Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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"), 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, e-commerce, social media and payment solutions. We continue to advise businesses in network marketing and brands in block chain services and mobile collaboration.

We are focused on serving business-to-business (B2B) needs in e-commerce, collaboration and supply chains. We 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, all of which are facilitated by the transactions of every stakeholder via e-commerce.

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 Interface (API) 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 significantly on Alset International Limited ("AIL"), our former majority stockholder, as its principal source of funding during the period. AIL, and later, our current majority stockholder, Alset Inc., 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 likely would 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.

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 Food and Beverage sector, retails and commercial facilities like cleaning and security; and
	●	offer digital transformation solutions for retails industry.

Achieved and Target Milestones

In 2024 and the first half of 2025, we achieved the following milestones:

	●	enhanced our software solutions to fit the needs of direct-to-consumer commerce with AI and Metaverse services; and
	●	achieved a closer partnership with Value Exchange International Inc. ("VEII") for digital transformation of retail sectors including electronic sales label management, shelf checkout solutions, and AI customer service.

Over the next twelve months we plan to:

	●	further enhance our software solutions to fit the need of direct-to-consumer commerce with AI and develop more strategic partnerships in robotics; and
	●	continue our close partnership with VEII for digital transformation of retail sectors including sales label management applications for both electronics and paper labels, and a service management platform with AI assistant and store management software services.

Our Business Model and User Monetization Plan

We plan to generate revenue through the following:

	●	operation of global e-commerce marketplace;
	●	IT services in serving retail business sector; and
	●	Robotics solution implementation and consulting services.

Our Competitiveness in the Businesses in Which we Operate

With the focus on being a service provider, our competitiveness is strengthened by:

	●	strengthening the methodology for project management and development through continuous improvement through project engagement;
	●	continuous strengthening of 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
	●	changing market behavior for those using competitive platform.

Please see "Risk Factors" and other information included in this report for a detailed discussion on the above and other challenges and risks.

Our Key Competitive Strengths

We believe building the following will provide us with some key competitive strengths:

	●	understanding local market needs - establish brand presence for local enterprises and communities based on the implementation know how for the early adopters; and
	●	thin and lean organization - structure - to effectively adapt to the growth and contraction of operation 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 module effectively to continue building new services to cope with the digital transformation need of the direct selling industry and supporting them capitalizing on the gig economy opportunity.

Key aspects or strengths of our technology include:

	●	scalable infrastructure;
	●	quick adaptation to third party services, such as back-end systems, payment and logistics; and
	●	dedicated to continuous improvement of user experience in local context.

Results of Operations

Summary of Key Results

For the unaudited three months period ending September 30, 2025 and 2024

Revenue

Revenue generated primarily by the food and beverage business, Hapi Group HK Limited ("MOC"), Dongguan Leyouyou Catering Management Co., Ltd. ("HCDG") and Hapi Café Co., Ltd. ("HCTW"), was $73,718 and $75,489, for the three months ended September 30, 2025, and 2024, respectively. The café under MOC was closed on September 16, 2024. Revenue generated from the travel business, Hapi Travel Limited ("HTL"), was $0 for the three months ended September 30, 2024. HTL was disposed on December 17, 2024. Revenue generated from the e-commerce business, HAIL, was $10 for the three months ended September 30, 2025. Total revenues were $73,728 and $75,489, respectively, for the three months ended September 30, 2025 and 2024. The decrease in revenue was mainly due to the café under MOC closed operation in Oct 2024.

Cost of Revenue

Cost of revenue related primarily to F&B cost was $16,164 and $29,679 for the three months ended September 30, 2025 and 2024, respectively, of which $9,056 and $2,643 was depreciation for computer equipment and leasehold improvement, respectively. The cost of e-commerce business was $84 for the three months ended September 30, 2025. Total cost of revenue for the three months ended September 30, 2025 and 2024 was $16,248 and $29,679, respectively. The increase in cost of revenue is due to renovation of café under HCTW in 2025.

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 September 30, 2025 and 2024 were $830,397 and $427,315, respectively, of which $391,822 and $0 were impairment loss on right-of-use assets, $134,457 and $0 were impairment on property and equipment, $0 and $60,557 were impairment loss on goodwill, $5,312 and $1,659 were depreciation expenses and $2,369 and $4,558 were rent expenses, respectively. The increase was mainly due to the increase in impairment of right-of-use assets and impairment on property and equipment.

Other (Expense) Income

Total other expenses for the three months ended September 30, 2025 and 2024 was $714,052 and $17,753, respectively, of which $26,239 and $22,411 was interest income, $596,399 and $270,877 was unrealized loss on securities investment-related party, $30 and $4,920 was other income, $40,833 and $40,834 was interest expenses, and ($103,089) and $266,627 of foreign exchange (loss) /gain, respectively. The decrease of other income was mainly due to $327,635 fair value loss of VEII shares and warrants decreased during the period.

Other Comprehensive Loss from translation

For the three months ended September 30, 2025 and 2024, the Company recorded other comprehensive gain from a translation of $83,060 and other comprehensive loss from a translation of $319,489 in the consolidated financial statements, respectively.

For the unaudited nine months period ending September 30, 2025 and 2024

Revenue

Revenue generated primarily by the food and beverage business, MOC, HCDG and HCTW, was $201,407 and $207,365, for the nine months ended September 30, 2025 and 2024, respectively. Revenue generated from the travel business, HTL, was $2,380 for the nine months ended September 30, 2024. Revenue generated from the e-commerce business, HAIL, was $151 for the nine months ended September 30, 2025. Total revenues were $201,558 and $209,745, respectively, for the nine months ended September 30, 2025 and 2024. The decrease in revenue was mainly due to the café under MOC closed operation in Oct 2024.

Cost of Revenue

Cost of revenue related primarily to F&B cost was $72,735 and $71,516 for the nine months ended September 30, 2025 and 2024, respectively, of which $21,772 and $5,174 was depreciation for computer equipment and leasehold improvement, respectively. The cost of travel business was $2,370 for the nine months ended September 30 2024. The cost of e-commerce business was $223 for the nine months ended September 30, 2025. Total cost of revenue for the nine months ended September 30, 2025 and 2024 was $72,958 and $73,886, respectively. The increase in cost of revenue is due to the acquisition of HCTW.

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 nine months ended September 30, 2025 and 2024 were $1,506,332 and $1,456,826, respectively, of which $391,822 and $0 were impairment loss on right-of-use assets, $134,457 and $0 were impairment on property and equipment, $0 and $414,173 were impairment loss on goodwill, $14,704 and $3,668 were depreciation expenses, $394,857 and $471,213 were salary expenses, and $6,875 and $10,481 were rent expenses, respectively. The increase of operating expenses was mainly due to the impairment of right-of-use assets and impairment on property and equipment.

Other (Expense) Income

Total other expense for the nine months ended September 30, 2025 and 2024 was $1,278,314 and $1,921,743, respectively, of which $77,114 and $66,823 was interest income, $1,511,199 and $2,018,536 was unrealized loss on securities investment-related party, $1,890 and $8,557 was other income, $121,617 and $121,617 was interest expenses, and $275,048 and $143,030 of foreign exchange gain, respectively. The decrease of other expenses was mainly due to $507,337 fair value loss of VEII shares and warrants decreased during the period.

Other Comprehensive Loss from Translation

For the nine months ended September 30, 2025 and 2024, the Company recorded other comprehensive loss from a translation of $325,277 and $183,184 in the consolidated financial statements, respectively.

Liquidity and Capital Resources

As of September 30, 2025, the Company had cash of $540,078, compared to $428,660 as of December 31, 2024.

In the three months ended September 30, 2025, we incurred net loss of $1,486,969, and negative working capital of $1,074,406. In the nine months ended September 30 2025, we incurred net loss of $2,656,046, and $953,276 net cash used in operating activities operations.

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 corporate parent. Alset Inc. 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.

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, inventory reserves 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, in the People's Republic of China ("PRC") since January 2023, and in Taiwan since April 2024.

In June 2023, the Company acquired a travel business and began generating revenue by providing travel packaging and ticketing services in Hong Kong. This was terminated in 2024.

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 September 30, 2025, the Company received $1,278,206 from Alset Inc. and its' subsidiaries, referred to "Advance from related parties" under Consolidated Statements of Cash Flows of Consolidated Financial Statements, of which a total $920,163 was transferred to its Hong Kong subsidiaries for their daily operation use, $530,481 to HAIL and $385,543 to HCHK. A total of $38,195 in foreign exchange loss was generated during the period of 2025, please refer to "Item. 1 - Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024" 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.

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 and Guangzhou Leyouyou Catering Management Co., Ltd. ("HCGZ") is the subsidiary of HCCN that does not conduct any operations in the PRC and was dissolved on November 26, 2024. Both of these companies were established as 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 Company 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 September 30, 2025 or 2024, 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 (the "1^st VEII Credit Agreement") with VEII. The Credit Agreement 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 the 1^st VEII Credit Agreement at 8%. The principal amount of any advance of money under the 1^st VEII Credit Agreement (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 the Credit Agreement. Accordingly, the Company will determine how much to loan to VEII pursuant to the Credit Agreement.

The 1^st VEII Credit Agreement 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.

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 ("2^nd VEII Second Credit Agreement") with VEII. On December 15, 2023, the Company loaned VEII $1,000,000. The 2^nd VEII Credit Agreement was amended pursuant to an agreement dated December 19, 2023. Under the 2^nd VEII Credit Agreement, as amended, this amount can be converted into shares of VEII pursuant to the terms of the Convertible Credit Agreement 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.

On July 15, 2024, the Company entered into a Convertible Credit Agreement ("3^rd VEII Credit Agreement") with VEII for an unsecured credit line in the maximum amount of $110,000. Advances of the principal under the 3^rd VEII Credit Agreement accrue simple interest at 8% per annum. Each Advance under the 3^rd 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 the 3^rd VEII Credit Agreement 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 the 3^rd VEII Credit Agreement 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 $213,320 and $747,676 at September 30, 2025 and December 31, 2024, respectively. $1,511,199 and $2,018,536 in unrealized loss was recognized during the nine months ended September 30, 2025 and 2024, respectively.