Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2020 | Aug. 11, 2020 | |
Document And Entity Information | ||
Entity Registrant Name | LiquidValue Development Inc. | |
Entity Central Index Key | 0001503658 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
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 Common Stock, Shares Outstanding | 704,043,324 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2020 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Real Estate | ||
Construction in Progress | $ 13,519,208 | $ 11,085,469 |
Land Held for Development | 13,101,120 | 13,773,100 |
Real Estate Assets | 26,620,328 | 24,858,569 |
Cash | 1,984,129 | 1,083,329 |
Restricted Cash | 3,967,829 | 4,319,543 |
Accounts Receivable | 71,666 | 166,294 |
Related Party Receivable | 722,053 | 211,271 |
Prepaid Expenses | 15,822 | 33,219 |
Fixed Assets, Net | 5,004 | 2,211 |
Deposits | 23,603 | 23,603 |
Operating Lease Right-Of-Use (Asset) | 47,040 | 87,193 |
Total Assets | 33,457,474 | 30,785,232 |
Liabilities: | ||
Accounts Payable and Accrued Expenses | 3,112,151 | 783,576 |
Accrued Interest - Related Parties | 228,557 | 324,982 |
Builder Deposits | 2,196,124 | 2,445,269 |
Operating Lease Liability | 45,665 | 91,330 |
Note Payable | 675,411 | 0 |
Income Tax Payable | 534,980 | 420,327 |
Total Liabilities | 6,792,888 | 4,065,484 |
Stockholders' Equity: | ||
Common Stock, at par $0.001, 1,000,000,000 shares authorized and 704,043,324 issued, and outstanding at June 30, 2020 and December 31, 2019, respectively | 704,043 | 704,043 |
Additional Paid In Capital | 32,542,720 | 32,542,720 |
Accumulated Deficit | (8,743,082) | (8,802,076) |
Total Stockholders' Equity | 24,503,681 | 24,444,687 |
Non-controlling Interests | 2,160,905 | 2,275,061 |
Total Stockholders' Equity | 26,664,586 | 26,719,748 |
Total Liabilities and Stockholders' Equity | $ 33,457,474 | $ 30,785,232 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2020 | Dec. 31, 2019 |
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 ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Revenue | ||||
Total Revenue | $ 2,047,405 | $ 5,252,585 | $ 5,001,794 | $ 16,571,180 |
Operating Expenses | ||||
Cost of Sales | 1,756,846 | 4,549,097 | 4,257,090 | 15,265,248 |
General and Administrative | 230,760 | 261,732 | 507,267 | 486,745 |
Total Operating Expenses | 1,987,606 | 4,810,829 | 4,764,357 | 15,751,993 |
Income From Operations | 59,799 | 441,756 | 237,437 | 819,187 |
Other Income & Expense | ||||
Interest Income | 8,900 | 10,475 | 15,262 | 25,657 |
Interest Expense | (1,095) | 0 | (1,095) | 0 |
Other Income | 4,107 | 2,470 | 5,287 | 3,970 |
Total Other Income | 11,912 | 12,945 | 19,454 | 29,627 |
Net Income Before Income Taxes | 71,711 | 454,701 | 256,891 | 848,814 |
Provision for Income Taxes | 114,653 | 0 | 114,653 | 0 |
Net (Loss) Income | (42,942) | 454,701 | 142,238 | 848,814 |
Net Income Attributable to Non-controlling Interests | 28,253 | 129,340 | 83,244 | 250,648 |
Net (Loss) Income Attributable to Common Stockholders | $ (71,195) | $ 325,361 | $ 58,994 | $ 598,166 |
Net (Loss) Income Per Share - Basic and Diluted | $ 0 | $ 0 | $ 0 | $ 0 |
Weighted Average Common Shares Outstanding - Basic and Diluted | 704,043,324 | 704,043,324 | 704,043,324 | 704,043,324 |
Rental | ||||
Revenue | ||||
Total Revenue | $ 0 | $ 4,365 | $ 0 | $ 8,730 |
Property | ||||
Revenue | ||||
Total Revenue | $ 2,047,405 | $ 5,248,220 | $ 5,001,794 | $ 16,562,450 |
Consolidated Statement of Stock
Consolidated Statement of Stockholders' Equity - USD ($) | Common Stock | Additional Paid in Capital | Accumulated Deficit | Minority Interest | Total |
Beginning Balance, Shares at Dec. 31, 2018 | 704,043,324 | ||||
Beginning Balance, Amount at Dec. 31, 2018 | $ 704,043 | $ 32,542,720 | $ (6,670,974) | $ 2,887,328 | $ 32,463,117 |
Net (Loss) Income | 272,805 | 121,308 | 394,113 | ||
Ending Balance, Shares at Mar. 31, 2019 | 704,043,324 | ||||
Ending Balance, Amount at Mar. 31, 2019 | $ 704,043 | 32,542,720 | (3,398,169) | 3,008,636 | 32,857,230 |
Beginning Balance, Shares at Dec. 31, 2018 | 704,043,324 | ||||
Beginning Balance, Amount at Dec. 31, 2018 | $ 704,043 | 32,542,720 | (6,670,974) | 2,887,328 | 32,463,117 |
Net (Loss) Income | 848,814 | ||||
Ending Balance, Shares at Jun. 30, 2019 | 704,043,324 | ||||
Ending Balance, Amount at Jun. 30, 2019 | $ 704,043 | 32,542,720 | (3,072,808) | 2,397,726 | 32,571,681 |
Beginning Balance, Shares at Mar. 31, 2019 | 704,043,324 | ||||
Beginning Balance, Amount at Mar. 31, 2019 | $ 704,043 | 32,542,720 | (3,398,169) | 3,008,636 | 32,857,230 |
Distribution to Minority Shareholder | (740,250) | (740,250) | |||
Net (Loss) Income | 325,361 | 129,340 | 454,701 | ||
Ending Balance, Shares at Jun. 30, 2019 | 704,043,324 | ||||
Ending Balance, Amount at Jun. 30, 2019 | $ 704,043 | 32,542,720 | (3,072,808) | 2,397,726 | 32,571,681 |
Beginning Balance, Shares at Dec. 31, 2019 | 704,043,324 | ||||
Beginning Balance, Amount at Dec. 31, 2019 | $ 704,043 | 32,542,720 | (8,802,076) | 2,275,061 | 26,719,748 |
Distribution to Minority Shareholder | (197,400) | (197,400) | |||
Net (Loss) Income | 130,189 | 54,991 | 185,180 | ||
Ending Balance, Shares at Mar. 31, 2020 | 704,043,324 | ||||
Ending Balance, Amount at Mar. 31, 2020 | $ 704,043 | 32,542,720 | (8,671,887) | 2,132,652 | 26,707,528 |
Beginning Balance, Shares at Dec. 31, 2019 | 704,043,324 | ||||
Beginning Balance, Amount at Dec. 31, 2019 | $ 704,043 | 32,542,720 | (8,802,076) | 2,275,061 | 26,719,748 |
Net (Loss) Income | 142,238 | ||||
Ending Balance, Shares at Jun. 30, 2020 | 704,043,324 | ||||
Ending Balance, Amount at Jun. 30, 2020 | $ 704,043 | 32,542,720 | (8,743,082) | 2,160,905 | 26,664,586 |
Beginning Balance, Shares at Mar. 31, 2020 | 704,043,324 | ||||
Beginning Balance, Amount at Mar. 31, 2020 | $ 704,043 | 32,542,720 | (8,671,887) | 2,132,652 | 26,707,528 |
Net (Loss) Income | (71,195) | 28,253 | (42,942) | ||
Ending Balance, Shares at Jun. 30, 2020 | 704,043,324 | ||||
Ending Balance, Amount at Jun. 30, 2020 | $ 704,043 | $ 32,542,720 | $ (8,743,082) | $ 2,160,905 | $ 26,664,586 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Cash Flows From Operating Activities | ||
Net Income | $ 142,238 | $ 848,814 |
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | ||
Depreciation | 1,389 | 3,327 |
Amortization of Debt Discount | 3,777 | 0 |
Amortization of Right-Of-Use Asset | 40,153 | 37,579 |
Changes in Operating Assets and Liabilities | ||
Real Estate | (1,761,759) | 10,463,768 |
Accounts Receivable | 94,628 | (33,072) |
Related Party Receivable | (510,782) | (20,046) |
Prepaid Expenses | 17,397 | 23,976 |
Accounts Payable and Accrued Expenses | 2,328,575 | (845,930) |
Accrued Interest - Related Parties | (96,425) | (762,246) |
Operating Lease Liability | (45,665) | (41,805) |
Builder Deposits | (249,145) | (880,318) |
Income Tax Payable | 114,653 | 0 |
Net Cash Provided By Operating Activities | 79,034 | 8,794,047 |
Cash Flows From Investing Activities | ||
Purchase of Fixed Assets | (4,182) | 0 |
Net Cash Used In Investing Activities | (4,182) | 0 |
Cash Flows From Financing Activities | ||
Note Payable | 671,634 | 0 |
Repayments to Note Payable | 0 | (13,899) |
Distribution to Minority Shareholder | (197,400) | (740,250) |
Repayment to Notes Payable - Related Parties | 0 | (5,745,584) |
Net Cash Provided by (Used In) Financing Activities | 474,234 | (6,499,733) |
Net Increase in Cash and Restricted Cash | 549,086 | 2,294,314 |
Cash and Restricted Cash - Beginning of Year | 5,402,872 | 4,645,164 |
Cash and Restricted Cash - End of Period | 5,951,958 | 6,939,478 |
Supplementary Cash Flow Information | ||
Cash Paid For Interest | 0 | 3,822 |
Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||
Initial Recognition of Operating Lease Right-Of-Use Asset and Liability | $ 0 | $ 174,940 |
1. NATURE OF OPERATIONS AND SUM
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Nature of Operations LiquidValue Development Inc. (the “Company”), was incorporated in the State of Nevada on December 10, 2009. On July 8, 2020 the Company changed its name from SeD Intelligent Home Inc. to LiquidValue Development Inc. Alset iHome Inc., a Delaware corporation, was incorporated on February 24, 2015 and was formerly known as SeD Home & REITs Inc. Alset iHome Inc., a wholly-owned subsidiary of the Company, is principally engaged in developing, selling, managing, and leasing residential properties in the United States, and may expand from residential properties to other property types, including but not limited to commercial and retail properties. 99.99% of the Company’s common stock is owned by a wholly-owned subsidiary of Singapore eDevelopment Limited (“SeD Ltd”), a multinational public company listed on the Singapore Exchange Securities Trading Limited (“SGXST”). Principles of Consolidation The condensed consolidated financial statements include all accounts of the following entities as of the reporting period ending dates and for the reporting periods as follows: Name of consolidated subsidiary State or other jurisdiction of Date of incorporation or Attributable Alset iHome Inc. Delaware February 24, 2015 100% SeD USA, LLC Delaware August 20, 2014 100% 150 Black Oak GP, Inc. Texas January 23, 2014 100% SeD Development USA, Inc. Delaware March 13, 2014 100% 150 CCM Black Oak Ltd. Texas March 17, 2014 100% SeD Ballenger, LLC Delaware July 7, 2015 100% SeD Maryland Development, LLC Delaware October 16, 2014 83.55% SeD Development Management, LLC Delaware June 18, 2015 85% SeD Builder, LLC Delaware October 21, 2015 100% SeD Texas Home, LLC Delaware June 16, 2015 100% SedHome Rental, Inc. Texas December 19, 2018 100% SeD REIT Inc. Maryland August 20, 2019 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 June 30, 2020 and December 31, 2019, the aggregate non-controlling interest in Alset iHome Inc. was $2,160,905 and $2,275,061, respectively, which is separately disclosed on the Condensed Consolidated Balance Sheet. Basis of Presentation The Company’s condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“US GAAP”). The unaudited financial information furnished herein reflects all adjustments, consisting solely of normal recurring items, which in the opinion of management are necessary to fairly state the financial position of the Company and the results of its operations for the periods presented. This report should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2019 filed on March 30, 2020. The Company assumes that the users of the interim financial information herein have read or have access to the audited financial statements for the preceding fiscal year and the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The condensed consolidated balance sheet at December 31, 2019 was derived from the audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the interim periods presented are not necessarily indicative of results for the year ending December 31, 2020. Use of Estimates The preparation of condensed 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 condensed consolidated financial statements. The Company's significant estimates are the valuation of real estate. 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 loss per share is computed similarly to basic 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 potentially dilutive financial instruments issued or outstanding for the periods ended June 30, 2020 or June 30, 2019. 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 June 30, 2020 and December 31, 2019. 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 were required to remain as collateral for the loan until the loan is paid off in full. The loan was fully paid off in January 2019 and the collateral was released on April 19, 2019. On April 17, 2019, SeD Maryland Development, LLC entered into a Development Loan Agreement with Manufacturers and Traders Trust Company (“M&T Bank”). Based on the agreement, SeD Maryland Development is required to maintain a minimum balance of $2,600,000 as a security collateral fund in the interest-bearing account maintained by the lender. As part of the agreement, NVR deposits funds to M&T Bank directly from lot sales and keeps any overpayment to apply to future borrowings. On June 30, 2020 and December 31, 2019, the total restricted cash held by M&T Bank was $3,967,829 and $4,319,543, respectively. 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. The restricted cash balance on June 30, 2020 and December 31, 2019 was $0 and $90,394, respectively. Accounts Receivable and Allowance for Doubtful Accounts 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 either June 30, 2020 or December 31, 2019. Property and Equipment and Depreciation Property and equipment are recorded at cost, less accumulated depreciation. Expenditures for major additions and betterments that extend the useful life or functionality 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 $0 and $79,662 for the six months ended June 30, 2020 and 2019, respectively. The Company capitalized interest from related party borrowings of $0 and $19,070 for the three months ended June 30, 2020 and 2019, respectively. The Company capitalized interest from the third-party borrowings of $0 and $3,822 for the six months ended June 30, 2020 and 2019, respectively. The Company capitalized interest from the third-party borrowings of $0 and $3,668 for the three months ended June 30, 2020 and 2019, respectively. 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 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 estimated a loss of $2.4 million which was recorded as an impairment of real estate in the last quarter of 2018. On September 30, 2019, the Company recorded approximately $4.7 million of impairment on the Black Oak project based on discounted estimated future cash flows. On December 31, 2019, the Company recorded approximately $1.2 million of additional impairment on the Black Oak project based on discounted estimated future cash flows. The Company did not record impairment on any of its projects during the three and six months ended on June 30, 2020. 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 and Black Oak projects, which were essentially all of the revenue of the Company in 2020 and 2019, 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. Each lot or a group of lots 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. Sale of the Front Foot Benefit Assessments. We have established a front foot benefit (“FFB”) assessment on all of the lots sold to NVR. This is a 30-year annual assessment allowed in Frederick County which requires homeowners to reimburse the developer for the costs of installing public water and sewer to the lots. These assessments become effective as homes are settled, at which time we can sell the collection rights to investors who will pay an upfront lump sum, enabling us to more quickly realize the revenue. The selling prices range from $3,000 to $4,500 per home depending the type of the home. Our total expected revenue from the front foot benefit assessment is approximately $1 million. To recognize revenue of the FFB assessment, both our and NVR’s performance obligations have to be satisfied. Our performance obligation is completed once we complete the construction of water and sewer facilities and close the lot sales with NVR, which inspects these water and sewer facilities prior to the close of lot sales to ensure all specifications are met. NVR’s performance obligation is to sell homes they build to homeowners. Our FFB revenue is recognized upon NVR’s sales of homes to homeowners. 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 and capitalized interest 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. 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. 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 was effective for the Company on January 1, 2019. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As our leases do not provide a readily determinable implicit rate, we estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. The operating lease right-of-use asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The lease term includes options to extend or terminate when we are reasonably certain the option will be exercised. In general, we are not reasonably certain to exercise such options. We recognize lease expense for minimum lease payments on a straight-line basis over the lease term. We elected the practical expedient to not recognize operating lease right-of-use assets and operating lease liabilities for lease agreements with terms less than 12 months. 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 is not expected to have a material impact on the Company. In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law in March 2020. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”). Corporate taxpayers may carryback net operating losses (NOLs) originating between 2018 and 2020 for up to five years, which was not previously allowed under the 2017 Tax Act. The CARES Act also eliminates the 80% of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 or 2020. Taxpayers may generally deduct interest up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for 2019 and 2020. The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in 2020 for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the 2017 Tax Act. In addition, the CARES Act raises the corporate charitable deduction limit to 25% of taxable income and makes qualified improvement property generally eligible for 15-year cost-recovery and 100% bonus depreciation. The enactment of the CARES Act did not result in any material adjustments to our income tax provision for the six months ended June 30, 2020, or to our net deferred tax assets as of June 30, 2020. Subsequent Events The Company evaluated the events and transactions subsequent to June 30, 2020, the balance sheet date, through August 11, 2020, the date the condensed consolidated financial statements were available to be issued. |
2. CONCENTRATION OF CREDIT RISK
2. CONCENTRATION OF CREDIT RISK | 6 Months Ended |
Jun. 30, 2020 | |
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. At June 30, 2020 and December 31, 2019, uninsured cash and restricted cash balances were $4,664,458 and $4,558,582, respectively. |
3. PROPERTY AND EQUIPMENT
3. PROPERTY AND EQUIPMENT | 6 Months Ended |
Jun. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | Property and equipment stated at cost, less accumulated depreciation, consisted of the following: June 30, 2020 December 31, 2019 Computer Equipment $ 45,387 $ 41,597 Furniture and Fixtures 24,785 24,393 70,172 65,990 Accumulated Depreciation (65,168 ) (63,779 ) Fixed Assets Net $ 5,004 $ 2,211 Depreciation expense was $1,389 and $3,327 for the six months ended June 30, 2020 and 2019, respectively. Depreciation expense was $633 and $1,663 for the three months ended June 30, 2020 and 2019, respectively. |
4. BUILDER DEPOSITS
4. BUILDER DEPOSITS | 6 Months Ended |
Jun. 30, 2020 | |
Deposits [Abstract] | |
BUILDER DEPOSITS | In November 2015, SeD Maryland Development, LLC (“SeD 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 three 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 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 as payback of the deposit. A violation of the agreements by NVR would cause NVR to forfeit the deposit. On January 3, 2019 and April 28, 2020, NVR gave SeD Maryland two more deposits in the amounts of $100,000 and $220,000, respectively, based on the 3rd Amendment to the Lot Purchase Agreement. On June 30, 2020 and December 31, 2019, there were $2,196,124 and $2,445,269 held on deposit, respectively. |
5. NOTES PAYABLE
5. NOTES PAYABLE | 6 Months Ended |
Jun. 30, 2020 | |
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%. On April 17, 2019, SeD Maryland Development LLC and Union Bank terminated the agreement and the loan was paid off. M&T Bank Loans 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 of 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 $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 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 a $2.6 million collateral fund and a Deed of Trust issued to the Lender on the property owned by SeD Maryland. As of June 30, 2020 and December 31, 2019, the principal loan balance was $0. As part of the transaction, the Company incurred loan origination fees and closing fees in the amount of $381,823 and capitalized it into construction in process during 2019. On June 18, 2020, Alset iHome Inc. (formerly known as SeD Home & REITs Inc.) entered into a Loan Agreement with M&T Bank. Pursuant to the Loan Agreement, M&T Bank provided a non-revolving loan to Alset iHome Inc. in an aggregate amount of up to $2,990,000. The line of credit bears interest rate on LIBOR plus 375 basis points. Repayment of this loan is secured by a Deed of Trust issued to M&T Bank on the property owned by certain subsidiaries of Alset iHome Inc. The maturity date of this Loan is July 1, 2022. The Company together with one of its subsidiaries, SeD Maryland Development LLC, are both the guarantors of this Loan. As of June 30, 2020, the loan balance was $664,810. As part of the transaction, the Company incurred loan origination fees and closing fees in the amount of $61,679 which are amortized over the term of the loan. Paycheck Protection Program Loan On April 6, 2020, the Company entered into a term note with M&T Bank with a principal amount of $68,502 pursuant to the Paycheck Protection Program (“PPP Term Note”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan is evidenced by a promissory note. The PPP Term Note bears interest at a fixed annual rate of 1.00%, with the first six months of principal and interest deferred. Beginning in November 2020, the Company will make 18 equal monthly payments of principal and interest with the final payment due in April 2022. The PPP Term Note may be accelerated upon the occurrence of an event of default. The PPP Term Note is unsecured and guaranteed by the United States Small Business Administration. The Company may apply to M&T Bank for forgiveness of the PPP Term Note, with the amount which may be forgiven equal to the sum of payroll costs, covered rent and mortgage obligations, and covered utility payments incurred by the Company during the eight-week period beginning upon receipt of PPP Term Note funds, calculated in accordance with the terms of the CARES Act. At this time, we are not in a position to quantify the portion of the PPP Term Note that will be forgiven. |
6. RELATED PARTY TRANSACTIONS
6. RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2020 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | Loan from SeD Home Limited The Company receives advances from SeD Home Limited, a subsidiary of SeD Ltd, to fund development and operation costs. The Company is 99.99% owned by SeD Home International, which is wholly owned by SeD Ltd. The advances bear interest of 10% and are payable on demand. As of June 30, 2020 and December 31, 2019, Alset iHome Inc. (formerly SeD Home & REITs Inc.) had outstanding principal due of $0 and accrued interest of $228,557. During the three and six months ended June 30, 2020 and 2019, the Company did not incur any interest from this related party. Loan to/from SeD Home International The Company receives advances from SeD Home International, the owner of 99.99% of the Company. The advances bore interest of 18% until August 30, 2017 when the interest rate was adjusted to 5% and have no set repayment terms. On December 31, 2019, there was $0 of principal and $96,424 of accrued interest outstanding. On February 24, 2020 the Company repaid outstanding interest and at the same time loaned $503,576 to SeD Home International. The advances bear interest of 5%. On June 30, 2020, SeD Home International owed the Company $433,680 in principal and $7,903 in accrued interest. During the six months ended June 30, 2020 and 2019, the Company earned interest income of $7,903 and $0, respectively. During the three months ended June 30, 2020 and 2019, the Company earned interest income of $5,536 and $0, respectively. Management Fees MacKenzie Equity Partners, owned by 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 $60,000 and $120,000 for the three and six months ended June 30, 2020 and 2019, respectively, which were capitalized as part of Real Estate on the balance sheet as the services relate to property and project management. On June 30, 2020 and December 31, 2019, the Company owed $20,000 and $0, respectively, to this related party. Advances 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 June 30, 2020 and December 31, 2019, the balance of these advances was $280,471 and $211,271, respectively. Consulting Services A law firm, owned by Conn Flanigan, a Director of the Company, performs legal consulting services for the Company. The Company incurred expenses of $0 and $43,357 for the six months ended June 30, 2020 and 2019, respectively. The Company incurred expenses of $0 and $37,558 for the three months ended June 30, 2020 and 2019, respectively. On June 30, 2020 and December 31, 2019, the Company owed $0 to this related party. |
7. STOCKHOLDERS' EQUITY
7. STOCKHOLDERS' EQUITY | 6 Months Ended |
Jun. 30, 2020 | |
Stockholders' Equity Attributable to Parent [Abstract] | |
STOCKHOLDERS' EQUITY | Cash Dividend Distributions On February 21, 2020, the Board of Managers of SeD Maryland Development LLC 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. |
8. COMMITMENTS AND CONTINGENCIE
8. COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Lot Sale Agreements On February 19, 2018, SeD Maryland entered into a contract to sell the Continuing Care Retirement Community Assisted Independent Living (“CCRC”) parcel to Orchard Development Corporation. It was agreed that the purchase price for the 5.9-acre lot would be $2,900,000.00 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 was obliged to convert the 5.9-acre CCRC parcel to 36 lots (these will be 28 feet wide villa lots) and sell such lots to NVR. SeD Maryland received the required zoning approval to change the number of such lots from 85 to 121 in July 2019. |
9. SUBSEQUENT EVENTS
9. SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | Name Change On April 28, 2020, our Board of Directors unanimously recommended that the Company change its name to “LiquidValue Development Inc.” Pursuant to the Nevada Revised Statutes and our Bylaws, actions required or permitted to be taken at a meeting of the stockholders may be taken without a meeting if a written consent thereto is signed by stockholders holding not less than a majority of the voting power of the Company. On April 30, 2020, this name change was approved by the stockholder owning the majority of our issued and outstanding shares. This name change became effective on July 8, 2020. On July 7, 2020 SeD Home & REITs Inc., the 100% owned subsidiary of the Company, changed its name to Alset iHome Inc. Our Board of Directors believes that the name changes better reflect the nature of our anticipated operations. |
1. NATURE OF OPERATIONS AND S_2
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations | LiquidValue Development Inc. (the “Company”), was incorporated in the State of Nevada on December 10, 2009. On July 8, 2020 the Company changed its name from SeD Intelligent Home Inc. to LiquidValue Development Inc. Alset iHome Inc., a Delaware corporation, was incorporated on February 24, 2015 and was formerly known as SeD Home & REITs Inc. Alset iHome Inc., a wholly-owned subsidiary of the Company, is principally engaged in developing, selling, managing, and leasing residential properties in the United States, and may expand from residential properties to other property types, including but not limited to commercial and retail properties. 99.99% of the Company’s common stock is owned by a wholly-owned subsidiary of Singapore eDevelopment Limited (“SeD Ltd”), a multinational public company listed on the Singapore Exchange Securities Trading Limited (“SGXST”). |
Principles of Consolidation | The condensed consolidated financial statements include all accounts of the following entities as of the reporting period ending dates and for the reporting periods as follows: Name of consolidated subsidiary State or other jurisdiction of Date of incorporation or Attributable Alset iHome Inc. Delaware February 24, 2015 100% SeD USA, LLC Delaware August 20, 2014 100% 150 Black Oak GP, Inc. Texas January 23, 2014 100% SeD Development USA, Inc. Delaware March 13, 2014 100% 150 CCM Black Oak Ltd. Texas March 17, 2014 100% SeD Ballenger, LLC Delaware July 7, 2015 100% SeD Maryland Development, LLC Delaware October 16, 2014 83.55% SeD Development Management, LLC Delaware June 18, 2015 85% SeD Builder, LLC Delaware October 21, 2015 100% SeD Texas Home, LLC Delaware June 16, 2015 100% SedHome Rental, Inc. Texas December 19, 2018 100% SeD REIT Inc. Maryland August 20, 2019 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 June 30, 2020 and December 31, 2019, the aggregate non-controlling interest in Alset iHome Inc. was $2,160,905 and $2,275,061, respectively, which is separately disclosed on the Condensed Consolidated Balance Sheet. |
Basis of Presentation | The Company’s condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“US GAAP”). The unaudited financial information furnished herein reflects all adjustments, consisting solely of normal recurring items, which in the opinion of management are necessary to fairly state the financial position of the Company and the results of its operations for the periods presented. This report should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2019 filed on March 30, 2020. The Company assumes that the users of the interim financial information herein have read or have access to the audited financial statements for the preceding fiscal year and the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The condensed consolidated balance sheet at December 31, 2019 was derived from the audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the interim periods presented are not necessarily indicative of results for the year ending December 31, 2020. |
Use of Estimates | The preparation of condensed 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 condensed consolidated financial statements. The Company's significant estimates are the valuation of real estate. 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 loss per share is computed similarly to basic 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 potentially dilutive financial instruments issued or outstanding for the periods ended June 30, 2020 or June 30, 2019. |
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 June 30, 2020 and December 31, 2019. |
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 were required to remain as collateral for the loan until the loan is paid off in full. The loan was fully paid off in January 2019 and the collateral was released on April 19, 2019. On April 17, 2019, SeD Maryland Development, LLC entered into a Development Loan Agreement with Manufacturers and Traders Trust Company (“M&T Bank”). Based on the agreement, SeD Maryland Development is required to maintain a minimum balance of $2,600,000 as a security collateral fund in the interest-bearing account maintained by the lender. As part of the agreement, NVR deposits funds to M&T Bank directly from lot sales and keeps any overpayment to apply to future borrowings. On June 30, 2020 and December 31, 2019, the total restricted cash held by M&T Bank was $3,967,829 and $4,319,543, respectively. 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. The restricted cash balance on June 30, 2020 and December 31, 2019 was $0 and $90,394, respectively. |
Accounts Receivable and Allowance for Doubtful Accounts | 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 either June 30, 2020 or December 31, 2019. |
Property and Equipment and Depreciation | Property and equipment are recorded at cost, less accumulated depreciation. Expenditures for major additions and betterments that extend the useful life or functionality 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 $0 and $79,662 for the six months ended June 30, 2020 and 2019, respectively. The Company capitalized interest from related party borrowings of $0 and $19,070 for the three months ended June 30, 2020 and 2019, respectively. The Company capitalized interest from the third-party borrowings of $0 and $3,822 for the six months ended June 30, 2020 and 2019, respectively. The Company capitalized interest from the third-party borrowings of $0 and $3,668 for the three months ended June 30, 2020 and 2019, respectively. 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 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 estimated a loss of $2.4 million which was recorded as an impairment of real estate in the last quarter of 2018. On September 30, 2019, the Company recorded approximately $4.7 million of impairment on the Black Oak project based on discounted estimated future cash flows. On December 31, 2019, the Company recorded approximately $1.2 million of additional impairment on the Black Oak project based on discounted estimated future cash flows. The Company did not record impairment on any of its projects during the three and six months ended on June 30, 2020. |
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 and Black Oak projects, which were essentially all of the revenue of the Company in 2020 and 2019, 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. Each lot or a group of lots 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. |
Sale of the Front Foot Benefit Assessments | We have established a front foot benefit (“FFB”) assessment on all of the lots sold to NVR. This is a 30-year annual assessment allowed in Frederick County which requires homeowners to reimburse the developer for the costs of installing public water and sewer to the lots. These assessments become effective as homes are settled, at which time we can sell the collection rights to investors who will pay an upfront lump sum, enabling us to more quickly realize the revenue. The selling prices range from $3,000 to $4,500 per home depending the type of the home. Our total expected revenue from the front foot benefit assessment is approximately $1 million. To recognize revenue of the FFB assessment, both our and NVR’s performance obligations have to be satisfied. Our performance obligation is completed once we complete the construction of water and sewer facilities and close the lot sales with NVR, which inspects these water and sewer facilities prior to the close of lot sales to ensure all specifications are met. NVR’s performance obligation is to sell homes they build to homeowners. Our FFB revenue is recognized upon NVR’s sales of homes to homeowners. |
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 and capitalized interest 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. |
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. 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 was effective for the Company on January 1, 2019. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As our leases do not provide a readily determinable implicit rate, we estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. The operating lease right-of-use asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The lease term includes options to extend or terminate when we are reasonably certain the option will be exercised. In general, we are not reasonably certain to exercise such options. We recognize lease expense for minimum lease payments on a straight-line basis over the lease term. We elected the practical expedient to not recognize operating lease right-of-use assets and operating lease liabilities for lease agreements with terms less than 12 months. 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 is not expected to have a material impact on the Company. In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law in March 2020. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”). Corporate taxpayers may carryback net operating losses (NOLs) originating between 2018 and 2020 for up to five years, which was not previously allowed under the 2017 Tax Act. The CARES Act also eliminates the 80% of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 or 2020. Taxpayers may generally deduct interest up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for 2019 and 2020. The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in 2020 for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the 2017 Tax Act. In addition, the CARES Act raises the corporate charitable deduction limit to 25% of taxable income and makes qualified improvement property generally eligible for 15-year cost-recovery and 100% bonus depreciation. The enactment of the CARES Act did not result in any material adjustments to our income tax provision for the six months ended June 30, 2020, or to our net deferred tax assets as of June 30, 2020. |
Subsequent Events | The Company evaluated the events and transactions subsequent to June 30, 2020, the balance sheet date, through August 11, 2020, the date the condensed 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) | 6 Months Ended |
Jun. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Accounts of Entities | Name of consolidated subsidiary State or other jurisdiction of Date of incorporation or Attributable Alset iHome Inc. Delaware February 24, 2015 100% SeD USA, LLC Delaware August 20, 2014 100% 150 Black Oak GP, Inc. Texas January 23, 2014 100% SeD Development USA, Inc. Delaware March 13, 2014 100% 150 CCM Black Oak Ltd. Texas March 17, 2014 100% SeD Ballenger, LLC Delaware July 7, 2015 100% SeD Maryland Development, LLC Delaware October 16, 2014 83.55% SeD Development Management, LLC Delaware June 18, 2015 85% SeD Builder, LLC Delaware October 21, 2015 100% SeD Texas Home, LLC Delaware June 16, 2015 100% SedHome Rental, Inc. Texas December 19, 2018 100% SeD REIT Inc. Maryland August 20, 2019 100% |
3. PROPERTY AND EQUIPMENT (Tabl
3. PROPERTY AND EQUIPMENT (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | June 30, 2020 December 31, 2019 Computer Equipment $ 45,387 $ 41,597 Furniture and Fixtures 24,785 24,393 70,172 65,990 Accumulated Depreciation (65,168 ) (63,779 ) Fixed Assets Net $ 5,004 $ 2,211 |
1. NATURE OF OPERATIONS AND S_4
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 6 Months Ended |
Jun. 30, 2020 | |
Subsidiary 1 | |
Name of Consolidated Subsidiary | Alset iHome Inc. |
State or Other Jurisdiction of Incorporation or Organization | Delaware |
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 | Delaware |
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 | Texas |
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 | Delaware |
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 | Texas |
Date of Incorporation or Formation | Mar. 17, 2014 |
Attributable Interest | 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% |
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% |
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% |
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% |
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% |
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, 2018 |
Attributable Interest | 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 ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
Non-controlling Interest | $ 2,160,905 | $ 2,160,905 | $ 2,275,061 | ||
Restricted Cash | 3,967,829 | 3,967,829 | $ 4,319,543 | ||
Capitalized Interest From Related Party Borrowings | 0 | $ 19,070 | 0 | $ 79,662 | |
Capitalized Interest From Third Party Borrowings | $ 0 | $ 3,668 | $ 0 | $ 3,822 |
2. CONCENTRATION OF CREDIT RI_2
2. CONCENTRATION OF CREDIT RISK (Details Narrative) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Risks and Uncertainties [Abstract] | ||
Uninsured Cash Balances | $ 4,664,458 | $ 4,558,582 |
3. PROPERTY AND EQUIPMENT (Deta
3. PROPERTY AND EQUIPMENT (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Property and Equipment, Gross | $ 70,172 | $ 65,990 |
Accumulated Depreciation | (65,168) | (63,779) |
Property and Equipment, Net | 5,004 | 2,211 |
Computer Equipment | ||
Property and Equipment, Gross | 45,387 | 41,597 |
Furniture and Fixtures | ||
Property and Equipment, Gross | $ 24,785 | $ 24,393 |
3. PROPERTY AND EQUIPMENT (De_2
3. PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation Expense | $ 633 | $ 1,663 | $ 1,389 | $ 3,327 |
4. BUILDER DEPOSITS (Details Na
4. BUILDER DEPOSITS (Details Narrative) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Deposits [Abstract] | ||
Builder Deposits | $ 2,196,124 | $ 2,445,269 |
5. NOTES PAYABLE (Details Narra
5. NOTES PAYABLE (Details Narrative) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Notes Payable [Abstract] | ||
Principal Loan Balance | $ 0 | $ 0 |
6. RELATED PARTY TRANSACTIONS (
6. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Related Party Transactions [Abstract] | |||||
Consulting Expenses | $ 0 | $ 37,558 | $ 0 | $ 43,357 | |
Due to Related Party | $ 0 | $ 0 | $ 0 |