ALSET INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)

March 31, 2023 at 04:06 pm EDT

This Form 10-K 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-K that are not statements of historical
fact including, without limitation, statements under "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding the Company's financial position, business strategy and the plans and
objectives of management for future operations, 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. Such forward-looking statements are based on the beliefs of
management, as well as assumptions made by, and information currently available
to, the Company's management. Actual results could differ materially from those
contemplated by the forward-looking statements as a result of certain factors
detailed in our filings with the SEC.

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Report. Certain information contained
in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties.

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 three 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. In our digital transformation
technology segment we focus on serving business-to-business (B2B) needs in
e-commerce, collaboration and social networking functions. Our biohealth segment
includes the sale of consumer products.


We also have ownership interests outside of Alset International, including a
36.9% equity interest in American Pacific Bancorp Inc., an indirect 15.5% equity
interest in Holista CollTech Limited, a 45.2% equity interest in DSS Inc.
("DSS"), a 38.3% equity interest in Value Exchange International, Inc., a 0.8%
equity interest in New Electric CV Corporation ("NECV" formerly known as
"American Premium Mining Corporation" or "APM," and earlier known as "American
Premium Water Corp."), 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). NECV is a publicly traded consumer products company
(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).


We generally acquire majority and/or control stakes in innovative and promising
businesses that are expected to appreciate in value over time. Our emphasis is
on building businesses in industries where our management team has in-depth
knowledge and experience, or where our management can provide value by advising
on new markets and expansion. We have at times provided a range of global
capital and management services to these companies in order to gain access to
Asian markets. We have historically favored businesses that improve an
individual's quality of life or that improve the efficiency of businesses
through technology in various industries. We believe our capital and management
services provide us with a competitive advantage in the selection of strategic
acquisitions, which creates and adds value for our company and our stockholders.

38





Our Revenue Model

Our total revenue for the years ended December 31, 2022, and 2021, was $4,480,442 and $19,798,822, respectively. Our net losses for the years ended December 31, 2022, and 2021, were $46,212,505 and $119,017,591, respectively.


We currently recognize revenue from the sale of our subdivision development
properties, rental homes, the sale of our biohealth products and other
activities. Sales of real properties accounted for approximately 29%, revenue
from houses rental accounted for approximately 40%, sales of biohealth products
accounted for approximately 17% and revenue from other activities accounted for
approximately 13% of our total revenue in the year ended December 31, 2022.
Sales of real properties accounted for approximately 70%, revenue from houses
rental accounted for approximately 2% and sales of biohealth products accounted
for approximately 28% of our total revenue in the year ended December 31, 2021.

From a geographical perspective, we recognized 69% and 72% of our total revenue
in the years ended December 31, 2022, and 2021, respectively, in the United
States. 20% and 28% of our revenue in 2022 and 2021, respectively, was
recognized from our sales in South Korea. 11% and 0% of our revenue in 2022 and
2021, respectively, was recognized from our sales in Singapore.

We believe that, on an ongoing basis, revenue generated from our property development business will decline as a percentage of our total revenue as we expect to experience greater revenue contribution from our rental business, digital transformation technology, biohealth businesses and future business acquisitions.

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 December 2022, we continued to
sell lots at our Ballenger Run project (in Maryland) for the construction of
town homes to NVR. 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 addition, 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.

At our Black Oak project in Texas, we have strategically redesigned the lots for
a smaller "starter home" products that we believe will be more resilient in
fluctuating markets. Should we initiate sales at Black Oak, we believe the same
implications described above, regarding our Ballenger Run project, may apply to
our Black Oak project (including the general trend of customers' interest
shifting from urban to suburban areas). Our Black Oak project may include our
involvement in single family rental home development.

39





On February 11, 2021, the Company entered into a term 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 sixteen months of
principal and interest 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 was unsecured and guaranteed by the United States Small
Business Administration. The Company applied to M&T Bank for forgiveness of the
PPP Term Note, with the amount which may be forgiven equal to at least 60% of
payroll costs and other eligible payments incurred by the Company, calculated in
accordance with the terms of the CARES Act. In April 2022 the Company received
confirmation that the PPP Loan was fully forgiven.

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.

Impact on Staff

Most of our U.S. staff works out of our Bethesda, Maryland office.


Some of 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 until early 2022. The
COVID-19 pandemic initially impacted the frequency with which our management
would travel to the Black Oaks project, however, this is no longer the case.
Limitations on the mobility of our management and staff, should they arise in
the future, could 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.

Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation


Our consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America ("U.S.
GAAP"). The consolidated financial statements include all accounts of the
Company and its majority owned and controlled subsidiaries. The Company
consolidates entities in which it owns more than 50% of the voting common stock
and controls operations. All intercompany transactions and balances among
consolidated subsidiaries have been eliminated.

Use of Estimates and Critical Accounting Estimates and Assumptions



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, recoverability
and useful lives of property, plant and equipment, valuation of real estate
assets, allocation of development costs and capitalized interest to sold lots,
the valuation allowance of deferred taxes, contingencies and equity
compensation. Actual results could differ from those estimates.

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, 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 $111.80 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 were transactions between entities under
common control.

On October 15, 2020, American Pacific Bancorp (which subsequently became a
majority-owned subsidiary of the Company) entered into an acquisition agreement
to acquire 3,500,001 common shares of HengFeng Finance Limited ("HFL"),
representing 100% of the common shares of HFL, in consideration for $1,500,000,
to be satisfied by the issuance and allotment of 250,000 shares of the Class A
Common Stock of American Pacific Bancorp. HFL is incorporated in Hong Kong with
limited liability. The principal activities of HFL are money lending, securities
trading and investment. This transaction closed on April 21, 2021. This
transaction between the Company and Chan Heng Fai is under common control of
Chan Heng Fai. In third quarter of 2021 APB was deconsolidated due to our loss
of majority ownership.

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The common control transactions resulted in the following basis of accounting for the financial reporting periods:

? The acquisition 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 acquisition of LVD, APB and HFL was under common control and was

consolidated in accordance with ASC 850-50. The consolidated financial

statements were retrospectively adjusted for the acquisition of LVD, APB

and HFL, and the operating results of LVD, APB and HFL as of January 1,

2020 for comparative purposes.





AEI's 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
discount is amortized to finance cost in full immediately. On May 13, 2021 and
June 14, 2021 all Alset CPNs of $63,920,128 and accrued interests of $306,438
were converted into 2,123 shares of series B preferred stock and 458,198 shares
of common stock of the Company.

Revenue Recognition and Cost of Revenue

The following represents a disaggregation of our revenue recognition policies by segment:



Real Estate

? Property Sales. Part of the Company's real estate business is land
development. The Company purchases land and develops it into residential
communities. The developed lots are sold to builders (customers) for the
construction of new homes. The builders enter into 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 29% and 70% of
the Company's revenue in the years ended on December 31, 2022 and 2021,
respectively, 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 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 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 lots sold to NVR. 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. The selling prices range from
$3,000 to $4,500 per home depending on the type of home. Our total expected
revenue from the front foot benefit assessment is approximately $1 million. To
recognize revenue of the FFB assessment, both our and NVR's performance
obligations have to be satisfied. Our performance obligation is completed once
we complete the construction of water and sewer facilities and close the lot
sales with NVR, which inspects these water and sewer facilities prior to the
close of 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 upon NVR's 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 years ended December, 2022
and 2021, we recognized revenue in the amounts of $126,737 and $289,375 from FFB
assessments, respectively.

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? Rental Revenue. The Company leases real estate properties to its tenants under
leases that are predominately classified as operating leases, in accordance with
ASC 842, Leases ("ASC 842"). Real estate rental revenue is comprised of minimum
base rent and revenue from the collection of lease termination fees.

Rent from tenants is recorded in accordance with the terms of each lease
agreement on a straight-line basis over the initial term of the lease. Rental
revenue recognition begins when the tenant controls the space and continues
through the term of the related lease. Generally, at the end of the lease term,
the Company provides the tenant with a one-year renewal option, including mostly
the same terms and conditions provided under the initial lease term, subject to
rent increases.

The Company defers rental revenue related to lease payments received from tenants in advance of their due dates. These amounts are presented within deferred revenues and other payables on the Company's consolidated balance sheets.



Rental revenue is subject to an evaluation for collectability on several
factors, including payment history, the financial strength of the tenant and any
guarantors, historical operations and operating trends of the property, and
current economic conditions. If our evaluation of these factors indicates that
it is not probable that we will recover substantially all of the receivable,
rental revenue is limited to the lesser of the rental revenue that would be
recognized on a straight-line basis (as applicable) or the lease payments that
have been collected from the lessee. Differences between rental revenue
recognized and amounts contractually due under the lease agreements are credited
or charged to straight-line rent receivable or straight-line rent liability, as
applicable. For the years ended December 31, 2022 and 2021, the Company did not
recognize any deferred revenue and collected all rents due.

? Cost of Revenue. 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 the 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 an area method, which uses the size of the lots
compared to the total project area and allocates costs based on their size.

Cost of rental revenue consists primarily of the costs associated with
management and leasing fees to our management company, repairs and maintenance,
depreciation and other related administrative costs. Utility expenses are paid
directly by tenants.

Digital Transformation Technology



? Software Development Income. Revenue is recognized when (or as) the Company
transfers promised goods or services to its customers in amounts that reflect
the consideration to which the Company expects to be entitled to in exchange for
those goods or services, which occurs when (or as) the Company satisfies its
contractual obligations and transfers over control of the promised goods or
services to its customers. We generate revenue from a project involving
provision of services and web/software development for customers. In respect to
the provision of services, the agreements are less than one year with a
cancellation clause and customers are typically billed on a monthly basis.



43





Biohealth

? Product Direct Sales. The Company's net sales consist of product sales. The
Company's performance obligation is to transfer ownership of its products to its
members. The Company generally recognizes revenue when product is delivered to
its members. Revenue is recorded net of applicable taxes, allowances, refund or
returns. The Company receives the net sales price in cash or through credit card
payments at the point of sale.

If any member returns a product to the Company on a timely basis, they may
obtain a replacement product from the Company for such returned products. We do
not have buyback program. However, when the customer requests a return and
management decides that the refund is necessary, we initiate the refund after
deducting all the benefits that a member has earned. The returns are deducted
from our sales revenue on our financial statements. Allowances for product and
membership returns 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. Product and membership returns for the
years ended December 31, 2022 and 2021 were approximately $41,755 and $39,203,
respectively.

? Annual Membership. The Company collects an annual membership fee from its
members. The fee is fixed, paid in full at the time upon joining the membership;
the fee is not refundable. The Company's performance obligation is to provide
its members the right to (a) purchase products from the Company, (b) access to
certain back-office services, (c) receive commissions and (d) attend corporate
events. The associated performance obligation is satisfied over time, generally
over the term of the membership agreement which is for a one-year period. The
Company recognizes revenue from membership fee over the one-year period of


the
membership.

Other Businesses

? Food and Beverage. The Company, through Alset F&B One Pte. Ltd. ("Alset F&B
One") and Alset F&B (PLQ) Pte. Ltd. ("Alset F&B PLQ") each acquired a restaurant
franchise licenses at the end of 2021 and 2022 respectively, both of which have
since commenced operations. These licenses will allow Alset F&B One and Alset
F&B PLQ each to operate a Killiney Kopitiam restaurant in Singapore. Killiney
Kopitiam, founded in 1919, is a Singapore-based chain of mass-market,
traditional kopitiam style service cafes selling traditional coffee and tea,
along with a range of local delicacies such as Curry Chicken, Laksa, Mee Siam,
and Mee Rebus.

The Company, through Hapi Café Inc. ("HCI-T"), commenced operation of two cafés during 2022 and 2021, which are located in Singapore and South Korea.


The cafes are operated by subsidiaries of HCI-T, namely Hapi Café SG Pte.
Limited ("HCSG") in Singapore and Hapi Café Korea Inc. ("HCKI") in Seoul, South
Korea. Hapi Cafes are distinctive lifestyle café outlets that strive to
revolutionize the way individuals dine, work, and live, by providing a conducive
environment for everyone to relish the four facets - health and wellness,
fitness, productivity, and recreation all under one roof.

The revenue earned from Food and Beverage business for the years ended December 31, 2022 and 2021 were $449,240 and $ 42,380 respectively.

? Remaining performance obligations. As of December 31, 2022 and 2021, there were no remaining performance obligations or continuing involvement, as all service obligations within the other business activities segment have been completed.

Real Estate Assets



Real estate assets are recorded at cost, except when acquired real estate assets
meet the definition of a business combination in accordance with ASC 805,
"Business Combinations," which 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 approximately $3.2 million and $6.0 million in the years ended December 31, 2022 and 2021, respectively.

On December 31, 2022, total real estate property under development was $23.4 million, including:

? land held for development in the amount of $7.9 million (consisting of $7.3

million for Black Oak and $0.6 million for Alset Villas);

? capitalized development costs in the amount of $12.3 million (consisting of $12

million for Black Oak and $0.3 million for Alset Villas); and

? capitalized finance costs were $3.2 million.

On December 31, 2021, total real estate property under development was $15.7 million, including:

? land held for development in the amount of $9.0 million (consisting of $7.7

million for Black Oak, $0.1 million for Ballenger Run, $0.7 million for Alset

Villas and $0.5 million for our Perth project);

? capitalized development costs in the amount of $3.4 million (consisting of $3.4

million for Black Oak); and

? capitalized finance costs were $3.2 million.

On December 31, 2022, the capitalized construction costs were as follows:



                               Ballenger Run       Black Oak        Alset Villas          Total
Land held for development      $            -     $  7,304,064     $      639,062     $   7,943,126
Capitalized development
Costs
Hard Construction Costs            29,253,317       10,960,927                  -        40,214,245
Engineering                         3,632,588        3,306,281            194,510         7,133,379
Consultation                          340,528          121,698             16,950           479,176
Project Management                  4,335,183        2,702,175                  -         7,037,359
Legal                                 375,672          256,693                  -           632,365
Taxes                               1,325,086        1,204,186             43,770         2,573,042
Other Services                        627,487           47,276                  -           674,763
Impairment Reserve                          -       (5,230,828 )                -        (5,230,828 )
Construction - Sold Lots          (39,889,863 )     (1,364,805 )                -       (41,254,668 )
Total capitalized
development costs              $            -     $ 12,003,603     $      255,230     $  12,258,833

Capitalized finance costs                                                             $   3,247,739

Total property under
development                                                                           $  23,449,698

On December 31, 2021, the capitalized construction costs were as follows:



                           Ballenger Run       Black Oak        Alset Villas       Perth Project          Total
Land held for
development                $      125,497     $  7,725,446     $      639,062     $       528,399     $   9,018,404
Capitalized development
Costs
Hard Construction Costs        29,244,223        8,865,369                  -                   -        38,109,592
Engineering                     3,626,928        2,852,710                  -                   -         6,479,638
Consultation                      340,528          109,826                  -                   -           450,354
Project Management              4,285,533        2,597,175                  -                   -         6,882,708
Legal                             375,585          237,970                  -                   -           613,555
Taxes                           1,326,734          985,440                  -                   -         2,312,174
Other Services                    605,657           33,791                  -              80,797           720,245
BAN reimbursement                       -       (5,738,461 )                -                   -        (5,738,461 )
Impairment Reserve                      -       (5,230,828 )                -                   -        (5,230,828 )
Construction - Sold Lots      (39,805,188 )     (1,364,805 )                -                   -       (41,169,993 )
Total capitalized
development costs          $            -     $  3,348,187     $            -     $        80,797     $   3,428,984

Capitalized finance
costs                                                                                                 $   3,247,739

Total property under
development                                                                                           $  15,695,127



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Through December 31, 2021, there were no sales from the Perth project. The project was fully sold during year ended December 31, 2022.


In 2021, our subsidiary Alset EHome Inc. acquired approximately 19.5 acres of
partially developed land near Houston, Texas which will be used to develop a
community named Alset Villas ("Alset Villas"). Alset EHome is targeting to
develop approximately 63 homes at Alset Villas for rent and/or for sale. The
Alset Villas project is currently in the engineering and design phase to achieve
final record plat.

Results of Operations

Summary of Consolidated Statements of Operations and Other Comprehensive Loss for the Years Ended December 31, 2022 and 2021


                         Years Ended December 31,
                         2022               2021
Revenue              $   4,480,442     $   19,798,822

Operating Expenses (11,569,816 ) (34,792,944 ) Other Expenses (39,123,131 ) (103,489,455 ) Income Tax Expense

               -           (534,014 )
Net Loss             $ (46,212,505 )   $ (119,017,591 )



Revenue

The following table sets forth period-over-period changes in revenues for each
of our reporting segments:

                                        Years Ended December 31,                    Change
                                          2022             2021            Dollars         Percentage
Real Estate                           $  3,088,628     $ 14,213,379     $ (11,124,751 )            -78 %
Digital Transformation Technology           69,915                -

69,915 100 %
Biohealth 753,651 5,543,066 (4,789,415 ) -86 %
Other 568,248 42,377 525,871 1,241 %
Total revenue $ 4,480,442 $ 19,798,822 $ (15,318,380 ) -77 %

Revenue was $4,480,442 and $19,798,822 for the years ended December 31, 2022 and
2021, respectively. A decrease in property sales and direct sales from our
indirect subsidiary HWH World in the 2022 contributed to lower revenue in this
period. In the year ended December 31, 2022 the last three homes in Ballenger
Project were sold. In this project, builders were required to purchase a minimum
number of lots based on their applicable sale agreements. We collected 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 Run
project lots, decreased from $289,375 in the year ended December 31, 2021 to
$126,737 in year ended December 31, 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 the rental business was $1,810,011 and $327,296 for the years ended
December 31, 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 South Korean
market through one of the subsidiaries of HWH International Inc., HWH World Inc
("HWH World"). HWH World operates based on a direct sale model of health
supplements. HWH World recognized $753,651 and $5,543,066 in revenue in the
years ended December 31, 2022 and 2021, respectively.

The category described as "Other" includes corporate and financial services,
food and beverage business 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, food and beverage businesses and new venture businesses
are small and diversified, and accordingly they are not separately addressed as
one independent category. In the years ended December 31, 2022 and 2021, the
revenue from other businesses was $568,248 and $42,377, respectively, generated
by Korean and Singaporean café shops and restaurants.

Operating Expenses

The following table sets forth period-over-period changes in cost of revenue for each of our reporting segments:



                                        Years Ended December 31,                   Change
                                          2022             2021           Dollars         Percentage
Real Estate                           $  3,016,200     $ 11,073,756     $ (8,057,556 )            -73 %


Digital Transformation Technology           23,423                -


  23,423              100 %
Biohealth                                  523,534          214,019          309,515              145 %
Other                                      168,833           14,039          154,794            1,103 %


Total cost of sales                   $  3,731,990     $ 11,301,814     $ (7,569,824 )            -67 %



Cost of revenue decreased from $11,301,814 in the year ended December 31, 2021
to $3,731,990 in the year ended December 31, 2022, as a result of the decrease
in the number of lots sold in the Ballenger Run and sales in HWH World business.
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 decreased from $8,497,008 to $748,452 in the years ended December 31, 2021 and 2022, respectively. The decrease of gross margin was caused by the decrease of gross margin of HWH World, mostly due to the decrease in the sales and from decrease in property sales.

The following table sets forth period-over-period changes in operating expenses for each of our reporting segments.



                                                 Years
                                           Ended December 31,                      Change
                                         2022             2021            Dollars         Percentage
Real Estate                           $ 1,479,674     $  1,136,031     $     343,643               30 %


Digital transformation technology         414,167          183,429


 230,738              126 %
Biohealth                                 850,044        3,624,200        (2,774,156 )            -77 %
Other                                   5,093,941       18,547,470       (13,422,592 )            -72 %
Total operating expenses              $ 7,837,826     $ 23,491,130     $ (15,653,304 )            -67 %



The decrease in sales related expenses and bonuses in our businesses contributed
to decreased operating expenses in the year ended December 31, 2022, as compared
to the year ended December 31, 2021.

47






Other Income (Expense)



In the year ended December 31, 2022, the Company had other expense of
$39,123,131 compared to other expense of $103,489,455 in the year ended December
31, 2021. The change in unrealized loss from related party securities investment
and financing costs are the primary reasons for the volatility in these two
periods. Unrealized loss on related party securities investment was $23,556,219
in year ended December 31, 2022, compared to $47,231,084 loss in the year ended
December 31, 2021. Finance costs were $450,000 in the year ended December 31,
2022, compared to $50,871,869 in the year ended December 31, 2021. Finance costs
in both years were related to the amortization of beneficial conversion feature
(BVC).



Net Loss

In the year ended December 31, 2022, the Company had net loss of $46,212,505 compared to net loss of $119,017,591 in the year ended December 31, 2021.

Liquidity and Capital Resources





Our real estate assets have increased to $54,618,729 as of December 31, 2022,
from $40,515,380 as of December 31, 2021. This increase primarily reflects the
acquisition of 132 new rental properties during 2022 and 2021. Our cash has
decreased from $56,061,309 as of December 31, 2021 to $17,827,383 as of December
31, 2022. Our liabilities decreased from $13,920,357 at December 31, 2021 to
$4,827,221 at December 31, 2022. Our total assets have decreased to $153,490,336
as of December 31, 2022 from $184,210,143 as of December 31, 2021 due to the
decrease in cash.


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
the 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 a $2,600,000 collateral fund and a
Deed of Trust issued to the Lender on the property owned by SeD Maryland. On
March 15, 2022, approximately $2,300,000 was released from collateral, leaving
approximately $300,000 as collateral for outstanding letters of credit.



On June 18, 2020, Alset EHome Inc. entered into a Loan Agreement with M&T Bank.
Pursuant to this Loan Agreement, M&T Bank provided a non-revolving loan to Alset
EHome Inc. in an aggregate amount of up to $2,990,000. Repayment of this loan
was secured by a deed of trust issued to the Lender on the property owned by
certain subsidiaries of Alset EHome Inc. Certain subsidiaries of our company
were the guarantors of this loan. The loan was closed in June 2021.



On February 11, 2021, the Company entered into a term 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 sixteen months of
principal and interest 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 was unsecured and guaranteed by the United States Small
Business Administration. The Company applied to M&T Bank for forgiveness of the
PPP Term Note, with the amount which may be forgiven equal to at least 60% of
payroll costs and other eligible payments incurred by the Company, calculated in
accordance with the terms of the CARES Act. In April 2022 the Company received
confirmation that the PPP Loan was fully forgiven.



From January to December 2021, the Company sold 280,000 shares of Hapi Metaverse
to international investors with the amount of $478,300, which was booked as
addition paid-in capital. The Company held 505,667,376 shares of the 506,898,576
outstanding shares before the sale. After the sale, the Company still owns
approximately 99% of Hapi Metaverse's total outstanding shares.



48

The management believes that the available cash on hand, available debt and equity financing are sufficient to fund our operations for at least the next 12 months.

Summary of Cash Flows for the Years Ended December 31, 2022 and 2021





                                               Years Ended December 31,
                                                2022              2021
Net cash used in operating activities       $ (31,855,435 )   $ (16,684,360 )
Net cash used in investing activities       $ (15,123,041 )   $ (56,044,001 )
Net cash provided by financing activities   $   6,057,481     $ 103,417,404

Cash Flows from Operating Activities





Net cash used in operating activities was $31,855,435 in the year ended December
31, 2022, as compared to net cash used in operating activities of $16,684,360 in
the same period of 2021. The purchase of trading securities for investment
purposes and high property development costs explained the increased cash flow
used in operating activities during year 2022.

Cash Flows from Investing Activities


Net cash used in investing activities was $15,123,041 in the year 2022, as
compared to net cash used in investing activities of $56,044,001 in the same
period of 2021. In the year ended December 31, 2022 we invested $8,429,620 in
marketable securities, $6,824,730 to purchase real estate properties and
improvements and $377,864 in promissory notes to a related party. At the same
time, we received approximately $1 million from a related party loan receivable.
In the year ended December 31, 2021 we invested $19,390,318 in marketable
securities, $25,362,146 to purchase real estate properties and $11,878,605 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.

Cash Flows from Financing Activities


Net cash provided by financing activities was $6,057,481 in the year ended
December 31, 2022, compared to net cash provided of $103,417,404 the year ended
December 31, 2021. Cash provided by financing activities in the year 2022 is
primarily related the proceeds from stock issuance of $6,213,000 and borrowing
from a commercial loan of $123,633. Additionally, the Company repaid $279,152 to
note payable. The increase in cash provided by financing activities in the year
2021 is primarily caused by the proceeds from stock issuance of $104,565,659 and
exercise of subsidiary warrants of $3,249,339. During the year ended December
31, 2021, we also received cash proceeds of $280,000 from the sale of our Hapi
Metaverse shares to individual investors and $68,502 from a loan. Additionally,
the Company distributed $2,549,750 to one minority interest investor, borrowed
$5,545,495 from related parties and repaid $7,057,324 to related parties.

Real Property Financing Arrangements

Through Alset International, we have three property development projects. Ballenger Run and Black Oak projects are the major projects.





The Company anticipates that the estimated construction costs (not including
land costs and financing costs) for the final phases of the Ballenger Run
project will be $0.2 million. The expected completion date for the final phases
of the Ballenger Run project is June of 2023.



At the present time, the Company is also considering expanding its current
policy of selling buildable lots to include a strategy of building housing for
sale or rent, particularly at our Black Oak and Alset Villas properties. The
required time and expenses needed to complete the Black Oak and Alset Villas
projects will be influenced by the strategy, or mix of strategies, we utilize at
each project.

Our Perth project in Australia was relatively small, and based on management's recommendations the land was sold in 2022.





49






Black Oak



Black Oak is a land infrastructure and subdivision project situated in Magnolia,
Texas, north of Houston. This project is owned by certain subsidiaries of Alset
International. Currently the Black Oak project does not have any financing


from
third parties.



Ballenger Run

The Company's Ballenger Run project is nearly complete, as all lots have been sold and the Company is completing its final tasks related to the project.





In November 2015, through LiquidValue Development, we completed the $15.7
million acquisition of Ballenger Run, a 197-acre land subdivision development
located in Frederick County, Maryland. Previously, on May 28, 2014, the RBG
Family, LLC entered into the Assignable Real Estate Sales Contract with NVR,
Inc. ("NVR") by which RBG Family, LLC would sell the 197 acres for $15 million
to NVR. On December 10, 2014, NVR assigned this contract to SeD Maryland
Development, LLC in the Assignment and Assumption Agreement and entered into a
series of Lot Purchase Agreements by which NVR would purchase subdivided lots
from SeD Maryland Development, LLC (the "Lot Purchase Agreements").



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 of 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 $900,000. The L/C commission is 1.5% per annum on the face amount of
the L/C. Other standard lender fees will apply in the event the L/C is drawn
down. 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 $2.6
million collateral fund and a Deed of Trust issued to the Lender on the property
owned by SeD Maryland. On March 15, 2022, approximately $2,300,000 was released
from collateral, leaving approximately $300,000 as collateral for outstanding
letters of credit.


As of December 31, 2022 and 2021, the principal balance of the loan was $0.

Equity Security Investments

Investment Securities at Fair Value





The Company commonly 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. Certain of the Company's investments in marketable equity securities and
other securities are long-term, strategic investments in companies that are in
various stages of development.



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, 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 True 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 4.3% of the common shares of AMBS and owned 15.5% of True Partner
in 2021. The stock fair value is determined by quoted stock prices.



50






On April 12, 2021, the Company acquired 6,500,000 common shares of Value
Exchange International, Inc. ("Value Exchange International"), an OTC listed
company, for an aggregate subscription price of $650,000. On October 17, 2022
the Company purchased additional 7,276,163 common shares of Value Exchange
International for an aggregate purchase price of $1,743,734. After these
transactions the Company owns approximately 38.3% of Value Exchange
International and exercises significant influence over it. Our Chief Executive
Officer, Chan Heng Fai, is also an owner of the common stock of Value Exchange
International (not including any common shares we hold). Additionally, certain
members of our board of directors serve as directors of Value Exchange
International. The stock's fair value is determined by quoted stock prices.



During the year ended December 31, 2021, the Company's subsidiaries established
a portfolio of trading securities. The objective is to generate profits on
short-term differences in market prices. The Company does not have significant
influence over any trading securities in our portfolio and fair value of these
trading securities are 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. Holista CollTech Limited ("Holista"), DSS Inc. ("DSS") and New
Electric CV Corporation("NECV", formerly known as "American Premium Mining
Corporation" or "APM")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 we owned approximately 45.2%
of the common stock of DSS as of December 31, 2022, and our Chief Executive
Officer, Chan Heng Fai, is an owner of the common stock of DSS (not including
any common or preferred shares we hold). In addition, our Chief Executive
Officer is the Chairman of the Board of Directors of DSS. Chan Tung Moe, our
Co-Chief Executive Officer and the son of Chan Heng Fai, is also a director of
DSS. The Company did not have a controlling interest and therefore the Company's
investment would be accounted for under equity method accounting or could elect
the fair value option accounting.



The Company had significant influence over Holista as the Company and its CEO
are the beneficial owner of approximately 15.5% of the outstanding shares of
Holista and our CEO had a position on the Board of Directors of Holista from
July of 2013 until June of 2021. The Company did not have a controlling interest
and therefore the Company's investment would be accounted for under equity
method accounting or could elect the fair value option accounting.



The Company has significant influence over NECV as the Company is the beneficial
owner of approximately 0.8% of the common shares of NECV and one officer from
the Company holds an executive and director position of NECV's board.
Additionally, our Chief Executive Officer, Chan Heng Fai, is also an owner of
the common stock of NECV (not including any common shares we hold). The Company
did not have a controlling interest and therefore the Company's investment would
be accounted for under equity method accounting or could elect the fair value
option accounting.



The Company has elected the fair value options for the equity securities noted
above that would otherwise be accounted for under the equity method of
accounting to better match the measurement of assets and liabilities in the
Consolidated Statements of Operations. Value Exchange International, Holista and
DSS are publicly traded companies and fair value of these equity investments is
determined by the quoted stock prices. On December 31, 2022 and 2021, the fair
value (calculated by market trading prices on the end dates of the periods) of
total held equity stock of Value Exchange International, Holista and DSS was
$13,503,533 and $16,821,636, respectively.



On March 2, 2020, and October 29, 2021, 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 two $200,000 promissory
notes. For further details on this transaction, refer to Note 8 to Company's
Financial Statements, Related Party Transactions, Note Receivable from a Related
Party Company. As of December 31, 2022 and 2021, AMRE was a private company.
Based on management's analysis, the fair value of the warrants and the stock
option was $0 as of December 31, 2021. In March 2022, both loans, together with
warrants were converted into common shares of AMRE. After the conversion, the
Company owns approximately 15.8% of AMRE.



51






The Company held 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 by
Vivacitas. As of December 31, 2020, Vivacitas was a private company. On March
18, 2021 the Company sold the subsidiary holding the ownership and stock option
in Vivacitas to an indirect subsidiary of DSS. For further details on this
transaction, refer to Note 8 - Related Party Transactions, Sale of Investment in
Vivacitas to DSS.



On July 17, 2020, the Company purchased 122,039,000 shares, approximately 9.99%
ownership, and 1,220,390,000 warrants with an exercise price of $0.0001 per
share, from NECV, for an aggregated purchase price of $122,039. We value NECV
warrants under level 3 category through a Black Scholes option pricing model and
the fair value of the warrants from NECV were $860,342 as of July 17, 2020, the
purchase date and $327,565 and $1,009,854 as of December 31, 2022 and 2021,
respectively.



The Company accounts for certain of its investments in funds without readily
determinable fair values in accordance with ASU No. 2015-07, Fair Value
Measurement (Topic 820): Disclosures for Investments in Certain Entities That
Calculate Net Asset Value per Share (or Its Equivalent) ("2015-07"). In the
first six months of 2022 the Company invested $100,000 in Class A Shares of
Novum Alpha Global Opportunity Digital Asset Fund I SP, a segregated portfolio
of Novum Alpha SPC ("Novum Alpha Fund"). This fund invests in long-short digital
assets. The Company subscribed in participating shares which are redeemable and
non-voting. The Company closed the fund in July 2022 recording $74,827 loss


on
this investment.

The changes in the fair values of the investment were recorded directly to accumulated other comprehensive income (loss). Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed.

Investment Securities at Cost



Investments in equity securities without readily determinable fair values are
measured at cost minus impairment adjusted by observable price changes in
orderly transactions for the identical or a similar investment of the same
issuer. These investments are measured at fair value on a nonrecurring basis
when there are events or changes in circumstances that may have a significant
adverse effect. An impairment loss is recognized in the consolidated statements
of comprehensive income equal to the amount by which the carrying value exceeds
the fair value of the investment.



The Company had an equity holding of 13.1% in Vivacitas Oncology Inc.
("Vivacitas"), a private company that is currently not listed on an exchange,
with a purchase cost of $200,128. 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.
Our ownership in Vivacitas was sold on March 18, 2021 to DSS for $2,480,000. The
difference of $2,279,872 between the selling price and our original investment
cost was recorded as additional paid capital considering a related party
transaction. For further details on this transaction, refer to Note 8 - Related
Party Transactions, Sale of Investment in Vivacitas to DSS.



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. 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 3,800 shares, approximately 19% ownership, from HWH World Company Limited (f.k.a. Hyten Global (Thailand) Co., Ltd.) ("HWH World Co."), a private company, at a purchase price of $42,562.


On May 31, 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.



52

There has been no indication of impairment or changes in observable prices via transactions of similar securities and is still carried at a cost.

Investment Securities under Equity Method Accounting





The Company accounts for equity investment in entities with significant
influence under equity-method accounting. Under this method, the Group's pro
rata share of income (loss) from investment is recognized in the consolidated
statements of comprehensive income. Dividends received reduce the carrying
amount of the investment. When the Company's share of loss in an equity-method
investee equals or exceeds its carrying value of the investment in that entity,
the equity method investment can be reduced below zero based on losses if the
Company either be liable for the obligations of the investee or provide for
losses in excess of the investment when imminent return to profitable operations
by the investee appears to be assured. Otherwise, the Company does not recognize
its share of equity method losses exceeding its carrying amount of the
investment, but discloses the losses in the footnotes. Equity-method investment
is reviewed for impairment by assessing if the decline in market value of the
investment below the carrying value is other-than-temporary. In making this
determination, factors are evaluated in determining whether a loss in value
should be recognized. These include consideration of the intent and ability of
the Group to hold investment and the ability of the investee to sustain an
earnings capacity, justifying the carrying amount of the investment. Impairment
losses are recognized in other expense when a decline in value is deemed to


be
other-than-temporary.



American Medical REIT Inc.

LiquidValue Asset Management Pte. Ltd. ("LiquidValue"), a subsidiary of the
Company owns 15.8% of American Medical REIT Inc. ("AMRE"), a 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. DSS, of which we own 45.2% and have significant influence over, owns 80.8%
of AMRE. Therefore, the Company has significant influence on AMRE.

American Pacific Bancorp, Inc.





Pursuant to Securities Purchase Agreement from March 12, 2021 the Company
purchased of 4,775,523 shares of the common stock of American Pacific Bancorp
Inc. ("APB") and gained majority ownership in that entity. APB was consolidated
into the Company under common control accounting (See Transactions between
Entities under Common Control for details). On September 8, 2021 APB sold
6,666,700 shares of Series A Common Stock to DSS, Inc. for $40,000,200 cash. As
a result of the new share issuances, the Company's ownership percentage of APB
fell below 50% to 41.3% and the entity was deconsolidated in accordance with ASC
810-10. Upon deconsolidation the Company elected to apply the equity method
accounting as the Company still retained significant influence. As a result of
the deconsolidation, the Company recognized gain of approximately $28.2 million.
The gain represents the difference between the fair value of retained equity
method investment of $30.8 million and $2.6 million, the Company's investment
percentage of carrying amount of APB's net assets of $2.9 million. Considering
the transaction was between related parties, the Company recorded the gain as
additional paid in capital in its equity. From September 8 to December 31, 2021,
the investment loss was $51,999. During the year ended December 31, 2022 the
investment gain was $867,117. As of December 31, 2022 and 2021, the investment
in APB was $31,668,246 and $30,801,129, respectively.



53

Alset Capital Acquisition Corp.





On February 3, 2022, Alset Capital Acquisition Corp. ("Alset Capital"), a
special purpose acquisition company (SPAC) sponsored by the Company and certain
affiliates, closed its initial public offering of 7,500,000 units at $10.00 per
unit (the "Offering"). At the same time the exercise of underwriters'
over-allotment option of additional 1,125,000 units closed. The Company is
majority owner of Alset Acquisition Sponsor, LLC, the sponsor (the "Sponsor") of
Alset Capital. On February 3, 2022, the Sponsor purchased 473,750 units pursuant
to a private placement for a purchase price of $4,737,500. Previously, the
Sponsor had purchased 2,156,250 shares of Class B common stock pursuant to a
private placement for a purchase price of $25,000. After the Offering the
Company holds 23.4% of Alset Capital. Chan Heng Fai, the Chairman and CEO of the
Company, is the CEO and director of Alset Capital. In June 2022, the Company
made an adjustment of $2,830,961 to Additional Paid in Capital and the fair
value of investment in Alset Capital, and reversed the previously recorded
unrealized loss of $237,578, because of the change of valuation methods of the
investment on Class B Common Stock and units the company held. Initially, the
Company used market trading prices of Class A common stock and units to
calculate the fair value of these investment securities and recorded $237,578
unrealized loss on security investment during three months ended March 31, 2022.
In June 2022, the Company determined the fair value of Class B common shares and
units by using a put option model and a Monte Carlo simulation considering some
restrictions and risks related to these securities the Company held. During the
year ended December 31, 2022, the Company recorded investment loss of $203,713
by equity method. On September 30, 2022 the Company purchased the remaining 10%
ownership in the Sponsor for $476,250 and currently owns 100% of it. The
Company's investment in Alset Capital was $21,111,575 as of December 31, 2022.



Ketomei Pte Ltd



On June 10, 2021 the Company's indirect subsidiary Hapi Cafe Inc. ("Hapi Cafe")
lent $76,723 to Ketomei Pte Ltd ("Ketomei"). On March 21, 2022 Hapi Cafe entered
into an agreement pursuant to which the principal of the loan together with
accrued interest were converted into an investment in Ketomei. At the same time,
Hapi Cafe invested an additional $179,595 in Ketomei. After the conversion and
fund investment the Company now holds 28% of Ketomei. Ketomei is in the business
of selling cooked food and drinks. During the year ended December 31, 2022 the
investment loss was $48,916. Investment in Ketomei was $207,402 at December


31,
2022.



Investment in Debt Securities



Debt securities are reported at fair value, with unrealized gains and losses
(other than impairment losses) recognized in accumulated other comprehensive
income or loss. Realized gains and losses on debt securities are recognized in
the net income in the consolidated statements of comprehensive income. The
Company monitors its investments for other-than-temporary impairment by
considering factors including, but not limited to, current economic and market
conditions, the operating performance of the companies including current
earnings trends and other company-specific information.



The Company invested $50,000 in a convertible promissory note of Sharing
Services Global Corporation ("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 was
$9,799 on December 31, 2021. The note was redeemed on July 14, 2022 and $50,000
principal together with $28,636 accrued interests were received from Sharing
Services.



On 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
December 31, 2021 and 2022, the Management estimated the fair value of the note
to be $88,599, the initial transaction price.



54






Variable Interest Entity



Under Financial Accounting Standards Board ("FASB") Accounting Standard
Codification ("ASC") 810, Consolidation, when a reporting entity is the primary
beneficiary of an entity that is a variable interest entity ("VIE"), as defined
in ASC 810, the VIE must be consolidated into the financial statements of the
reporting entity. The determination of which owner is the primary beneficiary of
a VIE requires management to make significant estimates and judgments about the
rights, obligations, and economic interests of each interest holder in the VIE.



The Company evaluates its interests in VIE's on an ongoing basis and
consolidates any VIE in which it has a controlling financial interest and is
deemed to be the primary beneficiary. A controlling financial interest has both
of the following characteristics: (i) the power to direct the activities of the
VIE that most significantly impact its economic performance; and (ii) the
obligation to absorb losses of the VIE that could potentially be significant to
it or the right to receive benefits from the VIE that could be significant


to
the VIE.



HWH World Company Limited

HWH World Co. is a direct sales company in Thailand. The Company has a 19%
ownership and lent a loan of $187,500 with zero interest and due on demand, to
HWH World Co. The current level of equity in HWH World Co. is not sufficient to
permit it to operate on its own without additional subordinated financial
support. The Company has a variable interest in HWH World Co. However, the
Company is not deemed to absorb losses or receive benefits that could
potentially be significant to HWH World Co. Ltd. Moreover, the Company does not
have the ultimate power over the activities which can impact VIE's economic
performance, like developing company budgets or overseeing and controlling the
management. The power to direct the activities are held by the manager in
Thailand who owns 51% of the HWH World Co. Therefore, the Company is not a
primary beneficiary of this VIE and does not consolidate it. On December 31,
2022 and 2021 variable interest and amount receivable in the non-consolidated
VIE was $236,699 and $236,699, respectively, which represents the Company's
maximum risk of loss from non-consolidated VIE. The Company applied ASC 321 and
measured HWH World Co. investment 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.



American Medical REIT Inc.



In 2021 the Company owned 3.4% of AMRE and made a loan in the amount of
$8,350,000 to AMRE, as well as two loans of $200,000 each, all with 8% per annum
interest rate. One of the $200,000 loans was due on March 3, 2022, the other one
is due on October 29, 2024. The $8,350,000 loan is due on November 29, 2023. The
Company has a variable interest in AMRE. However, the Company is not deemed to
absorb losses or receive benefits that could potentially be significant to AMRE.
The Company does not also have the ultimate power over the activities which can
impact VIE's economic performance, like developing company budgets or overseeing
and controlling the management. The power to direct these activities are held by
the AMRE's largest shareholder which owns approximately 80.8% of AMRE and AMRE's
management team. Therefore, the Company is not a primary beneficiary of this VIE
and does not consolidate it. In March 2022, the Company converted both $200,000
loans and accrued interests, together with accompanying warrants into AMRE
common shares. After the conversion the Company owns 15.8% of AMRE. On July 12,
2022, pursuant to Assignment and Assumption Agreement from February 25, 2022, as
amended on July 12, 2022, the Company sold the $8,350,000 loan, together with
accrued interest, to DSS for a purchase price of 21,366,177 shares of DSS's
common stock. The loss from this transaction of $1,089,675 was calculated as the
difference between the face value of promissory note together with accrued
interest and the fair value of DSS stock on July 12, 2022, and was recorded
under Other Expense in Statement of Operations. On December 31, 2022 and 2021
variable interest and amount receivable in the non-consolidated VIE was $0 and
$8,901,285, respectively, which represents the Company's maximum risk of loss
from non-consolidated VIE.



55






Impact of Inflation



We believe that inflation has not had a material impact on our results of
operations for the years ended December 31, 2022 and 2021. 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 Singapore to the United States and
which were approximately $51 million and $45 million on December 31, 2022 and
2021, 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
Singapore and United States will remain at approximately $51 million over the
next year, we expect this fluctuation of foreign exchange rates to still
significantly impact the results of operations in the year 2023, 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.

Market Closed - Nasdaq Other stock markets 04:30:00 2024-05-03 pm EDT			5-day change	1st Jan Change
0.505 ^USD	-0.98%		-14.39%	-50.97%

Apr. 29	Alset International Sets UP JV Company	MT
Apr. 16	Alset International Posts Wider 2023 Loss in Audited Results	MT

Alset International Sets UP JV Company	Apr. 29	MT
Alset International Posts Wider 2023 Loss in Audited Results	Apr. 16	MT
Alset International Arm Changes Name to Alset eVehicle	Apr. 05	MT
Alset Inc. Reports Earnings Results for the Full Year Ended December 31, 2023	Apr. 01	CI
Alset Inc. Announces Resignation of Anthony S. Chan as Chief Operating Officer	Mar. 14	CI
Alset International Closes Merger of HWH International with Alset Capital Acquisition	Jan. 12	MT
Alset Inc. entered binding term sheet to acquire New Energy Asia Pacific Inc. from Heng Fai Chan for approximately $100 million.	Dec. 12	CI
Singapore Shares Return to Black as Q3 GDP Climbs 1.1%; Starhill Global REIT Climbs 1% on SG$50 Million Credit Facility	Nov. 22	MT
Alset International Sells Minority Stake in HWH International for $16 Million; Shares Jump 5%	Nov. 22	MT
Alset International Unit Agrees to Buy Texas Lots for Over $11 Million	Nov. 21	MT
Alset Inc. Reports Earnings Results for the Third Quarter and Nine Months Ended September 30, 2023	Nov. 14	CI
Alset Capital Acquisition Corp. Jumped 7.7% After-Market Wednesday Following 6.7% Dive in Previous Regular Trading Session	23-09-28	MT
Alset Capital Acquisition Corp. Extends Redemption Deadline to Sept. 28	23-09-13	MT
Alset International Sets Up Subsidiary in Singapore	23-09-06	MT
Singapore Stocks Return to Green; Alset International Rises 15% on Receiving Bonus Shares of Impact Biomedical	23-08-31	MT
Alset International Receives Bonus Shares of US-Based Healthcare Company; Shares Surge 12%	23-08-31	MT
Alset Inc. Reports Earnings Results for the Second Quarter and Six Months Ended June 30, 2023	23-08-14	CI
Insider Buy: Alset	23-06-01	MT
Alset Inc. Reports Earnings Results for the First Quarter Ended March 31, 2023	23-05-15	CI
Alset Inc. Reports Earnings Results for the Full Year Ended December 31, 2022	23-03-31	CI
Alset International Flags Losses for 2022	23-02-27	MT
Hapi Metaverse Inc. announced that it expects to receive $1.4 million in funding from Alset Inc.	23-02-22	CI
Alset International's Stepdown Unit to be Struck Off	23-02-14	MT
Insider Buy: Alset	23-02-09	MT
Top Midday Decliners	23-02-06	MT

	1st Jan change	Capi.
ALSET INC.	-50.97%	4.66M
FORESTAR GROUP INC.	+1.51%	1.7B
SAHA PATHANA INTER-HOLDING	-2.81%	1.08B
ONE UNITED PROPERTIES SA	-10.73%	707M
TIELING NEWCITY INVESTMENT HOLDING (GROUP) LIMITED	-43.75%	195M
ALPHAVILLE S.A.	-21.65%	146M
SKYWORLD DEVELOPMENT	+13.64%	132M
KESAR INDIA LIMITED	+180.04%	125M
AMREP CORPORATION	-5.55%	109M
MAXIM GLOBAL	+4.00%	60.48M

Alset Inc.

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