DEFM14C: Alset Inc. Acquires EV Energy Stake from CEO in $83 Million Related-Party Deal Amidst Mounting Losses and Nasdaq Compliance Warning

Sentiment:

Information Statement 1 July 2025 4:29 PM

Alset Inc. has completed the acquisition of New Energy Asia Pacific Inc. from its Chairman and CEO for $83 million, paid via a convertible note, as the company navigates significant financial losses and a Nasdaq minimum bid price non-compliance.

Delay expectedThe first installment of the promissory note to EF Hutton LLC, due in October 2024, was paid in January 2025, resulting in a default due to the delay in payment. Negotiations are ongoing to resolve the default status.

Capital raiseOn January 2, 2025, Alset entered into a securities purchase agreement for a registered direct offering of 1,500,000 shares of common stock at $1.00 per share, which closed on January 3, 2025, generating approximately $1,200,000 in net proceeds.

Worse than expectedNet loss for the three months ended March 31, 2025, increased to $9,504,892 from $7,313,792 in the same period of 2024.Total revenue for the three months ended March 31, 2025, significantly decreased by 82% to $1,068,303 from $6,086,207 in the prior year period, primarily due to the completion of real estate lot sales.

Summary

Alset Inc. (AEI) has acquired New Energy Asia Pacific Inc. (NEAPI) from its Chairman, Chief Executive Officer, and largest stockholder, Chan Heng Fai, for a purchase price of $83,000,000.
The acquisition consideration is in the form of a convertible promissory note, convertible into newly issued shares of Alset's common stock at $3.00 per share, potentially issuing up to 27,666,667 shares.
NEAPI owns 41.5% of New Energy Asia Pacific Company Limited (New Energy), a Hong Kong corporation focused on distributing all-electric special-purpose and transportation vehicles, charging stations, and batteries.
The transaction was approved by written consent of Chan Heng Fai, who holds a majority (65.8%) of Alset's common stock, and therefore, no further stockholder vote was required.
An independent valuation firm, ValueScope, provided a fairness opinion on January 24, 2025, stating the purchase price was fair to Alset from a financial point of view.
Alset reported a net loss of $4,165,816 for the year ended December 31, 2024, a significant improvement from a net loss of $61,278,733 in 2023.
For the three months ended March 31, 2025, Alset reported a net loss of $9,504,892, which is worse than the $7,313,792 net loss for the same period in 2024.
Revenue for the three months ended March 31, 2025, decreased significantly to $1,068,303 from $6,086,207 in the prior year period, primarily due to the sale of remaining real estate lots in 2024.
On a pro forma basis, reflecting the NEAPI acquisition, Alset's total assets would increase by $83,000,000 to $173,464,745 as of March 31, 2025, and total liabilities would increase by the same amount to $88,654,372.
Pro forma net loss attributable to common stockholders would increase by $1,271,905 to $(5,237,789) for the year ended December 31, 2024, and by $311,028 to $(8,644,505) for the three months ended March 31, 2025.
Alset received a Nasdaq non-compliance notice on May 13, 2025, for failing to meet the minimum $1.00 bid price requirement, with 180 calendar days to regain compliance.
The company's Board of Directors approved a stock repurchase program of up to $1,000,000 of its common stock until December 31, 2025.
Management identified a material weakness in internal controls over financial reporting due to limited staff, impacting segregation of duties and timely financial statement evaluation.

Sentiment

Score: 3

Explanation: The company faces significant financial challenges, including increasing net losses and declining revenue in its core real estate segment. The Nasdaq non-compliance notice adds immediate pressure. While the strategic acquisition of an EV-related asset is a positive long-term move, its related-party nature and the company's internal control weaknesses raise governance concerns. The overall financial performance and regulatory issues outweigh the strategic positives in the short term.

Positives

The acquisition of New Energy Asia Pacific Inc. is a strategic move aligned with Alset's commitment to sustainable and eco-friendly solutions, entering the growing electric vehicle (EV) sector.
New Energy has a strong pipeline of demand with signed collective sales via Memorandums of Understanding and strong interest from local government departments.
Alset's net loss significantly improved in FY2024 to $4,165,816 from $61,278,733 in FY2023, driven by changes in realized/unrealized gains/losses on securities and equity method investments.
Rental revenue is increasing, with management expecting continued growth as more rental houses are acquired and leased.
Management believes current cash on hand, available debt, and equity financing are sufficient to fund operations for at least the next 12 months, with approximately $8 million in developer reimbursements expected within that period.

Negatives

Alset reported a net loss of $9,504,892 for the three months ended March 31, 2025, which is a worsening from the $7,313,792 net loss in the same period of 2024.
Total revenue for the three months ended March 31, 2025, decreased by 82% to $1,068,303 from $6,086,207 in the prior year period, primarily due to the completion of real estate lot sales.
The company received a Nasdaq non-compliance notice on May 13, 2025, for failing to maintain a minimum bid price of $1.00 per share.
The acquisition of NEAPI is a related-party transaction, with the seller being Chan Heng Fai, Alset's Chairman, CEO, and largest stockholder, raising potential conflict of interest concerns despite board approvals.
Alset has identified a material weakness in its internal controls over financial reporting due to limited staff, impacting segregation of duties and timely evaluation of financial disclosures.
Operating cash flow for Q1 2025 was a net cash outflow of $3,756,154, compared to an outflow of $1,509,247 in Q1 2024, indicating increased cash burn from operations.

Risks

The company may fail to preserve its expertise in medical therapy and product research and development.
Existing and potential partners may opt to work with, or favor the products of, competitors if competitors offer more favorable products or pricing terms.
The company may be unable to maintain or grow sources of revenue.
The company may be unable to attain and maintain profitability.
The company may be unable to attract and retain key personnel.
The company may not be able to effectively manage, or to increase, its relationships with customers.
The company may experience unexpected increases in costs and expenses.
There is no guarantee that the company will consummate the Stock Purchase Agreement on the desired terms, in a timely manner, or at all.
Future inflation could have an adverse impact on operating results and financial condition.
Fluctuations in foreign exchange rates on intercompany loans, particularly between Singapore and the United States, are expected to significantly impact results of operations in 2025 due to volatility.

Future Outlook

Management anticipates that revenue from the rental business will continue to increase as more rental houses are acquired and successfully leased. The company expects foreign exchange rate fluctuations on intercompany loans to significantly impact results in 2025 due to volatility. The company plans to appoint additional qualified personnel to remediate internal control weaknesses. The company intends to procure a new tenant for a model house after its conversion in Q1 2025 and expects to complete contract-build homes within the next twelve months. Management believes current liquidity is sufficient for at least the next 12 months.

Management Comments

Management believes that lower carbon emissions, reduced noise pollution, and the elimination of fuel costs will continue to drive demand for electric vehicles.
Management believes New Energy's expertise extends across Asia, with established service and training centers in China and Hong Kong, and ongoing development planned in various parts of the world.
Management believes that the available cash on hand, available debt and equity financing are sufficient to fund our operations for at least the next 12 months.
Management believes that the cost of ValueScope's services to be competitive and selected them due to their reputation.
Management intends to procure a new tenant to occupy the premises of a model house after the office used for real estate sales is converted back to a garage in the first quarter of 2025.
Management believes 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, but cannot assure that future inflation will not have an adverse impact.

Industry Context

Alset Inc. operates as a diversified holding company with interests spanning real estate, financial services, digital transformation technologies, biohealth, and consumer products. The acquisition of New Energy Asia Pacific Inc. marks a strategic expansion into the electric vehicle (EV) sector, including special-purpose and transportation vehicles, charging stations, and batteries. This move aligns with the broader global trend towards sustainability and decarbonization in the transportation industry, driven by increasing demand for eco-friendly alternatives and reduced fuel costs. New Energy's focus on Asia, with established centers in China and Hong Kong, positions Alset to tap into the rapidly growing EV markets in the region. This diversification into a high-growth, environmentally conscious sector could potentially balance the declining revenue from its traditional real estate property sales business.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Approval Process for Related Party Transaction	The NEAPI acquisition, a related party transaction with Chairman and CEO Chan Heng Fai, was approved by the Audit Committee (comprised of independent directors, excluding Mr. Chan) and the Board of Directors (with Mr. Chan and his son, Chan Tung Moe, abstaining).	2025-05-23	Demonstrates adherence to corporate governance procedures for related party transactions, though the concentration of ownership and control by the seller remains a factor.
Incentive Compensation Plan Adoption	The 2025 Incentive Compensation Plan, covering up to 2,147,024 shares of common stock, was approved by the Board and Majority Shareholders to attract and retain qualified personnel.	2025-03-17	Aims to align management and employee incentives with company performance and shareholder value, but also facilitates significant stock awards to key executives like the CEO.
Internal Control Weakness Identified	Management determined a material weakness in internal controls over financial reporting due to limited staff preventing segregation of duties and timely evaluation of financial statement disclosures.	2024-12-31	Indicates a significant deficiency in financial reporting processes, potentially affecting the reliability of financial statements. Remediation plans involve hiring additional qualified personnel.

Related Party Transactions

Acquisition of New Energy Asia Pacific Inc. (NEAPI) from Chan Heng Fai (Chairman, CEO, largest stockholder) for $83,000,000 via a convertible promissory note.
Issuance of up to 27,666,667 shares of common stock upon conversion of the NEAPI promissory note to Chan Heng Fai at $3.00 per share.
Chan Heng Fai's Executive Employment Agreement includes a fixed salary of $1 per month and two annual bonus payments of 5% of market capitalization growth and 5% of net asset value growth, extended until December 31, 2030.
Chan Heng Fai received $448,430 in compensation in 2024 and $0 in 2023.
Award of 1,000,000 restricted shares of common stock to Chan Heng Fai on April 15, 2025, as compensation for services, valued at $840,000.
Alset's subsidiary, HWH International Inc., entered into multiple convertible loan agreements with Sharing Services Global Corp. (SHRG), an affiliate, totaling $950,000 in principal from March 2024 to March 2025, plus additional loans.
Alset's subsidiary, Hapi Metaverse Inc., entered into multiple convertible credit agreements with Value Exchange International, Inc. (VEII), an affiliate, for credit lines and loans.
Alset purchased 982,303 shares of DSS Inc. from Chan Heng Fai and Heng Fai Holdings Limited (wholly owned by Mr. Chan) for 3,316,488 shares of Alset common stock.
Alset's subsidiary, HWH International Inc., entered into debt conversion agreements with Alset International Limited (Alset's majority stockholder) and Alset Inc. to convert HWH debt into HWH common stock.
Alset purchased 6,500,000 shares of HWH International Inc. from Alset International Limited for a $4,095,000 secured promissory note.
Alset sold Hapi Travel Limited to HapiTravel Holding Pte. Ltd., a related party, for $82,635 via a promissory note.
Alset provided loans to HapiTravel Holding Pte. Ltd. (HTHPL) and New Energy Asia Pacific Company Limited (New Energy Asia), both related parties.
Alset was renting an apartment in Singapore for its CEO and Chairman, Chan Heng Fai, as part of his compensation (lease expired September 2024).
Alset has notes payable to Chan Heng Fai for interest-free advances to subsidiaries.
Management fees paid to MacKenzie Equity Partners, LLC, an entity owned by Charles MacKenzie (Chief Development Officer), totaling $360,000 in 2024 and $400,000 in 2023, capitalized as real estate costs.
Consulting fees paid to CA Global Consulting Inc., an entity owned by Anthony Chan (former Chief Operating Officer), totaling $77,500 in 2024 and $120,000 in 2023 (agreement terminated June 2024).
Alset and its subsidiaries sold their entire equity interest in Impact Biomedical Inc. (IBO), where Chan Heng Fai is a director.

Stakeholder Impact

**Shareholders**: Potential dilution from the conversion of the NEAPI promissory note into common stock. Concerns regarding corporate governance due to the high volume and value of related-party transactions involving the CEO and majority shareholder. The Nasdaq non-compliance notice poses a risk to the stock's listing and liquidity. The stock repurchase program could provide some price support.
**Employees**: The identified material weakness in internal controls due to limited staff suggests potential operational strain or lack of sufficient resources in financial reporting. The 2025 Incentive Compensation Plan aims to attract and retain talent.
**Customers**: The acquisition of NEAPI could expand product offerings in the EV sector, potentially benefiting customers seeking eco-friendly transportation and charging solutions. Continued development of rental properties aims to serve the housing market.
**Creditors**: The issuance of an $83 million convertible promissory note increases the company's long-term liabilities. The default on the EF Hutton promissory note indicates potential challenges in meeting debt obligations, though negotiations are ongoing.
**Suppliers**: No direct impact mentioned, but the company's financial health and operational efficiency could indirectly affect relationships with suppliers.

Next Steps

Regain compliance with Nasdaq's minimum bid price requirement within 180 calendar days.
Implement the approved stock repurchase program of up to $1,000,000 of common stock by December 31, 2025.
Appoint additional qualified personnel with financial accounting, GAAP, and SEC experience to remediate the material weakness in internal controls.
Procure a new tenant for the model house in Montgomery County, Texas, after its conversion in the first quarter of 2025.
Complete contract-build homes within the next twelve months.
Continue negotiations with EF Hutton LLC to resolve the default status of the promissory note.

Key Dates

Date	Description
2023-12-13	Alset Inc. entered into an initial term sheet with Chan Heng Fai for the acquisition of NEAPI for $103,750,000.
2024-01-09	Business Combination between Alset Capital Acquisition Corp. and HWH International Inc. completed, with Alset Capital changing its name to HWH International Inc. (New HWH).
2024-01-17	Alset received a Convertible Promissory Note from Sharing Services Global Corp. (SHRG) for a $250,000 loan.
2024-02-20	Hapi Cafe Inc. invested an additional $312,064 in Ketomei Pte. Ltd. by converting a convertible loan, leading to Ketomei's consolidation into Alset's financial statements.
2024-03-14	Alset entered into a shares subscription agreement for Ideal Food & Beverage Pte. Ltd. (IFBPL), subscribing to 19,000 shares for $14,010.
2024-03-20	HWH International Inc. purchased a Convertible Promissory Note and warrants from SHRG for $250,000.
2024-04-18	Alset completed its F&B business acquisition of HCTW, an F&B business in Taiwan.
2024-04-25	Alset entered into a binding term sheet for a joint venture with Chen Ziping and Chan Heng Fai to build its travel business in Asia, forming HapiTravel Holding Pte. Ltd.
2024-05-09	HWH purchased a Convertible Promissory Note from SHRG for $250,000.
2024-05-21	Alset entered into a Securities Purchase Agreement with Chan Heng Fai and Heng Fai Holdings Limited to purchase 982,303 shares of DSS Inc.
2024-06-06	HWH purchased a Convertible Promissory Note from SHRG for $250,000.
2024-06-13	Alset terminated the consulting agreement with CA Global Consulting Inc.
2024-07-01	Sale of 70 lots from the Lakes at Black Oak project closed, generating approximately $3.8 million.
2024-07-15	Alset entered into a Convertible Credit Agreement with VEII for an unsecured credit line of up to $110,000.
2024-08-13	HWH purchased a Convertible Promissory Note from SHRG for $100,000.
2024-09-16	Alset temporarily ceased the caf business of MOC after the lease expired, leading to goodwill impairment.
2024-09-17	Impact Biomedical Inc. completed its Initial Public Offering and its shares began trading on the New York Stock Exchange.
2024-09-24	HWH entered into debt conversion agreements with Alset International Limited and Alset Inc., converting debt into HWH common stock.
2024-09-26	Alset entered into a Stock Purchase Agreement with Alset International Limited to purchase 6,500,000 shares of HWH International Inc. for $4,095,000 via a secured promissory note.
2024-10-10	Sale of an additional 72 lots from the Lakes at Black Oak project closed, generating approximately $3.9 million.
2024-11-06	Alset signed a loan agreement with HapiTravel Holding Pte. Ltd. (HTHPL) for $137,658.
2024-11-12	Alset entered into terms with SHRG to waive all interest previously accrued under the 1st SHRG Convertible Note and carried forward the principal under a new Convertible Promissory Note.
2024-11-13	Alset entered into two Contracts for Purchase and Sale and Escrow Instructions with Century Land Holdings of Texas, LLC for the sale of 142 single-family detached residential lots in Lakes at Black Oak and 63 lots in Alset Villas.
2024-11-19	HWH entered definitive agreements to acquire a controlling 60% interest in L.E.H. Insurance Group, LLC (LEH).
2024-11-20	The transactions related to the purchase of HWH International Inc. shares from Alset International Limited closed.
2024-11-25	Alset entered into a stock purchase agreement with HWH to purchase 4,411,764 newly issued shares of HWH's common stock.
2024-12-10	Alset entered into a stock purchase agreement with DSS to purchase 820,597 newly issued shares of DSS common stock for $800,000.
2024-12-17	Sale of 63 lots at Alset Villas closed, generating approximately $3.8 million. Also, Hapi Travel Limited was sold to HapiTravel Holding Pte. Ltd.
2024-12-24	Alset entered into a stock purchase agreement with HWH to purchase 1,300,000 newly issued shares of HWH's common stock.
2025-01-02	Alset entered into a securities purchase agreement for a registered direct offering of 1,500,000 shares of common stock at $1.00 per share.
2025-01-03	Closing of the registered direct offering, generating approximately $1,200,000 in net proceeds.
2025-01-15	HWH International Inc. entered into a Loan Agreement with Sharing Services Global Corp. (SHRG) for $150,000.
2025-01-23	Alset entered into a loan agreement with New Energy Asia Pacific Company Limited for $69,326.
2025-02-13	Alset's Board and Majority Shareholders approved and ratified the company's 2025 Incentive Compensation Plan.
2025-02-24	HWH common stock underwent a 5-for-1 reverse stock split.
2025-02-27	The acquisition of a controlling 60% interest in L.E.H. Insurance Group, LLC (LEH) closed.
2025-03-17	The 2025 Incentive Compensation Plan was put into effect.
2025-03-28	Value Exchange International, Inc. (VEII) issued a Convertible Promissory Note for $30,000 to Alset Inc.
2025-03-31	HWH entered into a securities purchase agreement with SHRG for a convertible promissory note of $150,000 and warrants.
2025-04-01	Between April 1 and April 4, 2025, Alset and its subsidiaries collectively sold their entire equity interest in Impact Biomedical Inc. (IBO).
2025-04-14	Alset entered into an amendment to the Credit Facility Agreement with HWH International Inc., extending the maturity date of advances to April 14, 2026.
2025-04-15	Alset's Board of Directors awarded Chairman and CEO Chan Heng Fai 1,000,000 restricted shares of common stock as compensation.
2025-04-17	HWH International Inc. entered into a Loan Agreement with Sharing Services Global Corp. (SHRG) for $250,000.
2025-05-08	Alset and Chan Heng Fai entered into an Amended Term Sheet for the NEAPI acquisition, revising the purchase price to $83,000,000.
2025-05-13	Alset received a letter from The Nasdaq Stock Market LLC indicating non-compliance with the minimum $1.00 bid price requirement.
2025-05-22	Alset entered into the definitive Stock Purchase Agreement with Chan Heng Fai for the NEAPI acquisition.
2025-05-23	Chan Heng Fai, as the majority stockholder, approved the NEAPI acquisition and the issuance of the convertible note by written consent.
2025-06-23	Alset's Board of Directors approved a new stock repurchase program authorizing the repurchase of up to $1,000,000 of its common stock.
2025-07-01	The Information Statement is being mailed to stockholders of record as of May 23, 2025.
2025-12-31	Stock repurchase program authorized until this date.
2030-12-31	Extended expiration date of Chan Heng Fai's Executive Employment Agreement.

Recommendation

sell

Keywords

Alset Inc., AEI, New Energy Asia Pacific Inc., NEAPI, Acquisition, Electric Vehicles, EV Charging, Convertible Note, Related Party Transaction, Financial Results, Net Loss, Revenue, Nasdaq Compliance, Corporate Governance, Risk Factors, Real Estate, Financial Services, Digital Transformation Technology, Biohealth

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