Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

References to the "Company," "HWH International Inc.," "HWH," "our," "us" or "we" refer to HWH International Inc. and its subsidiaries. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited interim financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.

Overview

Hapi Marketplace. On November 4, 2024, the Company announced the launch of its business-to-consumer marketplace, Hapi Marketplace. Hapi Marketplace features a selection of over forty-seven product categories including wellness, elderly care, auto accessories and more. Launching first in the United States, we intend for Hapi Marketplace to expand in the near future to South Korea and Hong Kong, followed by further expansion across Asia.

The various aspects of the Hapi Marketplace will be launched in phases in different regions, each with their own timeline, depending on the completion of logistical aspects for implementation (i.e., payment gateway systems, business licenses, banking set up, import licenses, managerial resources, etc.) We are expanding the product range into robotics for consumer and commercial markets. As of March 31, 2026, this project was not launched yet.

Hapi Cafés, which are, and will be, in-person, location-based social experiences, offer customers the opportunity to build a sense of community with like-minded customers who share a potential interest in our products. The cafes are designed to operate sustainably as standalone businesses. The cafes also seek to be an avenue to create awareness to and educate potential and existing customers about the products and services of HWH, providing us with the chance to significantly increase our customer base as well as increase the amounts spent by our customers on our affiliates' products and services. Each of our cafés is a "Hapi Café." We opened proof-of-concept Hapi Café locations in Seoul, the Republic of Korea and Singapore in May and July 2022, respectively, and one more opened in Seoul, in May 2024. We plan to open additional Hapi Cafés as we beta test and further improve our business concept. We intend to grow our customer base as we grow the number of Hapi Cafés around the world. Hapi Cafes are positioned to be integral parts of HWH's business model. Due to the underperformance of certain café locations, the Company closed several cafés during 2024 and 2025. The Company currently operates one café in Singapore.

Hapi Wealth Builder seeks to provide participants the opportunity to attend courses, workshops, and coaching sessions in person, fostering a collaborative learning environment for those dedicated to learning investment in equities and wealth-building strategies. The team has been diligently producing digital content for Hapi Wealth Builder and working to collaborate with the right partners to launch the program and make it available to members. Hapi Wealth Builder will leverage the wealth of knowledge and experience of its leaders to make wealth building accessible and effective for its members. Our unique community-centric approach will offer members tools for making informed financial decisions while creating pathways for sustained growth.

On October 31, 2024, we announced that the Company scheduled the launch of Hapi Wealth, a program dedicated to providing comprehensive education in equity investment and wealth-building strategies. We are targeting a rollout in selected regions later in 2026 as well.

To further support its mission, Hapi Wealth is opening its China headquarters, designed as a conducive environment for individuals to participate in tutorials and workshops. The hub will offer participants the opportunity to attend courses, workshops, and coaching sessions in person, fostering a collaborative learning environment for those dedicated to learning investment in equities and wealth-building strategies.

Our Revenue Model

Our total revenue for the three months ended March 31, 2026 and 2025 was $64,200 and $295,197, respectively. Our net loss for the three months ended March 31, 2026 and 2025 was $626,773 and $574,103, respectively.

We currently recognize revenue from food and beverage sales, which accounted for approximately 100% of revenue in the three months ended March 31, 2026 and 2025, respectively.

From a geographical perspective, we recognized 100% of our total revenue in the three months ended on March 31, 2026, in Singapore, and 11% and 89% in the three months ended March 31, 2025, in South Korea and Singapore, respectively.

Matters that May or Are Currently Affecting Our Business

In addition to the matters described above, the primary challenges and trends that could affect or are affecting our financial results include:

● Our ability to improve our revenue through cross-selling and revenue-sharing arrangements among our group of companies;

● Our ability to identify complementary businesses for acquisition, obtain additional financing for these acquisitions, if and when needed, and profitably integrate them into our existing operation;

● Our ability to attract competent, skilled technical and sales personnel for each of our businesses at acceptable compensation levels to manage our overhead; and

● Our ability to control our operating expenses as we expand each of our businesses and product and service offerings.

Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The Company's condensed consolidated financial statements and related notes include all the accounts of the Company and its wholly owned subsidiaries. They have been prepared in accordance with the accounting principles generally accepted in the United States of America ("U.S. GAAP"). All intercompany transactions have been eliminated in consolidation.

Use of Estimates and Critical Accounting Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates made by management include, but are not limited to, allowance for credit losses, recoverability and useful lives of property, plant and equipment, the valuation allowance of deferred taxes, contingencies, and equity compensation. Actual results could differ from those estimates.

Revenue Recognition and Cost of Sales

Product Sales: The Company's performance obligation is to transfer ownership of its products to its customers. The Company generally recognizes revenue when a product is delivered to the customer. Revenue is recorded net of applicable taxes, allowances, refund or returns. The Company receives the net sales price in cash or through credit card payments at the point of sale.

If any customer returns a product to the Company on a timely basis, they may obtain a replacement product from the Company for such returned product. Allowances for product returns are provided at the time the sale is recorded. This accrual is based upon historical return rates for each country and the relevant return pattern, which reflects anticipated returns to be received over a period of up to 12 months following the original sale. There were no product returns for the three months ended March 31, 2026, and 2025.

Food and Beverage: The revenue received from food and beverage business in the three months ended March 31, 2026 and 2025 was $64,200 and $295,197, respectively.

Cost of Revenue: Cost of revenue consists of cost of procuring finished goods from suppliers and related shipping and handling fees.

Results of Operations

Summary of Statements of Operations for the Three Months Ended March 31, 2026 and 2025

		Three Months Ended March 31,
		2026				2025
Revenue		$	64,200			$	295,197
Cost of revenue			16,912				147,603
Operating expenses			672,202				741,722
Other expenses (income)			1,859				(62,973	)
Income taxes			-				42,948
Net loss		$	626,773			$	574,103

Revenue

Revenue was $64,200 and $295,197 for the three months ended March 31, 2026 and 2025, respectively. Word of mouth, a social media presence, and the availability of meeting spaces are significant drivers of our revenue and revenue potential. Our revenue decreased in 2026 due to the cessation of operations of cafes located in Singapore and Korea in August and September 2025, respectively.

Cost of revenue

Cost of revenues decreased from $147,603 in the three months ended March 31, 2025 to $16,912 in the three months ended March 31, 2026. The decrease is a result of the cessation of operations of cafes located in Singapore and Korea in August and September 2025, respectively.

Gross profit decreased from $147,594 for the three months ended March 31, 2025 to $47,288 for the three months ended March 31, 2026. The decrease in gross margin was caused by the cessation of operations of cafes located in Singapore and Korea in August and September 2025, respectively.

Operating expenses

Operating expenses decreased from $741,722 for the three months ended March 31, 2025 to $672,202 for the three months ended March 31, 2026. General and administrative expenses increased from $664,242 for the three months ended March 31, 2025 to $672,202 for the three months ended March 31, 2026. The increase in general and administrative expenses in 2026 compared with 2025 was mostly caused by the loss from related party balance written off in Q1 2026. The Company recorded a goodwill impairment charge of $77,480 during the three months ended March 31, 2025, which increased operating expenses for that period.

Other non-operating (income) expense

The Company recorded other non-operating expense of $1,859 for the three months ended March 31, 2026, compared to other non-operating income of $62,973 for the same period in 2025. The change in non-operating income was primarily due to fluctuations in unrealized gain (loss) on convertible note receivable and warrants - related party, which changed from a gain of $17,442 for the three months ended March 31, 2025 to a loss of $49,238 for the three months ended March 31, 2026. This was partially offset by foreign exchange transaction gain (loss), which changed from a gain of $66,070 in the three months ended March 31, 2025 to a loss of $21,540 in the three months ended March 31, 2026.

Net loss

Net loss increased from $574,103 for the three months ended March 31, 2025 to $626,773 for the three months ended March 31, 2026.

Liquidity and Capital Resources

Our cash has decreased from $2,085,918 as of December 31, 2025 to $1,459,799 as of March 31, 2026. Our liabilities increased from $1,883,133 at December 31, 2025 to $2,132,077 at March 31, 2026. Our total assets have decreased from $4,567,858 as of December 31, 2025 to $4,210,297 as of March 31, 2026.

In the three months ended March 31, 2026, we incurred a net loss, a loss from operations and negative cash flow from operating cafés during the period. These factors raise substantial doubt about our ability to continue as a going concern.

The Company believes that the available cash in the Company's 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. The Company's capital requirements for the planned expansion are based on, among other items, geographical specific property costs, team requirements, and marketing steps needed. Our expansion consists of plans to take over leases of existing Hapi Cafes we currently do not own, as we look to add more Hapi Cafes over the next two years. There is no guarantee that we will be able to execute on our plans as laid out above.

On April 24, 2024, the Company entered into a Credit Facility Agreement (the "Agreement") with Alset Inc., a Texas corporation and the Company's majority stockholder, pursuant to which Alset Inc. has provided the Company a line of credit facility (the "Credit Facility") which provides a maximum, aggregate credit line of up to $1,000,000. As of March 31, 2026, there are no outstanding amounts related to the Credit Facility, as the debt with Alset Inc. was converted to equity on September 24, 2024. The remaining credit of $700,000 is available for draw as on March 31, 2026.

Pursuant to the Agreement, the Company may request an advance (each, an "Advance") on the Credit Facility. Each advance shall bear a simple interest rate of three percent (3%) per annum. Each Advance and all accrued but unpaid interest shall be due and payable at the first (1st) anniversary of the effective date of the Agreement. HWH may at any time during the term of the Agreement prepay a portion or all amounts of its indebtedness without penalty. Each Advance shall not be secured by a lien or other encumbrance on any HWH assets, but shall be solely a general unsecured debt obligation of the Company.

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.

The Company has obtained letters of financial support from Alset Inc., the majority stockholder of the Company. Alset Inc. committed to provide any additional funding required by the Company and would not demand repayment through twelve months from the issuance of these condensed consolidated financial statements.

Summary of Cash Flows for the Three Months Ended March 31, 2026 and 2025

		Three Months Ended March 31,
		2026				2025
Net cash used in operating activities		$	(192,539	)		$	(555,333	)
Net cash used in investing activities		$	(305,416	)		$	(300,000	)
Net cash (used in) / provided by financing activities		$	(148,432	)		$	656,229

Cash Flows from Operating Activities

Net cash used in operating activities was $192,539 in the three months ended of March 31, 2026, as compared to net cash used in operating activities of $555,333 in the same period of 2025. The decrease in cash used in operating activities during the three months ended March 31, 2026 was primarily due to changes in working capital, including movements in account receivable and operating lease liabilities.

Cash Flows from Investing Activities

Net cash used in investing activities was $305,416 in the three months ended of March 31, 2026, as compared to net cash used in investing activities of $300,000 in the same period of 2025. In the three months ended March 31, 2026 we paid $285,000 for convertible note receivable - related party with the remaining amount of cash outflows related to purchases of property and equipment, investments at cost, and purchases and sales of marketable securities. In the three months ended March 31, 2025 we paid $300,000 for convertible note receivable - related party.

Cash Flows from Financing Activities

Net cash used in financing activities was $148,432 in the three months ended March 31, 2026, compared to net cash provided by financing activities of $656,229 in the same period of 2025. In the three months ended March 31, 2026 we paid $140,687 to related parties. In the three months ended March 31, 2025, we received $1,409,983 from the issuance of common stock and warrants and repaid $236,875 under the D. Boral Capital (f.k.a. EF Hutton) promissory note and $506,454 to related parties.

Nasdaq Compliance

On September 4, 2024, the Company received written notice (the "Notice") from the Listing Qualifications Staff of Nasdaq notifying the Company that for the prior 30 consecutive business days prior to the date of the Notice, the Company's bid price was below the minimum $1 required for continued listing on the Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(a)(1) (the "Bid Price Requirement"). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), Nasdaq provided the Company with 180 calendar days, or until March 3, 2025, (the "Compliance Date"), to regain compliance with the Bid Price Requirement.

On February 18, 2025, the Company filed a Certificate of Amendment to the Company's Amended and Restated Certificate of Incorporation with the Delaware Secretary of State to effect a 1-for-5 reverse stock split (the "Reverse Stock Split"). The Reverse Stock Split became effective as of market open on February 24, 2025.

On March 10, 2025, the Company received written notice (the "Compliance Notice") from Nasdaq informing the Company that it has regained compliance with Nasdaq Listing Rule 5550(a)(2), which requires that companies listed on the Nasdaq Capital Market maintain a minimum bid price of $1.00 per share. Nasdaq notified the Company in the Compliance Notice that, from February 24, 2025 to March 7, 2025, the closing bid price of the Company's common stock had been $1.00 per share or greater and, accordingly, the Company had regained compliance with Nasdaq Listing Rule 5550(a)(2) and that the matter was now closed. The Company remains listed on the Nasdaq Capital Market.

Contractual Obligations

As of March 31, 2026, we did not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities.

Impact of Inflation

We believe that inflation has not had a material impact on our results of operations for the three months ended March 31, 2026 or the year ended December 31, 2025. We cannot assure you that future inflation will not have an adverse impact on our operating results and financial condition.

Impact of Foreign Exchange Rates

The effects of foreign exchange rate changes on the intercompany loans (under ASC 830), which mostly consist of loans between the subsidiaries and fellow subsidiaries under common control from Singapore, South Korea and Hong Kong and which were approximately $1.2 million and $0.7 million on March 31, 2026 and December 31, 2025, respectively, are the reason for the fluctuation in foreign currency transaction gains or losses which are included in the Consolidated Statements of Operations and Other Comprehensive Loss. Because the intercompany loan balances between the subsidiaries and fellow subsidiaries under common control from Singapore, South Korea and Hong Kong will remain at approximately $1 million over the next year, we expect this fluctuation of foreign exchange rates to still impact the results of operations in 2026, especially given that the foreign exchange rate may and is expected to be volatile. If the amount of intercompany loan is lowered in the future, the effect will also be reduced. However, at this moment, we do not expect to repay the intercompany loans in the short term.

Emerging Growth Company Status

We are an "emerging growth company," as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of these exemptions until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of this exemption.