Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Mar. 24, 2020 | Jun. 30, 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, 2019 | ||
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 Interactive Data Current | Yes | ||
Entity Incorporation, State or Country Code | NV | ||
Entity File Number | 000-55038 | ||
Entity Public Float | $ 0 | ||
Entity Common Stock, Shares Outstanding | 704,043,324 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2019 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Real Estate | ||
Construction in Progress | $ 11,085,469 | $ 22,059,722 |
Land Held for Development | 13,773,100 | 19,164,028 |
Real Estate Held For Sale | 0 | 136,248 |
Real Estate Assets | 24,858,569 | 41,359,998 |
Cash | 1,083,329 | 715,754 |
Restricted Cash | 4,319,543 | 3,929,410 |
Accounts Receivable | 166,294 | 112,706 |
Related Party Receivable | 211,271 | 0 |
Prepaid Expenses | 33,219 | 46,443 |
Fixed Assets, Net | 2,211 | 8,248 |
Deposits | 23,603 | 23,603 |
Operating Lease Right-Of-Use (Asset) | 87,193 | 0 |
Total Assets | 30,785,232 | 46,196,162 |
Liabilities: | ||
Accounts Payable and Accrued Expenses | 783,576 | 1,749,268 |
Accrued Interest - Related Parties | 324,982 | 2,344,227 |
Tenant Security Deposits | 0 | 1,225 |
Builder Deposits | 2,445,269 | 3,878,842 |
Note Payable | 0 | 13,899 |
Notes Payable - Related Parties | 0 | 5,745,584 |
Operating Lease Liability | 91,330 | 0 |
Income Tax Payable | 420,327 | 0 |
Total Liabilities | 4,065,484 | 13,733,045 |
Stockholders' Equity: | ||
Common Stock, at par $0.001, 1,000,000,000 shares authorized and 704,043,324 issued, and outstanding at December 31, 2019 and 2018, respectively | 704,043 | 704,043 |
Additional Paid In Capital | 32,542,720 | 32,542,720 |
Accumulated Deficit | (8,802,076) | (3,670,974) |
Total Stockholders' Equity | 24,444,687 | 29,575,789 |
Non-controlling Interest | 2,275,061 | 2,887,328 |
Total Stockholders' Equity | 26,719,748 | 32,463,117 |
Total Liabilities and Stockholders' Equity | $ 30,785,232 | $ 46,196,162 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 |
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, 2019 | Dec. 31, 2018 | |
Revenue | ||
Rental | $ 8,730 | $ 8,730 |
Property | 22,846,715 | 17,666,304 |
Total Revenue | 22,855,445 | 17,675,034 |
Operating Expenses | ||
Cost of Sales | 20,364,293 | 15,641,324 |
General and Administrative Expenses | 861,645 | 748,480 |
Impairment of Real Estate | 5,920,599 | 2,404,547 |
Total Operating Expenses | 27,146,537 | 18,794,351 |
Loss From Operations | (4,291,092) | (1,119,317) |
Other Income | ||
Interest Income | 41,062 | 31,437 |
Other Income | 7,299 | 5,683 |
Total Other Income | 48,361 | 37,120 |
Net Loss Before Income Taxes | (4,242,731) | (1,082,197) |
Income Tax Expense | 431,388 | 0 |
Net Loss | (4,674,119) | (1,082,197) |
Net Income Attributable to Non-controlling Interests | 456,983 | 495,940 |
Net Loss Attributable to Common Stockholders | $ (5,131,102) | $ (1,578,137) |
Net Loss Per Share - Basic and Diluted | $ (0.01) | $ 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 | Minority Interest | Total |
Beginning Balance, Shares at Dec. 31, 2017 | 704,043,324 | ||||
Beginning 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 (Loss) Income | (1,578,137) | 495,940 | (1,082,197) | ||
Ending Balance, Shares at Dec. 31, 2018 | 704,043,324 | ||||
Ending Balance, Amount at Dec. 31, 2018 | $ 704,043 | 35,542,720 | (3,670,974) | 2,887,328 | 32,463,117 |
Distribution to Minority Interest | (1,069,250) | (1,069,250) | |||
Net (Loss) Income | (5,131,102) | 456,983 | (4,674,119) | ||
Ending Balance, Shares at Dec. 31, 2019 | 704,043,324 | ||||
Ending Balance, Amount at Dec. 31, 2019 | $ 704,043 | $ 35,542,720 | $ (8,802,076) | $ 2,275,061 | $ 26,719,748 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Cash Flows From Operating Activities | ||
Net Loss | $ (4,674,119) | $ (1,082,197) |
Adjustments to reconcile net loss to net cash from operating activities: | ||
Depreciation | 6,037 | 16,814 |
Impairment of Real Estate | 5,920,599 | 2,404,547 |
Changes in Operating Assets and Liabilities | ||
Real Estate | 10,580,830 | 10,918,824 |
Right-Of-Use Operating | 73,872 | 0 |
Accounts Receivable | (53,588) | 400,337 |
Related Party Receivable | (211,271) | 0 |
Prepaid Expenses | 5,453 | 3,460 |
Accounts Payable and Accrued Expenses | (944,046) | 618,152 |
Accrued Interest - Related Parties | (2,019,245) | 409,005 |
Operating Lease Liability | (83,610) | 0 |
Tenant Security Deposits | (1,225) | (1,400) |
Builder Deposits | (1,433,573) | (1,477,876) |
Income Tax Payable | 420,327 | 0 |
Net Cash Provided By Operating Activities | 7,586,441 | 12,209,666 |
Cash Flows Used in Investing Activities | ||
Purchase of Fixed Assets | 0 | (3,000) |
Net Cash Used In Investing Activities | 0 | (3,000) |
Cash Flows Used in Financing Activities | ||
Acquisition of Minority Interest | 0 | (60,000) |
Repayments to Note Payable | (13,899) | (8,258,398) |
Repayment to Notes Payable - Related Parties | (5,745,584) | (2,258,007) |
Cash Dividend Distribution to Minority Shareholder | (1,069,250) | 0 |
Net Cash Used In Financing Activities | (6,828,733) | (10,576,405) |
Net Increase in Cash and Restricted Cash | 757,708 | 1,630,261 |
Cash and Restricted Cash - Beginning of Year | 4,645,164 | 3,014,903 |
Cash and Restricted Cash - End of Year | 5,402,872 | 4,645,164 |
Supplementary Cash Flow Information | ||
Cash Paid For Interest | 3,822 | 287,738 |
Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||
Amortization of Debt Discount Capitalized | $ 381,823 | $ 140,277 |
1. NATURE OF OPERATIONS AND SUM
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2019 | |
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 & REITs Inc. (“SeD Home & REITs”) by reverse merger. SeD Home & REITs, a Delaware corporation, was formed on February 24, 2015 and named SeD Home USA, Inc. before changing its name to SeD Home, Inc. in May of 2015. On February 6, 2020, this name was changed to SeD Home & REITs Inc. SeD Home & REITs 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, 2019 Attributable interest as of December 31, 2018 SeD Home & REITs Inc. Delaware February 24, 2015 100% 100% SeD USA, LLC Delaware August 20, 2014 100% 100% 150 Black Oak GP, Inc. Texas January 23, 2014 100% 100% SeD Development USA, Inc. Delaware March 13, 2014 100% 100% 150 CCM Black Oak Ltd. Texas January 23, 2014 100% 100% SeD Ballenger, LLC Delaware July 7, 2015 100% 100% SeD Maryland Development, LLC Delaware October 16, 2014 83.55% 83.55% SeD Development Management, LLC Delaware June 18, 2015 85% 85% SeD Builder, LLC Delaware October 21, 2015 100% 100% SeD Texas Home, LLC Delaware June 16, 2015 100% 100% SeDHome Rental Inc. Texas December 19, 2018 100% 100% SeD REIT Inc. Maryland August 20, 2019 100% n/a 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, 2019 and 2018, the aggregate noncontrolling interest was $2,275,061 and $2,887,328, respectively, which are separately disclosed on the Consolidated Balance Sheet. On December 29, 2017, the Company, SeD Acquisition Corp., a Delaware corporation and wholly owned subsidiary of the Company (the “Merger Sub”), SeD Home & REITs Inc., 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 & REITs, with SeD Home & REITs 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 & REITs 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 & REITs 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 & REITs. 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 & REITs. 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 earnings (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 earnings (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, 2019 or 2018. 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, 2019 and 2018. 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 was required to maintain a minimum of $2,600,000 in an interest-bearing account maintained by the lender as additional security for the loan. The funds remained as collateral for the loan until the loans were paid off in full in April 2019 and the collateral cash was released. As of December 31, 2019 and 2018, the Union Bank collateral cash amount was $0 and $2,726,154, respectively. On April 17, 2019, SeD Maryland Development LLC entered into a Development Loan Agreement with Manufacturers and Traders Trust Company (“M&T Bank”). As a condition to the loan agreement, 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 fund is required to remain as collateral for the loan until the loan is paid off in full and the loan agreement terminated. The Company also has an escrow account with M&T Bank to deposit partial revenue from lot sales. The fund in the escrow account is specifically used for the payment of the loan from M&T Bank. The fund is required to remain in the escrow account for the loan payment until the loan agreement terminates. As of December 31, 2019 the total balance of these two accounts was $4,229,149. On July 20, 2018, Black Oak LP received $4,592,079 of district reimbursement for previous construction costs incurred in 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: (a) the execution of a purchase agreement between Black Oak LP and a home builder with respect to the Black Oak development; and (b) the completion, finishing and readying for home construction of at least 105 unfinished lots in the Black Oak development. After entering the purchase agreement with Houston LD, LLC, the above requirements were met. The amount of the deposit will be released to the Company by presenting the invoices paid for land development. After releasing funds to the Company, the amount on deposit was $90,394 and $1,203,256 on December 31, 2019 and December 31, 2018, respectively. 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, 2019 and 2018. 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 $79,662 and $409,005 for the years ended December 31, 2019 and 2018, respectively. The Company capitalized interest from the third-party borrowings of $3,822 and $245,844 for the years ended December 31, 2019 and 2018, 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, a project owned by SeD USA, LLC. The last home in El Tesoro project was sold in December, 2019. 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. 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 at the Company’s Black Oak project in Magnolia, Texas was completed. After allocating costs of revenue to this sale, we had approximately $2.4 million loss from this sale and recognized approximately $2.4 million as the impairment of real estate in 2018. During 2019, the Company recorded approximately $5.3 million of impairment on the Black Oak project based on discounted estimated future cash flows. 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 of this new standard 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 were essentially all of the revenue of the Company in 2019 and 2018, 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 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. Each lot is considered to be a separate performance obligation, for which the specified price in the contract is allocated to. ● 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 area method, 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. If allocation of development costs based on the projection and relative expected sales value is impracticable, those costs could also be allocated based on area method, the size of the lot comparing to the total size 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 December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. ASU 2109-12 eliminates certain exceptions to the guidance in Topic 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes, enacted change in tax laws or rates and clarifies the accounting transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. We are currently in the process of evaluating the effect that ASU 2019-12 will have on the Company's Consolidated Financial Results. In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"). ASU 2018-15 amends ASC 350-40 and aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company will adopt ASU 2018-15 effective January 1, 2020. We do not believe that the adoption of ASU 2018-15 will have a material impact on the Company's Consolidated Financial Statements. 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 2019 and 2018 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 was effective for the Company on January 1, 2019. Based on this standard, the Company recognized new ROU assets and lease liabilities on its balance sheet for one of our office rental leases. On December 31, 2019, the Company recognized operating lease liabilities of $91,330 with corresponding ROU assets of $87,193, 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 and the application of the five step method to our contracts. 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 ASU does not have material impact on the Company. Subsequent Events The Company evaluated the events and transactions subsequent to December 31, 2019, the balance sheet date, through March 24, 2020, 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, 2019 | |
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, 2019 and 2018, uninsured cash balances were $4,558,582 and $3,783,330, respectively. The Company had three customers in the year ended December 31, 2019: the purchaser for Ballenger project, NVR Inc. (“NVR”), a NYSE publicly listed US homebuilding and mortgage company, who is the only purchaser of 479 residential lots, the purchaser of Phase 1 of Black Oak project - Houston LD, LLC and a private customer for the house in our El Tesoro project. During the year ended December 31, 2019, the Company earned revenues from property sales from these three customers representing approximately 72%, 27% and 1%, respectively. During the year ended December 31, 2018, the Company earned revenues from property sales in Ballenger project to NVR and Orchard Development Corporation, the purchaser of the parcel of 210 multifamily units. Sales to both customers represented approximately 70% and 30% of gross sales, respectively. As of December 31, 2019 and 2018, no accounts receivable was outstanding from these customers. |
3. PROPERTY AND EQUIPMENT
3. PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2019 | |
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, 2019 December 31, 2018 Computer Equipment $ 41,597 $ 41,597 Furniture and Fixtures 24,393 24,393 65,990 65,990 Accumulated Depreciation (63,779 ) (57,742 ) Fixed Assets Net $ 2,211 $ 8,248 Depreciation expense was $6,037 and $16,814 for the years ended December 31, 2019 and 2018, respectively. |
4. BUILDER DEPOSITS
4. BUILDER DEPOSITS | 12 Months Ended |
Dec. 31, 2019 | |
Deficit Accumulated During Development Stage | |
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, 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, 2019 and 2018, there was $2,445,269 and $3,878,842 outstanding, respectively. |
5. NOTES PAYABLE
5. NOTES PAYABLE | 12 Months Ended |
Dec. 31, 2019 | |
Notes Payable [Abstract] | |
NOTES PAYABLE | Union Bank Loan On November 23, 2015, SeD Maryland 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 were due on the outstanding principal balance. The entire unpaid principal and interest sum was 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 had an $800,000 letter of credit from the Union Bank. The letter of credit was due on November 22, 2018 and bore interest at 15%. In September 2017, SeD 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. Accordingly, this change in terms of the Union Bank Loan was accounted for as a modification in accordance with ASC 470 – Debt As of December 31, 2019 and 2018, the principal balance were $0 and $13,899, respectively. On April 17, 2019, the Union Bank Loan was paid off and SeD Maryland Development LLC and Union Bank terminated the Revolving Credit Note. After termination, the collateral cash was released and all L/Cs were transferred to the M&T Bank L/C Facility. M&T Bank Loan On April 17, 2019, SeD Maryland Development LLC entered into a Development Loan Agreement with Manufacturers and Traders Trust Company (“M&T Bank”) in the principal amount not to exceed at any one time outstanding the sum of $8,000,000, with a cumulative loan advance amount of $18,500,000. The line of credit bears interest rate on LIBOR plus 375 basis points. SeD Maryland Development LLC was also provided with a Letter of Credit (“L/C”) Facility in an aggregate amount of up to $900,000. The L/C commission will be 1.5% per annum on the face amount of the L/C. Other standard lender fees will apply in the event L/C is drawn down. The loan is a revolving line of credit. The L/C Facility is not a revolving loan, and amounts advanced and repaid may not be re-borrowed. Repayment of the Loan Agreement is secured by $2,600,000 collateral fund and a Deed of Trust issued to the Lender on the property owned by SeD Maryland. As of December 31, 2019, the outstanding balance of the revolving loan was $0. |
6. RELATED PARTY TRANSACTIONS
6. RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2019 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | Loan from SeD Home Limited SeD Home & REITs 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 31, 2019 and 2018, SeD Home & REITs had outstanding principal due of $0 and $1,116,406 and accrued interest of $228,557 and $193,382. Loan from SeD Home International SeD Home & REITs 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, 2019 and 2018, there was $0 and $4,629,178 of principal and $94,424 and $2,150,845 of accrued interest outstanding, respectively. The accrued outstanding interests for year 2018 include the remaining amount $1,723,122 after interest was forgiven on August 30, 2017 as discussed in previous paragraph. Other Transactions On November 29, 2016 an affiliate of SeD Home & REITs 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 & REITs 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 & REITs, and SeD will facilitate that transaction. The proposed acquisition purchase price would be at SeD Home & REITs' 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. On November 29, 2019, all three bonds were fully paid by cash. 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 Charles MacKenzie, a Director of the Company, has a consulting agreement with the Company since 2015. Per the 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 due upon the close of the sale to Houston LD, LLC. From January 2019, the Company pays a monthly fee of $20,000 for the consulting services. The Company incurred expenses of $240,000 in the years 2019 and 2018, which were capitalized as part of Real Estate on the balance sheet as the services relate to property and project management. On December 31, 2019 and 2018, the Company owed this related party $0 and $60,000, respectively. Advance to HF Enterprises Inc. The Company pays some operating expenses for HF Enterprise Inc., a related party under the common control of Chan Heng Fai, the CEO of the Company. The advances are interest free with no set repayment terms. On December 31, 2019 and December 31, 2018, the balance of these advances was $211,271 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 $38,584 and $101,979 for the years ended December 31, 2019 and 2018, respectively. On December 31, 2019 and December 31, 2018, the Company owed this related party $0 and $8,000, respectively. |
7. SHAREHOLDERS' EQUITY
7. SHAREHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2019 | |
Stockholders' Equity Attributable to Parent [Abstract] | |
SHAREHOLDERS' EQUITY | Purchase of Minority Interest of Black Oak LP 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. Cash Dividend Distributions From January to December, 2019, SeD Maryland Development LLC Board approved five payment distribution plans to members and paid total $1,069,250 in distributions to the minority shareholder. |
8. COMMITMENTS AND CONTINGENCIE
8. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Leases The Company leases office space in Texas and Maryland. Both leases expire in 2020 and have monthly rental payments ranging between $2,499 and $8,205, respectively. Rent expense was $113,884 and $120,071 for the year ended December 31, 2019 and 2018, respectively. The below table summarizes future payments due under these leases as of December 31, 2019. The balance of the operating lease right-of-use asset and operating lease liability as of December 31, 2019 was $87,193 and $91,330, respectively. Supplemental Cash Flow and Other Information Related to Operating Leases are as follows: Year Ended December 31, 2019 Weighted Average Remaining Operating Lease Term (in years) 1 Weighted average Operating Lease Discount 6.1 % The below table summarizes future payments due under these leases as of December 31, 2019. For the Years Ended December 31: 2020 106,918 Total $ 106,918 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 (these will be 28 feet wide villa lots) and sell such lots to NVR. In July, 2019 SeD Maryland received required zoning approval to change the number of such lots from 85 to 121. |
9. INCOME TAXES
9. INCOME TAXES | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | The components of income tax expense and the effective tax rates for the years ended December 31, 2019 and 2018 are as follows: Year Ended December 31, 2019 2018 Current: Federal $ 251,266 $ (23,471 ) State 180,122 18,924 Total Current 431,388 (4,547 ) Deferred: Federal (1,443,564 ) (300,341 ) State (618,108 ) (128,601 ) Total Deferred (2,061,672 ) (428,942 ) Valuation Allowance 2,061,672 433,489 Total Income Tax Expense $ 431,388 $ — Pre-tax Loss $ (4,242,731 ) $ (1,082,197 ) Effective Income Tax Rate -10% 0% A reconciliation of our income tax expense at federal statutory income tax rate of 21% to our income tax expense at the effective tax rate is as follows: Year Ended December 31, 2019 2018 Tax at the Statutory Federal Rate $ (868,486 ) $ 691,613 State Income Taxes (Net of Federal Benefit) (328,309 ) 290,271 Changes in Valuation Allowance, Net 1,628,183 (981,884 ) Total Income Tax Expense $ 431,388 $ — Deferred tax assets consist of the following at December 31, 2019 and 2018: Year Ended December 31, 2019 2018 Interest Income (4,574,401 ) (4,023,599 ) Interest Expense 4,327,741 3,928,264 Depreciation and Amortization (5,802 ) 6,302 Management Fee 531,968 404,342 Impairment 1,924,305 114,433 Accrued Expense 105,175 105,175 Partnership Loss (263,152 ) (144,723 ) Others 15,839 38,747 Net Operating Loss — 4,547 2,061,673 433,488 Valuation Allowance (2,061,673 ) (433,488 ) Net Deferred Tax Asset — — As of December 31, 2019, the Company did not have federal and Maryland state 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 year ended December 31, 2019, the valuation allowance increased by $1,628,183. As of December 31, 2019, total current tax liability is $420,327, including federal income tax liability $251,266 and Maryland state income tax liability $169,061. The deferred tax asset cannot be used to offset the current tax liability. As of December 31, 2018, no tax liability was recorded. |
10. SUBSEQUENT EVENTS
10. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | Distribution to Minority Shareholders On February 21, 2020, the Board of Managers of SeD Maryland Development LLC (the 83.55% owned subsidiary of the Company which owns the Company’s Ballenger Project) authorized the payment of distributions to its members in the amount of $1,200,000. Accordingly, the minority member of SeD Maryland Development LLC received a distribution in the amount of $197,400, with the remainder being distributed to a subsidiary of the Company, which is eliminated upon consolidation. |
1. NATURE OF OPERATIONS AND S_2
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
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 & REITs Inc. (“SeD Home & REITs”) by reverse merger. SeD Home & REITs, a Delaware corporation, was formed on February 24, 2015 and named SeD Home USA, Inc. before changing its name to SeD Home, Inc. in May of 2015. On February 6, 2020, this name was changed to SeD Home & REITs Inc. SeD Home & REITs 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, 2019 Attributable interest as of December 31, 2018 SeD Home & REITs Inc. Delaware February 24, 2015 100% 100% SeD USA, LLC Delaware August 20, 2014 100% 100% 150 Black Oak GP, Inc. Texas January 23, 2014 100% 100% SeD Development USA, Inc. Delaware March 13, 2014 100% 100% 150 CCM Black Oak Ltd. Texas January 23, 2014 100% 100% SeD Ballenger, LLC Delaware July 7, 2015 100% 100% SeD Maryland Development, LLC Delaware October 16, 2014 83.55% 83.55% SeD Development Management, LLC Delaware June 18, 2015 85% 85% SeD Builder, LLC Delaware October 21, 2015 100% 100% SeD Texas Home, LLC Delaware June 16, 2015 100% 100% SeDHome Rental Inc. Texas December 19, 2018 100% 100% SeD REIT Inc. Maryland August 20, 2019 100% n/a 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, 2019 and 2018, the aggregate noncontrolling interest was $2,275,061 and $2,887,328, respectively, which are separately disclosed on the Consolidated Balance Sheet. On December 29, 2017, the Company, SeD Acquisition Corp., a Delaware corporation and wholly owned subsidiary of the Company (the “Merger Sub”), SeD Home & REITs Inc., 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 & REITs, with SeD Home & REITs 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 & REITs 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 & REITs 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 & REITs. 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 & REITs. 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 earnings (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 earnings (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, 2019 or 2018. |
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, 2019 and 2018. |
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 was required to maintain a minimum of $2,600,000 in an interest-bearing account maintained by the lender as additional security for the loan. The funds remained as collateral for the loan until the loans were paid off in full in April 2019 and the collateral cash was released. As of December 31, 2019 and 2018, the Union Bank collateral cash amount was $0 and $2,726,154, respectively. On April 17, 2019, SeD Maryland Development LLC entered into a Development Loan Agreement with Manufacturers and Traders Trust Company (“M&T Bank”). As a condition to the loan agreement, 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 fund is required to remain as collateral for the loan until the loan is paid off in full and the loan agreement terminated. The Company also has an escrow account with M&T Bank to deposit partial revenue from lot sales. The fund in the escrow account is specifically used for the payment of the loan from M&T Bank. The fund is required to remain in the escrow account for the loan payment until the loan agreement terminates. As of December 31, 2019 the total balance of these two accounts was $4,229,149. On July 20, 2018, Black Oak LP received $4,592,079 of district reimbursement for previous construction costs incurred in 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: (a) the execution of a purchase agreement between Black Oak LP and a home builder with respect to the Black Oak development; and (b) the completion, finishing and readying for home construction of at least 105 unfinished lots in the Black Oak development. After entering the purchase agreement with Houston LD, LLC, the above requirements were met. The amount of the deposit will be released to the Company by presenting the invoices paid for land development. After releasing funds to the Company, the amount on deposit was $90,394 and $1,203,256 on December 31, 2019 and December 31, 2018, respectively. |
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, 2019 and 2018. |
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 $79,662 and $409,005 for the years ended December 31, 2019 and 2018, respectively. The Company capitalized interest from the third-party borrowings of $3,822 and $245,844 for the years ended December 31, 2019 and 2018, 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, a project owned by SeD USA, LLC. The last home in El Tesoro project was sold in December, 2019. 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. 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 at the Company’s Black Oak project in Magnolia, Texas was completed. After allocating costs of revenue to this sale, we had approximately $2.4 million loss from this sale and recognized approximately $2.4 million as the impairment of real estate in 2018. During 2019, the Company recorded approximately $5.3 million of impairment on the Black Oak project based on discounted estimated future cash flows. |
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 of this new standard 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 were essentially all of the revenue of the Company in 2019 and 2018, 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 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. Each lot is considered to be a separate performance obligation, for which the specified price in the contract is allocated to. ● 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 area method, 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. If allocation of development costs based on the projection and relative expected sales value is impracticable, those costs could also be allocated based on area method, the size of the lot comparing to the total size 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 December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. ASU 2109-12 eliminates certain exceptions to the guidance in Topic 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes, enacted change in tax laws or rates and clarifies the accounting transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. We are currently in the process of evaluating the effect that ASU 2019-12 will have on the Company's Consolidated Financial Results. In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"). ASU 2018-15 amends ASC 350-40 and aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company will adopt ASU 2018-15 effective January 1, 2020. We do not believe that the adoption of ASU 2018-15 will have a material impact on the Company's Consolidated Financial Statements. 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 2019 and 2018 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 was effective for the Company on January 1, 2019. Based on this standard, the Company recognized new ROU assets and lease liabilities on its balance sheet for one of our office rental leases. On December 31, 2019, the Company recognized operating lease liabilities of $91,330 with corresponding ROU assets of $87,193, 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 and the application of the five step method to our contracts. 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 ASU does not have material impact on the Company. |
Subsequent Events | The Company evaluated the events and transactions subsequent to December 31, 2019, the balance sheet date, through March 24, 2020, 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, 2019 | |
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, 2019 Attributable interest as of December 31, 2018 SeD Home & REITs Inc. Delaware February 24, 2015 100% 100% SeD USA, LLC Delaware August 20, 2014 100% 100% 150 Black Oak GP, Inc. Texas January 23, 2014 100% 100% SeD Development USA, Inc. Delaware March 13, 2014 100% 100% 150 CCM Black Oak Ltd. Texas January 23, 2014 100% 100% SeD Ballenger, LLC Delaware July 7, 2015 100% 100% SeD Maryland Development, LLC Delaware October 16, 2014 83.55% 83.55% SeD Development Management, LLC Delaware June 18, 2015 85% 85% SeD Builder, LLC Delaware October 21, 2015 100% 100% SeD Texas Home, LLC Delaware June 16, 2015 100% 100% SeDHome Rental Inc. Texas December 19, 2018 100% 100% SeD REIT Inc. Maryland August 20, 2019 100% n/a |
3. PROPERTY AND EQUIPMENT (Tabl
3. PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment | December 31, 2019 December 31, 2018 Computer Equipment $ 41,597 $ 41,597 Furniture and Fixtures 24,393 24,393 65,990 65,990 Accumulated Depreciation (63,779 ) (57,742 ) Fixed Assets Net $ 2,211 $ 8,248 |
8. COMMITMENTS AND CONTINGENC_2
8. COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Supplemental cash flow and other information related to operating leases | Year Ended December 31, 2019 Weighted Average Remaining Operating Lease Term (in years) 1 Weighted average Operating Lease Discount 6.1 % |
Future payments due under leases | 2020 106,918 Total $ 106,918 |
9. INCOME TAXES (Tables)
9. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Components of income tax expense | Year Ended December 31, 2019 2018 Current: Federal $ 251,266 $ (23,471 ) State 180,122 18,924 Total Current 431,388 (4,547 ) Deferred: Federal (1,443,564 ) (300,341 ) State (618,108 ) (128,601 ) Total Deferred (2,061,672 ) (428,942 ) Valuation Allowance 2,061,672 433,489 Total Income Tax Expense $ 431,388 $ — Pre-tax Loss $ (4,242,731 ) $ (1,082,197 ) Effective Income Tax Rate -10% 0% |
Reconciliation of income tax expense | Year Ended December 31, 2019 2018 Tax at the Statutory Federal Rate $ (868,486 ) $ 691,613 State Income Taxes (Net of Federal Benefit) (328,309 ) 290,271 Changes in Valuation Allowance, Net 1,628,183 (981,884 ) Total Income Tax Expense $ 431,388 $ — |
Deferred tax assets (liabilities) | 2019 2018 Interest Income (4,574,401 ) (4,023,599 ) Interest Expense 4,327,741 3,928,264 Depreciation and Amortization (5,802 ) 6,302 Management Fees 531,968 404,342 Others 1,782,166 113,633 Net Operating Loss 4,547 2,061,672 433,489 Valuation Allowance (2,061,672 ) (433,489 ) Net Deferred Tax Asset - - |
1. NATURE OF OPERATIONS AND S_4
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Subsidiary 1 | ||
Name of consolidated subsidiary | SeD Home Inc. | |
State or other jurisdiction of incorporation or organization | Delaware | |
Date of incorporation or formation | Feb. 24, 2015 | |
Attributable interest | 100.00% | 100.00% |
Subsidiary 2 | ||
Name of consolidated subsidiary | SeD USA, LLC | |
State or other jurisdiction of incorporation or organization | Delaware | |
Date of incorporation or formation | Feb. 24, 2015 | |
Attributable interest | 100.00% | 100.00% |
Subsidiary 3 | ||
Name of consolidated subsidiary | 150 Black Oak GP, Inc. | |
State or other jurisdiction of incorporation or organization | Texas | |
Date of incorporation or formation | Jan. 23, 2014 | |
Attributable interest | 100.00% | 100.00% |
Subsidiary 4 | ||
Name of consolidated subsidiary | SeD Development USA, Inc. | |
State or other jurisdiction of incorporation or organization | Delaware | |
Date of incorporation or formation | Mar. 13, 2014 | |
Attributable interest | 100.00% | 100.00% |
Subsidiary 5 | ||
Name of consolidated subsidiary | 150 CCM Black Oak Ltd. | |
State or other jurisdiction of incorporation or organization | Texas | |
Date of incorporation or formation | Jan. 23, 2014 | |
Attributable interest | 100.00% | 100.00% |
Subsidiary 6 | ||
Name of consolidated subsidiary | SeD Ballenger, LLC | |
State or other jurisdiction of incorporation or organization | Delaware | |
Date of incorporation or formation | Jul. 7, 2015 | |
Attributable interest | 100.00% | 100.00% |
Subsidiary 7 | ||
Name of consolidated subsidiary | SeD Maryland Development, LLC | |
State or other jurisdiction of incorporation or organization | Delaware | |
Date of incorporation or formation | Oct. 16, 2014 | |
Attributable interest | 83.55% | 83.55% |
Subsidiary 8 | ||
Name of consolidated subsidiary | SeD Development Management, LLC | |
State or other jurisdiction of incorporation or organization | Delaware | |
Date of incorporation or formation | Jun. 18, 2015 | |
Attributable interest | 85.00% | 85.00% |
Subsidiary 9 | ||
Name of consolidated subsidiary | SeD Builder, LLC | |
State or other jurisdiction of incorporation or organization | Delaware | |
Date of incorporation or formation | Oct. 21, 2015 | |
Attributable interest | 100.00% | 100.00% |
Subsidiary 10 | ||
Name of consolidated subsidiary | SeD Texas Home, LLC | |
State or other jurisdiction of incorporation or organization | Delaware | |
Date of incorporation or formation | Jun. 16, 2015 | |
Attributable interest | 100.00% | 100.00% |
Subsidiary 11 | ||
Name of consolidated subsidiary | SeDHome Rental Inc. | |
State or other jurisdiction of incorporation or organization | Texas | |
Date of incorporation or formation | Dec. 19, 2000 | |
Attributable interest | 100.00% | 100.00% |
Subsidiary 12 | ||
Name of consolidated subsidiary | SeD REIT Inc. | |
State or other jurisdiction of incorporation or organization | Maryland | |
Date of incorporation or formation | Aug. 20, 2019 | |
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, 2019 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | ||
Non-controlling interest | $ 2,275,061 | $ 2,887,328 |
Restricted cash | 4,319,543 | 3,929,410 |
Capitalized interest from related party borrowings | 79,662 | 409,005 |
Capitalized interest from third party borrowings | $ 3,822 | $ 245,844 |
2. CONCENTRATION OF CREDIT RI_2
2. CONCENTRATION OF CREDIT RISK (Details Narrative) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Risks and Uncertainties [Abstract] | ||
Uninsured cash balances | $ 4,558,582 | $ 3,783,330 |
3. PROPERTY AND EQUIPMENT (Deta
3. PROPERTY AND EQUIPMENT (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Property and equipment, gross | $ 65,990 | $ 65,990 |
Accumulated depreciation | (63,779) | (57,742) |
Property and equipment, net | 2,211 | 8,248 |
Computer Equipment | ||
Property and equipment, gross | 41,597 | 41,597 |
Furniture and Fixtures | ||
Property and equipment, gross | $ 24,393 | $ 24,393 |
3. PROPERTY AND EQUIPMENT (De_2
3. PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 6,037 | $ 16,814 |
5. NOTES PAYABLE (Details Narra
5. NOTES PAYABLE (Details Narrative) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Notes Payable [Abstract] | ||
Principal | $ 0 | $ 13,899 |
6. RELATED PARTY TRANSACTIONS (
6. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Related Party Transactions [Abstract] | ||
Consulting expenses | $ 38,584 | $ 101,979 |
Due to related party | $ 0 | $ 8,000 |
8. COMMITMENTS AND CONTINGENC_3
8. COMMITMENTS AND CONTINGENCIES (Details) | Dec. 31, 2019 |
Commitments and Contingencies Disclosure [Abstract] | |
Weighted average remaining operating lease term (in years) | 1 year |
Weighted average operating lease discount rate | 6.10% |
8. COMMITMENTS AND CONTINGENC_4
8. COMMITMENTS AND CONTINGENCIES (Details 1) | Dec. 31, 2019USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2020 | $ 106,918 |
Total | $ 106,918 |
8. COMMITMENTS AND CONTINGENC_5
8. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rent expenses | $ 113,884 | $ 120,071 |
Operating lease right-of-use asset | 87,193 | 0 |
Operating lease liability | $ 91,330 | $ 0 |
9. INCOME TAXES (Details)
9. INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Current: | ||
Federal | $ 251,266 | $ (23,471) |
State | 180,122 | 18,924 |
Total current | 431,388 | (4,547) |
Deferred: | ||
Federal | (1,443,564) | (300,341) |
State | (618,108) | (128,601) |
Total deferred | (2,061,672) | (428,942) |
Valuation allowance | 2,061,672 | 433,489 |
Total income tax expense | 431,388 | 0 |
Pre-tax loss | $ (4,242,731) | $ (1,082,197) |
Effective income tax rate | (10.00%) | 0.00% |
9. INCOME TAXES (Details 1)
9. INCOME TAXES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Tax at the statutory federal rate | $ (868,486) | $ 691,613 |
State income taxes (net of federal benefit) | (328,309) | 290,271 |
Changes in valutation allowance, net | 1,628,183 | (981,884) |
Total income tax expense | $ 431,388 | $ 0 |
9. INCOME TAXES (Details 2)
9. INCOME TAXES (Details 2) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Income Tax Disclosure [Abstract] | ||
Interest income | $ (4,574,401) | $ (4,023,599) |
Interest expense | 4,327,741 | 3,928,264 |
Depreciation and amortization | (5,802) | 6,302 |
Management fees | 531,968 | 404,342 |
Impairment | 1,924,305 | 114,433 |
Accrued expense | 105,175 | 105,175 |
Partnership loss | (263,152) | (144,723) |
Others | 15,839 | 38,747 |
Net operating losses | 0 | 4,547 |
Deferred tax assets, gross | 2,061,672 | 433,489 |
Valuation allowance | (2,061,672) | (433,489) |
Net deferred tax asset | $ 0 | $ 0 |
9. INCOME TAXES (Details Narrat
9. INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Valuation allowance increase | $ 1,628,183 | $ (981,884) |