UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________________to ____________________
Commission file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act: None
Indicate
by check mark whether the registrant (1) has filed all reports required 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, 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
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: As of May 8, 2026, there were shares outstanding of the registrant’s common stock $ par value.
Throughout this Report on Form 10-Q, the terms “Company,” “we,” “us” and “our” refer to Hapi Metaverse Inc. and “our board of directors” refers to the board of directors of Hapi Metaverse Inc.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that involve a number of risks and uncertainties. Although our forward-looking statements reflect the good faith judgment of our management, these statements can be based only on facts and factors of which we are currently aware. Consequently, forward-looking statements are inherently subject to risks and uncertainties. Actual results and outcomes may differ materially from results and outcomes discussed in the forward-looking statements.
Forward-looking statements can be identified by the use of forward-looking words such as “may,” “will,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or the negative of these terms or other similar expressions. Such forward-looking statements are based on our management’s current plans and expectations and are subject to risks, uncertainties and changes in plans that may cause actual results to differ materially from those anticipated in the forward-looking statements. You should be aware that, as a result of any of these factors materializing, the trading price of our common stock may decline. These factors include, but are not limited to, the following:
| ● | the availability and adequacy of capital to support and grow our business; |
| ● | economic, competitive, business and other conditions in our local and regional markets; |
| ● | actions taken or not taken by others, including competitors, as well as legislative, regulatory, judicial and other governmental authorities; |
| ● | competition in our industry; |
| ● | changes in our business and growth strategy, capital improvements or development plans; |
| ● | the availability of additional capital to support development; and |
| ● | other factors discussed elsewhere in this report. |
The cautionary statements made in this quarterly report are intended to be applicable to all related forward-looking statements wherever they may appear in this report.
We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly update any forward looking-statements, whether as a result of new information, future events or otherwise.
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TABLE OF CONTENTS
| 3 |
PART I FINANCIAL INFORMATION
ITEM 1. INTERIM FINANCIAL STATEMENTS
| 4 |
Hapi Metaverse Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| As
of March 31, 2026 (Unaudited) | As of December 31, 2025 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accrued interest receivable - related party | ||||||||
| Loan due from related party | ||||||||
| Prepaid expenses and other current assets | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Property and equipment, net | ||||||||
| Other non-current assets | ||||||||
| Promissory note receivable – related party | ||||||||
| Investment in securities at fair value – related party | ||||||||
| Convertible promissory note receivable – related party | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | |||||||
| Amount due to related parties | ||||||||
| Convertible promissory note payable – related party | ||||||||
| Promissory note payable – related party | ||||||||
| Operating lease liabilities – current | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| NON-CURRENT LIABILITIES: | ||||||||
| Operating lease liabilities- non-current | ||||||||
| TOTAL NON-CURRENT LIABILITIES: | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS’ (DEFICIT): | ||||||||
| Preferred stock, $ par value, shares authorized, issued and outstanding as of March 31, 2026 and December 31, 2025 | $ | $ | ||||||
| Common stock, $ par value, shares authorized, shares issued and outstanding, as of March 31, 2026 and December 31, 2025 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL HAPI METAVERSE INC. STOCKHOLDERS’ DEFICIT | ( | ) | ( | ) | ||||
| NON-CONTROLLING INTERESTS | ||||||||
| TOTAL STOCKHOLDERS’ DEFICIT | $ | ( | ) | $ | ( | ) | ||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Hapi Metaverse Inc. and Subsidiaries
Condensed Consolidated Statement of Operations and Comprehensive Loss
(Unaudited)
| Three Months Ended March 31 | ||||||||
| 2026 | 2025 | |||||||
| Revenues: | ||||||||
| Food & Beverage | $ | $ | ||||||
| eCommerce | ||||||||
| Total of Revenue | $ | $ | ||||||
| Cost of revenues | ||||||||
| Food & Beverage – Depreciation | $ | $ | ( | ) | ||||
| Food & Beverage – Cost of revenues | ( | ) | ( | ) | ||||
| eCommerce - Cost of revenues | ( | ) | ( | ) | ||||
| Total Cost of revenues | $ | ( | ) | $ | ( | ) | ||
| Gross profit | $ | $ | ||||||
| Operating expenses: | ||||||||
| Depreciation | $ | ( | ) | $ | ( | ) | ||
| General and administrative | ( | ) | ( | ) | ||||
| Total Operating expenses | $ | ( | ) | $ | ( | ) | ||
| Loss from operations | $ | ( | ) | $ | ( | ) | ||
| Other income (expense): | ||||||||
| Interest income – related party | $ | $ | ||||||
| Interest income | ||||||||
| Other income | ||||||||
| Interest expense – related party | ( | ) | ( | ) | ||||
| Foreign exchange (loss) gain | ( | ) | ||||||
| Unrealized gain (loss) on Securities Investment – related party | ( | ) | ||||||
| Total Other expense | $ | ( | ) | $ | ( | ) | ||
| Loss before taxes | $ | ( | ) | $ | ( | ) | ||
| Provision for income taxes | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Less: Net loss attributable to non-controlling interests | ||||||||
| Net loss attributable to common shareholders | $ | ( | ) | $ | ( | ) | ||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive loss, net of tax: | ||||||||
| Foreign currency translation adjustment | $ | $ | ( | ) | ||||
| Total Other comprehensive loss, net of tax: | $ | ( | ) | $ | ( | ) | ||
| Less Comprehensive loss attributable to non-controlling interests | $ | $ | ||||||
| Total Comprehensive loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | ||
| Net loss per common share – basic and diluted | ||||||||
| Basic and diluted net loss per share | $ | $ | ||||||
| Weighted average number of shares of common stock outstanding - | ||||||||
| Basic and diluted | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Hapi
Metaverse Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Deficit
(Unaudited)
| Three Months Ended March 31, 2026 | ||||||||||||||||||||||||||||||||
| Common Shares | Par
Value | Additional Paid-In Capital | Accumulated
Other Comprehensive Loss | Accumulated Deficit | Total Hapi Metaverse Inc. Stockholders’ Deficit | Non-Controlling Interests | Stockholders’
Deficit | |||||||||||||||||||||||||
| Balance December 31, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||
| Related party liabilities transferred to equity | - | |||||||||||||||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||||||||||
| Balance March 31, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||
| Three Months Ended March 31, 2025 | ||||||||||||||||||||||||||||||||
| Common Shares | Par
Value | Additional Paid-In Capital | Accumulated
Other Comprehensive Loss | Accumulated Deficit | Total Hapi Metaverse Inc. Stockholders’ Deficit | Non-Controlling Interests | Stockholders’
Deficit | |||||||||||||||||||||||||
| Balance December 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Acquisition of a subsidiary | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance March 31, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 7 |
Hapi Metaverse Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Three Months Ended March 31 | ||||||||
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to cash used in operations activities: | ||||||||
| Depreciation | ||||||||
| Non-cash lease expenses | ||||||||
| Foreign exchange loss / (gain) | ( | ) | ||||||
| Unrealized loss on securities investment – related party | ( | ) | ||||||
| Change in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Accrued interest receivable - related party | ( | ) | ( | ) | ||||
| Other non-current assets | ( | ) | ( | ) | ||||
| Accounts payable, other payable and accrued expenses | ( | ) | ( | ) | ||||
| Accounts payable, other payable and accrued expenses - related parties | ||||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | $ | ( | ) | $ | ( | ) | ||
| CASH FLOW FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | $ | ( | ) | $ | ( | ) | ||
| Net cash used in investing activities | $ | ( | ) | $ | ( | ) | ||
| CASH FLOW FROM FINANCING ACTIVITIES: | ||||||||
| Advance from related parties | $ | $ | ||||||
| Net cash provided by financing activities | $ | $ | ||||||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | $ | ( | ) | $ | ||||
| Effects of foreign exchange rates on cash and cash equivalents | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS at the beginning of period | ||||||||
| CASH AND CASH EQUIVALENTS at the end of period | $ | $ | ||||||
| Supplemental schedule of non-cash investing and financing activities | ||||||||
| Non-cash paid interest expenses | $ | $ | ||||||
| Transfer of due to related parties to equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 8 |
HAPI METAVERSE INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. ORGANIZATION AND PRINCIPAL BUSINESS ACTIVITIES
Hapi Metaverse Inc., formerly GigWorld Inc. (the “Company”) was incorporated in the State of Delaware on March 7, 2012 and established a fiscal year end of December 31. The Company has been in the Food and Beverage (“F&B”) business since 2022. The Company is planning on expanding serving business-to-business (B2B) needs in e-commerce, collaboration and social networking functions.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying condensed unaudited 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”), the instructions to Form 10-Q and Article 10 of Regulation S-X. 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, 2026 or any other interim periods or for any other future years. These unaudited 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, 2025 filed on March 17, 2026.
Liquidity and Capital Resources
In
the three months ended March 31, 2026, we incurred net loss of $
Current conditions raise substantial doubt about the Company’s ability to continue as a going concern. However, management expects improvement in the Food and Beverage business and anticipates that ongoing financial support from Alset Inc. will provide sufficient liquidity to meet the Company’s obligations for the foreseeable future, thereby alleviating such doubt. The Company has obtained a letter of financial support from Alset Inc., the Company’s direct corporate parent. Alset Inc. is committed to provide any additional funding required by the Company and would not demand repayment for the next twelve months from the filing of this Form 10-Q.
These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
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.
Basis of consolidation
The 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.
Use of estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, cost and expenses in the consolidated financial statements and accompanying notes. Significant accounting estimates reflected in the Company’s consolidated financial statements include the useful lives and impairment of property and equipment, valuation allowance for deferred tax assets, valuation of goodwill, and the fair value estimate for the Company’s warrants and convertible notes receivable with a related party.
Cash and cash equivalents
The Company considers all highly liquid investments with a maturity of three months or less at the date of acquisition to be cash equivalents. There are no cash equivalents within the period.
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 assess whether the contract involves the use of an identified asset, whether it has the right to obtain substantially all 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.
| 9 |
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. |
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.
Lease liabilities
Lease liability is measured at the present value of the outstanding lease payments at the commencement date, discounted using the Company incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise mainly fixed lease payments.
Foreign currency risk
Because
of its foreign operations, the Company holds cash balances denominated in currencies other than the U.S. dollar. As of March 31, 2026,
the Company’s cash included amounts equivalent to $
Investment in Securities at Fair Value – Related Party
The
Company currently has an investment in Value Exchange International, Inc. (“VEII”), a related party, consisting of
shares of common shares and
Property and Equipment
Property 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 (such as removal, and restoration costs). 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 operations. Depreciation is computed by the straight-line method (after considering their respective estimated residual values) over the estimated useful lives of the respective assets as follows:
| Office Equipment | ||
| Operating Equipment | ||
| Leasehold improvement | ||
| Motor Vehicles |
| 10 |
Concentrations
Financial
instruments that potentially expose the Company to concentration of credit risk consist primarily of cash. Although the cash at each
particular bank in the United States is insured up to $
Fair value
Fair Value of Financial Instruments
The carrying value of cash, accounts payable and accrued liabilities, and short-term borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the consolidated financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The authoritative guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company classifies and discloses assets and liabilities carried at fair value in one of the following three categories:
| ● | Level 1 – quoted prices in active markets for identical assets and liabilities. | |
| ● | Level 2 – observable market-based inputs or unobservable inputs that are corroborated by market data; and | |
| ● | Level 3 – significant unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
Revenue recognition
Accounting Standards Codification 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 or catering service to customers.
Revenue is recognized when (or as) the Company transfers promised goods or services or catering service to its customers in amounts that reflect the consideration to which the Company expects to be entitled to in exchange for those goods or services, which occurs when (or as) the Company satisfies its contractual obligations and transfers over control of the promised goods or services or catering service to its customers. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, the Company performs the following five steps: (i) identification of the promised goods or services or catering service in the contract by analyzing customer perspective, immateriality, implicit promises, setup activities, and marketing incentives ; (ii) determination of whether the promised goods or services or catering service are performance obligations including whether they are distinct in the context of the contract by analyze the contract from the perspective of the customer; (iii) measurement of the transaction price, including the constraint on variable consideration by the expected value method and the most likely amount method ; (iv) allocation of the transaction price to the performance obligations based on a relative stand-alone selling price basis, or the price at which the Company would sell the good or service separately to similar customers in similar circumstances ; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. This should only be done once the transaction is complete and your obligation is fulfilled. The Company only applies the five-step model to contracts when it is probable that the entity will collect consideration it is entitled to in exchange for the goods or services or catering service it transfers to the customer.
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Costs to obtain or fulfill a contract are capitalized and expensed over the life of the contract.
The Company began generating revenue from the food and beverage business by providing quality catering services in Hong Kong since October 2022 and in the People’s Republic of China (“PRC”) since January 2023. The Company acts as the principal in these arrangements because it controls the goods and services before they are transferred to customers. Accordingly, revenue is recognized on a gross basis at a point in time, when the Company provides the product to the customer.
Income taxes
Current income taxes are provided for in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Net operating loss carry forwards and credits are applied using enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that a portion of or all of the deferred tax assets will not be realized. The components of the deferred tax assets and liabilities are individually classified as non-current in accordance with ASC 740. The Company has recorded a full valuation allowance against all deferred tax assets as of March 31, 2026 and 2025.
The impact of an uncertain income tax position on the income tax return is recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Interest and penalties on income taxes will be classified as a component of the provisions for income taxes. The Group did not recognize any income tax due to uncertain tax position or incurred any interest and penalties related to potential underpaid income tax expenses for the years ended March 31, 2026 or 2025.
Foreign currency translation
Items included in the consolidated financial statements of each entity are measured using the currency of the primary economic environment in which the entity operates (“functional currency”).
The functional and reporting currency of the Company is the United States dollar (“U.S. dollar”). The financial records of the Company’s subsidiaries located in Singapore, Hong Kong, Mainland China and Taiwan are maintained in their local currencies, the Singapore Dollar (S$), Hong Kong Dollar (HK$), Chinese Yuan (CN ¥) and New Taiwan Dollar (NT$), which are also the functional currencies of these entities.
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the rates of exchange ruling at the balance sheet date. Transactions in currencies other than the functional currency during the year are converted into functional currency at the applicable rates of exchange prevailing when the transactions occurred. Transaction gains and losses are recognized in the consolidated statements of operations.
The Company’s entities with functional currency of Singapore Dollar, Hong Kong Dollar, Chinese Yuan and New Taiwan Dollar, translate their operating results and financial positions into the U.S. dollar, the Company’s reporting currency. Assets and liabilities are translated using the exchange rates in effect on the balance sheet date. Revenues, expenses, gains and losses are translated using the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of comprehensive income (loss).
| 12 |
For
the three months ended March 31, 2026, the Company recorded foreign currency translation adjustment of $
Comprehensive income (loss)
Comprehensive income (loss) includes gains (losses) from foreign currency translation adjustments. Comprehensive income (loss) is reported in the consolidated statements of operations and comprehensive loss.
Basic earnings (loss) per share is computed by dividing net income (loss) attributable to stockholders by the weighted average number of shares outstanding during the year.
The calculation of diluted net income per unit includes the effects of the assumed conversion of the Company’s outstanding convertible debt, except during the loss periods as the effect would be anti-dilutive.
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 consolidated statements of operation and comprehensive income, and within equity in the Consolidated Balance Sheets, separately from equity attributable to owners of the Company.
Recent accounting pronouncements
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 adoption of this ASU did not have a material impact on the Consolidated Financial Statements.
On November 27, 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 amends ASC 280, Segment Reporting (“ASC 280”) to expand segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the Company’s chief operating decision maker (“CODM”), the amount and description of other segment items, the title and position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. ASU 2023-07 further permits disclosure of more than one measure of segment profit or loss and extends the full disclosure requirements of ASC 280 to companies with single reportable segments. The Company adopted ASU 2023-07 on December 31, 2024. See —Segment reporting below for additional information.
Accounting pronouncements pending adoption
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.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270). This update enhances the clarity and organization of interim reporting and the applicability of Topic 270. It also clarifies the required form and content of interim financial statements, including requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The standard is effective for interim reporting periods within annual periods beginning after December 15, 2027, with early adoption permitted. Entities may apply the update either prospectively or retrospectively. We are currently evaluating the impact of adopting this standard on our financial statements and disclosures.
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 is responsible as the CODM and reviews 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.
Note 3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accrued expenses and other current liabilities consisted of the following:
| March
31, 2026 | December
31, 2025 | |||||||
| Accrued payroll | $ | $ | ||||||
| Accrued professional fees | ||||||||
| Other account payable and accrued expenses | ||||||||
| Total | $ | $ | ||||||
| 13 |
Note 4. PROPERTY AND EQUIPMENT, NET
Property and Equipment, net consisted of the following:
| March
31, 2026 | December
31, 2025 | |||||||
| Cost | ||||||||
| Leasehold improvement | $ | $ | ||||||
| Computer equipment | ||||||||
| Furniture & Fittings | ||||||||
| Motor Vehicle | ||||||||
| Total cost | $ | $ | ||||||
| Less: accumulated depreciation # | ||||||||
| Leasehold improvement | $ | $ | ||||||
| Computer equipment | ||||||||
| Furniture & Fittings | ||||||||
| Motor Vehicle | ||||||||
| Total accumulated depreciation | $ | $ | ||||||
| Less: impairment ## | ||||||||
| Leasehold improvement | $ | $ | ||||||
| Computer equipment | ||||||||
| Furniture & Fittings | ||||||||
| Total impairment## | $ | $ | ||||||
| Less: Foreign currency translation adjustment | $ | ( | ) | $ | ||||
| Net value at the end of period | ||||||||
| Leasehold improvement | $ | $ | ||||||
| Computer equipment | ||||||||
| Furniture & Fittings | ||||||||
| Motor Vehicle | ||||||||
| Total Net | $ | $ | ||||||
| # |
| ## |
Note 5. INVESTMENT IN RELATED PARTY
The Company elected the fair value option, or “FVO,” and therefore the Company continued to measure at fair value, for those of its assets and liabilities it had previously measured at fair value and for which such election is permitted, as provided for under ASC 825, and the financial instrument is initially measured at its issue-date estimated fair value and then subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. (as provided for by ASC 825). The Company initially elected the FVO for its equity method investment in VEII, a related party, to simplify the reporting process. As required under ASC 825, all other instruments with VEII are required to be reported at fair value, so the Company values its convertible loans receivable and warrants with VEII at fair value as well.
ASC 825 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. As provided by ASC 825, estimated fair value adjustment of the convertible promissory note and warrants are presented in a single line item within other income (expense) in the accompanying consolidated statements of operations and comprehensive loss.
On
September 6, 2023, the Company converted $
On
March 31, 2026 and December 31, 2025, the Company owned shares of VEII’s outstanding common stock, which represent %
of share capital of VEII and
| 14 |
Financial assets measured at fair value on a recurring basis are summarized below and disclosed on the consolidated balance sheets as of March 31, 2026 and December 31, 2025:
| Fair Value Measurement Using | Amount at | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| March 31, 2026 | ||||||||||||||||
| Asset | ||||||||||||||||
| Investment Securities – Fair Value | $ | $ | $ | $ | ||||||||||||
| Warrants – VEII | ||||||||||||||||
| Total Investment in securities at Fair Value-related party | $ | $ | $ | $ | ||||||||||||
| Fair Value Measurement Using | Amount at | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| December 31, 2025 | ||||||||||||||||
| Asset | ||||||||||||||||
| Investment Securities – Fair Value | $ | $ | $ | $ | ||||||||||||
| Warrants – VEII | ||||||||||||||||
| Total Investment in securities at Fair Value-related party | $ | $ | $ | $ | ||||||||||||
Unrealized
loss on securities investment at fair value-related party was $
Warrants
On
September 6, 2023, the Company received warrants to purchase shares of VEII. For further details on this transaction, refer to Note 6
- Related Party Balance and Transactions. As of March 31, 2026 and December 31, 2025, the fair value of the warrants was $
The fair value of the VEII warrants under level 2 category as of March 31, 2026, and December 31, 2025 was calculated using a Black-Scholes valuation model valued with the following weighted average assumptions:
| March
31, 2026 | December
31, 2025 | |||||||
| Stock price | $ | $ | ||||||
| Exercise price | $ | $ | ||||||
| Risk free interest rate | % | % | ||||||
| Annualized volatility | % | % | ||||||
| Dividend Yield | $ | $ | ||||||
| Year to maturity | ||||||||
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.
| 15 |
Note 6. RELATED PARTY BALANCES AND TRANSACTIONS
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 original total amount due to AEI was $
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 original total amount due to AIL was $
Due to Alset Business Development Pte. Limited.
Alset
Business Development Pte. Limited (“ABD”) is incorporated in Singapore and is a fellow subsidiary of Alset Inc. The amount
due from ABD represents short-term working capital advances for the Company to finance its daily operations. 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. During the year ended March 31, 2026, ABD advanced additional $
Due to Hapi Robot Inc.
Hapi
Robot Inc. (“HRI”) is incorporated in the United States of America, and is a fellow subsidiary of Alset Inc. The amount due
from HRI represents payable to the Company for the investment in 40% ownership of HRI. There is no written, executed agreement and no
financial/non-financial covenants and the amount due to HRI is non-interest bearing. Since the amount due to HRI is due upon request,
it is classified as a current liability. The original total amount due to HRI was $
Due to Alset Global Pte. Limited.
Alset
Global Pte. Limited (“AGPL”) is incorporated in Singapore and is a fellow subsidiary of Alset Inc. The amount due from AGPL
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 AGPL is non-interest bearing. Since the amount due to AGPL is due upon request,
it is classified as a current liability. The original total amount due to AGPL was $
| 16 |
Due to Global eHealth Limited.
Global
eHealth Limited (“GHL”) is incorporated in Hong Kong and is a fellow subsidiary of Alset Inc. The amount due from GHL 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 GHL is non-interest bearing. Since the amount due to GHL is due upon request, it is classified as a current
liability. The original total amount due to GHL was $
Due to HWH International Inc.
HWH
International Inc. (“HWH”) is incorporated in the United States of America, and is a fellow subsidiary of Alset Inc.
Due from LiquidValue Development Limited.
LiquidValue
Development Limited (“LVDL”) is incorporated in Hong Kong and is a fellow subsidiary of Alset Inc. The amount due from LVDL
represents short-term working capital advances from the Company for LVDL daily operations. There is no written, executed agreement and
no financial/non-financial covenants and the amount due from LVDL is non-interest bearing. Since the amount due from LVDL is due upon
request, it is classified as a current liability. The original total amount due to LVDL was $
Convertible Promissory Notes with VEII
CN #1
On
January 27, 2023, the Company and HIPH World Inc. (f.k.a. American Premium Water Corporation and New Electric CV Corporation) (together
with the Company, the “Lenders”) entered into a Convertible Credit Agreement (“CN #1”) with Value Exchange International,
Inc., a Nevada corporation. CN #1 provides VEII with a maximum credit line of $
On
September 6, 2023, the Company converted $
As
of March 31, 2026, $
On
February 23, 2023, the Company and Alset Inc. entered into a Subscription Agreement (the “AEI Subscription Agreement”).
Pursuant to the AEI Subscription Agreement, the Company has borrowed $
CN #2
On
December 14, 2023, the Company entered into a Convertible Credit Agreement (“CN #2”) with VEII. On December 15, 2023, the
Company loaned VEII $
| 17 |
On
December 15, 2023, the Company and AIL entered into a Subscription Agreement (the “AIL Subscription Agreement”). Pursuant
to the AIL Subscription Agreement, the Company has borrowed $
As
of March 31, 2026, $
CN #3
On
July 15, 2024, the Company entered into a Convertible Credit Agreement (“CN #3”) with VEII for an unsecured credit line in
the maximum amount of $
Our Chairman, Chan Heng Fai, and another member of our Board of Directors, Lum Kan Fai, are both members of the Board of Directors of VEII. In addition to Mr. Chan, three other members of the Board of Directors of Alset Inc., our majority stockholder, are also members of the Board of Directors of VEII (Wong Shui Yeung, Wong Tat Keung and Lim Sheng Hon, Danny).
Convertible promissory note receivable - related party measured at fair value on a recurring basis are summarized below and disclosed on the consolidated balance sheets as of March 31, 2026 and December 31, 2025:
| Fair Value Measurement Using | Amount at | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| March 31, 2026 | ||||||||||||||||
| Assets | ||||||||||||||||
| Convertible loans receivable – VEII | $ | $ | $ | $ | ||||||||||||
| Total convertible promissory note receivable - related party at Fair Value | $ | $ | $ | $ | ||||||||||||
| Fair Value Measurement Using | Amount at | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
| December 31, 2025 | ||||||||||||||||
| Assets | ||||||||||||||||
| Convertible loans receivable – VEII | $ | $ | $ | $ | ||||||||||||
| Total convertible promissory note receivable - related party at Fair Value | $ | $ | $ | $ | ||||||||||||
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 | |||||||||
| Valuation date | March 31, 2026 | March 31, 2026 | March 31, 2026 | |||||||||
| Risk-free interest rate | % | % | % | |||||||||
| Expected life | ||||||||||||
| Discount rate | % | % | % | |||||||||
| Expected volatility | % | % | % | |||||||||
| Expected dividend yield | % | % | % | |||||||||
| Fair value | $ | $ | $ |
| CN# | 1 | 2 | 3 | |||||||||
| Valuation date | December 31, 2025 | December 31, 2025 | December 31, 2025 | |||||||||
| Risk-free interest rate | % | % | % | |||||||||
| Expected life | ||||||||||||
| Discount rate | % | % | % | |||||||||
| Expected volatility | % | % | % | |||||||||
| Expected dividend yield | % | % | % | |||||||||
| Fair value | $ | $ | $ |
| 18 |
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.
| December
31, 2025 | Additions | Unrealized
Gain | March 31, 2026 | |||||||||||||
| Convertible notes receivable, related party | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| December
31, 2024 | Additions | Unrealized
Loss | March 31, 2025 | |||||||||||||
| Convertible notes receivable, related party | $ | $ | $ | ( | ) | $ | ||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
During
the three months ended March 31, 2026 and 2025, the Company measured the fair value of convertible notes receivable with VEII and
the balance increased from $
On
August 22, 2025, the Company paid a bill on behalf of Value Exchange International (Hong Kong) Limited (“VEIHK”), a subsidiary
of VEII, in the amount of $
On
September 5, 2025, the Company entered into a loan agreement with VEIHK, in the amount of $
As
of March 31, 2026, VEIHK owed the Company a total of $
Due from Hapi Travel Holding Pte. Ltd.
On
December 17, 2024, the Company entered into a shares purchase agreement with Hapi Travel Holding Pte. Limited (“HTHPL”),
pursuant to which the Company sold ordinary shares of Hapi Travel Limited (“HTL”), representing % of the issued
and outstanding share capital of HTL, in accordance with the terms and conditions set out in the shares purchase agreement entered into
with HTHPL, in exchange for a promissory note in amount of $
| 19 |
Note 7. LEASES
The
Company has operating leases for its F&B stores and warehouse in Hong Kong. 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
Impairment of Right-of-Use Assets
As
of December 31, 2025, the Company recorded impairment on right-of-use assets of $
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, 2026 | December
31, 2025 | |||||||
| Right-of-use assets | $ | $ | ||||||
| Lease liabilities - current | ||||||||
| Lease liabilities - non-current | ||||||||
| Total lease liabilities | $ | $ |
As of March 31, 2026, the aggregate future minimum rental payments under non-cancelable agreement are as follows:
| Maturity of Lease Liabilities | Total | |||
| 12 months ending March 31, 2027 | $ | |||
| 12 months ending March 31, 2028 | ||||
| 12 months ending March 31, 2029 | ||||
| 12 months ending March 31, 2030 | ||||
| Total undiscounted lease payments | ||||
| Less: Imputed interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
| Operating lease liabilities - current | ||||
| Operating lease liabilities - non-current | $ | |||
Note 8. SUBSEQUENT EVENTS
The Company has evaluated all subsequent events and transactions through May 8, 2026, the date that the condensed consolidated financial statements were available to be issued and noted no subsequent events requiring financial statement recognition or disclosure other than noted below:
On May 6, 2026, HWH International Inc. entered into a Termination Agreement with Alset Inc., mutually agreeing to not proceed with the planned closing of the acquisition of Hapi Metaverse Inc.
| 20 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
FORWARD-LOOKING STATEMENTS
Certain matters discussed herein are forward-looking statements. Such forward-looking statements contained in this Form 10-Q involve risks and uncertainties, including statements as to:
1. our future operating results;
2. our business prospects;
3. any contractual arrangements and relationships with third parties;
4. the dependence of our future success on the general economy;
5. any possible financings; and
6. the adequacy of our cash resources and working capital.
These forward-looking statements can generally be identified as such because the context of the statement will include words such as we “believe,” “anticipate,” “expect,” “estimate” or words of similar meaning. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated as of the date of filing of this Form 10-Q. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of filing of this Form 10-Q, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements.
Background and business
Hapi Metaverse Inc. (the “Company” or “Group”), was incorporated in the State of Delaware on March 7, 2012. The Company’s initial business plan was to be a financial acquisition intermediary which would serve buyers and sellers for companies that are in highly fragmented industries. Our Board determined it was in the best interest of the Company to expand our business plan.
Since 2018, one of our main developments was a broadening of our scope of planned operations into a digital transformation technology business. As a digital transformation technology business, we are committed to enabling enterprises we work with to engage in a digital transformation by providing consulting, implementation and development services with various technologies, including instant messaging, blockchain, eCommerce, social media and payment solutions. We continue to advise businesses in network marketing and brands in block chain services and mobile collaboration.
We are still planning to expand serving business-to-business (B2B) needs in e-commerce, collaboration and supply chains. We will help enterprises and community users to transform their business models with digital economy in a more effective manner. With our platform, users can discover and build their own communities and create valuable content. Enterprises can in turn enhance the user experience with premium content, which is facilitated by the transactions of every stakeholder via e-commerce. The Company started to generate revenue from this business in July 2024.
Our technology platform consists of instant messaging systems, social media, e-commerce and payment systems, and network marketing platforms. We are focused on business-to-business solutions such as enterprise messaging and workflow. We have successfully implemented several strategic platform developments for clients, including a mobile front-end solution for network marketing, a hotel e-commerce platform for Asia and a real estate agent management platform in China. We have also enhanced our technological capability from mobile application development to include blockchain architectural design, allowing mobile-friendly front-end solutions to integrate with software platforms. Our main digital assets at the present time are our applications. We continue to strengthen our technology architecture and develop Application Development Interfaces (APIs) for collaboration partners such as network marketing back end service providers. In addition, we are continuing our development activities in blockchain in order to prepare for future client opportunities.
The Company has relied on AIL, our former majority stockholder, and Alset Inc., our current majority stockholder, as its principal source of funding. AIL, and later, our current indirect corporate parent, Alset Inc., has advised us not to depend solely on them for financing. We have increased our efforts to raise additional capital through equity or debt financings from other sources. However, we cannot be certain that such capital (from our stockholders or third parties) will be available to us or whether such capital will be available on terms that are acceptable to us. Any such financing would likely be dilutive to existing stockholders and could result in significant financial operating covenants that would negatively impact our business. If we are unable to raise sufficient additional capital on acceptable terms, we will have insufficient funds to operate our business or pursue our planned growth.
| 21 |
Our Plan of Operations
We believe that we have significant opportunities to further enhance the value we deliver to our users. We intend to pursue the following plan of operations:
| ● | operation of global e-commerce marketplace bringing quality lifestyle products; | |
| ● | partner with technology providers in AI and robotics to offer robotics solutions and services in the food and beverage sector, retail, and industries like cleaning and security; and | |
| ● | offer digital transformation solutions for the retail sector. |
Achieved and Target Milestones
In 2025 and the first quarter of 2026, we achieved the following key milestones:
| ● | together with VEII, we built software solutions that integrate with retail solutions, including electronics sales label system control services and a sales label management portal; and | |
| ● | continued our developments in artificial intelligence in the area of customer service and call center support. |
Over the next twelve months we plan to further enhance our software solutions to fit the needs of direct-to-consumer commerce with AI and develop more strategic partnerships in robotics.
Our Business Model and User Monetization Plan
We plan to generate revenue through the following:
| ● | IT services for the retail business sector; and | |
| ● | robotics and artificial intelligence applications. |
Our Competitiveness in the Businesses in Which we Operate
With the focus on being a service provider, our competitiveness is strengthened by:
| ● | refinement of the methodology for project management and development through continuous improvement through project engagement; | |
| ● | continuous new technological development such as blockchain enabled services, metaverse and artificial intelligence; and | |
| ● | operating within effective overhead to reduce operational risk. |
Our Challenges
Our ability to execute our growth strategies is subject to risks and uncertainties, including those relating to our ability to:
| ● | raise additional funding for the continuous development of our technology and projects and to pursue our business strategy; | |
| ● | maintain the trusted status of our ecosystem; | |
| ● | grow our user base, enhance user engagement and create value services for communities and enterprises; | |
| ● | market and profit from our service offerings, monetize our user base and achieve profitability; | |
| ● | keep up with technological developments and evolving user expectations; | |
| ● | effectively manage our growth and control our costs and expenses; | |
| ● | address privacy and security concerns relating to our services and the use of user information; | |
| ● | identify a management team with owner mentality and proven track record; and | |
| ● | adapt to changing market behavior for those using competitive platforms. |
Please see “Risk Factors” and other information included in this report for a detailed discussion on the above and other challenges and risks.
| 22 |
Our Key Competitive Strengths
We believe building the following will provide us with some key competitive strengths:
| ● | understanding of local market needs - establishing brand presence for local enterprises and communities based on the implementation know how for the early adopters; and | |
| ● | lean organizational structure to effectively adapt to the growth and contraction of our operations based on market and sales pipelines. |
Our Technology
Based on our core technology infrastructure, we are building up additional functions on top of this stable and scalable infrastructure. The system architecture is designed in modular form so that we continue to add new applications modules while we are growing our customer base. In addition, we should also be able to incorporate third party application modules to effectively continue building new services to facilitate digital transformation for various industries such as retail, distribution and financial services.
Key aspects or strengths of our technology include:
| ● | scalable infrastructure; | |
| ● | quick adaptation to latest technology in the area of robotics, A.I., block chain and metaverse; and | |
| ● | dedication to continuous improvement of user experience in local context. |
Results of Operations
Summary of Key Results
For the unaudited three months period ending March 31, 2026 and 2025
Revenue
Revenue generated primarily by the food and beverage business, Dongguan Leyouyou Catering Management Co., Ltd. (“HCDG”) and Hapi Café Co., Ltd. (“HCTW”), was $60,902 and $55,274, for the three months ended March 31, 2026, and 2025, respectively. Revenue generated from the e-commerce business, HAIL, was $0 and $27 for the three months ended March 31, 2026 and 2025, respectively. Total revenues were $60,902 and $55,301, respectively, for the three months ended March 31, 2026 and 2025.
Cost of Revenue
Cost of revenue related primarily to F&B cost was $21,921 and $27,110 for the three months ended March 31, 2026 and 2025, respectively, of which $0 and $5,479 was depreciation for computer equipment and leasehold improvement, respectively, The cost of e-commerce business was $117 and $31 for the three months ended March 31, 2026 and 2025, respectively. Total cost of revenue for the three months ended March 31, 2026 and 2025 was $21,921 and $27,141, respectively.
Operating Expenses
Operating expenses consist primarily of salary and benefits, professional fees, consulting expenses and maintenance expenses of existing software framework. We expect to maintain our operating expenses with moderate changes in line with business activities. Total operating expenses for the three months ended March 31, 2026 and 2025 were $266,084 and $339,891, respectively, of which $1,358 and $4,602 were depreciation expenses and $1,835 and $2,149 were rent expenses, respectively. The decrease was mainly due to the zero amortization of right-of-use assets after fully impaired in 2025.
Other (Expense) Income
Total other expenses for the three months ended March 31, 2026 and 2025 was ($19,271) and ($1,231,733), respectively, of which $24,974 and $25,240 was interest income, $33,383 and ($1,256,389) was unrealized gain (loss) on securities investment-related party, $38 and $284 was other income, ($39,945) and ($39,945) was interest expenses, and ($37,721) and $39,077 of foreign exchange (loss) /gain, respectively. The decrease of other expenses was mainly due to $1,289,772 fair value loss of VEII shares and warrants decreased during the period.
Other Comprehensive Loss from translation
For the three months ended March 31, 2026 and 2025, the Company recorded other comprehensive loss from a translation of $63,331 and $52,333 in the consolidated financial statements, respectively.
| 23 |
Liquidity and Capital Resources
As of March 31, 2026, the Company had cash of $418,841, compared to $497,189 as of December 31, 2025.
In the three months ended March 31, 2026, we incurred net loss of $246,374, negative working capital of $2,289,308, and $320,248 net cash used in operating activities.
The Company is expecting the Food and Beverage business to improve, while the current conditions raise substantial doubt about the Company’s ability to continue as a going concern. However, this doubt is alleviated by expected cash flow from ongoing financial support from Alset Inc., which management believes will be sufficient to meet the Company’s obligations for the foreseeable future. The Company has obtained a letter of financial support from Alset Inc., the Company’s direct corporate parent. Alset Inc. committed to provide any additional funding required by the Company for the next twelve months from the filing of this Form 10-Q.
These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
Critical Accounting Policies
Our discussion and analysis of the consolidated financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our consolidated financial statements, so we consider these to be our critical accounting policies. Because of the uncertainty inherent in these matters, actual results could differ from the estimates we use in applying the critical accounting policies. Certain of these critical accounting policies affect working capital account balances, including the policies for revenue recognition, allowance for doubtful accounts, and income taxes. These policies require that we make estimates in the preparation of our consolidated financial statements as of a given date.
Within the context of these critical accounting policies, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.
Revenue recognition
Accounting Standards Codification 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 or catering service to customers.
Revenue is recognized when (or as) the Company transfers promised goods or services or catering service to its customers in amounts that reflect the consideration to which the Company expects to be entitled to in exchange for those goods or services, which occurs when (or as) the Company satisfies its contractual obligations and transfers over control of the promised goods or services or catering service to its customers. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, the Company performs the following five steps: (i) identification of the promised goods or services or catering service in the contract by analyzing customer perspective, immateriality, implicit promises, setup activities, and marketing incentives; (ii) determination of whether the promised goods or services or catering service are performance obligations including whether they are distinct in the context of the contract by analyze the contract from the perspective of the customer; (iii) measurement of the transaction price, including the constraint on variable consideration by the expected value method and the most likely amount method; (iv) allocation of the transaction price to the performance obligations based on a relative stand-alone selling price basis, or the price at which the Company would sell the good or service separately to similar customers in similar circumstances; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. This should only be done once the transaction is complete and your obligation is fulfilled. The Company only applies the five-step model to contracts when it is probable that the entity will collect consideration it is entitled to in exchange for the goods or services or catering service it transfers to the customer.
Costs to obtain or fulfill a contract are capitalized and expensed over the life of the contract.
The Company began generating revenue from the F&B business by providing quality catering services in Hong Kong since October 2022; which was terminated in 2024, in the People’s Republic of China (“PRC”) since January 2023, and in Taiwan since April 2024.
| 24 |
Transfers of Cash to and from Our Subsidiaries
Our equity structure is a direct holding company structure. Within our direct holding company structure, the cross-border transfer of funds between our corporate entities is legal and compliant with the laws and regulations of the PRC. After the foreign investors’ funds enter Hapi Metaverse Inc., the funds can only be transferred to the PRC operating companies through Hapi Cafe Limited (“HCHK”), the immediate holding company of the PRC operating companies. Hapi Metaverse Inc. is permitted under Delaware law to provide funding to all the subsidiaries, except for the PRC operating companies, through loans or capital contributions without restrictions on the amount of the funds, subject to satisfaction of applicable government registration, approval and filing requirements. All the subsidiaries except for the PRC operating companies are also permitted to provide funding between subsidiaries or to Hapi Metaverse Inc. through loans or dividend distribution without restrictions on the amount of the funds. HCHK is permitted by the laws of the PRC to provide funding in the form of loans or capital injection to Guangdong LeFu Wealth Investment Consulting Co., Ltd. (“HCCN”) and its subsidiaries for their daily operations.
HCCN is permitted by the laws of the PRC to distribute profit in the form of dividends only to its immediate holding company, HCHK.
As of March 31, 2026, the Company received $157,872 from Alset Inc. and its’ subsidiaries, which included in the amount $183,508 referred to “Advance from related parties” under Consolidated Statements of Cash Flows of Consolidated Financial Statements, of which a total $127,826 was transferred to its Hong Kong subsidiaries for their daily operations $127,826 to Hotapp International Limited. Throughout the period of 2026, $73,310 from HCHK were transferred to HCCN, respectively. The funds to HCCN, the PRC subsidiary of the Company, were mainly for capital injection to HCCN and for the daily operations of HCCN and HCDG. A total of $18,669 in foreign exchange loss was generated during the period of 2026. For details, please refer to “Item. 8 Financial Statements - Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025” set forth in this Quarterly Report.
We currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our Board of Directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the Board of Directors deems relevant, and subject to the restrictions contained in any future financing instruments.
Subject to the Delaware General Corporation Law and our bylaws, our Board of Directors may authorize and declare a dividend to shareholders at such time and in such amount as it deems appropriate, provided that the Board reasonably believes that, immediately following the dividend, our assets will exceed our liabilities and we will be able to pay our debts as they become due.
To address persistent capital outflows and the RMB’s depreciation against the U.S. dollar in the fourth quarter of 2016, the People’s Bank of China and the State Administration of Foreign Exchange, or SAFE, have implemented a series of capital control measures in the subsequent months, including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments. The PRC government may continue to strengthen its capital controls and our PRC subsidiaries’ dividends and other distributions may be subject to tightened scrutiny in the future. The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if our subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from our operations, we may be unable to pay dividends on our common stock.
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Cash dividends, if any, on our common stock will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at up to 10%.
As of the date hereof, our PRC subsidiaries have not made any transfers or distributions. As of the date hereof, no cash or asset transfers have occurred between the Company and its subsidiaries. We do not expect to pay any cash dividends in the foreseeable future. Furthermore, as of the date hereof, no cash generated from one subsidiary is used to fund another subsidiary’s operations and we do not anticipate any difficulties or limitations on our ability to transfer cash between subsidiaries. We have also not installed any cash management policies that dictate the amount of such funds and how such funds are transferred.
PRC Regulations
In accordance with PRC regulations on Enterprises with Foreign Investment and their articles of association, a foreign-invested enterprise (“FIE”) established in the PRC is required to provide statutory reserves, which are appropriated from net profit, as reported in the FIE’s PRC statutory accounts. A FIE is required to allocate at least 10% of its annual after-tax profit to the surplus reserve until such reserve has reached 50% of its respective registered capital (based on the FIE’s PRC statutory accounts). The aforementioned reserves may only be used for specific purposes and may not be distributed as cash dividends. Until such contribution of capital is satisfied, the FIE is not allowed to repatriate profits to its stockholders, unless approved by the State Administration of Foreign Exchange. After satisfaction of this requirement, the remaining funds may be appropriated at the discretion of the FIE’s board of directors. Our subsidiary, HCCN is the PRC holding company of the other PRC subsidiaries, qualifies as an FIE and is therefore subject to the above-mandated regulations on distributable profits.
Additionally, in accordance with PRC corporate law, a domestic enterprise is required to maintain a surplus reserve of at least 10% of its annual after-tax profit until such reserve has reached 50% of its respective registered capital based on the enterprise’s PRC statutory accounts. The aforementioned reserves can only be used for specific purposes and may not be distributed as cash dividends. HCDG) is the subsidiary of HCCN that conducts operations in the PRC. This company was established as a domestic enterprises; therefore, each is subject to the above-mentioned restrictions on distributable profits.
As a result of PRC laws and regulations that require annual appropriations of 10% of after-tax income to be set aside, prior to payment of dividends, in a general reserve fund, the Company’s PRC subsidiaries are restricted in their ability to transfer a portion of their net assets to the Company as a dividend or otherwise.
Income taxes
Current income taxes are provided for in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Net operating loss carry forwards and credits are applied using enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that a portion of or all of the deferred tax assets will not be realized. The components of the deferred tax assets and liabilities are individually classified as non-current in accordance with ASC 740.
The impact of an uncertain income tax position on the income tax return is recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Interest and penalties on income taxes will be classified as a component of the provisions for income taxes. The Group did not recognize any income tax due to uncertain tax position or incur any interest and penalties related to potential underpaid income tax expenses for the period ended March 31, 2026 or 2025, respectively.
Investment in Securities – related party
The Company entered into Securities Purchase Agreements pursuant to which the Company purchased 6,500,000 and 7,276,163 shares of Value Exchange International, Inc., a Nevada corporation on April 8, 2021 and October 17, 2022 respectively.
On January 27, 2023, , the Company and HIPH World Inc. (f.k.a. American Premium Water Corporation and New Electric CV Corporation) (together with the Company, the “Lenders”) entered into a Convertible Credit Agreement (“CN #1”) with Value Exchange International, Inc., a Nevada corporation. CN #1 provides VEII with a maximum credit line of $1,500,000 (“Maximum Credit Line”) with simple interest accrued on any advances of the money under CN #1 at 8%. The principal amount of any advance of money under CN #1 (each being referred to as an “Advance”) is due in a lump sum, balloon payment on the third annual anniversary of the date of the Advance (“Advance Maturity Date”). Accrued and unpaid interest on any Advance is due and payable on a semi-annual basis with interest payments due on the last business day of June and last business day of December of each year. A Lender may demand that any portion or all of the unpaid principal amount of any Advance as well as accrued and unpaid interest thereon may be paid by shares of VEII common stock in lieu of cash payment.
VEII must request Advances from the Lenders. Either Lender may elect to separately, fully fund the Advance, or both Lenders may jointly elect to fund the Advance based on Lenders’ agreement on the portion of the Advance to be funded by each Lender. Lenders may severally or jointly reject any request for an Advance and neither Lender has an obligation to fund any Advance under CN #1. Accordingly, the Company will determine how much to loan to VEII pursuant to the Credit Agreement.
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CN #1 grants conversion rights to each Lender. Each Advance shall be convertible, in whole or in part, into shares of VEII common stock at the option of the Lender who made that Advance (being referred to as a “Conversion”), at any time and from time to time, at a price per share equal the “Conversion Price” (as defined below). The Conversion Price for a Conversion shall be the average closing price of the VEII common stock for the three (3) consecutive trading days prior to date of the Notice of Conversion. The Lenders shall also have certain conversion rights upon a change of control of VEII, or a breach of the Credit Agreement by VEII.
In the event that a Lender elects to convert any portion of an Advance into shares of VEII common stock in lieu of cash payment in satisfaction of that Advance, then VEII would issue to the Lender five (5) detachable warrants for each share of VEII common stock issued in a Conversion (“Warrants”). Each Warrant will entitle the Lender to purchase one (1) share of common stock at a per-share exercise price equal to the Conversion Price. The exercise period of each Warrant will be five (5) years from date of issuance of the Warrant.
On February 23, 2023, Hapi Metaverse loaned VEII $1,400,000 (the “Loan Amount”). The Loan Amount can be converted into shares of VEII pursuant to the terms of the Convertible Credit Agreement for a period of three years. There is no fixed price for the derivative security until Hapi Metaverse converts the Loan Amount into shares of VEII common stock. The maturity date was extended to February 23, 2029 in March 2026.
On September 6, 2023, the Company converted $1,300,000 of the principal amount loaned to VEII into 7,344,632 shares of VEII’s common stock. Under the terms of the Credit Agreement, the Company received common stock warrants to purchase a maximum of 36,723,160 shares of VEII common stock at an exercise price of $0.1770 per share. Such warrants expire five (5) years from date of their issuance.
On December 14, 2023, the Company entered into a Convertible Credit Agreement (“CN #2”) with VEII. On December 15, 2023, the Company loaned VEII $1,000,000. CN #2 was amended pursuant to an agreement dated December 19, 2023. Under CN #2, as amended, this amount can be converted into shares of VEII pursuant to the terms of CN #2 for a period of three years. In the event that the Company converts this loan into shares of VEII common stock, the conversion price shall be $0.045 per share. In the event that the Company elects to convert any portion of the loan into shares of VEII common stock in lieu of cash payment in satisfaction of that loan, then VEII will issue to the Company five (5) detachable warrants for each share of VEII common stock issued in a conversion (“Warrants”). Each Warrant will entitle the Company to purchase one (1) share of common stock at a per-share exercise price equal to the Conversion Price. The exercise period of each Warrant will be five (5) years from date of issuance of the Warrant. At the time of this filing, the Company has not converted the Loan Amount. The Company has subsequently confirmed with VEII the intent to extend the loan, with final terms to be formalized prior to the original maturity.
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On July 15, 2024, the Company entered into a Convertible Credit Agreement (“CN #3”) with VEII for an unsecured credit line in the maximum amount of $110,000. Advances of the principal under CN #3 accrue simple interest at 8% per annum. Each Advance under the 3rd VEII Credit Agreement and all accrued interest thereon may, at the election of VEII, or the Company, be: (1) repaid in cash; (2) converted into shares of VEII Common Stock; or (3) be repaid in a combination of cash and shares of VEII Common Stock. The principal amount of each Advance under CN #3 shall be due and payable on the third (3rd) annual anniversary of the date that the Advance is received by VEII along with any unpaid interest accrued on the principal (the “Advance Maturity Date 3”). Prior to the Advance Maturity Date 3, unpaid interest accrued on any Advance shall be paid on the last business day of June and on the last business day of December of each year in which the Advance is outstanding and not converted into shares of VEII Common Stock. Company may prepay any Advance under CN #3 and interests accrued thereon prior to Advance Maturity Date 3 without penalty or charge. At the time of this filing, the Company has not converted the Loan Amount.
Our Chairman, Chan Heng Fai, and another member of our Board of Directors, Lum Kan Fai, are both members of the Board of Directors of VEII. In addition to Mr. Chan, two other members of the Board of Directors of our majority stockholder, Alset Inc., are also members of the Board of Directors of VEII (Wong Shui Yeung and Wong Tat Keung). The Company currently owns a total of 21,120,795 shares (representing 45.69%) of VEII, which are recorded at fair value of $10,560 and $10,560 at March 31, 2026 and December 31, 2025, respectively. $0 and $1,256,389 in unrealized loss was recognized during the three months ended March 31, 2026 and 2025, respectively.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company” as defined by Item 10(f)(1) of Regulation S-K, the Company is not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures are not effective as of March 31, 2026 to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure.
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Changes in the Company’s Internal Controls Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the quarterly period ended March 31, 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not a party to any legal proceedings. Management is not aware of any legal proceedings proposed to be initiated against us. However, from time to time, we may become subject to claims and litigation generally associated with any business venture operating in the ordinary course.
ITEM 1A. RISK FACTORS
Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS
| Exhibit Number | Description | |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 | Section 1350 Certification of Chief Executive Officer and Chief Financial Officer | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| HAPI METAVERSE INC. | ||
| Date: May 8, 2026 | By: | /s/ Lee Wang Kei |
| Lee Wang Kei | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: May 8, 2026 | By: | /s/ Lui Wai Leung, Alan |
| Lui Wai Leung, Alan | ||
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | ||
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