S-1/A: HWH International Inc. Seeks to Raise Capital Through Share and Warrant Offering

HWH International Inc. is offering up to 3,571,429 shares of common stock and pre-funded warrants to raise capital for working capital and general corporate purposes.

Summary

• HWH International Inc. is conducting a best-efforts offering of up to 3,571,429 shares of common stock and pre-funded warrants.
• The pre-funded warrants are offered to purchasers who would otherwise exceed a 4.99% (or 9.99%) beneficial ownership threshold.
• Each pre-funded warrant is exercisable for one share of common stock at a nominal price of $0.0001.
• The offering is being managed by D. Boral Capital LLC as the exclusive placement agent.
• The company intends to use the net proceeds for working capital and general corporate purposes, including potential acquisitions or investments.
• There is no minimum offering amount required to close this offering.
• The assumed public offering price is $0.98 per share, but the actual price will be negotiated with investors.
• The company's common stock is listed on Nasdaq under the symbol HWH.
• The company has faced Nasdaq listing deficiencies related to market value and share price.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While the company is actively pursuing growth and has some innovative ideas, the financial losses, Nasdaq listing deficiencies, and reliance on related parties raise significant concerns. The best-efforts nature of the offering also adds uncertainty.

Positives

• The company has a credit facility with Alset Inc. for up to $1,000,000.
• The company has a new business-to-consumer marketplace, Hapi Marketplace, with over 6,500 products.
• The company has opened Hapi Caf locations in South Korea and Singapore.
• The company is planning to launch Hapi Wealth Builder in 2024.
• The company has a joint venture planned for its travel business in Asia.

Negatives

• The company has incurred significant net losses since its inception.
• The company has faced Nasdaq listing deficiencies related to market value and share price.
• The company's operations are highly dependent on its South Korea and Singapore operations.
• The company relies on its affiliates for key services without written contracts.
• The company's business is subject to changing consumer preferences and strong competition.
• The company is subject to payment-related risks and potential product liability issues.
• The company may not be able to obtain or maintain necessary licenses and approvals.
• The company is subject to fluctuations in foreign currency exchange rates.
• The company does not have business insurance coverage.

Risks

• The company may not achieve or maintain profitability.
• The company's membership growth and brand recognition could be adversely affected.
• The company's direct selling business model is highly competitive.
• Changes to membership benefits could be negatively perceived by members.
• Negative publicity could harm the company's reputation.
• A downturn in the economy could affect consumer purchases.
• The company is subject to payment-related risks.
• The company might sell products that cause illness or injury.
• Cybersecurity risks could compromise the company's data.
• The company's international expansion strategy may not be successful.
• Fluctuations in foreign currency exchange rates will affect the company's financial results.
• Restrictions on currency exchange in certain countries may limit the company's ability to receive and use its revenue effectively.
• The company has no business insurance coverage.
• The company's revenue and net income may be materially and adversely affected by any economic slowdown in any regions of Asia as well as globally.
• Unfavorable financial and economic developments in Korea may have an adverse effect on the company.
• Escalations in tensions with North Korea could have an adverse effect on the company.
• Strengthening of Koreas consumer protection laws could adversely affect the company's Korean operations.
• Labor unrest in Korea may adversely affect the company's operations.
• The company's business may be adversely affected by legal claims and regulatory actions.
• The company may fail to obtain, maintain or renew requisite licenses and approvals.
• If government regulations regarding network marketing change or are interpreted or enforced in a manner adverse to the business of the company's affiliates, such affiliates may be subject to enforcement actions and material limitations regarding their overall business model, which in turn could impact the supply of products to the company for sale to its members.
• If the company violates governmental regulations or fails to obtain necessary regulatory approvals, its operations could be adversely affected.
• Taxation and transfer pricing affects operations and the company could be subjected to additional taxes, duties, interest, and penalties in material amounts, which could harm the company's business.
• Changes in and actual or perceived failures to comply with applicable data privacy, security and protection laws, regulations, standards and contractual obligations may adversely affect the company's business, operations and financial performance.
• This offering is being made on a best efforts basis and the company may sell fewer than all of the securities offered hereby and may receive significantly less in net proceeds from this offering, which will provide the company only limited working capital.
• Nasdaq may delist the company's common stock from quotation on its exchange, which could limit investors ability to make transactions in the company's securities and subject the company to additional trading restrictions.
• The Pre-funded Warrants will not be listed or quoted on any exchange.
• The Pre-funded Warrants are speculative in nature.
• The company's management will have broad discretion over the use of the net proceeds from this offering.
• Future sales of the company's common stock could lower the stock price and dilute existing stockholders.

Future Outlook

The company intends to use the net proceeds from the offering for working capital and general corporate purposes, including research and development expenses, capital expenditures, working capital and general and administrative expenses, potential acquisitions of or investments in businesses, products and technologies that complement the company's business. The company also plans to use approximately $1,000,000 of the net proceeds from this offering for its Hapi Marketplace and Hapi Wealth Builder projects, including hiring staff, expanding offerings and commencing advertising for each of these projects.

Management Comments

• The company believes that this investment of additional funds into HWH is in the best interests of each of Alset Inc. and the Company.
• The company believes that the available cash in the Companys 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.

Industry Context

The company operates in the direct selling industry and is implementing a new membership model, which is a common strategy in this sector. The company is also expanding into the online marketplace and in-person social experiences, which are growing trends in the retail and service industries.

Comparison to Industry Standards

• The company's reliance on a direct selling model is similar to companies like Herbalife and Nu Skin, but HWH is also incorporating a physical presence with its Hapi Cafs, which is a unique approach.
• The company's online marketplace, Hapi Marketplace, competes with established e-commerce platforms like Amazon and Alibaba, but HWH is targeting its existing membership base.
• The company's Hapi Caf concept is similar to social clubs and co-working spaces, but HWH is integrating it with its product offerings and membership program.
• The company's financial performance is not directly comparable to established companies due to its early stage and emerging growth status, but its losses are not uncommon for companies in this phase of development.
• The company's Nasdaq listing deficiencies are a concern, as many companies in the direct selling and retail sectors maintain compliance with listing requirements.

Related Party Transactions

• The company has a credit facility with Alset Inc.
• The company has entered into debt conversion agreements with Alset Inc. and Alset International Limited.
• The company entered into a stock purchase agreement with Alset Inc.
• The company has various loans and transactions with related parties, including Alset Inc., Alset International Limited, Alset Business Development Pte. Ltd., and BMI Capital Partners International Ltd.
• The company has a joint venture planned for its travel business in Asia with Mr. Chan and Mr. Chen.

Stakeholder Impact

• Shareholders face the risk of dilution and potential loss of investment due to the company's financial challenges and Nasdaq listing deficiencies.
• Employees may be affected by potential changes in the company's operations and financial stability.
• Customers may experience changes in membership benefits and product offerings.
• Suppliers may be impacted by the company's financial performance and ability to pay for goods and services.
• Creditors face the risk of non-payment due to the company's financial challenges.

Next Steps

• The company intends to resume membership sales under a new model.
• The company plans to open additional Hapi Cafs.
• The company is working with affiliates to determine market-by-market travel services.
• The company intends to launch Hapi Wealth Builder in 2024.
• The company is evaluating potential actions to regain compliance with the Nasdaq listing requirements.

Key Dates

Keywords

common stock, pre-funded warrants, capital raise, membership, Hapi Marketplace, Hapi Cafs, direct selling, Nasdaq, debt conversion, credit facility, working capital, Alset Inc., HWH International Inc.