UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from __________ to __________
Commission File No.
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction | (I.R.S. Employer | |
| of incorporation or organization) | Identification No.) |
| (Address of Principal Executive Offices, including zip code) |
| (Registrant’s telephone number, including area code) |
| N/A |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| The |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ | Large accelerated filer | ☐ | Accelerated filer | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark
if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐
No
As of May 15, 2025, there were shares of Common Stock, par value $ per share of the Company issued and outstanding.
HWH INTERNATIONAL INC.
Form 10-Q For the Quarter Ended March 31, 2025
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
HWH International Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| March 31, 2025 (Unaudited) | December 31, 2024 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Account receivable, net | ||||||||
| Inventory | ||||||||
| Other receivables, net | ||||||||
| Deposit | ||||||||
| Convertible loans receivable - related party, at fair value | ||||||||
| Investment security – related party | ||||||||
| Prepaid expenses | ||||||||
| Total Current Assets | $ | $ | ||||||
| Non-Current Assets | ||||||||
| Property and equipment, net | $ | $ | ||||||
| Deposit | ||||||||
| Investment at cost | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Total Non-Current Assets | $ | $ | ||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued commissions | ||||||||
| Due to related parties, net | ||||||||
| Operating lease liabilities - current | ||||||||
| Notes payable - current | ||||||||
| Deferred revenue | ||||||||
| Total Current Liabilities | $ | $ | ||||||
| Non-Current Liabilities | ||||||||
| Operating lease liabilities - non-current | $ | $ | ||||||
| Total Non-Current Liabilities | $ | $ | ||||||
| Commitments and Contingencies (Note 13) | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred stock, $ par value; shares authorized; issued and outstanding as of March 31, 2025 and December 31, 2024 | ||||||||
| Common stock, $ par value; shares authorized; and issued and outstanding as of March 31, 2025 and December 31, 2024* | ||||||||
| Additional paid in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total HWH International Inc. Stockholders’ Equity | $ | $ | ||||||
| Non-controlling interests | ||||||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
| * |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 1 |
HWH International Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Other Comprehensive Loss
For the Three Months Ended March 31, 2025 and 2024 (Unaudited)
Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |||||||
| Revenue | $ | 295,197 | $ | 286,110 | ||||
| Cost of revenue | $ | (147,603 | ) | $ | (122,813 | ) | ||
| Gross profit | $ | $ | ||||||
| Operating expenses: | ||||||||
| General and administrative expenses | $ | ( | ) | $ | ( | ) | ||
| Impairment of convertible note receivable – related party, and equity method investment - related party | ( | ) | ||||||
| Impairment loss on goodwill | ( | ) | ||||||
| Total Operating expenses | $ | ( | ) | $ | ( | ) | ||
| Other income (expense) | ||||||||
| Other income | $ | $ | ||||||
| Interest expense | ( | ) | ( | ) | ||||
| Foreign exchange transaction gain (loss) | ( | ) | ||||||
| Loss on equity method investment - related party | ( | ) | ||||||
| Unrealized gain on convertible note receivable – related party | ||||||||
| Total Other income (expense) | $ | $ | ( | ) | ||||
| Loss before provision for income taxes | ( | ) | ( | ) | ||||
| Income taxes | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Less: Net (loss) income attributable to non-controlling Interests | ( | ) | ||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | ||
| Net Loss | ( | ) | ( | ) | ||||
| Other comprehensive income, net of tax: | ||||||||
| Foreign currency translation adjustment | $ | ( | ) | $ | ||||
| Total comprehensive loss, net of tax: | $ | ( | ) | $ | ( | ) | ||
| Less Comprehensive (loss) income attributable to non-controlling interests | ( | ) | ||||||
| Total Comprehensive loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | ||
Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |||||||||||||||||||||||
| Common stock | Class A common stock | Class B common stock | Common stock | Class A common stock | Class B common stock | |||||||||||||||||||
| Loss per common share | ||||||||||||||||||||||||
| Basic | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||
| Diluted | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||
| Weighted average number of common shares outstanding* | ||||||||||||||||||||||||
| Basic | ||||||||||||||||||||||||
| Diluted | ||||||||||||||||||||||||
| * |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 2 |
HWH International Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
For the Three Months Ended March 31, 2025 and 2024
(Unaudited)
Class A Common stock | Class B Common stock | Common Stock | Additional | Accumulated Other | Total HWH International Inc. | Non- | Total | |||||||||||||||||||||||||||||||||||||||||
| Shares | Par Value $0.0001 | Shares | Par Value $0.0001 | Shares | Par Value $0.0001 | Paid in Capital | Comprehensive Loss | Accumulated Deficit | Stockholders’ Equity | controlling interests | Stockholders’ | |||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | | $ | $ | | |||||||||||||||||||||||||||||||||||
| Issuance of Common Stock | - | - | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Warrants exercised to Common Stock | - | - | $ | $ | ) | $ | $ | |||||||||||||||||||||||||||||||||||||||||
| Revaluation for SHRG note receivable and warrants | - | - | - | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Acquisition of LEH Insurance Group LLC | - | - | - | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Balances at March 31, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
Class A Common stock | Class B Common stock | Common Stock | Additional | Accumulated Other | Total HWH International Inc. | Non- | Total | |||||||||||||||||||||||||||||||||||||||||
| Shares | Par Value $0.0001 | Shares | Par Value $0.0001 | Shares | Par Value $0.0001 | Paid in Capital | Comprehensive Loss | Accumulated Deficit | Stockholders’ Deficit | controlling interests | Stockholders’ Deficit | |||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2023 | $ | | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of Common Stock to EF Hutton for Deferred Underwriting Compensation | - | - | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of Common Stock during Merger | - | - | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||
| Convert Common Stock Class A and B to Common Stock | ( | ) | $ | ( | ) | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||||
| Revaluation for SHRG note receivable and warrants | - | - | - | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||
| Change in Non-Controlling Interest Ketomei | - | - | - | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | $ | $ | $ | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Balances at March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 3 |
HWH International Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2025 and 2024 (Unaudited)
Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Foreign exchange transaction (gain) loss | ( | ) | ||||||
| Loss on equity method investment, related party | ||||||||
| Depreciation expense | ||||||||
| Non-cash lease expense | ||||||||
| Impairment of convertible note receivable – related party, and equity method investment - related party | ||||||||
| Impairment loss on goodwill | ||||||||
| Unrealized gain on convertible note receivable – related party | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Account receivables | ( | ) | ||||||
| Other receivables | ( | ) | ||||||
| Prepaid expenses | ||||||||
| Deposit | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ||||||||
| Accrued commissions | ( | ) | ||||||
| Deferred revenue | ||||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | $ | ( | ) | $ | ( | ) | ||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | $ | $ | ( | ) | ||||
| Convertible loans receivable - related party | ( | ) | ( | ) | ||||
| Net cash used in investing activities | $ | ( | ) | $ | ( | ) | ||
| Cash flows from financing activities: | ||||||||
| Repayment of loans and borrowing | $ | ( | ) | $ | ( | ) | ||
| Repayment of deferred underwriting compensation | ( | ) | ||||||
| Advances from related parties | ( | ) | ||||||
| Proceed from issuance of Common Stock and Warrants | ||||||||
| Net cash provided by financing activities | $ | $ | ||||||
| Net decrease in cash | $ | ( | ) | $ | ( | ) | ||
| Effects of foreign exchange rate on cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental Cash Flow Information | ||||||||
| Cash Paid for Interest | $ | $ | ||||||
| Cash Paid for Taxes | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||||
| Issuance of HWH Common Stock to D. Boral Capital (f.k.a. EF Hutton) for Deferred Underwriting Compensation | $ | $ | ||||||
| Issuance of Common Stock | $ | $ | ( | ) | ||||
| Valuation gain (loss) from notes receivable and warrants - SHRG | $ | $ | ( | ) | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 4 |
HWH International Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
For the Three Months Ended March, 2025 and 2024
(Unaudited)
NOTE 1 — DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS
HWH International Inc. (“HWH”) and its consolidated subsidiaries (collectively, the “Company”) operate a food and beverage (“F&B”) business in Singapore and South Korea. The F&B business operates four cafés, two of which are located in South Korea and two in Singapore, as well as an online healthy food store serving customers in Singapore.
HWH International Inc. was originally incorporated in Delaware on October 20, 2021 under the name Alset Capital Acquisition Corp. The Company was 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 (the “Business Combination”). The Company consummated the Business Combination on January 9, 2024 and changed its name from “Alset Capital Acquisition Corp.” to “HWH International Inc.” The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
On September 9, 2022, the Company entered into an agreement and plan of merger (the “Merger Agreement”) by and among the Company, HWH International Inc., a Nevada corporation (the “HWH Nevada” or “Target”) and HWH Merger Sub Inc., a Nevada corporation and a wholly owned subsidiary of the Company (“Merger Sub”). The Company and Merger Sub are sometimes referred to collectively as the “ACAX Parties.” Pursuant to the Merger Agreement, the Business Combination between the Company and the Target was effected through the merger of Merger Sub with and into HWH Nevada, with the Target surviving the merger as a wholly owned subsidiary of the Company (the “Merger”). Upon the closing of the Merger (the “Closing”) on January 9, 2024, the Company changed its name to “HWH International Inc.” The board of directors of the Company (i) approved and declared advisable the Merger Agreement, the Ancillary Agreements (as defined in the Merger Agreement) and the transactions contemplated thereby and (ii) resolved to recommend approval of the Merger Agreement and related transactions by the stockholders of the Company.
The Target was owned and controlled by certain member officers and directors of the Company and its Sponsor. The Merger was consummated following the receipt of the required approval by the stockholders of the Company and the shareholders of the Target and the satisfaction of certain other customary closing conditions.
The total consideration paid at
Closing (the “Merger Consideration”) by the Company to the Target’s shareholders was $
On January 6, 2025, the Company announced the closing
of its previously disclosed public offering of shares of common stock, par value $ per share (the “Shares”)
and pre-funded warrants to purchase shares of common stock (“Pre-Funded Warrants”). The Shares and Pre-Funded Warrants
were offered at a public offering price of $ per share and $ per Pre-Funded Warrant, respectively. The Pre-Funded Warrants are
exercisable immediately upon issuance and have an exercise price of $
D. Boral Capital LLC (“D. Boral Capital”)
acted as the exclusive placement agent for the offering. Pursuant to the Placement Agency Agreement, the Company paid D. Boral Capital
a cash fee equal to
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These interim financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the year ending December 31, 2025 or any other interim periods or for any other future years. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Form 10-K for the year ended December 31, 2024 filed on March 31, 2025.
| 5 |
The condensed 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.
The following chart describes the Company’s ownership of various subsidiaries:
The Company mainly focuses on
the F&B business. During the three months ended March 31, 2025 and 2024, substantially all of the Company’s business was generated
by F&B business. F&B business was generated by the following subsidiaries at March 31, 2025 and 2024, respectively:
| 6 |
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Functional and Reporting Currency
The functional and reporting currency of the Company is the United States dollar (“$”). The financial records of the Company’s subsidiaries located in South Korea, Singapore, Hong Kong and Malaysia are maintained in their local currencies, the Korean Won (₩), Singapore Dollar (S$), Hong Kong Dollar (HK$) and Malaysian Ringgit (MYR), which are also the functional currencies of these entities.
Use of Estimates
The preparation of the financial statements in conformity with US GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the balance sheet, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term
investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had cash of $
| 7 |
Fair Value of Financial Instruments
The Company adopted Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures”, for assets and liabilities measured at fair value on a recurring basis. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data
Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions
For purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying values reported in balance sheets for current assets and liabilities approximate their estimated fair market values based on the short-term maturity of these instruments.
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 similar investments 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 condensed consolidated statements of comprehensive income equal to the amount by which the carrying value exceeds the fair value of the investment.
Inventory
Inventory is stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method and includes all costs in bringing the inventories to their present location and condition. Net realizable value is an estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. As of March 31, 2025 and December 31, 2024, inventory consisted of finished goods procured from suppliers. The Company continuously evaluates the need for reserve for obsolescence and possible price concessions required to write-down inventory to its net realizable value.
Leases
The Company follows FASB ASC Topic 842 in accounting for its operating lease right-of-use assets and operating lease liabilities. At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange of a consideration. To assess whether a contract is or contains a lease, the Company assesses whether the contract involves the use of an identified asset, whether it has the right to obtain substantially all of the economic benefits from the use of the asset and whether it has the right to control the use of the asset. The right-of-use assets and related lease liabilities are recognized at the lease commencement date. The Company recognizes operating lease expenses on a straight-line basis over the lease term. For leases that contain related non-lease components, such as maintenance, the Company will account for these payments as a single lease component.
Right-of-use of Assets
The right-of-use of asset is measured at cost, which comprises the amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and less any lease incentive received.
| 8 |
Lease Liabilities
Lease liability is measured at the present value of the outstanding lease payments at the commencement date, discounted using the Company’s incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise mainly of fixed lease payments.
Short-term Leases and Leases of Low Value Assets
The Company has elected to not recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less at inception and leases of low value assets. Lease payments associated with these leases are expensed as incurred.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost, less depreciation. Repairs and maintenance are expensed as incurred. Expenditures incurred as a consequence of acquiring or using the asset, or that increase the value or productive capacity of assets are capitalized. When property and equipment is retired, sold, or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in statement of operations. Depreciation is computed by the reducing balance method (after considering their respective estimated residual values) over the estimated useful lives of the respective assets as follows:
| Office Equipment | ||
| Furniture and Fittings | ||
| Kitchen Equipment | ||
| Operating Equipment | ||
| Leasehold Improvements |
The Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends, and prospects, as well as the effects of obsolescence, demand, competition, and other economic factors.
Deposit
Deposit represents rental deposit paid for the office and the cafes used.
Revenue Recognition
ASC 606 – Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers.
In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services. The provisions of ASC 606 include a five-step process by which the determination of revenue recognition, depicting the transfer of goods or services to customers in amounts reflecting the payment to which the Company expects to be entitled in exchange for those goods or services. ASC 606 requires the Company to apply the following steps:
(1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, performance obligations are satisfied.
The Company generates its revenue primarily from product sales and F&B business.
| 9 |
Product Sales: The Company’s performance obligation is to transfer ownership of its products to its customer. The Company generally recognizes revenue when product is delivered to its customers. Revenue is recorded net of applicable taxes, allowances, refunds or returns. The Company receives the net sales price in cash or through credit card payments at the point of sale.
If any customer returns a product to the Company on a timely basis, they may obtain a replacement product from the Company for such returned product. 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 customer has earned. The returns are deducted from our sales revenue on our financial statements. Allowances for product 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 returns for the three months ended March 31, 2025 and 2024 were both $0.
Food and Beverage: The
Company’s performance obligation is to transfer ownership of its F&B products to its customers. The Company generally recognizes
revenue when F&B products are delivered to its customers. Revenue is recorded net of applicable taxes, allowances, refunds or returns.
The Company receives the net sales price in cash or through credit card payments at the point of sale or from web-based ordering system.
The revenue received from Food and Beverage business for the three months ended March 31, 2025 and 2024 was $
Contract Assets and Liabilities
Below is a summary of the beginning and ending balances of the Company’s contract assets and liabilities as of March 31, 2024 and December 31, 2024.
| March 31, 2025 | December 31, 2024 | |||||||
| Deferred Revenue | ||||||||
| Balances at the beginning of the period | $ | $ | ||||||
| Movement for the period | ||||||||
| Balances at the end of the period | $ | $ | ||||||
The deferred revenue is generated from KPL, which was the prepaid orders from customers for deliver after March 31, 2025.
| 10 |
Value-added Tax
The Company is obligated to pay
value-added tax (“VAT”), among other things, on its inventory purchase as well as its rent payments and payment of professional
fees. As of March 31, 2025 and December 31, 2024, included in other receivables was VAT paid of $
Cost of Revenue
Cost of revenue consists of the cost of procuring finished goods from suppliers and related shipping and handling fees from 3rd party money platforms, and contractor fees for part-time staff.
Below is a breakdown of the Company’s cost of revenue for the three months ended March 31, 2025 and 2024.
For the three months ended:
| Total | ||||
| March 31, 2025 | ||||
| Finished goods | $ | |||
| Related shipping | ||||
| Handling fee | ||||
| Contractor fee | ||||
| Franchise commission | ||||
| Depreciation | ||||
| Total of Cost of revenue | $ | |||
| March 31, 2024 | ||||
| Finished goods | $ | |||
| Related shipping | ||||
| Handling fee | ||||
| Contractor fee | ||||
| Franchise commission | ||||
| Sales commission | ( | ) | ||
| Depreciation | ||||
| Total of Cost of revenue | $ | |||
Shipping and Handling Fees
The Company utilizes the practical expedient under ASC 606-10-25-18B to account for its shipping and handling as fulfillment activities, and not a promised service (a revenue element). Shipping and handling fees are included in costs of revenue within the statements of operations.
| 11 |
Advertising Expenses
Costs incurred for advertising
the Company’s products are charged to operations as incurred. Advertising expenses for the three months ended March 31, 2025 and
2024 were $
Income Taxes
The Company accounts for income taxes pursuant to the provision of ASC 740-10, “Accounting for Income Taxes” (“ASC 740-10”), which requires, among other things, assets and liabilities approach to calculating deferred income taxes. The assets and liabilities approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred tax assets will not be realized. Tax positions that meet the more likely than not recognition threshold are measured at the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority.
The Company follows the provision of ASC 740-10 related to Accounting for Uncertain Income Tax Positions. When tax returns are filed, there may be uncertainty about the merits of positions taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.
The Company has not recorded any unrecognized tax benefits. The Company’s policy is to recognize interest and penalties related to income taxes in income tax expense.
The Company presents basic and diluted earnings (loss) per share data for its common shares. Basic earnings (loss) per share is calculated by dividing the profit or loss attributable to common stock shareholders of the Company by the weighted-average number of common shares outstanding during the year, adjusted for treasury shares held by the Company.
Diluted earnings (loss) per share is determined by adjusting the profit or loss attributable to common stock shareholders and the weighted-average number of common shares outstanding, adjusted for treasury shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible securities, such as stock options, convertible bonds and warrants. During the three months ended March 31, 2025 there were potentially dilutive warrants outstanding. During the three months ended March 31, 2024 there were potentially dilutive warrants outstanding.
For the periods ended March 31, 2025 and 2024, basic and diluted earnings per share (EPS) were the same, which because the impact of potentially dilutive securities is anti-dilutive during periods of net loss, means they do not reduce the loss per share.
Non-controlling Interests
Non-controlling interests represent the equity in a subsidiary not attributable, directly or indirectly, to owners of the Company, and are presented separately in the Condensed Consolidated Statements of Operations and Other Comprehensive Loss, and within equity in the Condensed Consolidated Balance Sheets, separately from equity attributable to owners of the Company.
On March 31, 2025 and December
31, 2024, the aggregate non-controlling interests in the Company were $
| 12 |
Liquidity and Capital Resources
In the three months ended March 31, 2025, we incurred a net loss, a loss from operations and negative cash flow from operations as we expanded our business of operating cafés during the period. These factors raise substantial doubt about our ability to continue as a going concern.
Notwithstanding the above, the Company believes that the available cash in the Company’s bank accounts, anticipated cash from operations, and financing availability from related parties are sufficient to alleviate substantial doubt about the Company’s ability to continue as a going concern for at least the next 12 months. The Company’s capital requirements for the planned expansion are based on, among other items, location-specific property costs, team requirements, and marketing steps needed. Our expansion includes plans to take over leases of existing Hapi Cafes that we currently do not own, with a goal to add additional Hapi Cafes over the next two years. Executing these plans will require a minimum investment for each Hapi Café location. There is no guarantee, however, that we will be able to achieve these plans as described.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern and do not contain any adjustments that might be required should the Company be unable to continue as a going concern.
On April
24, 2024, the Company entered into a Credit Facility Agreement (the “Credit Agreement”) with Alset Inc., a Texas corporation
and the Company’s indirect, majority stockholder, pursuant to which Alset Inc. has provided the Company a non-revolving line of
credit facility (the “Credit Facility”), which provides a maximum, aggregate credit line of up to $
Pursuant
to the Credit Agreement, the Company may request an advance (each, an “Advance”) on the Credit Facility. Each Advance shall
bear a simple interest rate of three percent (
The Company has obtained letters of financial support from Alset Inc., a direct majority owner of the Company, respectively. Alset Inc. committed to provide any additional funding required by the Company and would not demand repayment through twelve months from the issuance of these condensed consolidated financial statements.
Accounting pronouncements pending adoption
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures (“ASU 2023-09”), expanding the disclosures requirement for income taxes primarily by requiring more detailed disclosure for income taxes paid and the effective tax rate reconciliation. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted, and adoption of ASU 2023-09 can be applied prospectively or retrospectively. The Company is currently evaluating the impact of this standard.
On November 4, 2024, the FASB issued ASU No. 2024-03, Expense Disaggregation Disclosures (“ASU 2024-03”). ASU 2024-03 amends ASC 220, Comprehensive Income to expand income statement expense disclosures and require disclosure in the notes to the financial statements of specified information about certain costs and expenses. ASU 2024-03 is required to be adopted for fiscal years commencing after December 15, 2026, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard on the Consolidated Financial Statements.
Segment Reporting
The Company reports its segment information to reflect the manner in which the CODM reviews and assesses performance. The Company’s Chief Executive Officer and President and Chief Operating Officer have joint responsibility as the CODM and review and assess the performance of the Company as a whole.
The primary financial measures used by the CODM to evaluate performance and allocate resources are net income (loss) and operating income (loss). The CODM uses net income (loss) and operating income (loss) to evaluate the performance of the Company’s ongoing operations and as part of the Company’s internal planning and forecasting processes. Information on Net income (loss) and Operating income (loss) is disclosed in the Consolidated Statements of Operations. Segment expenses and other segment items are provided to the CODM on the same basis as disclosed in the Consolidated Statements of Operations.
The CODM does not evaluate performance or allocate resources based on segment assets, and therefore such information is not presented in the notes to the financial statements.
| 13 |
NOTE 3 — ACCOUNTS RECEIVABLE, NET
Accounts receivable, net at March
31, 2025, December 31, 2024, March 31, 2024 and December 31, 2023 of $
NOTE 4 — INVENTORY
As of March 31, 2025 and December
31, 2024, the balance of finished goods was $
NOTE 5 — PROPERTY AND EQUIPMENT, NET
The components of property and equipment are as follows:
| Total | ||||
| March 31, 2025 | ||||
| Cost: | ||||
| Office Equipment | $ | |||
| Furniture and Fittings | ||||
| Kitchen Equipment | ||||
| Operating Equipment | ||||
| Leasehold Improvements | ||||
| Accumulated Depreciation: | ||||
| Office equipment | $ | ( | ) | |
| Furniture and Fittings | ( | ) | ||
| Kitchen Equipment | ( | ) | ||
| Operating Equipment | ( | ) | ||
| Leasehold Improvements | ( | ) | ||
| Impairment: | ||||
| Office equipment | $ | ( | ) | |
| Furniture and Fittings | ( | ) | ||
| Kitchen Equipment | ( | ) | ||
| Operating Equipment | ( | ) | ||
| Leasehold Improvements | ( | ) | ||
| Total, net | $ | |||
| December 31, 2024 | ||||
| Cost: | ||||
| Office Equipment | $ | |||
| Furniture and Fittings | ||||
| Kitchen Equipment | ||||
| Operating Equipment | ||||
| Leasehold Improvements | ||||
| Accumulated Depreciation: | ||||
| Office equipment | $ | ( | ) | |
| Furniture and Fittings | ( | ) | ||
| Kitchen Equipment | ( | ) | ||
| Operating Equipment | ( | ) | ||
| Leasehold Improvements | ( | ) | ||
| Impairment: | ||||
| Office equipment | $ | ( | ) | |
| Furniture and Fittings | ( | ) | ||
| Kitchen Equipment | ( | ) | ||
| Operating Equipment | ( | ) | ||
| Leasehold Improvements | ( | ) | ||
| Total, net | $ | |||
For the three months ended March
31, 2025 and 2024, the Company recorded depreciation expenses of $
NOTE 6 — INVESTMENTS 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. No impairment was recorded as of and for the three months ended March 31, 2025.
Ideal Food & Beverage Pte. Ltd.
On March 14, 2024, the Company
entered into a share subscription agreement through its subsidiary Alset F&B Holding Pte. Ltd. (“F&BH”) for
shares of Ideal Food & Beverage Pte. Ltd. (“IFBPL”), constituting
| 14 |
NOTE 7 – LOAN DUE TO THIRD PARTY
Loans for Operations
The Company’s subsidiary,
Ketomei Pte Ltd (“Ketomei”) has a loan from DBS Bank Limited, which was used to fund Ketomei’s current operations. Ketomei
owes the bank $
Promissory Note to EF Hutton LLC
On December 18, 2023, the Company
entered into a Satisfaction and Discharge of Indebtedness Agreement in connection with an underwriting agreement previously entered into
by HWH and EF Hutton LLC (“EF Hutton”) (now known as D. Boral Capital LLC), a division of Benchmark Investments, LLC, under
which in lieu of HWH tendering the full amount due of $
NOTE 8 — DUE TO ALSET INC.
Alset Inc (“AEI”)
is our ultimate holding company that is incorporated in the United States of America. The amount due to AEI represents short-term working
capital advances to the Company for its daily operations. There is no written, executed agreement and no financial/non-financial covenants
and the amount due to AEI is non-interest bearing. Since the amount due to AEI is due upon request, it is classified as a current liability.
The amounts due to AEI at March 31, 2025 and December 31, 2024 are $
On
April 24, 2024, the Company entered into a Credit Facility Agreement (the “Credit Agreement”) with Alset Inc., pursuant
to which AEI has provided the Company a line of credit facility (the “Credit Facility”) which provides a maximum,
aggregate credit line of up to $
Pursuant
to the Credit Agreement, the Company may request an advance (each, an “Advance”) on the Credit Facility. Each Advance shall
bear a simple interest rate of three percent (
On September
24, 2024, the Company entered into a Debt Conversion Agreement (the “AEI Conversion”) with Alset Inc., pursuant to which a
debt of $
NOTE 9 — DUE TO/FROM RELATED PARTIES
Due to Alset International Limited.
Alset International Limited (“AIL”)
is incorporated in Singapore and is a fellow subsidiary of the common parent company, Alset Inc. The amount due to AIL represents short-term
working capital advances to the Company for its daily operations. There is no written, executed agreement and no financial/non-financial
covenants and the amount due to AIL is non-interest bearing. Since the amount due to AIL is due upon request, it is classified as a current
liability. The amounts due to AIL at March 31, 2025 and December 31, 2024 are $
On September
24, 2024, the Company entered into a Debt Conversion Agreement (the “AIL Conversion”) with Alset International Limited, pursuant
to which a debt of $
On April 14, 2025, the Company entered into an amendment (the “Amendment”) to the Credit Facility Agreement with Alset Inc. dated April 24, 2024, pursuant to the Amendment, the Company released Alset International Limited from its obligations under its Letter of Continuing Financial Support to the Company dated March 28, 2025. The terms of Alset Inc.’s Letter of Continuing Financial Support to the Company were not altered by the Amendment.
Due from Alset Business Development Pte. Limited.
Alset Business Development Pte.
Limited (“ABD”) is incorporated in Singapore and is a fellow subsidiary of the common parent company, Alset Inc. The amount
due to ABD represents amount loaned by ABD to Hapi Cafe Inc. for the investment in Ketomei Pte. Ltd (“Ketomei”) in March 2022,
and also represents amount loaned HWHPL to ABD in November 2024. There is no written, executed agreement and no financial/non-financial
covenants and the amount due to ABD is non-interest bearing. Since the amount due to ABD is due upon request, it is classified as a current
liability. The amount due from ABD at March 31, 2025 is $
Due from HotApp International Limited.
HotApp International Limited (“HAIL”)
is incorporated in Hong Kong and is a fellow subsidiary of the common parent company, Alset Inc. The amount due to HAIL represents the
amount loaned HWHPL to HAIL in January 2025. There is no written, executed agreement and no financial/non-financial covenants and the
amount due to HAIL is non-interest bearing. Since the amount due to HAIL is due upon request, it is classified as due to related parties, net under current liability of Condensed Consolidated
Balance Sheet. The amount due from HAIL at March 31, 2025 is $
Due from Hapi Cafe Limited.
Hapi Cafe Limited (“HCHK”)
is incorporated in Hong Kong and is a fellow subsidiary of the common parent company, Alset Inc. The amount due to HCHK represents the
amount loaned HWHPL to HCHK in January 2025. There is no written, executed agreement and no financial/non-financial covenants and the
amount due to HCHK is non-interest bearing. Since the amount due to HCHK is due upon request, it is classified as due to related parties, net under current liability of Condensed Consolidated
Balance Sheet. The amount due from HCHK at March 31, 2025 is $
| 15 |
Related Party Loans
Working Capital Loans
In order to finance transaction
costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers
and directors were permitted to, but were not obligated to, loan the Company funds as may be required (“Working Capital Loans”).
Such Working Capital Loans would be evidenced by promissory notes. The notes were to be repaid upon completion of a Business Combination,
without interest, or, at the lender’s discretion, up to $
NOTE 10 — RELATED PARTY TRANSACTIONS
On August 31, 2023, Hapi Café
Inc. and Ketomei Pte. Ltd. entered into a binding term sheet pursuant to which HCI agreed to lend Ketomei up to $
On October 26, 2023, the same
parties entered into another binding term sheet pursuant to which HCI agreed to lend Ketomei up to $
On February 20, 2024, the Company
invested additional $
On
March 20, 2024, the Company entered into a securities purchase agreement with Sharing Services Global Corporation (“SHRG”),
pursuant to which the Company purchased from SHRG a (i) Convertible Promissory Note (“CN 1”) in the amount of $
On May
9, 2024, the Company entered into a securities purchase agreement with Sharing Services Global Corporation, pursuant to which the Company
purchased from SHRG a Convertible Promissory Note (“CN 2”) in the amount of $
| 16 |
On June
6, 2024, the Company entered into a securities purchase agreement with Sharing Services Global Corporation, pursuant to which the Company
purchased from SHRG a Convertible Promissory Note (“CN 3”) in the amount of $
On August
13, 2024, the Company entered into a securities purchase agreement with Sharing Services Global Corporation, pursuant to which the Company
purchased from SHRG a Convertible Promissory Note (“CN 4”) in the amount of $
On November
25, 2024, the Company entered into a stock purchase agreement with Alset Inc. (“AEI”), pursuant to which Alset Inc. agreed
to purchase shares of the Company’s common stock for a purchase price of $ per share. AEI is the majority shareholder
of the Company, and immediately prior to the effectiveness of the stock purchase agreement, AEI directly and through its subsidiaries
owned
On December
24, 2024, the Company entered into a Stock Purchase Agreement with AEI, pursuant to which AEI agreed to purchase shares of the
Company’s common stock (the “Shares”) for a total of $
On January 15, 2025, the Company
entered into a securities purchase agreement with Sharing Services Global Corporation (“SHRG”), pursuant to which the Company
purchased from SHRG a Convertible Promissory Note (“CN 5”) to the Company in the amount of $
On
March 31, 2025, the Company entered into a securities purchase agreement with Sharing Services Global Corporation (“SHRG”),
pursuant to which the Company purchased from SHRG a (i) Convertible Promissory Note (“CN 6”) in the amount of $
As of
March 31, 2025 and December 31, 2024, a total of $
SHRG is a related party of our Company, as our stockholders Alset Inc. and Alset International Limited, in addition to certain entities affiliated with them, are significant stockholders of SHRG, and our Chief Executive Officer and Chairman are also the Chief Executive Officer and Chairman, respectively, of SHRG.
| 17 |
Financial assets measured at fair value on a recurring basis are summarized below and disclosed on the consolidated balance sheet as of March 31, 2025 and December 31, 2024:
| Fair Value Measurement Using | Amount at | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| March 31, 2025 | ||||||||||||||||
| Assets | ||||||||||||||||
| Warrants – SHRG | $ | $ | $ | $ | ||||||||||||
| Convertible loans receivable – SHRG | ||||||||||||||||
| Total Investment in securities at Fair Value | $ | $ | $ | $ | ||||||||||||
| Fair Value Measurement Using | Amount at | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| December 31, 2024 | ||||||||||||||||
| Assets | ||||||||||||||||
| Warrants – SHRG | $ | $ | $ | $ | ||||||||||||
| Convertible loans receivable – SHRG | ||||||||||||||||
| Total Investment in securities at Fair Value | $ | $ | $ | $ | ||||||||||||
The fair value of the SHRG warrants under level 2 category as of March 31, 2025 and December 31, 2024 were calculated using a binomial option pricing model valued with the following weighted average assumptions:
| March 31, 2025 | December 31, 2024 | |||||||
| WRNT 1 | ||||||||
| Stock price | $ | $ | ||||||
| Exercise price | $ | $ | ||||||
| Risk free interest rate | % | % | ||||||
| Annualized volatility | % | % | ||||||
| Dividend yield | % | % | ||||||
| Year to maturity | ||||||||
| March 31, 2025 | ||||
| WRNT 2 | ||||
| Stock price | $ | |||
| Exercise price | $ | |||
| Risk free interest rate | % | |||
| Annualized volatility | % | |||
| Dividend yield | % | |||
| Year to maturity | ||||
| 18 |
The Company has elected to recognize the convertible loan at fair value and therefore there was no further evaluation of embedded features for bifurcation. The Company engaged third party valuation firm to perform the valuation of convertible loans. The fair value of the convertible loans is calculated using the binomial tree model based on probability of remaining as straight debt using discounted cash flow with the following assumptions:
| CN# | 1 | 2 | 3 | 4 | ||||||||||||
| Issued date | March 18, 2024 | May 9, 2024 | June 6, 2024 | August 13, 2024 | ||||||||||||
| Risk-free interest rate | % | % | % | % | ||||||||||||
| Expected life | | | | | ||||||||||||
| Discount rate | % | % | % | % | ||||||||||||
| Expected volatility | % | % | % | % | ||||||||||||
| Expected dividend yield | % | % | % | % | ||||||||||||
| Fair value | $ | $ | $ | $ |
| CN# | 5 | 6 | ||||||
| Issued date | January 15, 2025 | March 31, | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected life | ||||||||
| Discount rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Expected dividend yield | % | % | ||||||
| Fair value | $ | $ |
Changes in the observable input values would likely cause material changes in the fair value of the Company’s Level 2 financial instruments. A significant increase (decrease) in this likelihood would result in a higher (lower) fair value measurement.
Revenue from F&B business
amounting to approximately $
Included in Accounts Receivable,
net at March 31, 2025 and December 31, 2024 is $
Included in other income during
the three months ended March 31, 2025 and 2024 is $
Acquisition of L.E.H. Insurance Group, LLC
On November 19, 2024,
HWH entered definitive agreements to acquire a controlling
As of March 31, 2025, the
Company impaired goodwill of $
HapiTravel Holding Pte. Ltd.
On April 25, 2024, the Company
entered into a binding term sheet (the “Term Sheet”) through its subsidiary Health Wealth Happiness Pte. Ltd. (“HWHPL”)
outlining a joint venture with Chen Ziping, an experienced entrepreneur in the travel industry, and Chan Heng Fai Ambrose, HWH’s
Executive Chairman, as a part of HWH’s strategy of building its travel business in Asia. The planned joint venture company (referred
to here as the “JVC” or “HTHPL”) will be known as HapiTravel Holding Pte. Ltd. The JVC will be initially owned
as follows: (a) HWHPL will hold
On November 6, 2024, the Company
signed a loan agreement with HTHPL in the amount of $
On December 18, 2024, the Company
sold Hapi Travel Pte. Ltd. (“HTPL”) to HTHPL for a consideration of $
As of March 31, 2025, HTHPL owed the
Company a total of $
| 19 |
NOTE 11 — STOCKHOLDERS’ EQUITY
The total amount of authorized
capital stock of the Company consists of
The Company previously had shares of Class B common stock outstanding, which automatically converted into Class A common stock at the time of a Business Combination, on a one-for-one basis.
Rights - Each holder of a right automatically received one-tenth (1/10) of one share of common stock upon consummation of the Business Combination.
Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants became exercisable 30 days after the completion of a Business Combination. The Public Warrants will expire five years after the completion of the Business Combination.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of residence of the exercising holder, or an exemption from registration is available.
Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $90.00 — Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:
| ● | in whole and not in part; | |
| ● | at a price of $ | |
| ● | upon a minimum of 30 days’ prior written notice of redemption, or the 30-day redemption period to each warrant holder; and | |
| ● | if, and only if, the last reported sale price of the Class A common stock equals or exceeds $ per share (as adjusted for stock splits, stock dividends, reorganization, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the trading day prior to the date on which the Company sends the notice of redemption to warrant holders. |
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants.
| 20 |
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering except the Private Placement Warrants (including the Class A common stock issuable upon exercise of the Private Placement Warrants) were not transferable, assignable or salable until 30 days after the completion of the Business Combination, subject to certain exceptions.
The following table summarizes the warrant activity for the three months ended March 31, 2025 and 2024.
| Warrant for | Weighted | Remaining Contractual | Aggregate | |||||||||||||
| Common | Average | Term | Intrinsic | |||||||||||||
| Shares | Exercise Price | (Years) | Value | |||||||||||||
| Warrants Outstanding as of December 31, 2024 | $ | $ | ||||||||||||||
| Warrants Vested and exercisable at December 31, 2024 | $ | $ | ||||||||||||||
| Granted | $ | |||||||||||||||
| Exercised | ( | ) | $ | ( | ) | |||||||||||
| Forfeited, cancelled, expired | ||||||||||||||||
| Warrants Outstanding as of March 31, 2025 | $ | $ | ||||||||||||||
| Warrants Vested and exercisable at March 31, 2025 | $ | $ | ||||||||||||||
| Warrant for | Weighted | Remaining Contractual | Aggregate | |||||||||||||
| Common | Average | Term | Intrinsic | |||||||||||||
| Shares | Exercise Price | (Years) | Value | |||||||||||||
| Warrants Outstanding as of December 31, 2023 | $ | $ | ||||||||||||||
| Warrants Vested and exercisable at December 31, 2023 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Forfeited, cancelled, expired | ( | ) | ||||||||||||||
| Warrants Outstanding as of March 31, 2024 | $ | $ | ||||||||||||||
| Warrants Vested and exercisable at March 31, 2024 | $ | $ | ||||||||||||||
Public Offering
On January 3, 2025, the Company
announced the pricing of its public offering of shares of common stock, par value $ per share (the “Shares”)
and
| 21 |
The offering was conducted pursuant to the Company’s registration statement on Form S-1 (File No. 333-282567), which was initially filed with the Securities and Exchange Commission on October 10, 2024, subsequently amended on October 23, 2024, December 4, 2024, and December 10, 2024, and declared effective on December 19, 2024. The offering closed on January 6, 2025.
D. Boral Capital LLC (“D.
Boral Capital”) was acting as the exclusive placement agent for the offering. Pursuant to the Placement Agency Agreement, the Company
has agreed to pay D. Boral Capital a cash fee equal to
Amendment to Amended and Restated Certificate of Incorporation
On January 8, 2025, the Company amended the text of Section 7.3 of Article VII of the Company’s Amended and Restated Certificate of Incorporation with the State of Delaware to permit the stockholders of the Company to take action by majority written consent. This Amendment of the Company’s Amended and Restated Certificate of Incorporation was approved by the Company’s stockholders at the Company’s annual meeting of stockholders on December 12, 2024.
The Reverse Stock Split
On January 16, 2025, the holders
of a majority of the issued and outstanding shares of common stock of the Company, approved by written consent, an amendment of the Company’s
Amended and Restated Certificate of Incorporation to effect a reverse stock split of the Company’s common stock, par value $
per share, at a ratio of
NOTE 12 —LEASES
The Company has operating leases
for its office spaces, one F&B store in South Korea and two F&B stores in Singapore. The related lease agreements do not contain
any material residual value guarantees or material restrictive covenants. Since the Company’s leases do not provide an implicit
rate that can be readily determined, management uses a discount rate based on the incremental borrowing rate. The Company’s weighted-average
remaining lease term relating to its operating leases is 1.64 years, with a weighted-average discount rate of
The Company has also utilized the following practical expedients:
| ● | Short-term leases – for leases that are for a period of 12 months or less, the Company will not apply the recognition requirements of ASC 842. | |
| ● | For leases that contain related non-lease components, such as maintenance, the Company will account for these payments as a single lease component. |
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The current portion of operating
lease liabilities and the non-current portion of operating lease liabilities are presented on the balance sheets. Total lease expenses
amounted to $
March 31, 2025 | December 31, 2024 | |||||||
| Right-of-use assets | $ | $ | ||||||
| Lease liabilities - current | $ | $ | ||||||
| Lease liabilities - non-current | ||||||||
| Total lease liabilities | $ | $ | ||||||
As of March 31, 2025, the aggregate future minimum rental payments under non-cancelable agreements are as follows:
| Maturity of Lease Liabilities | Total | |||
| 12 months ended March 31, 2026 | $ | |||
| 12 months ended March 31, 2027 | ||||
| 12 months ended March 31, 2028 | ||||
| Total undiscounted lease payments | $ | |||
| Less: Imputed interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
| Operating lease liabilities - Current | ||||
| Operating lease liabilities - Non-current | $ | |||
NOTE 13 — COMMITMENTS AND CONTINGENCIES
From time to time the Company may be named in claims arising in the ordinary course of business. Currently, no legal proceedings, government actions, administrative actions, investigations or claims are pending against the Company or involve the Company that, in the opinion of management, could reasonably be expected to have a material adverse effect on its business and financial condition. For all periods presented, the Company was not a party to any pending material litigation or other material legal proceedings.
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NOTE 14 — CONCENTRATION RISK
The Company maintains cash balances
at various financial institutions in different countries. These balances are usually secured by the central banks’ insurance companies.
At times, these balances may exceed the insurance limits. As of March 31, 2025 and December 31, 2024, uninsured cash balances were $
Major Suppliers
For the three months ended March
31, 2025, five suppliers accounted for approximately over
For the three months ended March
31, 2024, five suppliers accounted for approximately over
NOTE 15 — CONVERTIBLE NOTES RECEIVABLE, RELATED PARTY
During the three months ended March 31, 2025 and 2024, the Company held convertible notes receivable with SHRG. The following table shows the activity of the notes during the three months ended March 31, 2025 and 2024.
December 31, 2024 | Additions | Unrealized Gain | March 31, 2025 | |||||||||||||
| Convertible note receivable, related party | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| December 31, 2023 | Additions | Unrealized Gain | March 31, 2024 | |||||||||||||
| Convertible note receivable, related party | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
During the three months ended
March 31, 2025 and 2024, the Company revalued the convertible note receivable with SHRG of $
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NOTE 16 – CORRECTION OF AN IMMATERIAL ERROR IN PREVIOUSLY ISSUED FINANCIAL STATEMENTS
During the year ended December 31, 2024, the Company identified an immaterial error related to amounts allocated to Temporary Equity in its previously issued financial statements for the three months ended March 31, 2024.
The error resulted in an overstatement of Retained
Earnings and a corresponding understatement of Temporary Equity by approximately $
During the period ended March 31, 2025, the Company identified an immaterial error related to foreign currency translation adjustment in its previously issued financial statements for the year ended December 31, 2024.
The error resulted in an
understatement of general and administrative expenses and a corresponding overstatement of foreign currency translation adjustment
by approximately $
The accompanying comparative 2024 financial statements have been revised to correct this error. The Company has evaluated the error in accordance with the SEC’s Staff Accounting Bulletin No. 99 and SAB No. 108 and concluded that it was not material to its previously issued financial statements and therefore has been corrected herein through revision.
NOTE 17 — SUBSEQUENT EVENTS
On April 14, 2025, the Company
entered into an amendment (the “Amendment”) to the Credit Facility Agreement with Alset Inc. dated April 24, 2024, pursuant
to which Alset Inc. provided the Company a line of credit facility (the “Credit Facility”) which provides a maximum, aggregate
credit line of up to $
Loan Agreement with SHRG
On April 17, 2025, the Company entered into a Loan
Agreement (the “Loan Agreement”) with Sharing Services Global Corp., a related party of the Company (“SHRG”),
under which the Company provided a loan to SHRG in the amount of $
Sale of HWH World Inc
On April 23, 2025, the Company completed the sale of HWH World Inc.(“HWHKOR”) by Health Wealth Happiness Pte. Ltd. (“HWHPL”) to AES Group Inc. (“AES”), a Korean entity. The sale was consummated under a term sheet signed on April 20, 2025, pursuant to which the Company agreed to transfer its 100% equity interest in HWHKOR to AES. In exchange, AES agreed to issue new shares, representing 19.9% of the enlarged share capital of AES to the Company upon closing.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “HWH International Inc.,” “HWH,” “our,” “us” or “we” refer to HWH International Inc. and its subsidiaries. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim 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.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.
Overview
Hapi Marketplace. On November 4, 2024, the Company announced the launch of its business-to-consumer marketplace, Hapi Marketplace. Hapi Marketplace features a selection of over forty-seven product categories including wellness, elderly care, auto accessories and more. Launching first in the United States, we intend for Hapi Marketplace to expand in the near future to South Korea and Hong Kong, followed by further expansion across Asia.
The various aspects of the Hapi Marketplace will be launched in phases in different regions, each with their own timeline, depending on the completion of logistical aspects for implementation (i.e., payment gateway systems, business licenses, banking set up, import licenses, managerial resources, etc.) We are expanding the product range into robotics for consumer and commercial markets.
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Hapi Cafés, which are, and will be, in-person, location-based social experiences, offer customers the opportunity to build a sense of community with like-minded customers who share a potential interest in our products. The cafes are designed to operate sustainably as standalone businesses. The cafes also seek to be an avenue to create awareness to and educate potential and existing customers about the products and services of HWH, providing us with the chance to significantly increase our customers base as well as increase the amounts spent by our customers on our affiliates’ products and services. Each of our cafés is a “Hapi Café.” We opened proof-of-concept Hapi Café locations in Seoul, the Republic of Korea and Singapore in May and July 2022, respectively, one more opened in Seoul, the Republic of Korea in May 2024. We plan to open additional Hapi Cafés as we beta test and further improve our business concept. We intend to grow our customer base as we grow the number of Hapi Cafés around the world. Hapi Cafes are positioned to be integral parts of HWH’s business model. In June 2024, the Company’s decision to close the café under Alset F&B (PLQ) Pte. Ltd. (“F&BPLQ”) was driven by the unsustainable revenue it generated. We believe it is more strategic to refocus our efforts and resources on other business ventures that have greater growth potential.
Hapi Wealth Builder seeks to provide participants the opportunity to attend courses, workshops, and coaching sessions in person, fostering a collaborative learning environment for those dedicated to learning investment in equities and wealth-building strategies. The team has been diligently producing digital content for Hapi Wealth Builder and working to collaborate with the right partners to launch the program and make it available to members. Hapi Wealth Builder will leverage the wealth of knowledge and experience of its leaders to make wealth building accessible and effective for its members. Our unique community-centric approach will offer members tools for making informed financial decisions while creating pathways for sustained growth.
On October 31, 2024, we announced that the Company scheduled the launch of Hapi Wealth, a program dedicated to providing comprehensive education in equity investment and wealth-building strategies. We are targeting a rollout in selected regions later in 2025 as well.
To further support its mission, Hapi Wealth is opening its China headquarters, designed as a conducive environment for individuals to participate in tutorials and workshops. The hub will offer participants the opportunity to attend courses, workshops, and coaching sessions in person, fostering a collaborative learning environment for those dedicated to learning investment in equities and wealth-building strategies.
Our Revenue Model
Our total revenue for the three months ended March 31, 2025 and 2024 was $295,197 and $286,110, respectively. Our net loss for the three months ended March 31, 2025 and 2024 was $574,103 and $1,336,519, respectively.
We currently recognize revenue from food and beverage sales and sale of products. Sales of food and beverage accounted for approximately 100% and 100% of revenue in the three months ended March 31, 2025 and 2024, respectively.
From a geographical perspective, we recognized 11% and 89% of our total revenue in the three months ended on March 31, 2025, in South Korea and Singapore, respectively, and 4% and 96% in the three months ended March 31, 2024, in South Korea and Singapore, respectively.
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 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.
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Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The Company’s consolidated financial statements and related notes include all the accounts of the Company and its wholly owned subsidiaries. They have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany transactions have been eliminated in consolidation.
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 credit losses, recoverability and useful lives of property, plant and equipment, the valuation allowance of deferred taxes, contingencies, and equity compensation. Actual results could differ from those estimates.
Revenue Recognition and Cost of Sales
Product Sales: The Company’s performance obligation is to transfer ownership of its products to its customers. The Company generally recognizes revenue when a product is delivered to its member. 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 product. Allowances for product 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 returns for the three months ended March 31, 2025, and 2024 were approximately $0 and $0, respectively.
Food and Beverage: The revenue received from food and beverage business in the three months ended March 31, 2025 and 2024 was $295,197 and $286,110, respectively.
Cost of Revenue: Cost of revenue consists of cost of procuring finished goods from suppliers and related shipping and handling fees.
Results of Operations
Summary of Statements of Operations for the Three Months Ended March 31, 2025 and 2024
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue | $ | 295,197 | $ | 286,110 | ||||
| Cost of revenue | 147,603 | 122,813 | ||||||
| Operating expenses | 741,722 | 1,495,383 | ||||||
| Other (income) / expenses | (62,973 | ) | 4,433 | |||||
| Income taxes | 42,948 | - | ||||||
| Net loss | $ | 574,103 | $ | 1,336,519 | ||||
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Revenue
Revenue was $295,197 and $286,110 for the three months ended March 31, 2025 and 2024, respectively. Word of mouth, a social media presence, and the availability of meeting spaces are significant drivers of our revenue and revenue potential. Our revenue increased in 2025 due to the increased revenue from F&B business in Singapore following the opening of new café in April 2024.
Cost of revenue
Cost of revenues increased from $122,813 in the three months ended March 31, 2024 to $147,603 in the three months ended March 31, 2025. The increase is a result of the increase in sales in F&B business.
The gross margin decreased from $163,297 to $147,594 in the three months ended March 31, 2024 and 2025, respectively. The decrease in gross margin was caused by the increase in F&B cost of revenue.
Operating expenses
Operating expenses decreased from $1,495,383 to $741,722 in the three months ended March 31, 2024 and 2025, respectively, due to general and administrative expenses decreased from $1,129,191 to $664,242 in the three months ended March 31, 2024 and 2025, respectively. The decrease in general and administrative expenses in 2025 compared with 2024 was mostly caused by the decrease in the professional fees due to the 10-Q and S-4 filings.
Other income (expense)
Other income (expense) increased from ($4,433) to $62,973 in the three months ended March 31, 2024 and 2025, respectively. The increase is due to foreign exchange transaction (loss) gain change from ($49,571) to $66,070 in the three months ended March 31, 2024 and 2025, respectively.
Net loss
Net loss decreased from $1,336,519 to $574,103 in the three months ended March 31, 2024 and 2025, respectively.
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Liquidity and Capital Resources
Our cash has decreased from $4,341,746 as of December 31, 2024 to $4,176,546 as of March 31, 2025. Our liabilities decreased from $3,531,523 at December 31, 2024 to $2,835,738 at March 31, 2025. Our total assets have increased from $6,408,722 as of December 31, 2024 to $6,531,330 as of March 31, 2025.
The Company believes that the available cash in the Company’s bank accounts, anticipated cash from operations, and financing availability from related parties are sufficient to fund our operations for at least the next 12 months. The Company’s capital requirements for the planned expansion are based on, among other items, geographical specific property costs, team requirements, and marketing steps needed. Our expansion consists of plans to take over leases of existing Hapi Cafes we currently do not own, as we look to add more Hapi Cafes over the next two (2) years. There is no guarantee that we will be able to execute on our plans as laid out above.
On April 24, 2024, the Company entered into a Credit Facility Agreement (the “Agreement”) with Alset Inc., a Texas corporation and the Company’s indirect, majority stockholder, pursuant to which Alset Inc. has provided the Company a line of credit facility (the “Credit Facility”) which provides a maximum, aggregate credit line of up to $1,000,000. As of March 31, 2024, there are no outstanding amounts related to the Credit Facility, as the debt with Alset Inc. was converted to equity on September 24, 2024. The remaining credit of $700,000 is available for draw as on March 31, 2025.
Pursuant to the Agreement, the Company may request an advance (each, an “Advance”) on the Credit Facility. Each advance shall bear a simple interest rate of three percent (3%) per annum. Each Advance and all accrued but unpaid interest shall be due and payable at the first (1st) anniversary of the effective date of the Agreement. HWH may at any time during the term of the Agreement prepay a portion or all amounts of its indebtedness without penalty. Each Advance shall not be secured by a lien or other encumbrance on any HWH assets, but shall be solely a general unsecured debt obligation of the Company.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern and do not contain any adjustments that might be required should the Company be unable to continue as a going concern.
The Company has obtained letters of financial support from Alset International Limited and Alset Inc., a direct and indirect owner of the Company, respectively. Alset International Limited and Alset Inc. committed to provide any additional funding required by the Company and would not demand repayment through twelve months from the issuance of these consolidated financial statements. As of March 31, 2025, AIL was subsequently released from this commitment.
Summary of Cash Flows for the Three Months Ended March 31, 2025 and 2024
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net cash used in operating activities | $ | (555,333 | ) | $ | (638,211 | ) | ||
| Net cash used in investing activities | $ | (300,000 | ) | $ | (252,072 | ) | ||
| Net cash provided by financing activities | $ | 656,229 | $ | 749,949 | ||||
Cash Flows from Operating Activities
Net cash used in operating activities was $555,333 in the three months ended of March 31, 2025, as compared to net cash used in operating activities of $638,211 in the same period of 2024. The increase of cash used in operating activities in the three months ended March 31, 2025 was due to the impairment loss on goodwill of acquisition of LEH Insurance Group LLC.
Cash Flows from Investing Activities
Net cash used in investing activities was $300,000 in the first three months of March 31, 2025, as compared to net cash used in investing activities of $252,072 in the same period of 2024. In the three months ended March 31, 2025 we paid $300,000 for convertible note receivable – related party. In the three months ended March 31, 2024 we paid $2,072 for purchases of property and equipment and $250,000 for convertible note receivable – related party.
Cash Flows from Financing Activities
Net cash provided by financing activities was $656,229 in the three months ended March 31, 2025, compared to net cash provided by financing activities of $749,949 in the same period of 2024. In the three months ended March 31, 2025 we received $1,409,983 from proceed of issuance of common stock and warrants. We repaid $236,875 of EF Hutton promissory note and $506,454 to related parties. In the three months ended March 31, 2024 we received $1,101,256 from related parties.
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Nasdaq Compliance
On March 7, 2024, we received notice from Nasdaq Stock Market, LLC (“Nasdaq”) indicating that, because the market value of our common stock had been below $50,000,000 for the prior 37 consecutive business days, we no longer complied with the minimum market value of listed securities (the “MVLS”) requirement for continued listing on the Nasdaq Global Market under Rule 5450(b)(2)(A) of Nasdaq Listing Rules.
Nasdaq’s notice had no immediate effect on the listing of our common stock on the Nasdaq Global Market. Pursuant to Nasdaq Marketplace Rule 5810(c)(3)(C), we had been provided an initial compliance period of 180 calendar days, or until September 3, 2024, to regain compliance with the MVLS requirement. To regain compliance, the Company’s MVLS was required to be at least $50,000,000 or more for a minimum of ten consecutive business days prior to September 3, 2024. In that regard, on September 9, 2024, the Company received a notice from the Staff that the matter of the MVLS deficiency was to be considered at the Company’s upcoming appeal with the Nasdaq Hearings Panel.
On February 22, 2024, the Nasdaq Staff (the “Staff”) notified the Company that for the previous 30 consecutive trading days, the market value of its publicly held shares had been below the minimum $15,000,000 required for continued listing as set forth in Listing Rule 5450(b)(2)(C) (the “Rule”). Therefore, in accordance with Marketplace Rule 5810(c)(3)(D), the Company was provided 180 calendar days, or until August 20, 2024, to regain compliance with the Rule. In that regard, on August 27, 2024, the Company received a notice from the Staff that the Company will be delisted from the Nasdaq Global Market, unless the Company requested an appeal of this determination by September 3, 2024.
The Company presented its compliance plan to the Panel at a hearing on October 15, 2024. On October 21, 2024, the Company received a notice from the Panel granting the Company an extension to phase down its securities to the Nasdaq Capital Market and demonstrate compliance with the market value of its publicly held shares and Stockholders’ Equity requirements as set forth in Nasdaq Listing Rules 5550(a)(5) and 5550(b)(1).
On September 4, 2024, the Company received written notice (the “Notice”) from the Listing Qualifications Staff of Nasdaq notifying the Company that for the prior 30 consecutive business days prior to the date of the Notice, the Company’s bid price was below the minimum $1 required for continued listing on the Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(a)(1) (the “Bid Price Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), Nasdaq provided the Company with 180 calendar days, or until March 3, 2025, (the “Compliance Date”), to regain compliance with the Bid Price Requirement.
On February 18, 2025, the Company filed a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation with the Delaware Secretary of State to effect a 1-for-5 reverse stock split (the “Reverse Stock Split”). The Reverse Stock Split became effective as of market open on February 24, 2025.
On March 10, 2025, the Company received written notice (the “Compliance Notice”) from Nasdaq informing the Company that it has regained compliance with Nasdaq Listing Rule 5550(a)(2), which requires that companies listed on the Nasdaq Capital Market maintain a minimum bid price of $1.00 per share. Nasdaq notified the Company in the Compliance Notice that, from February 24, 2025 to March 7, 2025, the closing bid price of the Company’s common stock had been $1.00 per share or greater and, accordingly, the Company had regained compliance with Nasdaq Listing Rule 5550(a)(2) and that the matter was now closed. The Company is currently listed on the Nasdaq Capital Market.
Contractual Obligations
As of March 31, 2025, we did not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities.
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Administrative Services Agreement
We agreed to pay Alset Management Group Inc. $10,000 per month for office space, utilities and secretarial and administrative support services commencing on the date that our securities were first listed on the Nasdaq. Upon completion of the initial Business Combination, we ceased paying these monthly fees.
Underwriting Agreement
On February 3, 2022, the Company paid a cash underwriting discount of $0.20 per Unit, or $1,725,000.
In addition, the underwriters, EF Hutton, LLC (“EF Hutton”) (now known as D. Boral Capital LLC), were entitled to a deferred fee of $0.35 per Unit, or $3,018,750 in the aggregate, however, on December 18, 2023, the Company entered into a Satisfaction and Discharge of Indebtedness Agreement in connection with the Underwriting Agreement, under which in lieu of the Company tendering the full amount, the underwriters accepted a combination of $325,000 in cash paid upon the closing of the Business Combination, 149,443 shares of the Company’s common stock and a $1,184,375 promissory note as full satisfaction. This agreement was effective at the closing of Business Combination on January 9, 2024. Additionally, the Company has granted EF Hutton an irrevocable right of first refusal (the “ROFR”) to act as the sole investment banker, sole book-runner, and/or sole placement agent, at EF Hutton’s sole discretion, for each and every future public and private equity and debt offering, including all equity linked financing for a period commencing on the date of the satisfaction and ending twenty-four (24) months after the closing of the Business Combination.
Merger Agreement
As previously disclosed, on August 1, 2023, the Company held the Special Meeting, at which the Company’s stockholders considered and adopted, among other matters, a proposal to approve the Business Combination. On the Closing Date, the parties consummated the Business Combination pursuant to the terms of that certain Agreement and Plan of Merger, dated September 9, 2022 (the “Merger Agreement”), by and among the Company, Merger Sub, and HWH Nevada.
Pursuant to the terms of the Merger Agreement, (and upon all other conditions pursuant to the Merger Agreement being satisfied or waived), on the Closing Date, (i) the Merger Agreement provided for the combination of HWH Nevada and Merger Sub under the Company, with HWH Nevada surviving as the Surviving Corporation (collectively, the “Merger”). At the consummation of the Merger, HWH Nevada survived as a direct, wholly-owned subsidiary of the Company; and (ii) the Company changed its name to “HWH International Inc.”
The transaction has closed, as all closing conditions referenced in the Merger Agreement have either been met or waived by the parties. Certain closing conditions that have been waived by the parties, pursuant to the Merger Agreement include Section 8.1(i), which states “the aggregate cash available to the Company at the Closing from the Trust Account (after giving effect to the redemption of any shares of the Company’s Class A Common Stock in connection with the Company’s Proposals, but before giving effect to (i) the payment of the Outstanding Alset Transaction Expenses, and (ii) the payment of the Outstanding Company Transaction Expenses), shall equal or exceed Thirty Million dollars ($30,000,000); and 8.1(j), which states “upon the closing, the Company shall not have redeemed shares of the Company’s Class A Common Stock in the Offer in an amount that would cause the Company to have less than $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) under the Exchange Act).”
Registration Rights Agreement
On January 31, 2022 the Company, the Sponsor, and certain persons and entities holding securities of the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Company is obligated to register certain securities, including (i) all of the shares of the Company’s common stock and warrants held by the Sponsor, and the Company’s common stock issuable upon exercise of such warrants, and (ii) the shares of the Company’s common stock and the Company’s common stock underlying warrants that were issued in the Private Placement on January 31, 2022. The Company was obligated to (a) file a resale registration statement to register such securities within 15 business days after the closing of the Business Combination, and (b) use reasonable best efforts to cause such registration statement to be declared effective by the SEC within 60 business days after the closing of the Business Combination.
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Lock-Up Agreements
In connection with the execution of the Merger Agreement, at the closing, each of the HWH Holders holding more than 5% of the HWH Common Stock and certain members of HWH’s management team entered into a Lock-Up Agreement with the Company in substantially the form attached to the letter Agreement dated January 31, 2022 (the “Letter Agreement”) (each, a “Lock-Up Agreement”). Under the Lock-Up Agreement, each such holder agreed not to, during the period commencing from the Closing and with respect to the shares of the Company’s Common Stock to be received as part of the Merger Consideration by the HWH Holder (together with any securities paid as dividends or distributions with respect to such securities or into which such securities are exchanged or converted, the “Restricted Securities”), (A) ending on the earlier of nine months after the date of the Closing, the date on which the closing sale price of shares of the Company’s Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 trading day period commencing at least 150 days after the Closing or (y) the date after the Closing on which the Company consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated third party that results in all of the Company’s stockholders having the right to exchange their equity holdings in the Company for cash, securities or other property.
Termination of Subscription Agreement
On July 30, 2023, the Company entered into a Subscription Agreement (the “Subscription Agreement”) with Meteora Special Opportunity Fund I, LP (“MSOF”), Meteora Capital Partners, LP (“MCP”), Meteora Select Trading Opportunities Master, LP (“MSTO”) and Meteora Strategic Capital, LLC, (“MSC”, and together with MSOF, MCP and MSTO, are referred to herein collectively as “Meteora”). The Subscription Agreement was subsequently terminated. The Company and Meteora entered into a Settlement Agreement as of April 11, 2024 (the “Settlement Agreement”). Pursuant to the Settlement Agreement, the Company paid Meteora $200,000, and agreed that Meteora could retain $100,000 already paid to Meteora.
Impact of Inflation
We believe that inflation has not had a material impact on our results of operations for the three months ended March 31, 2025 or the year ended December 31, 2024. 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 effects of foreign exchange rate changes on the intercompany loans (under ASC 830), which mostly consist of loans from Singapore to South Korea and which were approximately $0.8 million and $0.9 million on March 31, 2025 and December 31, 2024, respectively, are the reason for the fluctuation in foreign currency transaction gains or losses which are included in the Consolidated Statements of Operations and Other Comprehensive Income. Because the intercompany loan balances between Singapore and South Korea will remain at approximately $1 million over the next year, we expect this fluctuation of foreign exchange rates to still impact the results of operations in 2025, 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.
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Controls and Procedures
We are not currently required to maintain an effective system of internal controls as defined by Section 404 of the Sarbanes-Oxley Act. Only in the event that we are deemed to be a large accelerated filer or an accelerated filer would we be required to comply with the independent registered public accounting firm attestation requirement. Further, for as long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirement.
Management is responsible for the preparation and fair presentation of the financial statements included in this prospectus. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and reflect management’s judgment and estimates concerning effects of events and transactions that are accounted for or disclosed.
Management is also responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting includes those policies and procedures that pertain to our ability to record, process, summarize and report reliable data. Management recognizes that there are inherent limitations in the effectiveness of any internal control over financial reporting, including the possibility of human error and the circumvention or overriding of internal control. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement presentation. Further, because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.
In order to ensure that our internal control over financial reporting is effective, management regularly assesses controls and did so most recently for its financial reporting as of December 31, 2024. This assessment was based on criteria for effective internal control over financial reporting described in the Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. In connection with management’s evaluation of the effectiveness of our Company’s internal control over financial reporting as of March 31, 2025, management determined that the following issues constitute as material weakness:
| ● | The Company has limited accounting personnel, and as such, is unable to properly segregate duties relating to the Company’s internal controls over financial reporting. | |
| ● | Additionally, well-defined accounting policies and procedures have not been established and many financial close procedures, including period-end review and reconciliations, did not occur on a timely basis or failed to identify material adjustments. |
This prospectus does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this prospectus.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2025, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer concluded that during the period covered by this report, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2025 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
As a smaller reporting company, we are not required to provide the information required by this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
* Filed herewith.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| HWH INTERNATIONAL INC. | ||
| May 15, 2025 | By: | /s/ John Thatch |
| Name: | John Thatch | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| May 15, 2025 | By: | /s/ Rongguo Wei |
| Name: | Rongguo Wei | |
| Title: | Chief Financial Officer | |
| (Principal Accounting and Financial Officer) | ||
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