AEI.NASDAQAlset INC
10-Q: Alset Inc. Q2 Loss Widens Amid Real Estate Sales Decline
Sentiment:
Quarterly Report
Alset Inc. reported a significant increase in net loss for the second quarter and first half of 2025, primarily driven by reduced real estate sales and adverse foreign exchange movements.
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 delayed payment.
Capital raiseOn January 2, 2025, the company completed a registered direct offering, selling 1,500,000 shares of common stock at $1.00 per share, generating net proceeds of approximately $1,205,000.On July 23, 2025, Chairman Chan Heng Fai converted an $83,000,000 convertible promissory note (issued for the NEAPI acquisition) into 27,666,667 restricted shares of the company's common stock.
Worse than expectedNet loss for the six months ended June 30, 2025, more than doubled to $18.35 million from $8.46 million in the prior year.Total revenue decreased by 70% due to the completion of major real estate sales projects.A significant foreign exchange transaction loss of $6.24 million was recorded, contrasting with a gain in the prior year.The company incurred a new realized loss of $2.44 million on related party securities investments.Net loss per share worsened to $(1.49) from $(0.87).
Summary
- Net loss for the six months ended June 30, 2025, more than doubled to $18.35 million, compared to $8.46 million in the same period of 2024.
- Total revenue decreased by 70% to $2.17 million for the six months ended June 30, 2025, from $7.21 million in the prior year, mainly due to the completion of property sales in 2024.
- Real estate property sales revenue declined significantly by 78% to $1.43 million for the six months ended June 30, 2025, as remaining lots from Lakes at Black Oak and Alset Villas projects were sold in 2024.
- Foreign exchange transaction losses were a major contributor to the increased net loss, totaling $6.24 million for the six months ended June 30, 2025, compared to a $2.04 million gain in the prior year.
- Realized loss on related party securities investments amounted to $2.44 million for the six months ended June 30, 2025, with no comparable loss in the prior year.
- Cash and cash equivalents decreased to $25.58 million as of June 30, 2025, from $27.24 million at December 31, 2024.
- Total assets decreased to $86.01 million as of June 30, 2025, from $96.76 million at December 31, 2024.
- Total liabilities decreased to $4.74 million as of June 30, 2025, from $6.56 million at December 31, 2024.
- Weighted average common shares outstanding increased to 11,143,337 for the six months ended June 30, 2025, from 9,235,119 in the prior year.
Sentiment
Score: 3
Explanation: The company reported a significantly widened net loss and a substantial revenue decline due to the completion of major real estate projects. While operating expenses decreased and Nasdaq compliance was regained, the large foreign exchange losses, new realized losses on related party investments, and ineffective disclosure controls indicate significant financial and operational challenges. The capital raise through debt conversion with the Chairman, while providing equity, also highlights reliance on related party financing.
Positives
- Operating expenses decreased by 28% to $8.85 million for the six months ended June 30, 2025, compared to $12.29 million in the prior year.
- Rental revenue saw a slight increase of 0.6% to $1.43 million for the six months ended June 30, 2025.
- Total liabilities decreased by $1.82 million from December 31, 2024, to June 30, 2025.
- Regained compliance with Nasdaq's minimum $1 bid price requirement on July 17, 2025.
Negatives
- Net loss more than doubled to $18.35 million for the six months ended June 30, 2025, from $8.46 million in the prior year.
- Total revenue decreased by 70% due to the completion of major real estate sales projects.
- Significant foreign exchange transaction loss of $6.24 million for the six months ended June 30, 2025, contrasting with a gain in the prior year.
- Realized loss on related party securities investment of $2.44 million for the six months ended June 30, 2025.
- Disclosure controls and procedures were deemed not effective as of June 30, 2025.
- Accumulated deficit increased to $268.41 million as of June 30, 2025, from $251.85 million at December 31, 2024.
Risks
- Ability to improve revenue through cross-selling and revenue-sharing arrangements among diverse group of companies.
- Ability to identify complementary businesses for acquisition, obtain additional financing, and profitably integrate them into existing operations.
- Ability to attract competent and skilled technical and sales personnel for each business at acceptable compensation levels to manage overhead.
- Ability to control operating expenses as businesses and product and service offerings expand.
- Effects of public health issues such as a major epidemic or pandemic, including the impact of COVID-19 on the economy and business.
- Volatility of foreign exchange rates significantly impacting results due to approximately $30 million in intercompany loans between Singapore and US entities.
- No assurance that the company will be able to maintain compliance with Nasdaq's minimum bid price requirement in the future.
- The real estate business is subject to seasonal shifts in costs.
Future Outlook
Management believes available cash and favorable cash revenue from real estate projects are sufficient to fund operations for at least the next 12 months. They expect continued volatility in foreign exchange rates to significantly impact results due to approximately $30 million in intercompany loans between Singapore and US entities. The company intends to procure new tenants for model houses and enter into contract-build agreements for single-family, for-rent homes, reserving the right to sell them if deemed the highest and best use in the marketplace.
Management Comments
- "We believe our capital and management services provide us with a competitive advantage in the selection of strategic acquisitions, which creates and adds value for our Company and our stockholders."
- "We have historically favored businesses that improve an individual's quality of life or that improve the efficiency of businesses through technology in various industries."
- "The management believes that the available cash in bank accounts and favorable cash revenue from real estate projects are sufficient to fund our operations for at least the next 12 months."
- "We expect this fluctuation of foreign exchange rates to still significantly impact the results of operations in 2025, especially given that the foreign exchange rate may and is expected to be volatile."
- "At this moment, we do not expect to repay the intercompany loans in the short term."
Industry Context
The company operates across diverse sectors including real estate, financial services, digital transformation, biohealth, and consumer products. The decline in real estate sales revenue is specific to the completion of certain projects rather than a broad market downturn, though the company is shifting focus to rental properties and contract-build homes. The acquisition of NEAPI indicates a strategic move into the electric vehicle and charging station industry, aligning with global sustainability trends. The continued volatility in foreign exchange rates is a common challenge for multinational companies with significant intercompany financing.
Comparison to Industry Standards
- The significant decline in real estate sales revenue is specific to the completion of the Lakes at Black Oak and Alset Villas projects, not necessarily indicative of broader industry performance.
- The shift towards rental properties and contract-build homes suggests an adaptation to market demand, potentially seeking more stable, recurring revenue streams compared to one-off land sales.
- The acquisition of NEAPI, focusing on electric vehicles and charging stations, positions the company in a high-growth, environmentally conscious sector, comparable to companies like Tesla, ChargePoint, or EVgo, though Alset's current scale and specific role (distribution) are not detailed enough for direct financial comparison.
- The company's diversified holding structure and numerous related-party transactions are common in certain investment-focused entities but can raise questions about transparency and potential conflicts of interest compared to more focused, independent operating companies.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Chairman and Chief Executive Officer | N/A | Chan Heng Fai | 2025-04-15 | Awarded 1,000,000 restricted shares as compensation for services rendered. |
| Chief Operating Officer | Anthony Chan | N/A | 2024-06-13 | Consulting agreement with CA Global Consulting Inc. (entity owned by Anthony Chan) terminated. |
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Internal Controls | Management concluded that disclosure controls and procedures are not effective as of June 30, 2025. | 2025-06-30 | Indicates a material weakness in financial reporting oversight and information flow, potentially affecting the reliability of disclosures. |
| Incentive Compensation Plan | Adopted the 2025 Incentive Compensation Plan. | 2025-03-17 | Provides a framework for equity-based compensation, aligning management incentives with shareholder value, but also dilutive potential. |
| Stock Repurchase Program | Board of Directors approved a new stock repurchase program authorizing up to $1,000,000 of common stock repurchases. | 2024-06-23 | Aims to return value to shareholders and potentially support stock price, but actual impact depends on execution and market conditions. |
Related Party Transactions
- Sale of 1,600,000 shares of HWH International Inc. to two investors for $16,000,000 via promissory notes, with the company not expecting repayment due to HWH's significantly lower stock price ($1.27 vs $10 per share).
- Purchase of 4,411,764 newly issued shares of HWH common stock for $0.68 per share on November 25, 2024.
- Purchase of 1,300,000 newly issued shares of HWH common stock for $0.45 per share on December 24, 2024.
- Purchase of 820,597 newly issued shares of DSS common stock for $800,000 on December 10, 2024.
- Business combination of Alset Capital Acquisition Corp. and HWH International Inc. on January 9, 2024, where Alset International (85.8% owned subsidiary) received 10,900,000 shares of New HWH.
- Debt conversion agreements on September 24, 2024, where Alset Inc. converted $300,000 of HWH debt into 476,190 HWH common shares, and Alset International Limited converted $3,501,759 of HWH debt into 5,558,347 HWH common shares.
- Stock Purchase Agreement on September 26, 2024, where Alset Inc. purchased 6,500,000 HWH shares from Alset International Limited for a $4,095,000 secured promissory note.
- Multiple convertible credit agreements and promissory notes with Value Exchange International Inc. (VEII), where Alset Inc. holds 45.8% and its CEO and other directors are on VEII's board.
- Multiple convertible promissory notes and loan agreements with Sharing Services Global Corp. (SHRG), where Alset Inc. holds 29% and its CEO is a significant stockholder.
- Acquisition of New Energy Asia Pacific Inc. (NEAPI) from Chairman Chan Heng Fai for $83,000,000 via a convertible promissory note, which was converted into 27,666,667 restricted shares of Alset Inc. common stock on July 23, 2025.
- Notes payable to Chan Heng Fai from SeD Perth Pty. Ltd. ($12,186) and Hapi Metaverse Inc. ($4,131).
- Management fees paid to MacKenzie Equity Partners, LLC (owned by Chief Development Officer Charles MacKenzie) totaling $225,000 for six months ended June 30, 2025.
- Loan agreement with HapiTravel Holding Pte. Ltd. (HTHPL) for $137,658 on November 6, 2024, with additional $19,053 lent in Q1 2025.
- Sale of Hapi Travel Limited shares to HTHPL for an $82,635 promissory note on December 17, 2024.
- Loan agreement with New Energy Asia Pacific Company Limited for $69,326 on January 23, 2025.
- Apartment rental for CEO and Chairman, Chan Heng Fai, in Singapore, with expenses of $60,631 for the six months ended June 30, 2024 (lease expired September 2024).
Stakeholder Impact
- Shareholders: Significant net loss and revenue decline could negatively impact share price and investor confidence. Increased share count from offerings and debt conversions could lead to dilution. Stock repurchase program aims to support share value.
- Management: CEO received a substantial stock award, aligning interests but also representing significant compensation. Management's conclusion of ineffective disclosure controls indicates internal challenges.
- Creditors: Default on a promissory note to EF Hutton LLC indicates potential credit risk, though negotiations are ongoing.
- Employees: No direct impact mentioned, but overall financial performance and strategic shifts could influence future employment stability or opportunities.
- Customers: Real estate sales completion means fewer new property sales, but rental business continues. Diversification into new ventures like Hapi Marketplace, Hapi Cafe, Hapi Travel, and New Energy Asia Pacific aims to serve new customer bases.
Next Steps
- Procure new tenants for model houses after converting office space back to garages.
- Enter into contract-build agreements with local, regional, or national builders to construct single-family, for-rent homes.
- Potentially sell these new homes if deemed the highest and best use in the marketplace.
- Complete new homes within the next twelve months.
- Negotiate with EF Hutton to resolve the default status of the promissory note and restore the account to good standing.
- Evaluate the impact of ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures) on financial statements.
Key Dates
| Date | Description |
|---|---|
| 2018-03-07 | Alset Inc. incorporated in Delaware. |
| 2019-04-17 | SeD Maryland Development LLC entered into a Development Loan Agreement with M&T Bank. |
| 2020-07-17 | Company purchased shares and warrants from New Electric CV Corporation (NECV). |
| 2020-09-08 | Company acquired 1,666 shares from Nervotec Pte Ltd. |
| 2021-10-13 | BMI Capital Partners International Limited entered into a loan agreement with Liquid Value Asset Management Limited. |
| 2022-03-15 | Approximately $2,300,000 was released from M&T Bank loan collateral. |
| 2022-10-05 | Acquisition of MOC HK Limited (caf business in Hong Kong). |
| 2023-01-27 | Hapi Metaverse Inc. and New Electric CV Corporation entered into a Convertible Credit Agreement with VEII. |
| 2023-09-06 | Hapi Metaverse converted $1,300,000 of loan to VEII into 7,344,632 shares of VEII common stock and warrants. |
| 2023-09-28 | Alset International Limited entered into a loan agreement with Value Exchange International Inc. |
| 2023-11-13 | 150 CCM Black Oak Ltd. entered into two Contracts for Purchase and Sale and Escrow Instructions with Century Land Holdings of Texas, LLC. |
| 2023-12-13 | Company entered into a term sheet with Chan Heng Fai to purchase New Energy Asia Pacific Inc. (NEAPI). |
| 2023-12-14 | Additional $201,751 was released from M&T Bank loan collateral. |
| 2023-12-15 | Hapi Metaverse loaned VEII $1,000,000 under a Convertible Credit Agreement. |
| 2023-12-18 | HWH International Inc. entered into a Satisfaction and Discharge of Indebtedness Agreement with EF Hutton LLC. |
| 2024-01-01 | Model home lease commenced with Davidson Homes, LLC. |
| 2024-01-04 | 150 CCM Black Oak Ltd. sent $220,076 to Davidson as reimbursement for construction costs. |
| 2024-01-09 | Business Combination between Alset Capital Acquisition Corp. and HWH International Inc. completed. |
| 2024-01-17 | Company received a Convertible Promissory Note from Sharing Services Global Corp. (SHRG) for a $250,000 loan. |
| 2024-02-20 | HCI-T invested $312,064 for additional ownership in Ketomei Pte. Ltd. by converting a loan. |
| 2024-03-14 | Company entered into shares subscription agreement for Ideal Food & Beverage Pte. Ltd. |
| 2024-03-20 | HWH International Inc. entered into a securities purchase agreement with SHRG for a $250,000 convertible note and warrants. |
| 2024-03-31 | Company wrote off the entire value of $88,599 convertible note of Vector Com Co., Ltd. |
| 2024-04-25 | Company entered into a binding term sheet for a joint venture with Chen Ziping and Chan Heng Fai to form HapiTravel Holding Pte. Ltd. |
| 2024-05-09 | HWH entered into a securities purchase agreement with SHRG for a $250,000 convertible note. |
| 2024-05-21 | Company entered into a Securities Purchase Agreement with Chan Heng Fai and Heng Fai Holdings Limited to purchase DSS Inc. shares (later mutually agreed not to proceed). |
| 2024-06-06 | HWH entered into a securities purchase agreement with SHRG for a $250,000 convertible note. |
| 2024-06-13 | Company terminated consulting agreement with CA Global Consulting Inc. |
| 2024-06-23 | Board of Directors approved a new stock repurchase program of up to $1,000,000. |
| 2024-07-01 | Sale of 70 lots from Lakes at Black Oak closed, generating approximately $3.8 million. |
| 2024-07-15 | Company entered into a Convertible Credit Agreement with VEII for an unsecured credit line of up to $110,000. |
| 2024-08-13 | HWH entered into a securities purchase agreement with SHRG for a $100,000 convertible note. |
| 2024-09-16 | MOC HK Limited caf closed. |
| 2024-09-24 | Alset Inc. and Alset International Limited entered into debt conversion agreements with HWH. |
| 2024-09-26 | Alset Inc. entered into a Stock Purchase Agreement with Alset International Limited to purchase HWH shares. |
| 2024-10-10 | Sale of remaining 72 lots at Lakes at Black Oak closed, generating approximately $3.9 million. |
| 2024-11-06 | Company signed a loan agreement with HapiTravel Holding Pte. Ltd. (HTHPL) for $137,658. |
| 2024-11-19 | HWH entered definitive agreements to acquire a controlling 60% interest in L.E.H. Insurance Group, LLC. |
| 2024-11-20 | Closing of HWH stock purchase from Alset International Limited. |
| 2024-12-10 | Company entered into a stock purchase agreement with DSS for 820,597 shares. |
| 2024-12-16 | Sale of 63 lots at Alset Villas closed, generating approximately $3.8 million. |
| 2024-12-17 | Company entered into a shares purchase agreement with HTHPL to sell Hapi Travel Limited shares. |
| 2024-12-18 | Company sold Hapi Travel Pte. Ltd. to HTHPL for $834. |
| 2025-01-02 | Company entered into a securities purchase agreement for a registered direct offering of 1,500,000 common shares. |
| 2025-01-03 | Closing of the registered direct offering. |
| 2025-01-15 | HWH entered into a Loan Agreement with SHRG for $150,000. |
| 2025-01-23 | Company entered into loan agreement with New Energy Asia Pacific Company Limited for $69,326. |
| 2025-02-24 | New HWH completed a 5-for-1 reverse stock split. |
| 2025-02-27 | Acquisition of L.E.H. Insurance Group, LLC closed. |
| 2025-03-17 | Company's 2025 Incentive Compensation Plan adopted. |
| 2025-03-28 | 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 $150,000 convertible note and warrants. |
| 2025-04-01 | Sale of Impact Biomedical Inc. (IBO) shares completed between March 31, 2025 and April 4, 2025. |
| 2025-04-14 | Company entered into an amendment to the Credit Facility Agreement with HWH International Inc. |
| 2025-04-15 | Board of Directors awarded Chairman and CEO Chan Heng Fai 1,000,000 restricted shares. |
| 2025-04-17 | HWH entered into a Loan Agreement with SHRG for $250,000. |
| 2025-04-21 | HWH entered into a Loan Agreement with SHRG for $30,000. |
| 2025-04-23 | Company completed the sale of HWH World Inc. (HWHKOR) to AES Group Inc. |
| 2025-05-08 | Company and Chan Heng Fai entered into an Amended Term Sheet for the purchase of NEAPI. |
| 2025-05-13 | Company received a letter from Nasdaq regarding non-compliance with minimum bid price requirement. |
| 2025-06-23 | Company announced a stock repurchase program of up to $1,000,000. |
| 2025-06-27 | HWH entered into a securities purchase agreement with SHRG for a $60,000 convertible note. |
| 2025-07-17 | Company received notice from Nasdaq that it had regained compliance with the minimum bid price requirement. |
| 2025-07-23 | Closing of the NEAPI acquisition; Chan Heng Fai converted the $83,000,000 Convertible Note into 27,666,667 restricted shares of Alset Inc. |
| 2025-08-14 | Filing date of the 10-Q report. |
Recommendation
sellThe company reported a substantial increase in net loss and a significant decline in revenue, primarily due to the completion of its major real estate projects and adverse foreign exchange movements. The disclosure of ineffective disclosure controls raises serious concerns about financial reporting reliability. While the company has regained Nasdaq compliance and is pursuing new ventures, the overall financial performance is weak, and the reliance on complex related-party transactions, including a large debt conversion with the Chairman, adds to the risk profile. The stock repurchase program is insufficient to offset these fundamental issues. Given the widening losses, revenue contraction, and governance concerns, a seasoned investor would likely recommend selling the stock.
Keywords
Alset Inc., AEI, Quarterly Report, SEC Filing, Real Estate Development, Financial Services, Digital Transformation, Biohealth, Consumer Products, EHome Communities, Nasdaq Compliance, Foreign Exchange Risk, Related Party Transactions, Net Loss, Revenue Decline, Stock Repurchase, Convertible Notes, HWH International, New Energy Asia Pacific
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