not subject to attestation by the registered public accounting firm due to temporary SEC rules[100]