10-Q: Alset Inc. Q3 2025: Revenue Plummets, Losses Mount, Controls Ineffective

Alset Inc. reported a significant revenue decline and increased net losses for the nine months ended September 30, 2025, despite a quarterly net income, while also disclosing ineffective disclosure controls.

Summary

• Total revenue for the nine months ended September 30, 2025, decreased by 74% to $3,166,093 from $12,173,964 in the prior year, primarily due to the completion of property sales projects.
• The company recorded a net loss of $16,382,033 for the nine months ended September 30, 2025, more than doubling the $6,994,516 net loss from the same period in 2024.
• Operating losses increased to $9,266,557 for the nine-month period, up from $6,039,764 in the prior year.
• Despite the year-to-date loss, Alset Inc. reported a net income of $1,964,001 for the three months ended September 30, 2025, compared to $1,469,239 in the same quarter of 2024, driven by foreign exchange transaction gains and unrealized gains on securities.
• Total assets significantly increased to $169,106,722 as of September 30, 2025, from $96,761,977 at December 31, 2024, largely due to an increase in investment securities and the acquisition of New Energy Asia Pacific Inc. (NEAPI).
• Total stockholders' equity rose substantially to $164,395,054 from $90,198,851 over the same period.
• Cash and cash equivalents decreased to $25,459,416 as of September 30, 2025, from $27,243,787 at December 31, 2024.
• Management concluded that disclosure controls and procedures were not effective as of September 30, 2025.
• The company defaulted on a $1,184,375 promissory note to EF Hutton LLC due to a delayed payment of the first installment.

Sentiment

Score: 3

Explanation: While the balance sheet shows significant asset and equity growth, driven by acquisitions and investments, the substantial decline in revenue and increased operating and net losses for the nine-month period, coupled with ineffective internal controls and a loan default, indicate significant operational challenges and financial underperformance. The positive quarterly net income is largely due to non-operating items like foreign exchange gains.

Positives

• Net income for the three months ended September 30, 2025, increased to $1,964,001 from $1,469,239 in the prior year, primarily due to foreign exchange transaction gains and unrealized gains on securities.
• Total assets significantly increased by approximately $72.3 million to $169,106,722, mainly driven by investment securities and the acquisition of New Energy Asia Pacific Inc. (NEAPI).
• Total stockholders' equity increased by approximately $74.2 million to $164,395,054.
• Net cash used in operating activities decreased from $8,751,416 in the nine months ended September 30, 2024, to $5,491,443 in the same period of 2025.
• The company regained compliance with Nasdaq's minimum $1.00 bid price per share requirement on July 17, 2025.
• The Board approved an increase to the stock repurchase program, authorizing up to an additional $1,000,000, bringing the total authorized to $1,391,376.

Negatives

• Total revenue decreased significantly by 80% for the three months ended September 30, 2025, to $998,828 and by 74% for the nine months ended September 30, 2025, to $3,166,093, mainly due to reduced property sales.
• Loss from operations increased for both the three-month (from $963,781 to $2,578,978) and nine-month (from $6,039,764 to $9,266,557) periods.
• Net loss for the nine months ended September 30, 2025, more than doubled to $16,382,033 from $6,994,516 in the prior year.
• Accumulated deficit increased to $266,894,027 from $251,851,540.
• Cash and cash equivalents decreased by $1,784,371 from December 31, 2024, to September 30, 2025.
• Disclosure controls and procedures were deemed not effective as of September 30, 2025.
• The company defaulted on a $1,184,375 promissory note to EF Hutton LLC due to delayed payment of the first installment.
• Significant foreign exchange transaction losses of $4,795,345 were recorded for the nine months ended September 30, 2025.
• Realized loss on securities investment amounted to $3,176,050 for the nine months ended September 30, 2025.
• Impairment of right-of-use assets of $391,822 was recorded due to losses in certain F&B business locations.

Risks

• Recurring losses from operations and an accumulated deficit of $266,894,027 raise substantial doubt about the company's ability to continue as a going concern.
• Significant decrease in revenue due to the completion of major property sales projects, requiring successful transition to other revenue streams like rental properties and new developments.
• Volatility in foreign exchange rates is expected to significantly impact results in 2025 due to approximately $30 million in intercompany loans, with no short-term repayment planned.
• Challenges in improving revenue through cross-selling and revenue-sharing arrangements among the diverse group of subsidiaries.
• Difficulty in identifying complementary businesses for acquisition, obtaining additional financing, and profitably integrating them into existing operations.
• Potential inability to attract competent and skilled technical and sales personnel for each business at acceptable compensation levels.
• Challenges in controlling operating expenses as businesses and product and service offerings expand.
• The effects of public health issues, such as a major epidemic or pandemic, could adversely impact the economy and the company's business.
• Ineffectiveness of disclosure controls and procedures poses a risk to the reliability of financial reporting and compliance.
• Default on a promissory note to EF Hutton LLC could lead to further financial or reputational consequences.

Future Outlook

The company expects revenue from its rental business to continue increasing as it acquires and rents more houses. It intends to enter into contract-build agreements for single-family, for-rent homes, with completion expected within the next twelve months. Management believes current cash balances and expected cash revenue from real estate projects are sufficient to fund operations for at least the next 12 months. However, significant volatility in foreign exchange rates is anticipated to continue impacting results in 2025 due to large intercompany loans, which are not expected to be repaid in the short term.

Management Comments

• "Management believes that the substantial doubt previously identified has been alleviated."
• "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."
• "We believe that inflation has not had a material impact on our results of operations for the nine months ended September 30, 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."
• "Our management, including our Chief Executive Officers and Chief Financial Officers, concluded that our disclosure controls and procedures are not effective as of September 30, 2025."

Industry Context

Alset Inc. operates as a highly diversified holding company, spanning real estate, financial services, digital transformation, biohealth, and consumer products across multiple geographies. This broad diversification aims to capture growth opportunities in various sectors and potentially mitigate risks from any single industry. The real estate segment is shifting from land development and sales, which saw a significant revenue decline as projects concluded, towards rental properties and new contract-build homes, aligning with evolving housing market demands. The acquisition of New Energy Asia Pacific Inc. (NEAPI) for electric vehicles and charging stations signifies a strategic move into the sustainable energy and transportation sector, reflecting global trends towards decarbonization. The company's extensive network of related-party transactions and investments in other publicly traded entities suggests a strategy of leveraging existing relationships and influence for growth, which is common in certain Asian business models.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Related Party Transactions

• Numerous convertible notes and loan agreements with related parties including Value Exchange International Inc. (VEII), Sharing Services Global Corp. (SHRG), HWH International Inc. (HWH), and Document Securities Systems Inc. (DSS).
• Purchase of shares and warrants from HIPH World Inc. (HIPH).
• Stock purchase agreements with HWH and DSS.
• Business combination of Alset Capital Acquisition Corp. and HWH International Inc., where Alset International owned the majority of HWH-NV.
• Debt conversion agreements with HWH, converting debt owed by HWH to Alset International Limited and Alset Inc. into HWH common stock.
• Acquisition of L.E.H. Insurance Group, LLC from SHRG, with HWH acquiring controlling and then remaining interest.
• Apartment rental for CEO and Chairman, Chan Heng Fai, with the lease expiring in September 2024.
• Credit Facility Agreement with HWH International Inc., providing a line of credit up to $1,000,000, extended to April 14, 2026.
• Sale of the company's entire equity interest in Impact Biomedical Inc. (IBO) through market sales, generating proceeds of $4,184,575 and a recognized loss of $2,439,264.
• Acquisition of New Energy Asia Pacific Inc. (NEAPI) from Chan Heng Fai for $83,000,000, paid via a convertible promissory note subsequently converted into 27,666,667 restricted shares of common stock.
• Notes payable to Chan Heng Fai from subsidiaries SeD Perth Pty. Ltd., Hapi Metaverse Inc., and HWH International Inc.
• Management fees paid to MacKenzie Equity Partners, LLC, an entity owned by Charles MacKenzie, Chief Development Officer.
• Termination of consulting agreement with CA Global Consulting Inc., an entity owned by Anthony Chan, former Chief Operating Officer.
• Notes receivable from related parties including Ketomei Pte. Ltd., Liquid Value Asset Management Limited, Value Exchange International Inc., HapiTravel Holding Pte. Ltd., New Energy Asia Pacific Company Limited, and Value Exchange International (Hong Kong) Limited.
• Issuance of 1,000,000 restricted shares of common stock to Chairman and CEO Chan Heng Fai as compensation for services rendered.

Stakeholder Impact

• Shareholders face significant dilution from the issuance of 27,666,667 shares for the NEAPI acquisition, and increased accumulated deficit and operating losses negatively impact shareholder value. The stock repurchase program may offer some price support.
• Creditors, particularly EF Hutton LLC, are impacted by the company's default on a promissory note, indicating potential credit risk and requiring negotiations for resolution.
• Employees may be affected by operational challenges and business closures, such as Hapi Caf Korea Inc. and Alset F&B PLQ, although no direct employee impact is explicitly detailed.
• Customers in the real estate segment will experience a shift as the company transitions from land sales to rental properties and contract-build homes. Changes in F&B operations may also affect customers in those areas.
• Regulatory bodies and investors will scrutinize the company's disclosure of ineffective disclosure controls and procedures, which could lead to increased oversight and reduced investor confidence.

Next Steps

• Negotiate with EF Hutton to resolve the default status and restore the promissory note account to good standing.
• Procure a new tenant to occupy the model house in Montgomery County, Texas, after converting the office used for real estate sales back to a garage.
• Enter into contract-build agreements with local, regional, or national builders to construct single-family, for-rent homes, with completion expected within the next twelve months.
• Address and remediate the identified ineffectiveness of disclosure controls and procedures.
• Continue to manage the authorized stock repurchase program.
• Proceed with the planned merger of Winning Catering Group, Inc. (formerly LiquidValue Development Inc.) with Winning Group, which has not yet closed.

Key Dates

Recommendation

The company exhibits severe operational underperformance with significant revenue declines and increasing losses across the nine-month period. While total assets and equity have grown, this is largely due to related-party acquisitions and investments, not organic operational strength. The ineffective disclosure controls and a default on a promissory note highlight serious governance and financial management concerns. The diversified business model appears to lack focus, and the 'going concern' note, despite management's stated alleviation, remains a red flag given the recurring losses. These factors collectively point to a high-risk investment with poor fundamental performance.

Keywords

Real estate, EHome communities, Financial services, Digital transformation, Biohealth, Consumer products, Diversified holding company, SEC filing, 10-Q, Alset Inc., AEI, Property development, Rental properties, Investment securities, Related party transactions, Corporate governance, Nasdaq compliance, Stock repurchase, Foreign exchange risk, Going concern