Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Apr. 01, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | SeD Intelligent Home Inc. | |
Entity Central Index Key | 0001503658 | |
Document Type | 10-K | |
Document Period End Date | Dec. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Public Float | $ 0 | |
Entity Common Stock, Shares Outstanding | 704,043,324 | |
Document Fiscal Period Focus | FY | |
Document Fiscal Year Focus | 2018 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Real Estate | ||
Construction in Progress | $ 24,464,269 | $ 30,104,201 |
Land Held for Development | 19,164,028 | 24,302,643 |
Real Estate Held For Sale | 136,248 | 136,248 |
Real Estate Assets | 43,764,545 | 54,543,092 |
Cash | 715,754 | 358,233 |
Restricted Cash | 3,929,410 | 2,656,670 |
Accounts Receivable | 112,706 | 513,043 |
Prepaid Expenses | 46,443 | 49,903 |
Fixed Assets, Net | 8,248 | 22,062 |
Deposits | 23,603 | 23,603 |
Total Assets | 48,600,709 | 58,166,606 |
Liabilities | ||
Accounts Payable and Accrued Expenses | 1,749,268 | 1,131,116 |
Accrued Interest - Related Parties | 2,344,227 | 1,935,222 |
Tenant Security Deposits | 1,225 | 2,625 |
Builder Deposits | 3,878,842 | 5,356,718 |
Notes Payable, Net of Debt Discount | 13,899 | 8,132,020 |
Notes Payable - Related Parties, Net of Debt Discount | 5,745,584 | 8,003,591 |
Total Liabilities | 13,733,045 | 24,561,292 |
Stockholders' Equity | ||
Common Stock, at par $0.001, 1,000,000,000 shares authorized and 704,043,324 issued, and outstanding at December 31, 2018 and 2017, respectively | 704,043 | 704,043 |
Additional Paid In Capital | 32,542,720 | 32,739,017 |
Accumulated deficit | (1,266,427) | (2,092,837) |
Total Stockholders' Equity | 31,980,336 | 31,350,223 |
Non-controlling Interest | 2,887,328 | 2,255,091 |
Total Stockholders' Equity | 34,867,664 | 33,605,314 |
Total Liabilities and Stockholders' Equity | $ 48,600,709 | $ 58,166,606 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Common stock, Par Value | $ .001 | $ 0.001 |
Common stock, Authorized | 1,000,000,000 | 1,000,000,000 |
Common stock, Issued | 704,043,324 | 704,043,324 |
Common stock, Outstanding | 704,043,324 | 704,043,324 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Revenue | ||
Rental | $ 8,730 | $ 88,438 |
Property | 17,666,304 | 6,868,604 |
Total Revenue | 17,675,034 | 6,957,042 |
Operating Expenses | ||
Cost of Sales | 15,641,324 | 6,217,779 |
General and Administrative Expenses | 748,480 | 1,118,540 |
Total Operating Expenses | 16,389,804 | 7,336,319 |
Income (Loss) From Operations | 1,285,230 | (379,277) |
Other Income | ||
Interest Income | 31,437 | 24,909 |
Other Income | 5,683 | 104,599 |
Total Other Income | 37,120 | 129,508 |
Net Income (Loss) Before Income Taxes | 1,322,350 | (249,769) |
Provision for Income Taxes | 0 | 0 |
Net Income (Loss) | 1,322,350 | (249,769) |
Net Income (Loss) Attributable to Non-controlling Interests | 495,940 | (22,791) |
Net Income (Loss) Attributable to Common Stockholders | $ 826,410 | $ (226,978) |
Net Loss Per Share - Basic and Diluted | $ 0 | $ 0 |
Weighted Average Common Shares Outstanding - Basic and Diluted | 704,043,324 | 704,043,324 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Deficit - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Non-controlling Interest | Total |
Beginning Balance, Shares at Dec. 31, 2016 | 704,043,324 | ||||
Beginning Balance, Amount at Dec. 31, 2016 | $ 704,043 | $ 27,970,331 | $ (1,865,859) | $ 2,277,882 | $ 29,086,397 |
Proceeds from majority stockholders | 178,601 | 178,601 | |||
Forgiveness of debt - related party | 4,590,085 | 4,590,085 | |||
Acquisition of Minority Interest | 0 | ||||
Net income (loss) | (226,978) | (22,791) | (249,769) | ||
Ending Balance, Shares at Dec. 31, 2017 | 704,043,324 | ||||
Ending Balance, Amount at Dec. 31, 2017 | $ 704,043 | 32,739,017 | (2,092,837) | 2,255,091 | 33,605,314 |
Acquisition of Minority Interest | (196,297) | 136,297 | 60,000 | ||
Net income (loss) | 826,410 | 495,940 | 1,322,350 | ||
Ending Balance, Shares at Dec. 31, 2018 | 704,043,324 | ||||
Ending Balance, Amount at Dec. 31, 2018 | $ 704,043 | $ 35,542,720 | $ (1,266,427) | $ 2,887,328 | $ 34,867,664 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash Flows From Operating Activities | ||
Net Income (Loss) | $ 1,322,350 | $ (249,769) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation | 16,814 | 20,453 |
Changes in Operating Assets and Liabilities | ||
Real Estate | 10,918,824 | (1,302,568) |
Accounts Receivable | 400,337 | (494,783) |
Prepaid Expenses | 3,460 | 35,546 |
Accounts Payable and Accrued Expenses | 618,152 | (362,108) |
Accrued Interest - Related Parties | 409,005 | 211,005 |
Tenant Security Deposits | (1,400) | (2,550) |
Builder Deposits | (1,477,876) | (543,282) |
Net Cash Provided By (Used In) Operating Activities | 12,209,666 | (2,688,056) |
Cash Flows From Investing Activities | ||
Purchase of Fixed Assets | (3,000) | (7,892) |
Net Cash Used In Investing Activities | (3,000) | (7,892) |
CASH FLOW FROM FINANCING ACTIVITIES | ||
Acquisition of Minority Interest | (60,000) | 0 |
Financing Fees Paid | 0 | (110,000) |
Capital Contribution - Related Party | 0 | 178,601 |
Proceeds from Notes Payable | 0 | 1,052,350 |
Repayments to Note Payable | (8,258,398) | (6,000,000) |
Net Proceeds from Notes Payable - Related Parties | 0 | 7,533,591 |
Repayment to Notes Payable - Related Parties | (2,258,007) | 0 |
Net Cash (Used In) Provided By Financing Activities | (10,576,405) | 2,654,542 |
Net Increase (Decrease) in Cash | 1,630,261 | (41,406) |
Cash and Restricted Cash - Beginning of Year | 3,014,903 | 3,056,309 |
Cash and Restricted Cash - End of Year | 4,645,164 | 3,014,903 |
Supplementary Cash Flow Information | ||
Cash Paid For Interest | 287,738 | 905,376 |
Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||
Forgiveness of Notes Payable - Related Parties | 0 | 4,560,085 |
Amortization of Debt Discount Capitalized | $ 140,277 | $ 324,958 |
1. NATURE OF OPERATIONS AND SUM
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Nature of Operations SeD Intelligent Home Inc. (the “Company”), formerly known as Homeownusa, was incorporated in the State of Nevada on December 10, 2009. On December 29, 2017, the Company, acquired SeD Home Inc. (“SeD Home”) by reverse merger. SeD Home, a Delaware corporation, formed on February 24, 2015 and named SeD Home USA, Inc. before changing its name in May of 2015, is principally engaged in developing, selling, managing, and leasing residential properties in the United States in current stage and may expand from residential properties to other property types, including but not limited to commercial and retail properties. The Company is 99.99% owned by SeD Home International, Inc., which is wholly – owned by Singapore eDevelopment Limited (“SeD Ltd”), a multinational public company, listed on the Singapore Exchange Securities Trading Limited (“SGXST”). Principles of Consolidation The consolidated financial statements include all accounts of the entities as of the reporting period ending dates and for the reporting periods as follows: Name of consolidated subsidiary State or other jurisdiction of incorporation or organization Date of incorporation or formation Attributable interest as of December 31, 2018 Attributable interest as of December 31, 2017 SeD Home Inc. The State of Delaware, U.S.A. February 24, 2015 100 % 100 % SeD USA, LLC The State of Delaware, U.S.A. August 20, 2014 100 % 100 % 150 Black Oak GP, Inc. The State of Texas, U.S.A. January 23, 2014 100 % 100 % SeD Development USA, Inc. The State of Delaware, U.S.A. March 13, 2014 100 % 100 % 150 CCM Black Oak Ltd. The State of Texas, U.S.A. January 23, 2014 100 % 69 % SeD Ballenger, LLC The State of Delaware, U.S.A. July 7, 2015 100 % 100 % SeD Maryland Development, LLC The State of Delaware, U.S.A. October 16, 2014 83.55 % 83.55 % SeD Development Management, LLC The State of Delaware, U.S.A. June 18, 2015 85 % 85 % SeD Builder, LLC The State of Delaware, U.S.A. October 21, 2015 100 % 100 % SeD Texas Home, LLC The State of Delaware, U.S.A. June 16, 2015 100 % 100 % All intercompany balances and transactions have been eliminated. Non–controlling interest represents the minority equity investment in the Company’s subsidiaries, plus the minority investors’ share of the net operating results and other components of equity relating to the non–controlling interest. As of December 31, 2018 and 2017, the aggregate noncontrolling interest was $2,887,328 and $2,255,091, which are separately disclosed on the Consolidated Balance Sheet. On December 29, 2017, the Company, SeD Acquisition Corp., a Delaware corporation and whollyowned subsidiary of the Company (the “Merger Sub”), SeD Home, Inc. (“SeD Home”), a Delaware corporation, and SeD Home International, Inc., a Delaware corporation entered into an Acquisition Agreement and Plan of Merger (the “Agreement”) pursuant to which the Merger Sub was merged with and into SeD Home, with SeD Home surviving as a wholly owned subsidiary of the Company. The closing of this transaction (the “Closing”) also took place on December 29, 2017 (the “Closing Date”). Prior to the Closing, SeD Home International, Inc. was the owner of 100% of the issued and outstanding common stock of SeD Home and was also the owner of 99.96% of the Company’s issued and outstanding common stock. The Company acquired all of the outstanding common stock of SeD Home from SeD Home International, Inc. in exchange for issuing to SeD Home International, Inc. 630,000,000 shares of the Company’s common stock. Accordingly, SeD Home International, Inc. remains the Company’s largest shareholder, and the Company is now the sole shareholder of SeD Home. The Agreement and the transactions contemplated thereby were approved by the Board of Directors of each of the Company, the Merger Sub, SeD Home International, Inc., and SeD Home. The Agreement is considered a business combination of companies under common control and therefore, the consolidated financial statements include the financial statements of both companies. Basis of Presentation The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements. Actual results could differ from those estimates. Earnings (Loss) per Share Basic income (loss) per share is computed by dividing the net loss attributable to the common stockholders by weighted average number of shares of common stock outstanding during the period. Fully diluted income (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial instruments issued or outstanding for the periods ended December 31, 2018 or 2017. Fair Value of Financial Instruments For purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amount of the Company’s short-term financial instruments approximates fair value due to the relatively short period to maturity for these instruments. 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 were no cash equivalents as of December 31, 2018 and 2017. Restricted Cash As a condition to the loan agreement with the Union Bank (formerly known as Xenith Bank, f/k/a The Bank of Hampton Roads), the Company is required to maintain a minimum of $2,600,000 in an interest-bearing account maintained by the lender as additional security for the loans. The funds will remain as collateral for the loans until the loans are paid off in full. As of December 31, 2018 and 2017, the balance of the account was $2,726,154 and $2,656,670, respectively. On July 20, 2018, Black Oak LP received $4,592,079 of district reimbursement for previous construction costs incurred in the land development. Of this amount, $1,650,000 will remain on deposit in the District’s Capital Projects Fund for the benefit of Black Oak LP and will be released upon receipt of the evidence of the: (a) execution of a purchase agreement between Black Oak LP and a home builder with respect to the Black Oak development and (b) of the completion, finishing and making ready for home construction of at least 105 unfinished lots in the Black Oak development. In 2018, $446,745 was released to reimburse the construction costs leaving a balance of $1,203,256 on December 31, 2018. Accounts Receivable Accounts receivable include all receivables from buyers, contractors and all other parties. The Company records an allowance for doubtful accounts based on a review of the outstanding receivables, historical collection information and economic conditions. No allowance was necessary at December 31, 2018 and 2017. Property and Equipment and Depreciation Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives, which are 3 years. Real Estate Assets Real estate assets are recorded at cost, except when real estate assets are acquired that meet the definition of a business combination in accordance with Financial Accounting Standards Board (“FASB”) ASC 805, “Business Combinations,” which acquired assets are recorded at fair value. Interest, property taxes, insurance and other incremental costs (including salaries) directly related to a project are capitalized during the construction period of major facilities and land improvements. The capitalization period begins when activities to develop the parcel commence and ends when the asset constructed is completed. The capitalized costs are recorded as part of the asset to which they relate and are reduced when lots are sold. The Company capitalized interest from related party borrowings of $409,005 and $211,005 for the years ended December 31, 2018 and 2017, respectively. The Company capitalized interest from the third-party borrowings of $245,844 and $1,008,220 for the years ended December 31, 2018 and 2017, respectively. A property is classified as “held for sale” when all of the following criteria for a plan of sale have been met: (1) management, having the authority to approve the action, commits to a plan to sell the property. (2) the property is available for immediate sale in its present condition, subject only to terms that are usual and customary. (3) an active program to locate a buyer and other actions required to complete the plan to sell, have been initiated. (4) the sale of the property is probable and is expected to be completed within one year or the property is under a contract to be sold. (5) the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value. and (6) actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. When all of these criteria have been met, the property is classified as “held for sale”. “Real estate held for sale” only includes El Tesoro project and D street project. In addition to our annual assessment of potential triggering events in accordance with ASC 360, the Company applies a fair value-based impairment test to the net book value assets on an annual basis and on an interim basis if certain events or circumstances indicate that an impairment loss may have occurred. As of December 31, 2018 and 2017, there was no impairment recognized for any of the projects. Revenue Recognition Accounting Standards Codification ("ASC") 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 to customers. The Company adopted this new standard on January 1, 2018 under the modified retrospective method. The adoption did not have a material effect on our financial statements. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods or services. The provisions of ASC 606 include a five-step process by which we determine revenue recognition, depicting the transfer of goods or services to customers in amounts reflecting the payment to which we expect to be entitled in exchange for those goods or services. ASC 606 requires us to apply the following steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, we satisfy the performance obligation. A detailed breakdown of the five-step process for the revenue recognition of our Ballenger project, which was approximately all the revenue of the Company in 2018 and 2017, is as follows: Identify the contract with a customer The Company has signed agreements with the builders for developing the raw land to ready to build lots. The contract has agreed upon prices, timelines, and specifications for what is to be provided. Identify the performance obligations in the contract Performance obligations of the company include delivering developed lots to the customer, which are required to meet certain specifications that are outlined in the contract. The customer inspects all lots prior to accepting title to ensure all specifications are met. Determine the transaction price The transaction price is fixed and specified in the contract. Any subsequent change orders or price changes are required to be approved by both parties. Allocate the transaction price to performance obligations in the contract If there are multiple performance obligations to the contract, the costs must be allocated appropriately and consistently to each performance obligation. In the Company’s land developing business, each lot is considered to be a separate performance obligation, for which the specified price in the contract is allocated to. If there were multiple services provided for one client, the company would split out the services over multiple contracts. Recognize revenue when (or as) the entity satisfies a performance obligation The builders do the inspections to make sure all conditions/requirements are met before taking title of lots. The Company recognizes revenue when title is transferred. The Company does not have further performance obligations once title is transferred. Contract Assets and Contract Liabilities Based on our contracts, we invoice customers once our performance obligations have been satisfied, at which point payment is unconditional. Accordingly, our contracts do not give rise to contract assets or liabilities under ASC 606. Accounts receivable are recorded when the right to consideration becomes unconditional. We disclose receivables from contracts with customers separately in the statement of financial position. Cost of Sales Land acquisition costs are allocated to each lot based on the size of the lot comparing to the total size of all lots in the project. Development costs and capitalized interest are allocated to lots sold based on the total expected development and interest costs of the completed project and allocating a percentage of those costs based on the selling price of the sold lot compared to the expected sales values of all lots in the project. Income Taxes Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carry-forwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The differences relate primarily to net operating loss carryforward from date of acquisition and to the use of the cash basis of accounting for income tax purposes. The Company records an estimated valuation allowance on its deferred income tax assets if it is more likely than not that these deferred income tax assets will not be realized. The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company has not recorded any unrecognized tax benefits. The Company’s tax returns for 2018, 2017, 2016 and 2015 remain open to examination. Recent Accounting Pronouncements In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18), which requires that restricted cash and cash equivalents be included as components of total cash and cash equivalents as presented on the statement of cash flows. ASU 2016-18 was effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 and a retrospective transition method is required. This guidance did not impact financial results, but resulted in a change in the presentation of restricted cash and restricted cash equivalents within the statement of cash flows. The Company adopted this guidance in the 2018 and 2017 Consolidated Statement of Cash Flows. On February 25, 2016, the Financial Accounting Standards Board (FASB) released Accounting Standards Update No. 2016-02, Leases (Topic 842) (the Update). This ASU requires an entity to recognize a right-of-use asset (“ROU”) and lease liability for all leases with terms of more than 12 months. The amendments also require certain quantitative and qualitative disclosures about leasing arrangements. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The new standard is effective for the Company on January 1, 2019, with early adoption permitted. While the Company continues to assess all of the effects of adoption, it currently believes the most significant effects relate to: the recognition of new ROU assets and lease liabilities on its balance sheet for one of our office rental leases. The Company does not expect a significant change in its leasing activities between now and adoption. On adoption, the Company currently expects to recognize operating lease liabilities less than $200,000 with corresponding ROU assets of the same amount based on the present value of the remaining rental payments for our Bethesda Office lease on the consolidated balance sheet. In May 2014, the FASB issued accounting standard update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under previous guidance. This may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In July 2015, the FASB approved the proposal to defer the effective date of ASU 2014-09 standard by one year. Early adoption was permitted after December 15, 2016, and the standard became effective for public entities for annual reporting periods beginning after December 15, 2017 and interim periods therein. In 2016, the FASB issued final amendments to clarify the implementation guidance for principal versus agent considerations (ASU No. 2016-08), accounting for licenses of intellectual property and identifying performance obligations (ASU No. 2016-10), narrow-scope improvements and practical expedients (ASU No. 2016-12) and technical corrections and improvements to ASU 2014-09 (ASU No. 2016-20) in its new revenue standard. The Company has performed a review of the requirements of the new revenue standard and is monitoring the activity of the FASB and the transition resource group as it relates to specific interpretive guidance. The Company reviewed customer contracts, applied the five-step model of the new standard to its contracts, and compared the results to its current accounting practices. The adoption of this standard required increased disclosures related to the disaggregation of revenue. In March 2018, the FASB issued ASU 2018-05, “Income Taxes (Topic 740) – Amendments to SEC paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 118.” ASU 2018-05 amends the Accounting Standards Codification to incorporate various SEC paragraphs pursuant to the issuance of SAB 118, which addresses the application of generally accepted accounting principles in situations when a registrant does not have necessary information available, prepared, or analyzed (including computation) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act. The ASU does not have material impact on the Company. In February 2018, the FASB issued ASU No. 2018-02, Reporting Comprehensive Income - Reclassification of Certain tax Effects from Accumulated Other Comprehensive Income to help businesses present some effects form the Tax Act's reduction in the corporate tax rate in their income statements. ASU 2018-02 gives the option of reclassifying what are called the “stranded” tax effects within accumulated other comprehensive income (loss) to retained earnings (deficit) during each fiscal year or quarter in which the effect of the lower tax rate is recorded. ASU 2018-02 instructs businesses to provide a disclosure in their financial statement footnotes that describes the accounting policy they used to release the income tax effects form accumulated other comprehensive income (loss), whether they are reclassifying the stranded income tax effects from the Tax Act, and information about the other effects on taxes from the reclassification. The update is effective for fiscal years beginning after December 15, 2018, and the interim periods in those years, and early adoption is permitted. We are evaluating the impact on the Company. Subsequent Events The Company evaluated the events and transactions subsequent to December 31, 2018, the balance sheet date, through April 1, 2019, the date the consolidated financial statements were available to be issued. |
2. CONCENTRATION OF CREDIT RISK
2. CONCENTRATION OF CREDIT RISK | 12 Months Ended |
Dec. 31, 2018 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATION OF CREDIT RISK | The group maintains cash balances at various financial institutions. These balances are secured by the Federal Deposit Insurance Corporation. At times, these balances may exceed the federal insurance limits. On December 31, 2018 and 2017, uninsured cash balances were $3,783,330 and $2,514,903, respectively. The Company’s Ballenger project only has two purchasers: NVR Inc. (“NVR”), a NYSE publicly listed US homebuilding and mortgage company, is the only purchaser of 479 residential lots of Ballenger project; Orchard Development Corporation is the purchaser of the parcel of 210 multifamily units. During the year ended December 31, 2018, the Company earned revenues from property sales from these two customers representing approximately 70% and 30%, respectively. During the year ended December 31, 2017, the Company earned revenues from property sales from these two customers representing approximately 100% and 0% of gross sales, respectively. As of December 31, 2018, no accounts receivable was outstanding from these two customers. As of December 31, 2017, the above two customers represented approximately 100% and 0% of receivables, respectively. |
3. PROPERTY AND EQUIPMENT
3. PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | Property and equipment stated at cost, less accumulated depreciation and amortization, consisted of the following: December 31, 2018 December 31, 2017 Computer Equipment $ 41,597 $ 41,597 Furniture and Fixtures 24,393 21,393 65,990 62,990 Accumulated Depreciation (57,742 ) (40,928 ) Fixed Assets Net $ 8,248 $ 22,062 Depreciation expense was $16,814 and $20,453 for the years ended December 31, 2018 and 2017, respectively. |
4. BUILDER DEPOSITS
4. BUILDER DEPOSITS | 12 Months Ended |
Dec. 31, 2018 | |
Builder Deposits Abstract | |
BUILDER DEPOSITS | In November 2015, SeD Maryland Development, LLC (“Maryland”) entered into lot purchase agreements with NVR, Inc. (“NVR”) relating to the sale of single-family home and townhome lots to NVR in the Ballenger Run Project. The purchase agreements were amended two times thereafter. Based on the agreements, NVR is entitled to purchase 479 lots for a price of approximately $64 million over a 21-year period, which escalates 3% annually after June 1, 2018. As part of the agreements, NVR provided was required to give a deposit in the amount of $5,600,000. Upon the sale of lots to NVR, 9.9% of the purchase price is taken from the deposit. A violation of the agreements by NVR would cause NVR to forfeit the deposit. On December 31, 2018 and 2017, there was $3,878,842 and $5,056,718 outstanding, respectively. Black Oak LP received a deposit of $300,000 from Lexington 26 LP (Colina), a building company located in Texas. On December 31, 2018 and 2017, there was $0 and $300,000 outstanding, respectively. In February 2018, the deposit $300,000 was refunded to Colina since both sides agreed to the changed development plan of Colina. |
5. NOTES PAYABLE
5. NOTES PAYABLE | 12 Months Ended |
Dec. 31, 2018 | |
Notes Payable [Abstract] | |
NOTES PAYABLE | Revere Loan On October 7, 2015, the Company entered into a note for $6,000,000, bearing interest at 13%, with a maturity date of October 7, 2016 with Revere High Yield Fund, LP (“Revere”). In connection with the loan, the Company incurred origination and closing fees of $524,233, which were recorded as debt discount and are amortized over the life of the loan. The loan is secured by a deed of trust on the property and a Limited Guarantee Agreement with related parties of the Company. On October 1, 2016, the loan was extended to April 1, 2017 for fees of $109,285. These fees were recorded as a debt discount under debt modification accounting are amortized over the extension period. On April 1, 2017, the loan was again extended until October 1, 2017 for a fee of $110,000. These fees were recorded as a debt discount under debt modification accounting and were amortized over the extension period. As of October 1, 2017, the loan was fully repaid and there is no outstanding principal or unamortized debt discount. Union Bank Loan On November 23, 2015, SeD Maryland Development LLC entered into a Revolving Credit Note with the Union Bank in the original principal amount of $8,000,000. During the term of the loan, cumulative loan advances may not exceed $26,000,000. The line of credit bears interest at LIBOR plus 3.8% with a floor rate of 4.5%. The interest rate at December 31, 2018 was 6.125%. Beginning December 1, 2015, interest only payments are due on the outstanding principal balance. The entire unpaid principal and interest sum is due and payable on November 22, 2018, with the option of one twelve-month extension period. The loan is secured by a deed of trust on the property, $2,600,000 of collateral cash, and a Limited Guaranty Agreement with SeD Ballenger. The Company also has an $800,000 letter of credit from the Union Bank. The letter of credit is due on November 22, 2018 and bears interest at 15%. In September 2017, Maryland Development LLC and the Union Bank modified the Revolving Credit Note, which increased the original principal amount from $8,000,000 to $11,000,000 and extended the maturity date of the loan and letter of credit to December 31, 2019. As of December 31, 2018 and 2017, the principal balance were $13,899 and $8,272,297, respectively. As part of the transaction, the Company incurred loan origination fees and closing fees, totaling $480,947, which were recorded as debt discount and are amortized over the life of the loan. The unamortized debt discount was $0 and $140,277 on December 31, 2018 and December 31, 2017, respectively. |
6. RELATED PARTY TRANSACTIONS
6. RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | Notes Payable before Intercompany Loan Restructuring SeD Home received advances from SeD Ltd (which was the 100% owner of the Company) to fund development costs and operation costs. The advances were unsecured, bear interest at 18% per annum and are payable on demand. As of December 31, 2015, SeD Home had outstanding principal due of $12,293,715 and accrued interest of $2,161,055 due to this related party. SeD Home received advances from SCDPL (owned 100% by SeD Ltd) to fund development costs and operation costs. The advances were unsecured, bear interest at 18% per annum and were payable on demand. As of December 31, 2015, SeD Home had outstanding principal due of $4,300,930 and accrued interest of $1,461,058 due to this related party. On September 30, 2015, SeD Home received $10,500,000 interest free loan, with a maturity date of March 31, 2016, from Hengfai Business Development Pte, Ltd, owned by the Chief Executive Officer of SeD Ltd and is also the majority shareholder of SeD Ltd, specifically for Ballenger Run project. SeD Home imputed interest at 13%, which is the interest rate on the Revere Loan noted in Note 5. The imputed interest resulted in a debt discount of $622,431 which is amortized over the life of the note. At December 31, 2015, SeD Home had $10,500,000 outstanding on the note and unamortized debt discount of $311,216. On April 1, 2016, SeD Home extended the note on the same terms through December 31, 2016. This resulted in an additional $933,647 of new imputed interest which was amortized during 2016. Intercompany Loans Restructuring At December 31, 2016, considering the long-term development and short-term debt repayment, SeD Home restructured the loans from these affiliates. The restructuring process was done to transfer the loans to SeD Home International (99.99 % owner of the Company), the principal of which, $26,913,525, was then forgiven and recorded into additional paid in capital. SeD Home still owed the accrued interest of $6,283,207 to SeD Home International. The remaining accrued interest does not bear interest. On August 30, 2017, an additional $4,560,085 of this interest was forgiven and recorded into additional paid in capital. The remaining amount of $1,723,122 was still outstanding as of December 31, 2018 and 2017 Loan from SeD Home Limited SeD Home receives advances from SeD Home Limited (an affiliate of SeD Ltd), to fund development and operation costs. The advances bear interest at 10% and are payable on demand. As of December, 2018 and 2017, SeD Home had outstanding principal due of $1,116,406 and $1,050,000 and accrued interest of $193,382 and $86,425. Loan from SeD Home International SeD Home receives advances from SeD Home International. The advances bore interest at 18% until August 30, 2017 when the interest rate was adjusted to 5% and have no set repayment terms. On December 31, 2018 and 2017, there was $4,629,178 and $6,953,591 of principal and $2,150,845 and $1,848,797 of accrued interest outstanding. Both accrued outstanding interests include the remaining amount $1,723,122 after interest was forgiven on August 30, 2017 as discussed in previous paragraph. During 2017, prior to the Reverse Merger, SeD Intelligent Home Inc. borrowed $30,000 from SeD Home International Inc. The borrowings did not bear any interest. In November 2017, the debt was forgiven by SeD Home International Inc. and was recognized into additional paid in capital. Other Transactions On November 29, 2016 an affiliate of SeD Home entered into three $500,000 bonds for a total of $1.5 million that are to incur annual interest at 8% and the principal shall be paid in full on November 29, 2019. SeD Home agreed to guarantee the payment obligations of these bonds. Further, at the maturity date, the bondholder has the right to propose to acquire a property built by SeD Home, and SeD will facilitate that transaction. The proposed acquisition purchase price would be at SeD Home's cost. If the cost price is more than $1.5 million, the proposed acquirer would pay the difference, and if the cost price is below $1.5 million, the affiliate of SeD would pay the difference in cash. The Reverse Merger As described in Note 1, the Reverse Merger was done with a related party through common control and ownership. Management Fees Black Oak LP is obligated under the Limited Partnership Agreement (as amended) to pay a $6,500 per month management fee to Arete Real Estate and Development Company (Arete), a related party through common ownership and $2,000 per month to American Real Estate Investments LLC (AREI), a related party through common ownership. Arete is also entitled to a developer fee of 3% of all development costs excluding certain costs. The fees are to be accrued until $1,000,000 is received in revenue and/or builder deposits relating to the Black Oak Project. On December 31, 2017, the Company had $314,630 owed to Arete and $48,000 to AREI in accounts payable and accrued expenses. On April 26, 2018, SeD Development USA, Arete and AREI reached an agreement to terminate the terms related to management fees and developer fees in the Limited Partnership Agreement. In July 2018, per the terms of the termination agreement, Black Oak LP paid Arete $300,000 and AREI $30,000 to fulfill the commitments. MacKenzie Equity Partners, owned by a Charlie MacKenzie, a Director of the Company, has a consulting agreement with the Company since 2015. Per the current terms of the agreement, as amended on January 1, 2018, the Company pays a monthly fee of $15,000 with an additional $5,000 per month to be paid when the property development cashflow milestones have been met. The Company incurred expenses of $240,000 and $222,930 for the years 2018 and 2017, respectively, which were capitalized as part of Real Estate on the balance sheet as the services relate to property and project management. On December, 2018 and 2017, the Company owed this related party $60,000 and $0, respectively. Purchase of Minority Interest of Black Oak LP On July 23, 2018, SeD Development USA, LLC, a wholly owned subsidiary of the Company, entered into two Partnership Interest Purchase Agreements through which it purchased an aggregate of 31% of Black Oak LP for $60,000. In addition, if and when Black Oak LP receives at least $15 million in net reimbursement receivable proceeds from HC17 and/or Aqua Texas, Inc. (net of any expenses Harris County Improvement District 17 and/or Aqua Texas, Inc. may deduct), Black Oak LP shall pay Fogarty Family Trust II, one of two previous partners of Black Oak LP, an amount equal to 10% of the net reimbursement receivable proceeds received from HC17 and/or Aqua Texas, Inc. that exceeds $15 million; provided however, this obligation shall only apply to reimbursement revenue received on or before December 31, 2025. Prior to the Partnership Interest Purchase Agreements, the Company owned and controlled Black Oak LP through its 68.5% limited partnership interest and its ownership of the General Partner, 150 Black Oak GP, Inc, a 0.5% owner in Black Oak LP. As a result of the purchase, the Company, through its subsidiaries, now owns 100% of Black Oak LP. Consulting Services A law firm, owned by Conn Flanigan, a Director of the Company, performs consulting services for the Company. The Company incurred expenses of $101,979 and $110,334 for the years ended December 31, 2018 and 2017, respectively. On December 31, 2018 and December 31, 2017, the Company owed this related party $8,000 and $18,000, respectively. |
7. SHAREHOLDERS' EQUITY
7. SHAREHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2018 | |
Stockholders' Equity Attributable to Parent [Abstract] | |
SHAREHOLDERS' EQUITY | On August 28, 2017 the Company increased its authorized shares from 75,000,000 to 1,000,000,000 common shares with a par value of $0.001 per share. No preferred shares have been authorized or issued. In 2017, SeD Home International, a related party through common ownership, contributed $178,600 into the Company. The related party also forgave $4,560,085 of accrued interest as of August 30, 2017, which was recorded as additional paid in capital. Per Note 1, 630,000,000 shares of common stock were issued on December 29, 2017 in connection with the Reverse Merger. On July 23, 2018, the Company entered into two Partnership Interest Purchase Agreements through which it purchased an aggregate of 31% of Black Oak LP for $60,000 and fulfilled the agreement thereafter. |
8. COMMITMENTS AND CONTINGENCIE
8. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Leases The Company leases office space in Texas and Maryland. The leases expire in 2018 and 2020, respectively and have monthly rental payments ranging between $2,284 and $8,205. Rent expense was $120,071 and $116,870 for the year ended December 31, 2018 and 2017, respectively. The below table summarizes future payments due under these leases as of December 31, 2018. For the Years Ended December 31: 2019 118,410 2020 96,924 Total $ 215,334 Lot Sale Agreements On February 19, 2018, SeD Maryland entered into a contract to sell the Continuing Care Retirement Community Assisted Independent Living parcel to Orchard Development Corporation. It was agreed that the purchase price for the 5.9 acre lot would be $2,900,000 with a $50,000 deposit. It was also agreed that Orchard Development Corporation would have the right to terminate the transaction during the feasibility study period, which would last through May 30, 2018, and receive a refund of its deposit. On April 13, 2018, Orchard Development Corporation indicated that it would not be proceeding with the purchase of the CCRC parcel. On December 31, 2018, SeD Maryland entered into the Third Amendment to the Lot Purchase Agreement for Ballenger Run with NVR. Pursuant to the Third Amendment, SeD Maryland will convert the 5.9 acre CCRC parcel to 36 lots (the 28 feet wide villa lot) and sell to NVR. SeD Maryland will pursue the required zoning approval to change the number of such lots from 85 to 121. On July 3, 2018, 150 CCM Black Oak entered into a Purchase and Sale Agreement with Houston LD, LLC for the sale of 124 lots located at its Black Oak project. Pursuant to the Purchase and Sale Agreement, it was agreed that 124 lots would be sold for a range of prices based on the lot type. In addition, Houston LD, LLC agreed to contribute a “community enhancement fee” for each lot, collectively totaling $310,000, which is currently held in escrow. 150 CCM Black Oak will apply these funds exclusively towards an amenity package on the property. The closing of the transactions contemplated by the Purchase and Sale Agreement was subject to Houston LD, LLC completing due diligence to its satisfaction. On October 12, 2018, 150 CCM Black Oak, Ltd. entered into an Amended and Restated Purchase and Sale Agreement (the “Amended and Restated Purchase and Sale Agreement”) for these 124 lots. Pursuant to the Amended and Restated Purchase and Sale Agreement, the purchase price remained $6,175,000, 150 CCM Black Oak, Ltd. was required to meet certain closing conditions and the timing for the closing was extended. |
9. INCOME TAXES
9. INCOME TAXES | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act” (TCJA) that significantly reformed the Internal Revenue Code of 1986, as amended. The TCJA reduces the corporate tax rate to 21 percent beginning with years starting January 1, 2018. Because a change in tax law is accounted for in the period of enactment, the deferred tax assets and liabilities have been adjusted to the newly enacted U.S. corporate rate, and the related impact to the tax expense has been recognized in the current year. Deferred tax assets and (liabilities) consist of the following at December 31, 2018 and 2017: 2018 2017 Interest Income (4,023,599 ) (2,957,688 ) Interest Expense 3,928,264 3,355,098 Depreciation and Amortization 6,302 2,510 Management Fees 404,342 276,741 Others 113,633 239,482 Net Operating Loss 4,547 499,230 433,489 1,415,373 Valuation Allowance (433,489 ) (1,415,373 ) Net Deferred Tax Asset - - As of December 31, 2018, the Company has federal net operating loss carry-forwards of approximately $111,769 which will begin to expire in 2038. The Maryland did not have net operating loss carry-forwards. The full utilization of the deferred tax assets in the future is dependent upon the Company’s ability to generate taxable income. accordingly, a valuation allowance of an equal amount has been established. During the years ended December 31, 2018 and 2017, the valuation allowance decreased by $616,332 and $871,109, respectively. The expected tax expense (benefit) based on the statuary rate is reconciled with actual tax benefit as follows: 2018 2017 US Federal statutory rate 21 % 21 % State income tax rate 8.25 % 8.25 % Federal Benefit (1.73 )% (1.73 )% Valuation Allowance (27.52 )% (27.52 )% Income tax provision (benefit) - % - % |
10. SUBSEQUENT EVENTS
10. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | Black Oak completed Sale with Houston LD, LLC On July 3, 2018, 150 CCM Black Oak entered into a Purchase and Sale Agreement with Houston LD, LLC for the sale of 124 lots located at its Black Oak project. On October 12, 2018, 150 CCM Black Oak, Ltd. entered into an Amended and Restated Purchase and Sale Agreement for these 124 lots. Pursuant to the Amended and Restated Purchase and Sale Agreement, the purchase price remained $6,175,000, 150 CCM Black Oak, Ltd. was required to meet certain closing conditions and the timing for the closing was extended. On January 18, 2019, the sale of 124 lots in Magnolia, Texas was completed. |
1. NATURE OF OPERATIONS AND S_2
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Nature of Operations | SeD Intelligent Home Inc. (the “Company”), formerly known as Homeownusa, was incorporated in the State of Nevada on December 10, 2009. On December 29, 2017, the Company, acquired SeD Home Inc. (“SeD Home”) by reverse merger. SeD Home, a Delaware corporation, formed on February 24, 2015 and named SeD Home USA, Inc. before changing its name in May of 2015, is principally engaged in developing, selling, managing, and leasing residential properties in the United States in current stage and may expand from residential properties to other property types, including but not limited to commercial and retail properties. The Company is 99.99% owned by SeD Home International, Inc., which is wholly – owned by Singapore eDevelopment Limited (“SeD Ltd”), a multinational public company, listed on the Singapore Exchange Securities Trading Limited (“SGXST”). |
Principles of Consolidation | The consolidated financial statements include all accounts of the entities as of the reporting period ending dates and for the reporting periods as follows: Name of consolidated subsidiary State or other jurisdiction of incorporation or organization Date of incorporation or formation Attributable interest as of December 31, 2018 Attributable interest as of December 31, 2017 SeD Home Inc. The State of Delaware, U.S.A. February 24, 2015 100 % 100 % SeD USA, LLC The State of Delaware, U.S.A. August 20, 2014 100 % 100 % 150 Black Oak GP, Inc. The State of Texas, U.S.A. January 23, 2014 100 % 100 % SeD Development USA, Inc. The State of Delaware, U.S.A. March 13, 2014 100 % 100 % 150 CCM Black Oak Ltd. The State of Texas, U.S.A. January 23, 2014 100 % 69 % SeD Ballenger, LLC The State of Delaware, U.S.A. July 7, 2015 100 % 100 % SeD Maryland Development, LLC The State of Delaware, U.S.A. October 16, 2014 83.55 % 83.55 % SeD Development Management, LLC The State of Delaware, U.S.A. June 18, 2015 85 % 85 % SeD Builder, LLC The State of Delaware, U.S.A. October 21, 2015 100 % 100 % SeD Texas Home, LLC The State of Delaware, U.S.A. June 16, 2015 100 % 100 % All intercompany balances and transactions have been eliminated. Non–controlling interest represents the minority equity investment in the Company’s subsidiaries, plus the minority investors’ share of the net operating results and other components of equity relating to the non–controlling interest. As of December 31, 2018 and 2017, the aggregate noncontrolling interest was $2,887,328 and $2,255,091, which are separately disclosed on the Consolidated Balance Sheet. On December 29, 2017, the Company, SeD Acquisition Corp., a Delaware corporation and whollyowned subsidiary of the Company (the “Merger Sub”), SeD Home, Inc. (“SeD Home”), a Delaware corporation, and SeD Home International, Inc., a Delaware corporation entered into an Acquisition Agreement and Plan of Merger (the “Agreement”) pursuant to which the Merger Sub was merged with and into SeD Home, with SeD Home surviving as a wholly owned subsidiary of the Company. The closing of this transaction (the “Closing”) also took place on December 29, 2017 (the “Closing Date”). Prior to the Closing, SeD Home International, Inc. was the owner of 100% of the issued and outstanding common stock of SeD Home and was also the owner of 99.96% of the Company’s issued and outstanding common stock. The Company acquired all of the outstanding common stock of SeD Home from SeD Home International, Inc. in exchange for issuing to SeD Home International, Inc. 630,000,000 shares of the Company’s common stock. Accordingly, SeD Home International, Inc. remains the Company’s largest shareholder, and the Company is now the sole shareholder of SeD Home. The Agreement and the transactions contemplated thereby were approved by the Board of Directors of each of the Company, the Merger Sub, SeD Home International, Inc., and SeD Home. The Agreement is considered a business combination of companies under common control and therefore, the consolidated financial statements include the financial statements of both companies. |
Basis of Presentation | The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). |
Use of Estimates | The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements. Actual results could differ from those estimates. |
Earnings (Loss) per Share | Basic income (loss) per share is computed by dividing the net loss attributable to the common stockholders by weighted average number of shares of common stock outstanding during the period. Fully diluted income (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial instruments issued or outstanding for the periods ended December 31, 2018 or 2017. |
Fair Value of Financial Instruments | For purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amount of the Company’s short-term financial instruments approximates fair value due to the relatively short period to maturity for these instruments. |
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 were no cash equivalents as of December 31, 2018 and 2017. |
Restricted Cash | As a condition to the loan agreement with the Union Bank (formerly known as Xenith Bank, f/k/a The Bank of Hampton Roads), the Company is required to maintain a minimum of $2,600,000 in an interest-bearing account maintained by the lender as additional security for the loans. The funds will remain as collateral for the loans until the loans are paid off in full. As of December 31, 2018 and 2017, the balance of the account was $2,726,154 and $2,656,670, respectively. On July 20, 2018, Black Oak LP received $4,592,079 of district reimbursement for previous construction costs incurred in the land development. Of this amount, $1,650,000 will remain on deposit in the District’s Capital Projects Fund for the benefit of Black Oak LP and will be released upon receipt of the evidence of the: (a) execution of a purchase agreement between Black Oak LP and a home builder with respect to the Black Oak development and (b) of the completion, finishing and making ready for home construction of at least 105 unfinished lots in the Black Oak development. In 2018, $446,745 was released to reimburse the construction costs leaving a balance of $1,203,256 on December 31, 2018. |
Accounts Receivable | Accounts receivable include all receivables from buyers, contractors and all other parties. The Company records an allowance for doubtful accounts based on a review of the outstanding receivables, historical collection information and economic conditions. No allowance was necessary at December 31, 2018 and 2017. |
Property and Equipment and Depreciation | Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives, which are 3 years. |
Real Estate Assets | Real estate assets are recorded at cost, except when real estate assets are acquired that meet the definition of a business combination in accordance with Financial Accounting Standards Board (“FASB”) ASC 805, “Business Combinations,” which acquired assets are recorded at fair value. Interest, property taxes, insurance and other incremental costs (including salaries) directly related to a project are capitalized during the construction period of major facilities and land improvements. The capitalization period begins when activities to develop the parcel commence and ends when the asset constructed is completed. The capitalized costs are recorded as part of the asset to which they relate and are reduced when lots are sold. The Company capitalized interest from related party borrowings of $409,005 and $211,005 for the years ended December 31, 2018 and 2017, respectively. The Company capitalized interest from the third-party borrowings of $245,844 and $1,008,220 for the years ended December 31, 2018 and 2017, respectively. A property is classified as “held for sale” when all of the following criteria for a plan of sale have been met: (1) management, having the authority to approve the action, commits to a plan to sell the property. (2) the property is available for immediate sale in its present condition, subject only to terms that are usual and customary. (3) an active program to locate a buyer and other actions required to complete the plan to sell, have been initiated. (4) the sale of the property is probable and is expected to be completed within one year or the property is under a contract to be sold. (5) the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value. and (6) actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. When all of these criteria have been met, the property is classified as “held for sale”. “Real estate held for sale” only includes El Tesoro project and D street project. In addition to our annual assessment of potential triggering events in accordance with ASC 360, the Company applies a fair value-based impairment test to the net book value assets on an annual basis and on an interim basis if certain events or circumstances indicate that an impairment loss may have occurred. As of December 31, 2018 and 2017, there was no impairment recognized for any of the projects. |
Revenue Recognition | Accounting Standards Codification ("ASC") 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 to customers. The Company adopted this new standard on January 1, 2018 under the modified retrospective method. The adoption did not have a material effect on our financial statements. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods or services. The provisions of ASC 606 include a five-step process by which we determine revenue recognition, depicting the transfer of goods or services to customers in amounts reflecting the payment to which we expect to be entitled in exchange for those goods or services. ASC 606 requires us to apply the following steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, we satisfy the performance obligation. A detailed breakdown of the five-step process for the revenue recognition of our Ballenger project, which was approximately all the revenue of the Company in 2018 and 2017, is as follows: Identify the contract with a customer The Company has signed agreements with the builders for developing the raw land to ready to build lots. The contract has agreed upon prices, timelines, and specifications for what is to be provided. Identify the performance obligations in the contract Performance obligations of the company include delivering developed lots to the customer, which are required to meet certain specifications that are outlined in the contract. The customer inspects all lots prior to accepting title to ensure all specifications are met. Determine the transaction price The transaction price is fixed and specified in the contract. Any subsequent change orders or price changes are required to be approved by both parties. Allocate the transaction price to performance obligations in the contract If there are multiple performance obligations to the contract, the costs must be allocated appropriately and consistently to each performance obligation. In the Company’s land developing business, each lot is considered to be a separate performance obligation, for which the specified price in the contract is allocated to. If there were multiple services provided for one client, the company would split out the services over multiple contracts. Recognize revenue when (or as) the entity satisfies a performance obligation The builders do the inspections to make sure all conditions/requirements are met before taking title of lots. The Company recognizes revenue when title is transferred. The Company does not have further performance obligations once title is transferred. |
Contract Assets and Contract Liabilities | Based on our contracts, we invoice customers once our performance obligations have been satisfied, at which point payment is unconditional. Accordingly, our contracts do not give rise to contract assets or liabilities under ASC 606. Accounts receivable are recorded when the right to consideration becomes unconditional. We disclose receivables from contracts with customers separately in the statement of financial position. |
Cost of Sales | Land acquisition costs are allocated to each lot based on the size of the lot comparing to the total size of all lots in the project. Development costs and capitalized interest are allocated to lots sold based on the total expected development and interest costs of the completed project and allocating a percentage of those costs based on the selling price of the sold lot compared to the expected sales values of all lots in the project. |
Income Taxes | Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carry-forwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The differences relate primarily to net operating loss carryforward from date of acquisition and to the use of the cash basis of accounting for income tax purposes. The Company records an estimated valuation allowance on its deferred income tax assets if it is more likely than not that these deferred income tax assets will not be realized. The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company has not recorded any unrecognized tax benefits. The Company’s tax returns for 2018, 2017, 2016 and 2015 remain open to examination. |
Recent Accounting Pronouncements | In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18), which requires that restricted cash and cash equivalents be included as components of total cash and cash equivalents as presented on the statement of cash flows. ASU 2016-18 was effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 and a retrospective transition method is required. This guidance did not impact financial results, but resulted in a change in the presentation of restricted cash and restricted cash equivalents within the statement of cash flows. The Company adopted this guidance in the 2018 and 2017 Consolidated Statement of Cash Flows. On February 25, 2016, the Financial Accounting Standards Board (FASB) released Accounting Standards Update No. 2016-02, Leases (Topic 842) (the Update). This ASU requires an entity to recognize a right-of-use asset (“ROU”) and lease liability for all leases with terms of more than 12 months. The amendments also require certain quantitative and qualitative disclosures about leasing arrangements. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The new standard is effective for the Company on January 1, 2019, with early adoption permitted. While the Company continues to assess all of the effects of adoption, it currently believes the most significant effects relate to: the recognition of new ROU assets and lease liabilities on its balance sheet for one of our office rental leases. The Company does not expect a significant change in its leasing activities between now and adoption. On adoption, the Company currently expects to recognize operating lease liabilities less than $200,000 with corresponding ROU assets of the same amount based on the present value of the remaining rental payments for our Bethesda Office lease on the consolidated balance sheet. In May 2014, the FASB issued accounting standard update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under previous guidance. This may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In July 2015, the FASB approved the proposal to defer the effective date of ASU 2014-09 standard by one year. Early adoption was permitted after December 15, 2016, and the standard became effective for public entities for annual reporting periods beginning after December 15, 2017 and interim periods therein. In 2016, the FASB issued final amendments to clarify the implementation guidance for principal versus agent considerations (ASU No. 2016-08), accounting for licenses of intellectual property and identifying performance obligations (ASU No. 2016-10), narrow-scope improvements and practical expedients (ASU No. 2016-12) and technical corrections and improvements to ASU 2014-09 (ASU No. 2016-20) in its new revenue standard. The Company has performed a review of the requirements of the new revenue standard and is monitoring the activity of the FASB and the transition resource group as it relates to specific interpretive guidance. The Company reviewed customer contracts, applied the five-step model of the new standard to its contracts, and compared the results to its current accounting practices. The adoption of this standard required increased disclosures related to the disaggregation of revenue. In March 2018, the FASB issued ASU 2018-05, “Income Taxes (Topic 740) – Amendments to SEC paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 118.” ASU 2018-05 amends the Accounting Standards Codification to incorporate various SEC paragraphs pursuant to the issuance of SAB 118, which addresses the application of generally accepted accounting principles in situations when a registrant does not have necessary information available, prepared, or analyzed (including computation) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act. The ASU does not have material impact on the Company. In February 2018, the FASB issued ASU No. 2018-02, Reporting Comprehensive Income - Reclassification of Certain tax Effects from Accumulated Other Comprehensive Income to help businesses present some effects form the Tax Act's reduction in the corporate tax rate in their income statements. ASU 2018-02 gives the option of reclassifying what are called the “stranded” tax effects within accumulated other comprehensive income (loss) to retained earnings (deficit) during each fiscal year or quarter in which the effect of the lower tax rate is recorded. ASU 2018-02 instructs businesses to provide a disclosure in their financial statement footnotes that describes the accounting policy they used to release the income tax effects form accumulated other comprehensive income (loss), whether they are reclassifying the stranded income tax effects from the Tax Act, and information about the other effects on taxes from the reclassification. The update is effective for fiscal years beginning after December 15, 2018, and the interim periods in those years, and early adoption is permitted. We are evaluating the impact on the Company. |
Subsequent Events | The Company evaluated the events and transactions subsequent to December 31, 2018, the balance sheet date, through April 1, 2019, the date the consolidated financial statements were available to be issued. |
1. NATURE OF OPERATIONS AND S_3
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Accounts of entities | Name of consolidated subsidiary State or other jurisdiction of incorporation or organization Date of incorporation or formation Attributable interest as of December 31, 2018 Attributable interest as of December 31, 2017 SeD Home Inc. The State of Delaware, U.S.A. February 24, 2015 100 % 100 % SeD USA, LLC The State of Delaware, U.S.A. August 20, 2014 100 % 100 % 150 Black Oak GP, Inc. The State of Texas, U.S.A. January 23, 2014 100 % 100 % SeD Development USA, Inc. The State of Delaware, U.S.A. March 13, 2014 100 % 100 % 150 CCM Black Oak Ltd. The State of Texas, U.S.A. January 23, 2014 100 % 69 % SeD Ballenger, LLC The State of Delaware, U.S.A. July 7, 2015 100 % 100 % SeD Maryland Development, LLC The State of Delaware, U.S.A. October 16, 2014 83.55 % 83.55 % SeD Development Management, LLC The State of Delaware, U.S.A. June 18, 2015 85 % 85 % SeD Builder, LLC The State of Delaware, U.S.A. October 21, 2015 100 % 100 % SeD Texas Home, LLC The State of Delaware, U.S.A. June 16, 2015 100 % 100 % |
3. PROPERTY AND EQUIPMENT (Tabl
3. PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment | December 31, 2018 December 31, 2017 Computer Equipment $ 41,597 $ 41,597 Furniture and Fixtures 24,393 21,393 65,990 62,990 Accumulated Depreciation (57,742 ) (40,928 ) Fixed Assets Net $ 8,248 $ 22,062 |
8. COMMITMENTS AND CONTINGENC_2
8. COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future payments due under leases | 2019 118,410 2020 96,924 Total $ 215,334 |
9. INCOME TAXES (Tables)
9. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Deferred tax assets (liabilities) | 2018 2017 Interest Income (4,023,599 ) (2,957,688 ) Interest Expense 3,928,264 3,355,098 Depreciation and Amortization 6,302 2,510 Management Fees 404,342 276,741 Others 113,633 239,482 Net Operating Loss 4,547 499,230 433,489 1,415,373 Valuation Allowance (433,489 ) (1,415,373 ) Net Deferred Tax Asset - - |
Income tax rate reconciliation | 2018 2017 US Federal statutory rate 21 % 21 % State income tax rate 8.25 % 8.25 % Federal Benefit (1.73 )% (1.73 )% Valuation Allowance (27.52 )% (27.52 )% Income tax provision (benefit) - % - % |
1. NATURE OF OPERATIONS AND S_4
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 12 Months Ended |
Dec. 31, 2018 | |
Subsidiary 1 | |
Name of consolidated subsidiary | SeD Home Inc. |
State or other jurisdiction of incorporation or organization | The State of Delaware, U.S.A. |
Date of incorporation or formation | Feb. 24, 2015 |
Attributable interest | 100.00% |
Subsidiary 2 | |
Name of consolidated subsidiary | SeD USA, LLC |
State or other jurisdiction of incorporation or organization | The State of Delaware, U.S.A. |
Date of incorporation or formation | Aug. 20, 2014 |
Attributable interest | 100.00% |
Subsidiary 3 | |
Name of consolidated subsidiary | 150 Black Oak GP, Inc. |
State or other jurisdiction of incorporation or organization | The State of Texas, U.S.A. |
Date of incorporation or formation | Jan. 23, 2014 |
Attributable interest | 100.00% |
Subsidiary 4 | |
Name of consolidated subsidiary | SeD Development USA, Inc. |
State or other jurisdiction of incorporation or organization | The State of Delaware, U.S.A. |
Date of incorporation or formation | Mar. 13, 2014 |
Attributable interest | 100.00% |
Subsidiary 5 | |
Name of consolidated subsidiary | 150 CCM Black Oak Ltd. |
State or other jurisdiction of incorporation or organization | The State of Texas, U.S.A. |
Date of incorporation or formation | Jan. 23, 2014 |
Attributable interest | 69.00% |
Subsidiary 6 | |
Name of consolidated subsidiary | SeD Ballenger, LLC |
State or other jurisdiction of incorporation or organization | The State of Delaware, U.S.A. |
Date of incorporation or formation | Jul. 7, 2015 |
Attributable interest | 100.00% |
Subsidiary 7 | |
Name of consolidated subsidiary | SeD Maryland Development, LLC |
State or other jurisdiction of incorporation or organization | The State of Delaware, U.S.A. |
Date of incorporation or formation | Oct. 16, 2014 |
Attributable interest | 83.55% |
Subsidiary 8 | |
Name of consolidated subsidiary | SeD Development Management, LLC |
State or other jurisdiction of incorporation or organization | The State of Delaware, U.S.A. |
Date of incorporation or formation | Jun. 18, 2015 |
Attributable interest | 85.00% |
Subsidiary 9 | |
Name of consolidated subsidiary | SeD Builder, LLC |
State or other jurisdiction of incorporation or organization | The State of Delaware, U.S.A. |
Date of incorporation or formation | Oct. 21, 2015 |
Attributable interest | 100.00% |
Subsidiary 10 | |
Name of consolidated subsidiary | SeD Texas Home, LLC |
State or other jurisdiction of incorporation or organization | The State of Delaware, U.S.A. |
Date of incorporation or formation | Jun. 16, 2015 |
Attributable interest | 100.00% |
1. NATURE OF OPERATIONS AND S_5
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | ||
Non-controlling interest | $ 2,887,328 | $ 2,255,091 |
Restricted cash | 3,929,410 | 2,656,670 |
Capitalized interest from related party borrowings | 409,005 | 211,005 |
Capitalized interest from third party borrowings | $ 245,844 | $ 1,008,220 |
2. CONCENTRATION OF CREDIT RI_2
2. CONCENTRATION OF CREDIT RISK (Details Narrative) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Risks and Uncertainties [Abstract] | ||
Uninsured cash balances | $ 3,783,330 | $ 2,514,903 |
3. PROPERTY AND EQUIPMENT (Deta
3. PROPERTY AND EQUIPMENT (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Property and equipment, gross | $ 65,990 | $ 62,990 |
Accumulated depreciation | (57,742) | (40,928) |
Property and equipment, net | 8,248 | 22,062 |
Computer Equipment | ||
Property and equipment, gross | 41,597 | 41,597 |
Furniture and Fixtures | ||
Property and equipment, gross | $ 24,393 | $ 21,393 |
3. PROPERTY AND EQUIPMENT (De_2
3. PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 16,814 | $ 20,453 |
5. NOTES PAYABLE (Details Narra
5. NOTES PAYABLE (Details Narrative) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Notes Payable [Abstract] | ||
Principal | $ 13,899 | $ 8,272,297 |
Unamortized debt discount | $ 0 | $ 140,277 |
6. RELATED PARTY TRANSACTIONS (
6. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Related Party Transactions [Abstract] | ||
Consulting expenses | $ 101,979 | $ 110,334 |
Due to related party | $ 8,000 | $ 18,000 |
8. COMMITMENTS AND CONTINGENC_3
8. COMMITMENTS AND CONTINGENCIES (Details) | Dec. 31, 2018USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2019 | $ 118,410 |
2020 | 96,924 |
Total | $ 215,334 |
8. COMMITMENTS AND CONTINGENC_4
8. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rent expenses | $ 120,071 | $ 116,870 |
9. INCOME TAXES (Details)
9. INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Interest income | $ (4,023,599) | $ (2,957,688) |
Interest expense | 3,928,264 | 3,355,098 |
Depreciation and amortization | 6,302 | 2,510 |
Management fees | 404,342 | 276,741 |
Others | 113,633 | 239,482 |
Net operating losses | 4,547 | 499,230 |
Deferred tax assets, gross | 433,489 | 1,415,373 |
Valuation allowance | (433,489) | (1,415,373) |
Net deferred tax asset | $ 0 | $ 0 |
9. INCOME TAXES (Details 1)
9. INCOME TAXES (Details 1) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
US Federal statutory rate | 21.00% | 21.00% |
State income tax rate | 8.25% | 8.25% |
Federal Benefit | (1.73%) | 1.73% |
Valuation Allowance | (27.52%) | (27.52%) |
Income tax provision (benefit) | 0.00% | 0.00% |