Alset(AEI) - 2023 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (Unaudited) The unaudited financial statements for Alset Inc. as of September 30, 2023, reflect increased assets and liabilities, with a reduced net loss on significantly higher revenue driven by property sales Condensed Consolidated Balance Sheets The balance sheets show total assets increased to $157.0 million, driven by cash, while liabilities rose and equity decreased due to net loss Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | Sep 30, 2023 ($) | Dec 31, 2022 ($) | | :--- | :--- | :--- | | Assets | | | | Cash | 28,038,818 | 17,827,383 | | Properties under Development | 8,775,951 | 23,449,698 | | Total Assets | 157,014,408 | 153,490,336 | | Liabilities & Equity | | | | Total Current Liabilities | 6,501,992 | 3,244,738 | | Total Liabilities | 8,149,184 | 4,827,221 | | Total Stockholders' Equity | 128,482,259 | 148,663,115 | | Total Liabilities and Stockholders' Equity | 157,014,408 | 153,490,336 | Condensed Consolidated Statements of Operations and Other Comprehensive Loss Statements of operations show a significant revenue increase to $21.1 million, primarily from property sales, leading to a reduced net loss of $27.2 million Statement of Operations Highlights (Unaudited) | Metric | Nine Months Ended Sep 30, 2023 ($) | Nine Months Ended Sep 30, 2022 ($) | | :--- | :--- | :--- | | Total Revenue | 21,070,983 | 3,600,482 | | (Loss) Income from Operations | 942,862 | (5,378,815) | | Net Loss | (27,162,596) | (30,994,705) | | Net Loss Attributable to Common Stockholders | (25,677,321) | (27,166,771) | | Net Loss Per Share - Basic and Diluted | (2.86) | (4.38) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity declined to $128.5 million due to net loss and foreign currency translation, partially offset by common stock issuance - Stockholders' equity declined to $128.5 million due to a net loss of $25.7 million and other comprehensive losses, despite a $3.4 million capital infusion from a common stock issuance[6] Condensed Consolidated Statements of Cash Flows Cash flow statements show a positive shift in operating cash flow to $8.3 million, driven by property sales, and $3.4 million from financing activities Cash Flow Summary (Unaudited) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 ($) | Nine Months Ended Sep 30, 2022 ($) | | :--- | :--- | :--- | | Net Cash Provided by (Used in) Operating Activities | 8,255,675 | (28,331,829) | | Net Cash Used in Investing Activities | (748,188) | (15,031,318) | | Net Cash Provided by Financing Activities | 3,408,560 | 5,996,133 | | Net Increase (Decrease) in Cash | 10,916,047 | (37,367,014) | Notes to Condensed Consolidated Financial Statements Notes provide details on the company's diversified segments, accounting policies, related-party transactions, and recent consolidation events impacting financial results - The company operates through four segments: real estate, digital transformation technology, biohealth, and other business activities, managed largely via its 85.4% owned subsidiary, Alset International Limited[13] - On May 1, 2023, the company's ownership in Alset Capital Acquisition Corp. increased to 58.0%, leading to its consolidation and the recognition of a $21.7 million loss[79] - The company has significant influence over several publicly traded companies, including DSS Inc. (44.8% ownership), Value Exchange International Inc. (48.7% ownership), and Sharing Services Global Corp. (33.4% ownership), and accounts for them using the fair value option[24][78] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant revenue growth from property sales, improved net loss, strengthened liquidity, and ongoing operational challenges - The company is a diversified holding company with four main segments: real estate development (EHome communities), financial services, digital transformation technologies, and biohealth/consumer products[115] - A significant portion of the business is managed through its 85.4% owned subsidiary, Alset International Limited, which is traded on the Singapore Stock Exchange[115] - Management believes available cash and revenue from real estate projects are sufficient to fund operations for at least the next 12 months[131] Recent Developments Recent developments include the consolidation of Alset Capital, a $3.3 million public offering, and strategic real estate sales generating approximately $18.1 million - The company's sponsored SPAC, Alset Capital Acquisition Corp., is working to close a business combination with HWH International Inc., an indirect subsidiary of the company[116] - In February 2023, the company closed a public offering of 1,727,273 shares of common stock at $2.20 per share, with net proceeds of approximately $3.3 million[118] - The company closed the sale of 335 lots from its Black Oak project in the first half of 2023, generating approximately $18.1 million in revenue[127] Results of Operations Results of operations show a 485% revenue increase to $21.1 million, driven by real estate sales, improving gross margin and reducing net loss Revenue by Segment - Nine Months Ended Sep 30 | Segment | 2023 Revenue ($) | 2022 Revenue ($) | % Change | | :--- | :--- | :--- | :--- | | Real Estate | 20,227,362 | 2,494,707 | 711% | | Biohealth | 12,786 | 771,847 | -98% | | Digital Transformation Technology | 28,094 | 14,066 | 100% | | Other | 802,741 | 319,862 | 151% | | Total Revenue | 21,070,983 | 3,600,482 | 485% | Cost of Revenues by Segment - Nine Months Ended Sep 30 | Segment | 2023 Cost of Revenues ($) | 2022 Cost of Revenues ($) | % Change | | :--- | :--- | :--- | :--- | | Real Estate | 12,755,702 | 1,880,914 | 578% | | Biohealth | 21,516 | 512,931 | -96% | | Digital Transformation Technology | 9,145 | 4,574 | 100% | | Other | 222,470 | 80,177 | 177% | | Total Cost of Revenues | 13,008,833 | 2,478,596 | 425% | - The change in net loss was primarily driven by volatility in securities investments and a $21.7 million loss on the consolidation of Alset Capital Acquisition Corp. in Q2 2023[131] Liquidity and Capital Resources Liquidity improved with cash increasing to $28.0 million, primarily from operating activities driven by real estate sales and financing activities Summary of Cash Flows - Nine Months Ended | Cash Flow Activity | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | 8,255,675 | (28,331,829) | | Net cash used in investing activities | (748,188) | (15,031,318) | | Net cash provided by financing activities | 3,408,560 | 5,996,133 | - The positive shift in operating cash flow in 2023 was mainly due to property sales from the Black Oak project[133] Item 3. Quantitative and Qualitative Disclosure About Market Risk As a smaller reporting company, the company is exempt from providing quantitative and qualitative disclosures about market risk - As a "smaller reporting company," the company is exempt from providing disclosures about market risk[139] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of September 30, 2023, with no material changes to internal controls during the quarter - Management concluded that the company's disclosure controls and procedures were not effective as of September 30, 2023[139] - No material changes to internal controls over financial reporting occurred during the quarter[139] PART II OTHER INFORMATION This section covers other required information including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings The company reported no legal proceedings for the period - The company reported no legal proceedings for the period[139] Item 1A. Risk Factors As a smaller reporting company, this section on risk factors is not applicable - As a smaller reporting company, this section is not applicable[139] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds - The company reported no unregistered sales of equity securities[139] Item 6. Exhibits The report includes standard filings such as CEO and CFO certifications and Inline XBRL data files - Exhibits filed include certifications from the CEO and CFOs pursuant to Sarbanes-Oxley Act Sections 302 and 906[140] - Inline XBRL instance documents and related taxonomy files were also filed as part of the report[140]