Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
or
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 000-55038
LIQUIDVALUE DEVELOPMENT INC.
(Exact name of registrant as specified in its charter)
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Nevada
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27-1467606
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification Number)
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4800
Montgomery Lane, Suite 210
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Bethesda, MD 20814
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301-971-3940
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(Address of Principal Executive Offices)
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Registrant’s telephone number,
including area code
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Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to section 12(g) of the Act: Common
Stock, $0.001 par value
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities
Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Exchange
Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 229.405 of this
chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☐
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Smaller reporting company ☒
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Emerging
growth company ☐
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
Indicate
by check mark whether the registrant has filed a report on and
attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b))
by the registered public accounting firm that prepared or issued
its audit report. ☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No ☒
State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the
price at which the common equity was last sold, or the average bid
and asked price of such common equity, as of the last business day
of the registrant’s most recently completed second fiscal
quarter. The Company’s common stock did not trade during the
year ended December 31, 2020.
Indicate the number of shares outstanding of each of the
registrant’s classes of common stock, as of the latest
practicable date. As of March 22, 2021, there were 704,043,324
shares outstanding of the registrant’s common stock, $0.001
par value.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Throughout this Report on Form 10-K, the terms the
“Company,” “we,” “us,” and
“our” refer to LiquidValue Development Inc., and
“our board of directors” refers to the board of
directors of LiquidValue Development Inc.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION
This Annual Report on Form 10-K contains forward-looking statements
regarding, among other things, our future operating results and
financial position, our business strategy, and other objectives for
our future operations. The words “anticipate,”
“believe,” “intend,” “expect,”
“may,” “estimate,” “predict,”
“project,” “potential” and similar
expression are intended to identify forward-looking statements,
although not all forward-looking statements contain these
identifying words. We have based these forward-looking statements
largely on our current expectations and projections about future
events and financial trends that we believe may affect our
business, financial condition and results of operations. There are
a number of important risks and uncertainties that could cause our
actual results to differ materially from those indicated by
forward-looking statements. We may not actually achieve the plans,
intentions or expectations disclosed in our forward-looking
statements, and you should not place undue reliance on our
forward-looking statements. Actual results or events could differ
materially from the plans, intentions and expectations disclosed in
the forward-looking statements we make. Our forward-looking
statements do not reflect the potential impact of any future
acquisitions, mergers, dispositions, joint ventures or investments
that we may make.
You should read this Report on Form 10-K and the documents that we
have filed as exhibits to this Report on Form 10-K completely
and with the understanding that our actual future results may be
materially different from what we expect. The forward-looking
statements contained in this Report on Form 10-K are made as of the
date of this Report on Form 10-K, and we do not assume
any obligation to update any forward-looking statements, whether as
a result of new information, future events or otherwise, except as
required by applicable law.
LiquidValue
Development Inc.
Form
10-K
For the
Year Ended December 31, 2020
Table
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1
PART I
General
LiquidValue Development Inc. (the “Company”), formerly
known as SeD Intelligent Home Inc. and Homeownusa, was incorporated
in the State of Nevada on December 10, 2009. Our address is 4800
Montgomery Lane, Suite 210, Bethesda, MD, 20814. Our telephone
number is 301-971-3940.
On December 22, 2016 Alset International Limited (formerly known as
Singapore eDevelopment Limited and referred to herein as
“Alset International”) acquired 74,015,730 shares of
the Company’s common stock. Alset International subsequently
contributed its ownership in the Company to its subsidiary SeD
Intelligent Home Inc, formerly known as SeD Home International,
Inc. (which also owned Alset EHome Inc. until December 29, 2017, at
which time SeD Intelligent Home Inc. contributed its shares of
Alset EHome Inc. to the Company). On January 10, 2017, our board of
directors appointed Fai H. Chan as Director. On March 10, 2017,
Rongguo (Ronald) Wei was appointed as Chief Financial Officer of
the Company.
On September 5, 2017, the Company changed its name to SeD
Intelligent Home Inc., and increased its number of authorized
shares to 1,000,000,000 (the par value per share remained $.001).
On July 7, 2020, the Company changed its name to LiquidValue
Development Management Inc.
On December 29, 2017, the Company, SeD Acquisition Corp., a
Delaware corporation and wholly-owned subsidiary of the Company
(the “Merger Sub”), Alset EHome Inc. (formerly known as
Alset iHome Inc, SeD Home & REITs Inc. and SeD Home, Inc., and
referred to herein as “Alset EHome”), a Delaware
corporation, and SeD Intelligent Home 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 Alset EHome, with Alset EHome surviving as a
wholly-owned subsidiary of the Company. The closing of this
transaction (the “Closing”) also took place on December
29, 2017. The Company ceased to be a “shell company” as
that term is defined in Rule 405 of the Securities Act and Rule
12b-2 of the Exchange Act. The Company’s business operations
became those operations that Alset EHome was
conducting.
In connection with the acquisition of Alset EHome, the Company
appointed new officers and directors. Fai H. Chan and Moe T. Chan
serve as co-Chief Executive Officers; Rongguo (Ronald) Wei
and Alan W. L. Lui serve as Co-Chief Financial Officers, and
our Board of Directors includes Fai H. Chan, Moe T. Chan, Conn
Flanigan and Charles MacKenzie.
Alset EHome was incorporated in Delaware on February 24, 2015, and
was named SeD Home USA, Inc. before changing its name in May of
2015 to SeD Home, Inc. On February 6, 2020, this name was
changed to SeD Home & REITs Inc., on July 7, 2020 the name was changed to Alset
iHome Inc. and on December 9, 2020 it was changed to Alset EHome
Inc. Prior to the Closing, the officers and directors of Alset
EHome are the same six individuals who are the officers and
directors of the Company.
With the completion of the Company’s acquisition of Alset
EHome, we entered into the business of land development. While the
Company will own real estate, the Company does not intend to be a
REIT for federal tax purposes. Alset EHome’s Lakes at Black
Oak (referred to herein as “Black Oak”) project
is a 162-acre land sub-division development located north of
Houston, Texas. Alset EHome’s Ballenger Run project is a
197-acre sub-division development near Washington D.C. in Frederick
County, Maryland. Alset EHome conducts its operations through
twelve wholly and partially owned subsidiaries. Alset EHome’s
affiliates provide project and asset management via separate
agreements with consultants.
The land development business involves converting undeveloped land
into buildable lots. When possible, in future projects we will
attempt to mitigate risk by attempting to enter into contracts with
strategic home building partners for the sale of lots to be
developed. In such circumstances, it is our intention that (i) we
will conduct a feasibility study on a particular land development;
(ii) both Alset EHome and the strategic home building partners will
work together in connection with acquisition of the appropriate
land; (iii) strategic home building partners will typically agree
to enter into agreements to purchase up to 100% of the buildable
lots to be developed; (iv) Alset EHome and the strategic home
building partners will enter into appropriate agreements; and (v)
Alset EHome will proceed to acquire the land for development and
will be responsible for the infrastructure development, ensuring
the completion of the project and delivery of buildable lots to the
strategic home building partner.
2
We also intend, to the fullest extent practicable, to source land
where local government agencies (including county, district and
other municipalities) and public authorities, such as improvement
districts, will reimburse the majority of infrastructure costs
incurred by the land developer for developing the land to build
taxable properties. The developers and public authorities enter
into agreements whereby the developers are reimbursed for their
costs of infrastructure.
The Company will also consider the potential to purchase
foreclosure property development projects from banks, if attractive
opportunities should arise.
The Company, utilizing the extensive business network of its
management and majority shareholder, may from time to time attempt
to forge joint ventures with other parties. Through its
subsidiaries, Alset EHome may manage such joint
ventures.
In addition to the completion of our current projects, we intend to
seek additional land development projects in diverse regions across
the United States. Such projects may be within both the for sale
and for rent markets, and we may expand from residential properties
to other property types, including but not limited to commercial
and retail properties. We will consider projects in diverse regions
across the United States, however, Alset EHome and its management
and consultants have longstanding relationships with local owners,
brokers, managers, lenders, tenants, attorneys and accountants to
help it source deals throughout Maryland and Texas. Alset EHome
will continue to focus on off-market deals and raise appropriate
financing.
Alset EHome, via a subsidiary, is presently exploring opportunities
to expand its current portfolio by developing communities solely
designed for renters. Alset EHome is exploring the potential to
pursue this new endeavor in part to improve cash flow and smooth
out the inconsistencies of income in residential land development.
Alset EHome will continue to attempt to mitigate risk and maximize
returns.
Entering into the business of building homes with the intention of
owning and renting those homes would provide an opportunity for
Alset EHome to create value by (i) acquiring properties for
horizontal and vertical development; (ii) providing fee generation
via property management and leasing; and (iii) capturing rent
escalations over long term periods. Alset EHome and its affiliates
would provide property management for customers seeking to offload
home maintenance and lawn care.
Through
our subsidiaries, we will explore the potential to pursue other
business opportunities related to real estate. The Company is
evaluating the potential to enter into activities related to solar
energy and energy efficient products as well as smart home
technologies, although we note that these potential opportunities
remain at the exploratory stage, and we may not pursue these
opportunities at the discretion of our management. Through the
Company’s eco-systems of businesses based around sustainable,
healthy living communities, Alset EHome intends to develop single
family homes which are eco-friendly. They will be fitted out with
solar energy products such as photovoltaic systems, battery
systems, and car charging ports for sustainable transport as well
as other energy efficient systems. The Company also envisions
acquiring land surrounding its communities for solar farm projects
to power these communities. Alset EHome has commenced the
infrastructure design and engineering for this sustainable, healthy
living community concept within the Black Oak project outside of
Houston, Texas. The company intends to bring this concept to other
strategic parts of the US as well as markets abroad.
We also intend to enlarge the scope of property-related services.
Additional planned activities, which we intend to be carried out
through Alset EHome, include financing, home management, realtor
services, insurance and home title validation. We may particularly
provide these services in connection with homes we build. These
activities are also in the planning stages.
As of December 31, 2020, we had total assets of $29,219,785 and
total liabilities of $2,691,098. Total assets as of December 31,
2019 were $30,785,232 and total liabilities were
$4,065,484.
Employees
At the present time, the Company has four full time employees. Much
of our work is done by contractors retained for projects, and at
the present time we have no part-time employees.
3
Compliance with Government Regulation
The development of our real estate projects will require the
Company to comply with federal, state and local environmental
regulations. In connection with this compliance, our real
estate acquisition and development projects will require
environmental studies. To date, the Company has spent approximately
$42,356 on environmental studies and compliance. Such costs
are reflected in construction progress costs in our financial
statements.
The cost of complying with governmental regulations
is significant and will increase if we add additional real
estate projects and become involved in homebuilding in the future
and are required to comply with certain due diligence procedures
related to third party lenders.
At the present time, we believe that we have all of the material
government approvals that we need to conduct our business as
currently conducted. We are subject to periodic local permitting
that must be addressed, but we do not anticipate that such
requirements for government approval will have a material impact on
our business as presently conducted. We are required to comply with
government regulations and to make filings from time to time with
various government entities. Such work is typically handled by
outside contractors we retain.
Impact of Recent Public Health Events
In December 2019, a novel strain of coronavirus (COVID-19) was
first identified in Wuhan, Hubei Province, China, and has since
spread to a number of other countries, including the United States.
The COVID-19 pandemic, or other adverse public health developments,
could have a material and adverse effect on our business
operations.
In the year ended December 31, 2020, the COVID-19 pandemic did not
have a material impact on our operations. However, the extent to
which the COVID-19 pandemic and the related economic decline that
occurred in the United States in March of 2020 may impact our
business in the future will depend on developments which are highly
uncertain and cannot be predicted. The COVID-19 pandemic’s
far-reaching impact on the global economy could negatively affect
various aspects of our business, including demand for real estate.
From March through December 2020, we continued to sell lots at our
Ballenger Run project (in Maryland) for the construction of homes
to NVR. Sales of such homes by NVR were at the same level in 2020
as in the 2019. In 2020 we sold 121 lots to NVR and in 2019, 123
lots. Such homes are often a first home that generally did not
require buyers to sell an existing home. We believe low interest
rates have encouraged home sales. Many buyers opted to see home
models at the project virtually. This technology allowed them to
ask questions to sales staff and see the homes. Home closings were
able to occur electronically.
We have received strong indications that buyers and renters across
the country are expressing interest in moving from more densely
populated urban areas to the suburbs. We believe that our Ballenger
Run project is well suited and positioned to accommodate those
buyers. Our latest phase for sale at Ballenger Run, involving
single-family homes, has seen a high number of interested potential
buyers signing up for additional information and updates on home
availability.
The COVID-19 pandemic could impact the ability of our staff and
contractors to continue to work, and our ability to conduct our
operations in a prompt and efficient manner. We have experienced a
slowdown in the planned construction of a clubhouse at the
Ballenger Run project which was completed behind schedule. We
believe this delay was caused in part by policies requiring lower
numbers of contractors working in indoor
spaces.
The COVID-19 pandemic may adversely impact the timeliness of local
government in granting required approvals. Accordingly, COVID-19
may cause the completion of important stages in our real estate
projects to be delayed.
At our Black Oak project in Texas, we have strategically redesigned
the lots over the past year for a smaller “starter
home” products that we believe will be more resilient in
fluctuating markets. Should we initiate sales at Black Oak, we
believe the same implications described above regarding our
Ballenger Run project may apply to our Black Oak project (including
the general trend of customers’ interest shifting from urban
to suburban areas). In addition, Houston and its surrounding areas
were economically impacted by the decline in energy prices in 2020.
Unlike our Ballenger Run project, our Black Oak project may include
our involvement in single family rental home
development.
4
Impact on Staff
Most of our staff works out of our Bethesda, Maryland office. Our
staff has shifted to mostly working from home since March 2020, but
this has had minimal impact on our operations to date. The COVID-19
pandemic has also impacted the frequency with which our management
would otherwise travel to the Black Oaks project; however, we have
a contractor in Texas providing supervision of the project.
Management continues to regularly supervise the Ballenger Run
project. Limitations on the mobility of our management and staff
may slow down our ability to enter into new transactions and expand
existing projects.
We have not reduced our staff in connection with the COVID-19
pandemic. To date, we did not have to expend significant resources
related to employee health and safety matters related to the
COVID-19 pandemic. We have a small staff, however, and the
inability of any significant number of our staff to work due to
illness or the illness of a family member could adversely impact
our operations.
Intellectual Property
At the present time, the Company does not own any trademarks, but
we anticipate filing trademark applications as we expand into new
areas of business.
Corporate Organization
The following chart describes the Company’s ownership of
various subsidiaries:
5
Black Oak
Our Black Oak project is a 162-acre land infrastructure development
and sub-division project situated in Magnolia, Texas north of
Houston. 150 Black Oak, Ltd. was a partnership formed by our
former partner prior to our investment in this project. Black Oak
had contracts to purchase seven contiguous parcels of land. Our
initial equity investment was US$4.3 million for ownership of 60%
of the partnership. Upon this initial investment in February 2014,
we changed the name of the partnership to 150 CCM Black Oak, Ltd
(“Black Oak”) and subsequently increased our ownership
to 69%. 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. Prior to the Partnership Interest Purchase
Agreements, the Company owned and controlled Black Oak 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. As a
result of the purchase, the Company, through its subsidiaries, now
owns 100% of Black Oak. 150 Black Oak GP, Inc. is wholly owned by
SeD USA, LLC, which in turn is wholly owned by Alset EHome. The
limited partnership interests are owned by SeD Development USA,
Inc., which is wholly owned by Alset EHome. 150 Black Oak GP, Inc.
was previously jointly owned with a partner, but is now entirely
owned by SeD USA, LLC.
In October 2015, the project obtained a $6.0 million construction
loan from Revere High Yield Fund, LP. This loan was paid off in
October of 2017. Currently the Black Oak project does not have any
financing from third parties.
The site plan at Black Oak allows for approximately 550-600
residential lots of varying sizes. We anticipate that our
involvement in land development aspects of this project will take
approximately three to five additional years to complete. Since
February of 2015, we have completed several important tasks related
to the project, including clearing certain portions of the
property, paving certain roads within the project and complying
with the local improvement district to ensure reimbursement of
these costs.
The
estimated construction costs (not including the cost of land and
financing costs) and completion date for each phase are as follows.
Please note that the following is subject to change based on our
single family for sale and for rent models:
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Black
Oak
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Estimated
Construction Costs
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Expected
Completion Date
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Phase
1
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$7,080,000
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Completed
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Phase
2
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330,671
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November
2022
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Phase
3
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422,331
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November
2022
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Phase
4
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142,788
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November
2022
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Phase
5
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3,293,000
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April
2022
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Total
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$11,268,790
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On July
3, 2018, 150 CCM Black Oak Ltd. entered into a Purchase and Sale
Agreement with Houston LD, LLC for the sale of 124 lots within the
Black Oak project (the “Black Oak Purchase Agreement”).
Pursuant to the Black Oak Purchase Agreement, it was agreed that
124 lots would be sold for a range of prices based on the lot type.
In addition, Houston LD, LLC agreed to contribute a
“community enhancement fee” for each lot, collectively
totaling $310,000 which was held in escrow. 150 CCM Black Oak, Ltd.
agreed to apply these funds exclusively towards an amenity package
on the property. The closing of the transactions contemplated by
the Black Oak Purchase Agreement was subject to Houston LD, LLC
completing due diligence to its satisfaction.
On
October 12, 2018, 150 CCM Black Oak, Ltd. entered into an Amended
and Restated Purchase and Sale Agreement (the “Amended and
Restated Black Oak Purchase Agreement”) for these 124 lots.
Pursuant to the Amended and Restated Black Oak Purchase Agreement,
the purchase price remained at $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 Black Oak was completed
for $6,175,000 and the community enhancement fee equal to $310,000
was delivered to the escrow account, which was later drawn and
closed. An impairment of real estate of approximately $2.4 million
related to this sale was recorded on December 31, 2018. The revenue
was recognized in January, 2019, when the sale was closed, and no
gain or loss was recognized in January, 2019.
6
On July
20, 2018, Black Oak Ltd received $4,592,079 of district
reimbursement for previous construction costs incurred in the land
development. Of this amount, $1,650,000 remained on deposit in the
District’s Capital Projects Fund for the benefit of Black Oak
Ltd and to be released upon receipt of the evidence of the: (a)
execution of a purchase agreement between Black Oak Ltd and a home
builder with respect to the Black Oak development and (b) of the
completion, finishing and making ready for home construction of at
least 105 unfinished lots in the Black Oak development. After
entering the purchase agreement with Houston LD, LLC, the above
requirements were met. The amount of the deposit was released to
the Company after presenting the invoices paid for land
development. After releasing funds to the Company, the amount on
deposit was $0 and $90,394 on December 31, 2020 and December 31,
2019, respectively.
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.
On January 13, 2021, 150 CCM Black Oak, Ltd. purchased an
approximately 6.297 acre tract of land in Montgomery County, Texas.
The Company’s strategic acquisition contiguous to the Black
Oak project is intended to provide additional lot yield, potential
additional amenities and/or a solar farm to support the
Company’s sustainable, healthy living
concept.
At the present time, the Company is also considering expanding its
current policy of selling buildable lots to include a strategy of
building housing for sale or rent, particularly at our Black Oak
property.
Ballenger Run
In November 2015, we completed the $15.65 million acquisition of
Ballenger Run, a 197-acre land sub-division development located in
Frederick County, Maryland. Previously, on May 28, 2014, the
RBG Family, LLC entered into the Assignable Real Estate Sales
Contract with NVR, Inc. (“NVR”) by which RBG Family,
LLC would sell the 197 acres for $15 million to NVR. On December
10, 2014, NVR assigned this contract to SeD Maryland Development,
LLC in the Assignment and Assumption Agreement and entered into a
series of Lot Purchase Agreements by which NVR would purchase
subdivided lots from SeD Maryland Development, LLC.
SeD Maryland Development’s acquisition of the 197
acres was funded in part from a $5.6 million deposit from NVR
Inc. (“NVR”). The balance of $10.05 million was derived
from a total equity contribution of $15.2 million by SeD Ballenger
LLC (“SeD Ballenger”) and CNQC Maryland Development LLC
(a unit of Qingjian International Group Co, Ltd, China,
“CNQC”). The project is owned by SeD Maryland
Development, LLC (“SeD Maryland”). SeD Maryland is
83.55% owned by SeD Ballenger and 16.45% by CNQC.
SeD Maryland entered into a Project Development and Management
Agreement for Ballenger Run with MacKenzie Development Company, LLC
and Cavalier Development Group, LLC on February 25, 2015. MacKenzie
Development Company, LLC assigned its rights and obligations to
this agreement to Adams Aumiller Properties, LLC on September 9,
2017. Pursuant to this Project Development and Management
Agreement, Adams Aumiller, LLC and Cavalier Development Group, LLC
coordinate and manage the construction, financing, and development
of Ballenger Run. SeD Maryland compensates Adams Aumiller LLC and
Cavalier Development Group, LLC with a monthly aggregate fee of
$14,667 until all single family and townhome lots are sold. The
monthly aggregate fee will then be adjusted to $11,000 which will
continue for approximately eight months to allow all close out
items to be finished, including the release of guarantees and
securities as required by government authorities. The Project
Development and Management Agreement for Ballenger Run also
requires SeD Maryland to pay a fee of $1,200 and $500 for each
single-family and townhome, respectively, sold to a third party.
SeD Maryland also paid a fee of $50,000 after the sale of the
parcel underlying the multi-family lots in August
2018.
This property was initially zoned for 443 entitled Residential
Lots, 210 entitled Multifamily Units and 200 entitled continuing
care retirement community units approved for twenty (20) years from
the date of a Developers Rights & Responsibilities Agreement
dated October 8, 2014, as amended on September 6, 2016. In July
2019 we received required government approval to revise the zoning
of this property to include 479 entitled residential lots and 210
entitled multi-family units, with no entitled continuing care
retirement community units. We anticipate that the completion of
our involvement in this project will take approximately 12-18
months from the date of this Annual Report.
7
Revenue from Ballenger Run is anticipated to come from three main
sources:
●
The
sale of 479 entitled and constructed residential lots to
NVR;
●
The
sale of the lot for the 210 entitled multi-family units;
and
●
The
sale of 479 front foot benefit assessments.
Revenues may be adversely impacted, if we fail to attain certain
goals, meet certain conditions or if market prices for this
development unexpectedly begin to drop.
The
Company anticipates that the estimated construction costs (not
including land costs and financing costs) for the final phases of
the Ballenger Run project will be $4,179,000. The expected
completion date for the final phases of the Ballenger Run project
is June of 2022.
Financing from Union Bank (f/k/a The Bank of Hampton Roads, Shore
Bank and Xenith Bank) closed simultaneous with the settlement on
the land on November 23, 2015, pursuant to a subsequent amendment
to the terms of this loan, the loan provides (i) for a maximum of
$11 million outstanding; (ii) that the maturity of this loan will
be December 31, 2019; and (iii) includes an $800,000 letter of
credit facility, with an annual rate of 1.5% on all issued letters
of credit.
This loan is to fund the development of the first 276 lots, the
multi-family parcel and senior living parcel, the amenities
associated with these phases, and certain road improvements. The
Union Bank Revolving Loan was repaid in January 2019.
On April 17, 2019, SeD Maryland Development LLC entered into a
Development Loan Agreement with Manufacturers and Traders Trust
Company (“M&T Bank”) which is comprised of: (1) a
Note 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, and (2) a letter of credit facility in an
aggregate amount of up to $900,000 (the “L/C
Facility”). The Note bears an interest rate of the one month
LIBOR plus 375 basis points. Commissions on each letter of credit
(“L/C”) 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 Note 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 Development Loan Agreement
is secured by $2,600,000 collateral fund and a Deed of Trust issued
to M&T Bank on the property owned by SeD Maryland. As of
December 31, 2020 and 2019, the outstanding balance of the
revolving loan was $0.
On April 17, 2019, SeD Maryland Development LLC and Union Bank
terminated the Revolving Credit Note. After termination, Union Bank
still held $602,150 as collateral for these outstanding Letters of
Credit (L/C). The L/C collateral was released in June 2019, when
all L/Cs were transferred to the M&T Bank L/C
Facility.
Expenses from Ballenger Run include, but are not limited to costs
associated with land prices, closing costs, hard development costs,
cost in lieu of construction, soft development costs and interest
costs. We presently estimate these costs to be between $56 and $57
million. We may also encounter expenses which we have not
anticipated, or which are higher than presently
anticipated.
8
The initial phases of this project have been completed and we are
currently in the final phases of this project. The following chart
describes the various phases of this project:
Phase 1 construction of all infrastructure was completed in 2017.
The initial model lot sales with NVR began in May 2017 and all lot
sales of varying types as outlined in the chart set forth above are
continuing through the first quarter of 2018. In the fourth quarter
of 2017 all improvement plans and cost estimates were approved for
Phases 2A, 2B, 2C and 2D. Phase 2B is the next phase of lot
takedowns for NVR. Phase 2B plat recordation and final construction
began in March of 2018. Lot sales to NVR also began in March of
2018. Phases 2A and 2C plat recordation and construction began in
June of 2018 and were completed in December 2018 Phase 2D
construction began in September 2018 and was completed in June
2019. Phase 3A construction began in June 2020 and NVR is currently
building in this Phase. Phase 3B construction began in August 2020
and was completed in December 2020. The Clubhouse and pool began
construction in Fall 2019 and was completed in June
2020.
Sale of Residential Lots
The 479 Residential Lots were contracted for sale under a Lot
Purchase Agreement to NVR, a company based in the US and listed on
the New York Stock Exchange. NVR is a home builder which is engaged
in the construction and sale of single-family detached homes,
townhouses and condominium buildings. It also operates a mortgage
banking and title services business. Under the Lot Purchase
Agreements, NVR provided Alset EHome with an upfront deposit
of $5.6 million and has agreed to purchase the lots at a range
of prices. The lot types and quantities to be sold to NVR under the
Lot Purchase Agreements include the following:
|
Lot Type
|
Quantity
|
|
Single
Family Detached Large
|
85
|
|
Single
Family Detached Small
|
89
|
|
Single
Family Detached Neo Traditional
|
33
|
|
Single
Family Attached 28’ Villa
|
121
|
|
Single
Family Attached 20’ End Unit
|
46
|
|
Single
Family Attached 16’ Internal Unit
|
105
|
|
Total
|
479
|
There are five different types of Lot Purchase Agreements
(“LPAs”), which are essentially the same except for the
price and unit details for each type of lot. Under the LPAs, NVR
shall purchase 30 available lots per quarter. The LPAs provide
several conditions related to preparation of the lots which must be
met so that a lot can be made available for sale to NVR. SeD
Maryland is to provide customary lot preparation including but not
limited to survey, grading, utilities installation, paving, and
other infrastructure and engineering. In the event NVR does not
purchase the lots under the LPAs, SeD Maryland would be entitled to
keep the NVR deposit and terminate the LPAs. Should SeD Maryland
breach the LPAs, it would have to return the remainder of the NVR
deposit that has not already been credited to NVR for any sales of
lots under the LPAs and NVR would be able to seek specific
performance of the LPAs as well as any other rights available at
law or in equity.
The sale of 13 model lots to NVR began in May of 2017. 121 lots
were sold in the year ended December 31, 2020, compared to 123 lots
sold in the year ended December 31, 2019. As of December 31, 2020,
388 lots have been sold to NVR with 91 remaining for the duration
of the project. NVR continues to market and sell
homes.
9
Sale of Lots for the Multi-family Units
In June
2016, SeD Maryland entered into a lot purchase agreement with
Orchard Development Corporation relating to the sale of 210
multifamily units in the Ballenger Run Project for a total purchase
price of $5,250,000, which closed on August 7, 2018.
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. The agreement with
these FFB investors is not subject to amendment by regulatory
agencies and thus our revenue from FFB assessment is not either.
During the years ended December, 2020 and 2019, we recognized
revenue in the amounts of $273,620 and $548,457 from FFB
assessments, respectively.
Wetland Impact Permit
The Ballenger Run project required a joint wetland impact permit,
which requires the review of several state and federal agencies,
including the U.S. Army Corps of Engineers and Maryland Department
of the Environment. The permit is primarily required for Phase 3 of
construction but it also affects a pedestrian trail at the
Ballenger Run project and the multi-family sewer connection. The
U.S. Army Corps of Engineers allowed us to proceed with
construction on Phase 1 but required archeological testing. In
November 2018, the archeological testing was completed with no
further recommendations on Phase 1 of the project. Required
architectural studies on the final phase of development will likely
result in the loss of only one lot, however, we cannot be certain
of future reviews and their impact on the project.
The U.S. Army Corps of Engineers and
Maryland Department of the Environment permits were issued in June
2019. A modification to the permit for a temporary stream crossing
was also issued in October 2019 allowing for the commencement of
construction on Phase 3.
K-6 Grade School Site
In connection with getting the necessary approvals for the
Ballenger Project, we agreed to transfer thirty acres of land that
abuts the development for the construction of a local K-6 grade
school. We will not be involved in the construction of such
school.
Home Incubation Project
Recognizing that large land sub-division projects have a longer
time horizon, we previously introduced a home incubation initiative
to market completed U.S. single-family homes, with existing
tenants, to investors in Asia. Under this project, we purchased 27
homes, mostly located in Texas. We sold 24 of the homes by the end
of 2016, an additional two in 2017 and the last one in December of
2019.
Competition
There are a number of companies engaged in the development of land.
Should we expand our operations into the business of constructing
homes ourselves, we will face increased competition, including
competition from large, established and well-financed companies,
some of which may have considerable ties and experience in the
geographical areas in which we seek to operate. Similarly, as we
consider other opportunities, we may wish to pursue in addition to
our current land development business, we anticipate that we will
face experienced competitors.
We will compete in part on the basis of the skill, experience and
innovative nature of our management team, and their track record of
success in diverse industries.
10
Item
1A. Risk
Factors.
An investment in our common stock involves a high degree of risk.
You should carefully consider the risks described below and the
other information in this report before making a decision to invest
in our common stock. If any of the following risks and
uncertainties develop into actual events, our business, results of
operations and financial condition could be adversely affected. In
those cases, the trading price of our common stock could decline
and you may lose all or part of your investment.
Risks Related to Our Company
Management has identified a material
weakness in the design and effectiveness of our internal
controls, which, if not remediated, could affect the
accuracy and timeliness of our financial reporting and result in
misstatements in our financial statements.
In connection with the preparation of our Report on Form 10-K, an
evaluation was carried out by management, with the participation of
our Co-Chief Executive Officers and Co-Chief Financial Officers, of
the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (the “Exchange Act”) as of
December 31, 2020. Disclosure controls and procedures are designed
to ensure that information required to be disclosed in reports
filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified, and that
such information is accumulated and communicated to management,
including the Co-Chief Executive Officers and Co-Chief Financial
Officers, to allow timely decisions regarding required
disclosure.
During evaluation of disclosure controls and procedures as of
December 31, 2020, conducted as part of our annual audit and
preparation of our annual financial statements, management
conducted an evaluation of the effectiveness of the design and
operations of our disclosure controls and procedures and concluded
that our disclosure controls and procedures were not effective.
Management determined that at December 31, 2020, we had a material
weakness that relates to the relatively small number of staff who
have bookkeeping and accounting experience. This limited number of
staff prevents us from segregating duties within our internal
control system.
This
material weakness, which remained unremedied by the company as of
December 31, 2020, could result in a misstatement to the accounts
and disclosures that would result in a material misstatement to our
annual or interim consolidated financial statements that would not
be prevented or detected. If we do not remediate the material
weakness or if other material weaknesses are identified in the
future, we may be unable to report our financial results accurately
or to report them on a timely basis, which could result in the loss
of investor confidence and have a material adverse effect on our
stock price as well as our ability to access capital and lending
markets.
We will need additional capital to expand our current operations or
to enter into new fields of operations.
Both the expansion of our current land development operations into
new geographic areas and the proposed expansion of the Company into
new businesses in the real estate industry will require additional
capital. We will need to seek additional financing either through
borrowing, private offerings of our securities or through strategic
partnerships and other arrangements with corporate partners. We
cannot be assured that additional financing will be available to
us, or if available, will be available to us on terms favorable to
us. If adequate additional financing is not available on acceptable
terms, we may not be able to implement our business development
plan or expand our operations.
We must retain key personnel for the success of our
business.
Our success is highly dependent on the skills and knowledge of our
management team, including their knowledge of our projects and
network of relationships. If we are unable to retain the members of
such team, or adequate substitutes, this could have a material
adverse effect on our business and financial
condition.
11
If we fail to effectively manage our growth our future business
results could be harmed and our managerial and operational
resources may be strained.
As we proceed with the expansion of our operations, we expect to
experience significant and rapid growth in the scope and complexity
of our business. We will need to hire additional personnel in order
to successfully advance our operations. This growth is likely to
place a strain on our management and operational resources. The
failure to develop and implement effective systems, or to hire and
retain sufficient personnel for the performance of all of the
functions necessary to effectively service and manage our potential
business, or the failure to manage growth effectively, could have a
materially adverse effect on our business and financial
condition.
There are risks related to conflicts of interest with our partners
in the Ballenger Run Project.
The Company owns the Ballenger Run Project with another LLC member.
This entity is controlled, however, by the Company not only through
the Company’s majority voting interest in such project, but
also through the control of the entity responsible for such
project’s day-to-day operations. The project will be
dependent upon SeD Development Management LLC, a subsidiary of
Alset EHome, for the services required for its operations. The
Company’s control of both the voting control of this project
as well as the control of the entity responsible for the day-to-day
interests of the project could create conflicts of interest between
our Company and our partner in the project. SeD Maryland, the owner
of the project, has no employees, and this project will be
dependent upon SeD Development Management LLC and its affiliates
for the services required for its operations.
The terms of the Management Agreement between SeD Maryland and SeD
Development Management LLC were not negotiated at
arm’s-length, although it was adopted by CNQC, the other
member. Pursuant to the Management Agreement, the owners of SeD
Maryland, SeD Ballenger and CNQC, have delegated the day-to-day
operations of developing Ballenger Run to SeD Development
Management, LLC.
Despite this delegation, potential conflict between CNQC and SeD
Development Management, LLC regarding the management of day-to-day
operations of Ballenger Run could undermine our ability to
effectively implement our vision for these projects, and could
result in costly and time-consuming litigation.
Members of our management may face competing demands relating to
their time, and this may cause our operating results to
suffer.
Fai H. Chan, one of our Co-Chief Executive Officers, is both an
officer and director of Alset International, the entity which owns
SeD Intelligent Home Inc., our majority shareholder. Mr Chan is
also the Chairman and Chief Executive Officer of Alset EHome
International Inc., a Nasdaq listed company that owns the majority
of Alset International. Mr. Chan is involved in a number of other
projects other than our Company’s real estate business and
will continue to be so involved. Moe T. Chan, our other Co-Chief
Executive Officer, is both an officer and director of Alset
International and will also be involved in projects other than our
Company’s real estate business. Both of our Co-Chief
Executive Officers have their primarily residences and business
offices in Asia, and accordingly, there will be limits on how often
they are able to visit the locations of our real estate projects.
Similarly, our Co-Chief Financial Officers are both engaged in
non-real estate activities of Alset International and Alset EHome
International Inc., and only one of our Co-Chief Financial Officers
resides and works in the United States (at an office located in
Bethesda, MD).
Since some members of our board of directors are not residents of
the United States, shareholders may not be able to enforce a U.S.
judgment for claims brought against such directors.
Several members of our senior management team, including our
Co-Chief Executive Officers, have their primary residences and
business offices in Asia, and some portion of the assets of these
directors are located outside the United States. As a result, it
may be more difficult for shareholders to enforce a lawsuit within
the United States against these non-U.S. residents than if they
were residents of the United States. Also, it may be more difficult
for shareholders to enforce any judgment obtained in the United
States against the assets of our non-U.S. resident management
located outside the United States than if these assets were located
within the United States. A foreign court may not enforce
liabilities predicated on U.S. federal securities laws in original
actions commenced in certain foreign jurisdictions, or judgments of
U.S. courts obtained in actions based upon the civil liability
provisions of U.S. federal securities laws.
12
Concentration of ownership of our common stock by our majority
shareholder will limit other investors from influencing significant
corporate decisions.
Our majority shareholder will be able to make decisions such as (i)
making amendments to our certificate of incorporation and by-laws,
(ii) whether to issue additional shares of common stock and
preferred stock, (iii) employment decisions, including compensation
arrangements, (iv) whether to enter into material transactions with
related parties, (v) election and removal of directors and (vi) any
merger or other significant corporate transactions. The interests
of our majority shareholder may not coincide with the interests of
other shareholders.
Our relationship with our majority shareholder and its parent and
affiliates may be on terms which are perceived by investors as more
or less favorable than those that could be obtained from third
parties.
Our majority shareholder, SeD Intelligent Home Inc., presently owns
99.99% of our issued and outstanding common stock. While we
anticipate that such percentage will be diluted over time, our
majority shareholder, its parent and affiliates will be perceived
as having influence over our management and operations, and any
loans or other agreements which we may enter into with our majority
shareholder and its parent and affiliates may be perceived by
investors as being on terms that are less favorable than we could
otherwise receive; such perception could adversely impact the price
of our common stock. Similarly, such agreements could be perceived
as being on terms more favorable than those that could be obtained
from third parties, and any unwillingness by our majority
shareholder and its parent and affiliates to engage with our common
stock could discourage investors.
Risks Relating to the Real Estate Industry
The market for real estate is subject to fluctuations that may
impact the value of the land or housing inventory that we hold,
which may impact the price of our common stock.
Investors should be aware that the value of any real estate we own
may fluctuate from time to time in connection with broader market
conditions and regulatory issues which we cannot predict or
control, including interest rates, the availability of credit, the
tax benefits of homeownership and wage growth, unemployment and
demographic trends in the regions in which we conduct business.
Should the price of real estate decline in the areas in which we
have purchased land, the price at which we will be able to sell
lots to home builders, or if we build houses, the price at which
can sell such houses to buyers, will decline.
The coronavirus or other adverse public health developments could
have a material and adverse effect on our business operations,
financial condition and results of operations.
In
December 2019, a novel strain of coronavirus was first identified
in Wuhan, Hubei Province, China, and has since spread to a number
of other countries, including the United States. The coronavirus,
or other adverse public health developments, could have a material
and adverse effect on our business operations. The
coronavirus’ far-reaching impact on the global economy could
negatively affect various aspects of our business, including demand
for real estate. In addition, the coronavirus could directly impact
the ability of our staff and contractors to continue to work, and
our ability to conduct our operations in a prompt and efficient
manner. The coronavirus may adversely impact the timeliness of
local government in granting required approvals. Accordingly,
the coronavirus may cause the completion of important stages in our
projects to be delayed. The extent to which the coronavirus
may impact our business will depend on future developments, which
are highly uncertain and cannot be predicted. For more information on this matter, see
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations- Financial Impact of the
COVID-19 Pandemic.”
The regulation of mortgages could adversely impact home
buyers’ willingness to buy new homes which we may be involved
in building and selling.
If we become active in the construction and sale of homes to
customers, the ability of home buyers to get mortgages could have
an impact on our sales, as we anticipate that the majority of home
buyers will be financed through mortgage financing.
13
An increase in interest rates will cause a decrease in the
willingness of buyers to purchase land for building homes and
completed homes.
An increase in interest rates will likely impact sales, reducing
both the number of homes and lots we can sell and the price at
which we can sell them.
Our business, results of operations and financial condition could
be adversely impacted by significant inflation or
deflation.
Significant inflation could have an adverse impact on us by
increasing the costs of land, materials and labor. We may not be
able to offset cost increases caused by inflation. In addition, our
costs of capital, as well as those of our future business partners,
may increase in the event of inflation, which may cause us to need
to cancel projects. Significant deflation could cause the value of
our inventories of land or homes to decline, which could sharply
impact our profits.
New environmental regulations could create new costs for our land
development business, and other business in which we may commence
operations.
At the present time, we are subjected to a number of environmental
regulations. If we expand into the business of building homes
ourselves, we will be subjected to an increasing number of
environmental regulations. The number and complexity of local,
state and federal regulations may increase over time. Additional
environmental regulations can add expenses to our existing
business, and to businesses which we may enter into the future,
which may reduce our profits.
Zoning and land use regulations impacting the land development and
homebuilding industries may limit our activities and increase our
expenses, which would adversely affect our profits.
We must comply with zoning and land use regulations impacting the
land development and home building industries. We will need to
obtain the approval of various government agencies to expand our
operations as currently into new areas and to commence the building
of homes. Our ability to gain the necessary approvals is not
certain, and the expense and timing of approval processes may
increase in ways that adversely impact our profits.
The availability and cost of skilled workers in the building trades
may impact the timing and profitability of projects that we
participate in.
Should there be a lack of skilled workers to be retained by our
Company and its partners, the ability to complete land development
and potential construction projects may be delayed.
Shortages in required materials could impact the profitability of
construction partnerships we may participate in.
Should a shortage of required materials occur, such shortage could
cause added expense and delays that will undermine our
profits.
Our ability to have a positive relationship with local communities
could impact our profits.
Should we develop a poor relationship with the communities in which
we will operate, such relationship will impact our
profits.
We may face litigation in connection with either our current
activities or activities which we may conduct in the
future.
As we expand our activities, the likelihood of litigation shall
increase. The expenses of such litigation may be substantial. We
may be exposed to litigation for environmental, health, safety,
breach of contract, defective title, construction defects, home
warranty and other matters. Such litigation could include expensive
class action matters. We could be responsible for matters assigned
to subcontractors, which could be both expensive and difficult to
predict.
14
As we expand operations, we will incur greater insurance costs and
likelihood of uninsured losses.
If we expand our operations into home building, we may experience
material losses for personal injuries and damage to property in
excess of insurance limits. In addition, our premiums may
raise.
Health and safety incidents that occur in connection with our
potential expansion into the home building business could be
costly.
If we commence operations in the homebuilding business, we will be
exposed to the danger of health and safety risks to our employees
and contractors. Health and safety incidents could result in the
loss of the services of valued employees and contractors and expose
us to significant litigation and fines. Insurance may not cover, or
may be insufficient to cover, such losses.
Adverse weather conditions, natural disasters and man-made
disasters may delay our projects or cause additional
expenses.
The land development operations which we currently conduct and the
construction projects which we may become involved in at a later
date may be adversely impacted by unexpected weather and natural
disasters, including but not limited to storms, hurricanes,
tornados, floods, blizzards, fires or earthquakes. Man-made
disasters including terrorist attacks, electrical outages and
cyber-security incidents may also impact the costs and timing of
the completion of our projects. Cyber-security incidents, including
those that result in the loss of financial or other personal data,
could expose us to litigation and reputational damage. If insurance
is unavailable to us on acceptable terms, or if our insurance is
not adequate to cover business interruptions and losses from the
conditions described above and similar incidents, or results of
operations will be adversely affected. In addition, damage to new
homes caused by these conditions may cause our insurance costs to
increase.
We have a concentration of revenue and credit risk with one
customer.
We have been highly dependent on sales of residential lots to NVR.
Pursuant to agreements between NVR and SeD Maryland Development,
LLC, NVR will be the sole purchaser of 479 residential lots at our
Ballenger Project. During 2019 and 2020, we received $15.9 million
and $15.4 million in revenue from lot sales to NVR, respectively.
Therefore, at the present time, a significant portion of our
business depends largely on NVR’s continued relationship with
us. A decision by NVR to discontinue or limit its relationship with
us could have a material adverse impact on the
Company.
Risks Associated with Real Estate Related Debt and Other
Investments
Any real estate debt security that we originate or purchase is
subject to the risks of delinquency and foreclosure.
We may originate and purchase real estate debt securities, which
are subject to numerous risks including delinquency and
foreclosure. We will not have recourse to the personal assets of
our tenants. The ability of a lessee to pay rent depends primarily
upon the successful operation of the property, rather than upon the
existence of independent income or assets of the
tenant.
Any hedging strategies we utilize may not be successful in
mitigating our risks.
We may enter into hedging transactions to manage, for example, the
risk of interest rate or price changes. To the extent that we may
occasionally use derivative financial instruments, we will be
exposed to credit, basis and legal enforceability risks. Derivative
financial instruments may include interest rate swap contracts,
interest rate cap or floor contracts, futures or forward contracts,
options or repurchase agreements. In this context, credit risk is
the failure of the counterparty to perform under the terms of the
derivative contract. If the fair value of a derivative contract is
positive, the counterparty owes us, which creates credit risk for
us. Basis risk occurs when the index upon which the contract is
based is more or less variable than the index upon which the hedged
asset or liability is based, thereby making the hedge less
effective. Finally, legal enforceability risks encompass general
contractual risks, including the risk that the counterparty will
breach the terms of, or fail to perform its obligations under, the
derivative contract. We may not be able to manage these risks
effectively.
15
Risks Related to Our Potential Expansion into New Fields of
Operations
If we pursue the development of new technologies, we will be
required to respond to rapidly changing technology and customer
demands.
In the event that the Company enters the business of developing
“Smart Home” and similar technologies (an area which we
are presently exploring), the future success of such operation will
depend on our ability to adapt to technological advances,
anticipate customer demands and develop new products. We may
experience technical or other difficulties that could delay or
prevent the development, introduction or marketing of products.
Also, we may not be able to adapt new or enhanced services to
emerging industry standards, and our new products may not be
favorably received.
Risks Related to Our Common Stock
The shares of our common stock are currently not being traded and
there can be no assurance that there will be an active market in
the future.
Our shares of common stock are not publicly traded, and if trading
commences, the price may not reflect our value. There can be no
assurance that there will be an active market for our shares of
common stock in the future. As a result, investors may not be able
to liquidate their investment or liquidate it at a price that
reflects the value of the business.
It is possible that we will not establish an active market unless
our stock is listed for trading on an exchange, and we cannot
assure shareholders that we will ever satisfy exchange listing
requirements.
It is possible that a significant trading market for our shares
will not develop unless the shares are listed for trading on a
national exchange. Exchange listing would require us to satisfy a
number of tests as to corporate governance, public float,
shareholders, equity, assets, market makers and other matters, some
of which we do not currently meet. We cannot assure shareholders
that we will ever satisfy listing requirements for a national
exchange or that there ever will be significant liquidity in our
shares.
If we issue additional shares of our common stock, shareholders
will experience dilution of their ownership interest.
We may issue shares of our authorized but unissued equity
securities in the future. Such shares may be issued in connection
with raising capital, acquiring assets or firing or retaining
employees or consultants. If we issue such shares,
shareholders’ ownership will be diluted.
We do not intend to pay dividends in the foreseeable future, and
investors should not purchase our stock expecting to receive
dividends.
We have not paid any dividends on our common stock in the past, and
we do not anticipate that we will pay dividends in the foreseeable
future. Accordingly, some investors may decline to invest in our
common stock, and this may reduce the liquidity of our
stock.
The limitations on liability for officers, directors and employees
under the laws of the State of Nevada and the existence of
indemnification rights for our officers, directors and employees
could result in substantial expenditures by the Company and could
discourage lawsuits against our officers, directors and
employees.
Our Articles of Incorporation contain a specific provision that
eliminates the liability of our officers and directors for monetary
damages to our company and shareholders. Further, we intend to
provide indemnification to our officers and directors to the
fullest extent permitted by the laws of the State of Nevada. We may
also enter into employment and other agreements in the future
pursuant to which we will have indemnification obligations. The
foregoing indemnification obligations could result in the Company
incurring substantial expenditures to cover the cost of settlement
or damage awards against officers and directors. These obligations
may discourage the filing of derivative litigation by our
shareholders against our officers and directors even where such
litigation may be perceived as beneficial by our
shareholders.
16
Item
1B. Unresolved Staff
Comments.
Not Applicable.
Item
2. Properties.
Black Oak
The
Black Oak property is located in Montgomery County in Magnolia,
Texas. This property is located east of FM 2978 via Standard Road
to Dry Creek Road and South of the Woodlands, one of the most
successful, fastest growing master planned communities in Texas.
This residential land development consisted of approximately 162
acres. On January 13, 2021, 150 CCM Black Oak, Ltd. purchased
an approximately 6.297 acre tract of land in Montgomery County. The
Company’s strategic acquisition contiguous to the Black Oak
project is intended to provide additional lot yield, potential
additional amenities and/or a solar farm to support the
Company’s sustainable, healthy living concept. Together with
the additional tract of land there are approximately 648 lots to be
platted for the Company’s future endeavors. This does not
include the 124 lots sold to Rausch Coleman in Phase I.
150 CCM Black Oak Ltd is the primary developer responsible for all
infrastructure development. This property is included in Harris
County Improvement District #17.
Ballenger Run
Ballenger Run is a residential land development project located in
Frederick County in Frederick, Maryland. This property is located
approximately 40 miles from Washington, DC, 50 miles from Baltimore
and is located less than four miles from I-70 and I-270. Ballenger
Run is situated on approximately 197 acres of land and entitled for
689 residential units consisting of 479 residential Lots and 210
multi-family units. SeD Maryland Development, LLC is the primary
developer responsible for all infrastructure
development.
Development of Properties
At the present time, the Company is considering expanding its
current policy of selling buildable lots to include a strategy of
building housing for sale or rent, particularly at our Black Oak
property.
Office Space
At the present time, the Company is renting offices in Houston,
Texas and Bethesda, Maryland through Alset EHome. At the present
time, our office space is sufficient for our operations as
presently conducted, however, as we expand into new projects and
into new areas of operations, we anticipate that we will require
additional office space.
Item
3. Legal
Proceedings.
The Company is not a party to any pending legal proceedings, and no
such proceedings are known to be contemplated.
There are no material proceedings to which any director, officer or
affiliate of the Company, or any owner of record or beneficially of
more than five percent of any class of voting securities of the
Company, or any associate of any such director, officer, affiliate
of the Company, or security holder is a party adverse to the
Company or any of its subsidiaries or has a material interest
adverse to the Company or any of its subsidiaries.
Item
4. Mine Safety
Disclosures
Not applicable.
17
PART II
Item
5. Market for Company’s
Common Equity, Related Stockholder Matters and Small Business
Issuer Purchases of Equity Securities
Market Information
There is presently no established public trading market for our
shares of common stock. We plan to reapply for quoting of our
common stock on the OTC Bulletin Board. However, we can provide no
assurance that our shares of common stock will be quoted on
the Bulletin Board or, if traded, that a public market will
materialize. In connection with the change of the Company’s
name from Homeownusa to SeD Intelligent Home Inc., the
Company’s symbol changed from HMUS to SEDH on December 13,
2017. On July 7, 2020 the Company changed its name to LiquidValue
Development Inc., changing at the same time the symbol to
LVDW.
Holders
As of March 22, 2021, the Company had 53 shareholders.
Dividends
Since inception we have not paid any dividends on our common stock.
We currently do not anticipate paying any cash dividends in the
foreseeable future on our common stock. Although we intend to
retain our earnings, if any, to finance the exploration and growth
of our business, our board of directors will have the discretion to
declare and pay dividends in the future. Payment of dividends in
the future will depend upon our earnings, capital requirements, and
other factors, which our board of directors may deem
relevant.
Securities authorized for issuance under equity compensation
plans.
The Company does not have securities authorized for issuance under
any equity compensation plans
Performance graph
Not applicable to smaller reporting companies.
Recent sales of unregistered securities; use of proceeds from
registered securities
On December 29, 2017, we issued 630,000,000 shares of our Common
Stock to SeD Intelligent Home Inc., the sole shareholder of Alset
EHome, in exchange for all 500,000,000 of the issued and
outstanding shares of Alset EHome. Such securities were not
registered under the Securities Act of 1933 and were issued
pursuant to the exemption under Section 4(2) of the Securities
Act.
Purchases of Equity Securities by the issuer and affiliated
purchasers
The Company did not repurchase any shares of the Company’s
common stock during 2020.
Item 6. Selected Financial
Data.
Not applicable to smaller reporting companies
18
Item
7. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
This Form 10-K contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. For this purpose, any statements contained in this Form 10-K
that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, words
such as “may”, “will”,
“expect”, “believe”,
“anticipate”, “estimate” or
“continue” or comparable terminology are intended to
identify forward-looking statements. These statements by their
nature involve substantial risks and uncertainties, and actual
results may differ materially depending on a variety of factors,
many of which are not within our control. These factors include by
are not limited to economic conditions generally and in the
industries in which we may participate; competition within our
chosen industry, including competition from much larger
competitors; technological advances and failure to successfully
develop business relationships.
Results of Operations
Results of Operations for the Year Ended December 31, 2020 Compared
to the Year Ended December 31, 2019
|
|
Year
Ended
|
|
|
|
December
31,
2020
|
December
31,
2019
|
|
|
|
|
|
Revenue
|
$15,656,829
|
$22,855,445
|
|
Cost of
Sales
|
$14,326,252
|
$20,364,293
|
|
General and
Administrative
|
$1,185,368
|
$861,645
|
|
Impairment of Real
Estate
|
$-
|
$5,920,599
|
|
Net Income
(Loss)
|
$220,189
|
$(4,674,119)
|
Revenue
Revenue was $15,656,829 for the period ended December 31, 2020 as
compared to $22,855,445 for the period ended December 31, 2019. The
increased revenue in year 2019 is primarily attributable to the
Company having first sale of a section of Black Oak
Project. Pursuant to a lot
purchase agreement dated July 3, 2018, 150 CCM Black Oak Ltd sold
124 lots located in the Company’s Black Oak to Houston LD,
LLC for a total purchase price of $6,175,000. As for our Ballenger Project,
builders are required to purchase a minimum number of lots based on
their applicable sale agreements. We collect revenue only from the
sale of lots to builders. We are not involved in the construction
of homes at the present time. The
revenue from the sale of lots in our Ballenger project was similar
in both years, 2019 and 2020.
Income
from the sale of Front Foot Benefits (“FFBs”), assessed
on Ballenger Run project lots, decreased from $548,457 in the year
ended December 31, 2019 to $273,620 in year ended December 31,
2020. The decrease is a mixed result of the decreased sale of
properties to homebuyers in 2020 and sale of FFBs of a smaller
value.
Operating Expenses
Cost of sales decreased from $20,364,293 in the period ended
December 31, 2019 to $14,326,252 in the period ended December 31,
2020. The Company had a gross margin of 8.5% in 2020 compared to
10.9% in 2019.
The general and administrative expenses increased from $861,645 for
the period ended December 31, 2019 to $1,185,368 for the period
ended December 31, 2020 due to an increase in professional
fees.
We recorded approximately $5.9 million impairment of real estate
for Black Oak project in 2019 based on discounted estimated future
cash flows.
19
Net Loss
After a net loss of $4,674,119 for the period ended December 31,
2019, we had a net income of $220,189 for the period ended on
December 31, 2020. The loss in 2019 is a result of impairment of
Black Oak sale to Houston LD LLC.
Liquidity and Capital Resources
Our real estate assets have decreased to $20,616,237 as of December
31, 2020 from $24,858,569 as of December 31, 2019. This decrease
primarily reflects a higher increase in the cost of sales than in
the capitalized costs related to the construction in progress. Our
liabilities declined from $4,065,484 at December 31, 2019 to
$2,691,098 at December 31, 2020. Our total assets have decreased to
$29,219,785 as of December 31, 2020 from $30,785,232 as of December
31, 2019.
As of December 31, 2020, we had cash in the amount of $2,375,180,
compared to $1,083,329 as of December 31, 2019. Our Ballenger Run
revolver loan balance from M&T Bank was $0 at December 31, 2020
and 2019.
Currently the Black Oak project does not have any financing from
third parties. On July 20, 2018, Black Oak was reimbursed
$4,592,079 from the Harris County Improvement District 17
(“HC17”) for previous expenses incurred by Black Oak in
the development and installation of infrastructure within the Black
Oak project. The future development
timeline of Black Oak is based on multiple limiting conditions,
including the amount of funds which may be raised from capital
markets, the loans from third party financial institutions, and
government reimbursements which may be received. The development
will be step by step and expenses will be contingent on the amount
of funding we will receive.
Summary of Cash Flows
A summary of cash flows from operating, investing and financing
activities for the years ended December 31, 2020 and 2019 are as
follows:
|
|
2020
|
2019
|
|
|
|
|
|
Net
Cash Provided by Operating Activities
|
$2,434,714
|
$7,586,441
|
|
Net
Cash Used in Investing Activities
|
$(4,181)
|
$-
|
|
Net
Cash Provided by (Used in) Financing Activities
|
$270,842
|
$(6,828,733)
|
|
Net
Increase in Cash
|
$2,701,375
|
$757,708
|
|
Cash
and restricted cash at beginning of the year
|
$5,402,872
|
$4,645,164
|
|
Cash
and restricted cash at end of the year
|
$8,104,247
|
$5,402,872
|
Cash Flows from Operating Activities
Cash flows from operating activities include costs related to
assets which we plan to sell, such as land purchased for
development and resale, and costs related to construction, which
are capitalized in the book. In 2020, cash provided by operating
activities was $2,434,714 compared with 2019, in which the cash
provided was $7,586,441. With the completion of Phase One of our
Black Oak project, development speed was adjusted. The
Company’s development funding conditions and development
costs decreased as well.
Cash Flows from Investing Activities
Cash flows used in investing activities in 2020 include purchases
of office fixture and computer equipment.
Cash Flows from Financing Activities
In 2020 Alset EHome borrowed $664,810 from M&T Bank, incurring
at the same time origination fees of $61,679. During 2020, $14,458
interest incurred on this loan. In the same period, SeD Maryland
Development distributed $411,250 in cash to the minority
shareholder. In 2019 the Company paid back approximately $5.7
million of related party borrowings and paid back $13,899 of Union
Bank loan. Additionally, SeD Maryland Development distributed
approximately $1.1 million in cash to the minority
shareholder.
20
Seasonality
The real estate business is subject to seasonal shifts in costs as
certain work in more likely to be performed at certain times of
year. This may impact the expenses of Alset EHome from time to
time. In addition, should we commence building homes, we are likely
to experience periodic spikes in sales as we commence the sales
process at a particular location.
Off-Balance Sheet Arrangements
As of
December 31, 2020, we did not have any off-balance sheet
arrangements, as defined under applicable SEC rules.
Critical Accounting Policies and Estimates
We have
established various accounting policies under US GAAP. Some of
these policies involve judgments, assumptions and estimates by
management. We base these estimates on historical experience,
available current market information and on various other
assumptions that management believes are reasonable under the
circumstances. Additionally, we evaluate the results of these
estimates on an ongoing basis. We are subject to uncertainties such
as the impact of future events, economic, environmental and
political factors and changes in our business environment.
Accordingly, actual results could differ from these estimates. The
accounting policies that we deem most critical are as
follows:
Revenue Recognition and Cost of Sales
Accounting
Standards Codification ("ASC") 606, Revenue from Contracts with
Customers ("ASC 606"), establishes principles for reporting
information about the nature, amount, timing and uncertainty of
revenue and cash flows arising from the entity's contracts to
provide goods or services to customers. The Company adopted this
new standard on January 1, 2018 under the modified retrospective
method. The adoption did not have a material effect on our
financial statements.
In
accordance with ASC 606, revenue is recognized when a customer
obtains control of promised goods or services. The amount of
revenue recognized reflects the consideration to which we expect to
be entitled to receive in exchange for these goods or services. The
provisions of ASC 606 include a five-step process by which we
determine revenue recognition, depicting the transfer of goods or
services to customers in amounts reflecting the payment to which we
expect to be entitled in exchange for those goods or services. ASC
606 requires us to apply the following steps: (1) identify the
contract with the customer; (2) identify the performance
obligations in the contract; (3) determine the transaction price;
(4) allocate the transaction price to the performance obligations
in the contract; and (5) recognize revenue when, or as, we satisfy
the performance obligation. A detailed breakdown of the five-step
process for the revenue recognition of our Ballenger project, which
was approximately all the revenue of the Company in 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 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.
21
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 on
the balance sheets.
Cost of Sales
Land
acquisition costs are allocated to each lot based on the size of
the lot comparing to the total size of all lots in the project.
Development costs and capitalized interest are allocated to lots
sold based on the total expected development and interest costs of
the completed project and allocating a percentage of those costs
based on the selling price of the sold lot compared to the expected
sales values of all lots in the project.
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.
See following chart for details of the capitalized construction
costs of Ballenger and Black Oak projects as of December 31, 2020
and 2019:
|
|
As of December 31, 2020
|
||
|
|
Ballenger Run
|
Black Oak
|
Total
|
|
|
($)
|
($)
|
($)
|
|
Hard
Construction Costs
|
26,542,028
|
3,647,973
|
30,190,001
|
|
Engineering
|
3,516,161
|
1,885,761
|
5,401,922
|
|
Consultation
|
340,528
|
105,667
|
446,195
|
|
Project
Management
|
3,682,401
|
874,028
|
4,556,429
|
|
Legal
|
359,353
|
235,961
|
595,314
|
|
Taxes
|
1,273,587
|
770,983
|
2,044,570
|
|
Other
Services
|
1,291,447
|
33,091
|
1,324,538
|
|
Impairment
Reserve
|
-
|
(5,920,599)
|
(5,920,599)
|
|
Construction
- Sold Lots
|
(31,979,300)
|
(1,364,805)
|
(33,344,105)
|
|
Total
|
$5,026,205
|
$268,060
|
$5,294,265
|
|
|
|
|
|
|
Capitalized
Finance Costs
|
|
|
$4,945,132
|
|
|
|
|
|
|
Construction
in Progress
|
|
|
$10,239,397
|
22
|
|
As of December 31, 2019
|
||
|
|
Ballenger Run
|
Black Oak
|
Total
|
|
|
($)
|
($)
|
($)
|
|
Hard
Construction Costs
|
18,857,552
|
3,366,525
|
22,224,077
|
|
Engineering
|
2,890,373
|
1,804,034
|
4,694,407
|
|
Consultation
|
330,387
|
105,267
|
435,654
|
|
Project
Management
|
3,042,600
|
800,505
|
3,843,106
|
|
Legal
|
327,011
|
234,106
|
561,117
|
|
Taxes
|
1,092,247
|
556,194
|
1,648,441
|
|
Other
Services
|
488,717
|
29,398
|
518,114
|
|
Impairment
Reserve
|
-
|
(5,920,599)
|
(5,920,599)
|
|
Construction
- Sold Lots
|
(21,713,668)
|
(1,364,805)
|
(23,078,473)
|
|
Total
|
$5,315,220
|
$(389,375)
|
$4,925,845
|
|
|
|
|
|
|
Capitalized
Finance Costs
|
|
|
$6,159,624
|
|
|
|
|
|
|
Construction
in Progress
|
|
|
$11,085,469
|
The Company capitalized interest from related party borrowings of
$0 and $79,662 for the years ended December 31, 2020 and 2019,
respectively. The Company capitalized interest from the third-party
borrowings of $0 and $3,822 for the years ended December 31, 2020
and 2019, respectively. As of December 31, 2020 and 2019, total
capitalized finance related costs were $4,945,132 and $6,159,624,
respectively.
The
Company anticipates that the estimated construction costs (not
including land costs and financing costs) for the final phases of
the Ballenger Run project will be $4,179,000. The expected
completion date for the final phases of the Ballenger Run project
is June of 2022.
The
following table shows the Company’s forecasts of the phases
of the development and costs for each phase of development for the
Black Oak project. Please note that
the following is subject to change based on our single family for
sale and for rent models:
|
Black Oak
|
Estimated Construction Costs
|
Expected Completion Date
|
|
Phase
1
|
$7,080,000 $
|
Completed
|
|
Phase
2
|
$330,671
|
November
2022
|
|
Phase
3
|
$422,331
|
November
2022
|
|
Phase
4
|
$142,788
|
November
2022
|
|
Phase
5
|
$3,293,000
|
April
2022
|
|
Total
|
$11,268,790
|
|
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.
23
When all of these criteria have been met, the property is
classified as “held for sale”. “Real estate held
for sale” only included El Tesoro project, a project owned by
SeD USA, LLC. The last home from El Tesoro project was sold in
December, 2019. As of December 31, 2020, the Company had $0 real
estate held for sale.
In addition to our annual assessment of potential triggering events
in accordance with ASC 360, Impairment Testing: Long- Lived Assets
classified as held and used, 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 the 124 lots.
Pursuant to the Amended and Restated Purchase and Sale Agreement,
the purchase price remained $6,175,000, 150 CCM Black Oak, Ltd. was
required to meet certain closing conditions and the timing for the
closing was extended. On January 18, 2019, the sale of 124 lots in
Magnolia, Texas was completed. 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.
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.
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk
Not applicable to smaller reporting companies.
24
Item 8. Financial Statements
LiquidValue Development Inc. and Subsidiaries
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020 and 2019
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25
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
LiquidValue
Development Inc. and Subsidiaries
Opinion on the Consolidated Financial Statements
We have
audited the accompanying consolidated balance sheet of LiquidValue
Development Inc. and subsidiaries (the Company) as of December 31,
2020, and the related consolidated statements of operations,
stockholders’ equity, and cash flows for the year ended
December 31, 2020, and the related notes (collectively referred to
as the financial statements). In our opinion, the financial
statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2020, and the results of
their operations and their cash flows for the year ended December
31, 2020, in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audit. We are a
public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required
to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the
PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting.
As part of our audit, we are required to obtain an understanding of
internal control over financial reporting, but not for the purpose
of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audit also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audit provides a reasonable basis
for our opinion.
Critical Audit Matters
The
critical audit matters communicated below are matters arising from
the current period audit of the financial statements that were
communicated or required to be communicated to the audit committee
and that: (1) relate to accounts or disclosures that are material
to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the
financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or
disclosures to which they relate.
Valuation of Real Estate Assets
Critical Audit Matter Description
As
discussed in Note 1 to the consolidated financial statements, the
real estate assets balance as of December 31, 2020 was $20.6
million. Real estate assets consist of construction in progress and
land held for development, all of which are stated at cost, unless
the carrying amount is determined not to be recoverable, in which
case asset is written down to its fair value. The Company reviews
each real estate asset on an annual basis or whenever indicators of
impairment exist. Indicators of impairment include, but are not
limited to, significant decreases in local land market values and
selling prices of comparable lands, significant decreases in gross
margins or sales absorption rates, costs significantly in excess of
budget and actual or projected cash flow losses. If there are
indicators of impairment, the Company will perform a fair
value-based impairment analysis to determine if the asset is
impaired.
26
We
identified the assessment of real estate assets for impairment as a
critical audit matter. Specifically, evaluating the Company’s
identification of potential impairment indicators required
subjective auditor judgment. In addition, the significant
assumptions regarding selling prices of comparable land, gross
margins, sales absorption rates, and discount rates used in
management’s impairment analyses required the application of
greater auditor judgment. Changes to these estimates and
assumptions could have a significant impact on the Company’s
impairment analysis.
How the Critical Audit Matter Was Addressed in the
Audit
To test
management’s identification and assessment of the severity of
indicators of impairment of the Company’s real estate assets
owned, our audit procedures included, among other things, assessing
management’s quantitative analyses by testing the underlying
data used by the Company. Our audit procedures also included
evaluating management’s qualitative analyses for completeness
through inquiries outside the accounting function and considering
external market data.
We
involved a specialist to assist in:
●
assessing the
reasonableness of the sales comparable data used in the
company’s fair value-based impairment analysis by comparing
to available market data
●
assessing the
reasonableness of the discount rate used in management’s fair
value calculation by comparing to available market
data.
Additionally,
our procedures performed over land held for future development also
included the consideration of contrary or corroborative evidence of
management’s assertions by obtaining other market data to
evaluate against the Company’s projected gross margin by
project.
|
/s/ Briggs & Veselka Co.
|
|
|
|
|
|
We have
served as the Company’s auditor since 2021.
|
|
|
|
|
|
Houston,
Texas
|
|
|
|
|
|
March
22, 2021
|
|
27
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the
Board of Directors and
Stockholders
of LiquidValue Development Inc.
Opinion on the Consolidated Financial Statements
We have
audited the accompanying consolidated balance sheet of LiquidValue
Development Inc. (the Company) (formerly SeD Intelligent Home Inc.
and Subsidiaries) as of December 31, 2019, and the related
consolidated statement of operations, stockholders’ equity,
and cash flows for the year ended December 31, 2019, and the
related notes (collectively referred to as the consolidated
financial statements). In our opinion, the consolidated financial
statement present fairly, in all material respects, the financial
position of the Company as of December 31, 2019, and the results of
its operations and its cash flows for each of the years ended
December 31, 2019, in conformity with accounting principles
generally accepted in the United States of America.
Basis for Opinion
These
consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements
based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation
of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
/s/
Rosenberg Rich Baker Berman, P.A.
We
served as the Company’s Auditor from 2014 to
2019.
Somerset,
New Jersey
March
30, 2020
28
LiquidValue Development Inc. and
Subsidiaries
Consolidated Balance Sheets
|
|
December 31,
|
December 31,
|
|
|
2020
|
2019
|
|
|
|
|
|
Assets:
|
|
|
|
Real
Estate
|
|
|
|
Construction
in Progress
|
$10,239,397
|
$11,085,469
|
|
Land
Held for Development
|
10,376,840
|
13,773,100
|
|
Total
Real Estate
|
20,616,237
|
24,858,569
|
|
|
|
|
|
Cash
|
2,375,180
|
1,083,329
|
|
Restricted
Cash
|
5,729,067
|
4,319,543
|
|
Accounts
Receivable
|
84,025
|
166,294
|
|
Other
Receivable
|
258,367
|
-
|
|
Related
Party Receivable
|
117,941
|
211,271
|
|
Prepaid
Expenses
|
11,563
|
33,219
|
|
Fixed
Assets, Net
|
3,802
|
2,211
|
|
Deposits
|
23,603
|
23,603
|
|
Operating
Lease Right-Of-Use Asset
|
-
|
87,193
|
|
Total
Assets
|
$29,219,785
|
$30,785,232
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders' Equity:
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
Accounts
Payable and Accrued Expenses
|
$563,843
|
$783,576
|
|
Accrued
Interest - Related Parties
|
228,557
|
324,982
|
|
Builder
Deposits
|
1,262,336
|
2,445,269
|
|
Operating
Lease Liability
|
-
|
91,330
|
|
Note
Payable
|
636,362
|
-
|
|
Income
Tax Payable
|
-
|
420,327
|
|
Total
Liabilities
|
2,691,098
|
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 December 31, 2020 and 2019,
respectively
|
704,043
|
704,043
|
|
Additional
Paid In Capital
|
32,542,720
|
32,542,720
|
|
Accumulated
Deficit
|
(8,632,867)
|
(8,802,076)
|
|
Total
LiquidValue Development Inc. Stockholders' Equity
|
24,613,896
|
24,444,687
|
|
Non-controlling
Interests
|
1,914,791
|
2,275,061
|
|
Total
Stockholders' Equity
|
26,528,687
|
26,719,748
|
|
Total
Liabilities and Stockholders' Equity
|
$29,219,785
|
$30,785,232
|
See accompanying notes to consolidated financial
statements.
29
LiquidValue Development Inc. and
Subsidiaries
Consolidated Statements of Operations
For the Years Ended December 31, 2020 and 2019
|
|
2020
|
2019
|
|
Revenue
|
|
|
|
|
|
|
|
Rental
|
$-
|
$8,730
|
|
Property
|
15,656,829
|
22,846,715
|
|
|
15,656,829
|
22,855,445
|
|
Operating
Expenses
|
|
|
|
Cost
of Sales
|
14,326,252
|
20,364,293
|
|
General
and Administrative
|
1,185,368
|
861,645
|
|
Impairment
of Real Estate
|
-
|
5,920,599
|
|
Total
Operating Expenses
|
15,511,620
|
27,146,537
|
|
|
|
|
|
Income
(Loss) From Operations
|
145,209
|
(4,291,092)
|
|
|
|
|
|
Other
Income
|
|
|
|
Interest
Income
|
13,612
|
41,062
|
|
Other
Income
|
70,990
|
7,299
|
|
Total
Other Income
|
84,602
|
48,361
|
|
|
|
|
|
Net
Income (Loss) Before Income Taxes
|
229,811
|
(4,242,731)
|
|
|
|
|
|
Income
Tax Expense
|
9,622
|
431,388
|
|
|
|
|
|
Net
Income (Loss)
|
220,189
|
(4,674,119)
|
|
|
|
|
|
Net
Income Attributable to Non-controlling Interests
|
50,980
|
456,983
|
|
|
|
|
|
Net
Income (Loss) Attributable to Common Stockholders
|
$169,209
|
$(5,131,102)
|
|
|
|
|
|
Net
Income (Loss) Per Share - Basic and Diluted
|
$0.00
|
$(0.01)
|
|
|
|
|
|
Weighted
Average Common Shares Oustanding - Basic and Diluted
|
704,043,324
|
704,043,324
|
See accompanying notes to consolidated financial
statements.
30
LiquidValue Development Inc. and
Subsidiaries
Consolidated Statements of Stockholders’ Equity
for the Years Ended on December 31, 2020 and 2019
|
|
Common Stock
|
|
|
|
|
|
|
|
|
Shares
|
Par Value $0.001
|
Additional Paid in Capital
|
Accumulated Deficit
|
Total LiquidValue Development Inc. Stockholders'
Equity
|
Non-controlling Interests
|
Total Stockholders Equity
|
|
January 1,
2019
|
704,043,324
|
$704,043
|
$32,542,720
|
$(3,670,974)
|
$29,575,789
|
$2,887,328
|
$32,463,117
|
|
|
|
|
|
|
|
|
|
|
Distribution
to Minority Interest
|
|
|
|
|
|
(1,069,250)
|
(1,069,250)
|
|
|
|
|
|
|
|
|
|
|
Net (Loss)
Income
|
|
|
|
(5,131,102)
|
(5,131,102)
|
456,983
|
(4,674,119)
|
|
|
|
|
|
|
|
|
|
|
December 31,
2019
|
704,043,324
|
704,043
|
32,542,720
|
(8,802,076)
|
24,444,687
|
2,275,061
|
26,719,748
|
|
|
|
|
|
|
|
|
|
|
Distribution
to Minority Interest
|
|
|
|
|
|
(411,250)
|
(411,250)
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
|
|
169,209
|
169,209
|
50,980
|
220,189
|
|
|
|
|
|
|
|
|
|
|
December 31,
2020
|
704,043,324
|
$704,043
|
$32,542,720
|
$(8,632,867)
|
$24,613,896
|
$1,914,791
|
$26,528,687
|
See accompanying notes to consolidated financial
statements.
31
LiquidValue Development Inc. and
Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2020 and 2019
|
|
2020
|
2019
|
|
|
|
|
|
Cash
Flows From Operating Activities
|
|
|
|
Net
Income (Loss)
|
$220,189
|
$(4,674,119)
|
|
Adjustments
to Reconcile Net Income (Loss) to Net Cash Provided by Operating
Activities:
|
|
|
|
Depreciation
|
2,590
|
6,037
|
|
Impairment
of Real Estate
|
-
|
5,920,599
|
|
Amortization
of Debt Discount
|
18,772
|
-
|
|
Amortization
of Right -Of- Use Asset
|
87,193
|
73,872
|
|
PPP
Loan Forgiveness
|
(64,502)
|
-
|
|
Changes
in Operating Assets and Liabilities
|
|
|
|
Real
Estate
|
4,242,332
|
10,580,830
|
|
Accounts
Receivable
|
82,269
|
(53,588)
|
|
Related
Party Receivable
|
93,330
|
(211,271)
|
|
Prepaid
Expenses
|
21,656
|
4,228
|
|
Accounts
Payable and Accrued Expenses
|
(219,733)
|
(944,046)
|
|
Accrued
Interest - Related Parties
|
(96,425)
|
(2,019,245)
|
|
Operating
Lease Liability
|
(91,330)
|
(83,610)
|
|
Builder
Deposits
|
(1,182,933)
|
(1,433,573)
|
|
Income
Tax
|
(678,694)
|
420,327
|
|
Net
Cash Provided by Operating Activities
|
2,434,714
|
7,586,441
|
|
|
|
|
|
Cash
Flows From Investing Activities
|
|
|
|
Purchase
of Fixed Assets
|
(4,181)
|
-
|
|
Net
Cash Used In Investing Activities
|
(4,181)
|
-
|
|
|
|
|
|
Cash
Flows From Financing Activities
|
|
|
|
Borrowing
from Note Payable
|
617,590
|
-
|
|
Repayment
to Note Payable
|
-
|
(13,899)
|
|
Borrowing
from PPP Loan
|
68,502
|
-
|
|
Repayment
to PPP Loan
|
(4,000)
|
-
|
|
Distribution
to Minority Shareholder
|
(411,250)
|
(1,069,250)
|
|
Repayment
to Notes Payable - Related Parties
|
-
|
(5,745,584)
|
|
Net
Cash Provided by (Used In) Financing Activities
|
270,842
|
(6,828,733)
|
|
|
|
|
|
Net
Increase in Cash and Restricted Cash
|
2,701,375
|
757,708
|
|
Cash
and Restricted Cash - Beginning of Year
|
5,402,872
|
4,645,164
|
|
Cash
and Restricted Cash at End of Period
|
$8,104,247
|
$5,402,872
|
|
|
|
|
|
Supplementary
Cash Flow Information
|
|
|
|
Cash
Paid For Interest
|
$19,929
|
$3,822
|
|
Cash
Paid For Taxes
|
$688,316
|
$11,061
|
|
|
|
|
|
Supplemental
Disclosure of Non-Cash Investing and Financing
Activities
|
|
|
|
Amortization
of Debt Discount Capitalized
|
$-
|
$381,823
|
See accompanying notes to consolidated financial
statements.
32
LiquidValue Development Inc. and
Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2020
1.
NATURE
OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature of Operations
LiquidValue Development Inc. (the “Company”),
formerly known as SeD Intelligent Home Inc. and Homeownusa, was
incorporated in the State of Nevada on December 10, 2009. On
December 29, 2017, the Company, acquired Alset EHome Inc.
(“Alset EHome”) by reverse merger. Alset EHome, 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., on July 7, 2020 the name
was changed to Alset iHome Inc. and on December 9, 2020 it was
changed to Alset EHome Inc. Alset EHome 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 Intelligent Home Inc., formerly known as SeD
Home International, Inc., which is wholly – owned by Alset
International Limited (formerly known as Singapore eDevelopment
Limited “Alset International”), 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,
2020
|
|
Attributable
interest as of
December
31,
2019
|
|
|
Alset
EHome 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%
|
|
100%
|
|
|
Alset
Solar Inc.
|
|
Texas
|
|
September
21, 2020
|
|
80%
|
|
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
interests.
As of
December 31, 2020 and 2019, the aggregate noncontrolling interest
was $1,914,791 and $2,275,061, respectively, which are separately
disclosed on the Consolidated Balance Sheets.
33
On
December 29, 2017, the Company, SeD Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of the Company (the
“Merger Sub”), Alset EHome Inc., a Delaware
corporation, and SeD Intelligent Home 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 Alset EHome, with Alset EHome 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 Intelligent Home Inc. was the owner of 100% of the issued and
outstanding common stock of Alset EHome 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 Alset
EHome from SeD Intelligent Home Inc. in exchange for issuing to SeD
Intelligent Home Inc. 630,000,000 shares of the Company’s
common stock. Accordingly, SeD Intelligent Home Inc. remains the
Company’s largest shareholder, and the Company is now the
sole shareholder of Alset EHome. The Agreement and the transactions
contemplated thereby were approved by the Board of Directors of
each of the Company, the Merger Sub, SeD Intelligent Home Inc., and
Alset EHome.
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 earnings
(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 earnings (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, 2020 or 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 December 31, 2020
and 2019.
Restricted Cash
As a
condition to the loan agreement with the Manufacturers and Traders
Trust Company (“M&T Bank”), 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 a
portion of cash proceeds 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, 2020 and 2019, the total balance of these two accounts
was $5,729,067 and $4,229,149, respectively.
34
On July
20, 2018, Black Oak Ltd received $4,592,079 of district
reimbursement for previous construction costs incurred in land
development. Of this amount, $1,650,000 remained on deposit in the
District’s Capital Projects Fund for the benefit of Black Oak
Ltd and to be released upon receipt of the evidence of: (a) the
execution of a purchase agreement between Black Oak Ltd 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 was released to
the Company after presenting the invoices paid for land
development. After releasing funds to the Company, the amount on
deposit was $0 and $90,394 on December 31, 2020 and 2019,
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, 2020 and 2019.
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
$0 and $79,662 for the years
ended December 31, 2020 and 2019, respectively. The Company
capitalized interest from the third-party borrowings of
$0 and $3,822 for the years
ended December 31, 2020 and 2019, 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.
35
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 the 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.
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.
Revenue Recognition
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 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.
36
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.
Sale
of the Front Foot Benefit Assessments
We have
established a front foot benefit (“FFB”) assessment on
all of the NVR lots. 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 revenue from the front
foot benefit assessment is approximately $1 million. To recognize
revenue of FFB assessment, both our and NVR’s performance
obligation have to be satisfied. Our performance obligation is
completed once we complete the construction of water and sewer
facility and close the lot sales with NVR, which inspects these
water and sewer facility prior to close 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
on quarterly basis after NVR closes sales of homes to homeowners.
The agreement with these FFB investors is not subject to amendment
by regulatory agencies and thus our revenue from FFB assessment is
not either. During the years ended on December 31, 2020 and 2019,
we recognized revenue $273,620 and $548,457 from FFB assessment,
respectively.
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 on
the balance sheets.
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.
37
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 2019, 2018, 2017, 2016 and 2015
remain open to examination.
Recent Accounting Pronouncements
In December 2019, the FASB issued Accounting Standard Codification
("ASU") 2019-12, Income Taxes (Topic 740), Simplifying the
Accounting for Income Taxes. ASU 2019-12 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
Statements.
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 adopted ASU 2018-15
effective January 1, 2020. We do not believe that the adoption of
ASU 2018-15 had a material impact on the Company's Consolidated
Financial Statements.
On
February 25, 2016, the FASB released ASU No. 2016-02, Leases (Topic
842) (the ASU 2016-02 Updates). This ASU 2016-02 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.
Based on this standard, the Company recognized new ROU assets and
lease liabilities on its balance sheet for one of our office rental
leases.
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
year ended December 31, 2020, or to our net deferred tax
assets as of December 31, 2020.
2.
CONCENTRATION
OF CREDIT RISK
The
Company 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, 2020 and 2019, uninsured cash
balances were $6,937,716 and $4,558,582, respectively.
38
The
Company had only three customers in the year ended December 31,
2020: 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, Western Utility, the purchaser of the FFBs of Ballenger
project, and a private customer of the historic farmhouse located
in Ballenger Project, which was not included under NVR contract.
During the year ended December 31, 2020, the Company earned
revenues from property sales from these two customers representing
approximately 98% and 2%, respectively. The Company had four
customers in the year ended December 31, 2019: the purchaser for
Ballenger project - NVR, the purchaser of the FFB of Ballenger
project – Western Utility, 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 four
customers representing approximately 70%, 2%, 27% and 1%,
respectively. As of December 31, 2020 and 2019, no accounts
receivable was outstanding from these customers.
3.
PROPERTY
AND EQUIPMENT
Property
and equipment stated at cost, less accumulated depreciation and
amortization, consisted of the following:
|
|
December 31,
2020
|
December 31,
2019
|
|
Computer
Equipment
|
$45,386
|
$41,597
|
|
Furniture
and Fixtures
|
24,785
|
24,393
|
|
|
70,171
|
65,990
|
|
Accumulated
Depreciation
|
(66,369)
|
(63,779)
|
|
Fixed
Assets Net
|
$3,802
|
$2,211
|
Depreciation
expense was $2,590 and $6,037 for the years ended December 31, 2020
and 2019, respectively.
4.
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 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 December 31, 2020 and 2019, there was
$1,262,336 and $2,445,269 outstanding, respectively.
5.
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 3.75% 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.
39
As of
December 31, 2020 and 2019, the principal balances were $0. 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, 2020 and 2019, the outstanding balance of the revolving loan
was $0.
On June 18, 2020, Alset EHome 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 EHome 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 EHome 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.
In 2020 Alset EHome borrowed $664,810 from M&T Bank, incurring
at the same time origination fees of $61,679 which are amortized
over the term of the loan. During 2020, interest $14,458 incurred
on this loan. As of December 31, 2020, the remaining unamortized
debt discount was $42,906.
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 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 ten months
of principal and interest deferred. On November 26, 2020,
$64,502 of this loan was forgiven by the United States Small
Business Administration and $64,502 was recorded as other income.
The remaining balance of $4,000 was paid back in December
2020.
6.
RELATED
PARTY TRANSACTIONS
Loan from SeD Home Limited
Alset
EHome receives advances from SeD Home Limited (an affiliate of
Alset International), to fund development and operation costs. The
advances bear interest at 10% and are payable on demand. As of
December 31, 2020 and 2019, Alset EHome had outstanding principal
due of $0 and $0, respectively and accrued interest of $228,557 and
$228,557, respectively.
Loan to/from SeD Intelligent Home Inc. (f.k.a. SeD Home
International)
The Company receives advances from or loans to SeD Intelligent
Home, the owner of 99.99% of the Company. The advances or the loans
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 advance principal and $96,425 of accrued
advance interest outstanding. On December 31, 2020, SeD Intelligent
Home owed the Company $98,680 in loan principal and $19,261 in
accrued loan interest. During the years ended December 31, 2020 and
2019, the Company earned interest income of $19,261 and $0,
respectively.
40
Management Fees
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 2020 and 2019, which were capitalized as part of Real
Estate on the balance sheet as the services relate to property and
project management. On December 31, 2020 and 2019, the Company owed
this related party $0.
On December 29, 2020, the Company entered into a Management
Services Agreement (the “Management Services
Agreement”) with Alset International, pursuant to which the
Company will pay Alset International a one-time payment of $360,000
for the services of certain Alset International staff members the
Company received in 2020, and will pay Alset International $30,000
per month for services to be provided in 2021. This Management
Services Agreement has a term that ends December 31, 2021, and can
be cancelled by either party on thirty days’ notice. Alset
International will provide the Company with services related to the
development of the Black Oak and Ballenger Run real estate projects
near Houston, Texas and in Frederick, Maryland, respectively, and
the potential development of future real estate projects. During
year ended December 31, 2020 the Company incurred expense of
$360,000 and owned this related party $360,000 as of December 31,
2020.
Advance
to Alset EHome International Inc.
The Company pays some operating
expenses for Alset EHome International 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, 2020 and December 31, 2019, the balance of these advances was
$0 and $211,271, respectively.
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 $12,645 and $38,584 for the years ended December 31, 2020 and
2019, respectively. On December 31, 2020 and December 31, 2019, the
Company owed this related party $0.
7.
SHAREHOLDERS’
EQUITY
Cash Dividend Distributions
From
January to December, 2020, SeD Maryland Development LLC Board
approved three payment distribution plans to members and paid total
of $411,250 in distributions to the minority
shareholder.
From
January to December, 2019, SeD Maryland Development LLC Board
approved five payment distribution plans to members and paid total
of $1,069,250 in distributions to the minority
shareholder.
8.
COMMITMENTS
AND CONTINGENCIES
Leases
The
Company leases office space in Texas and Maryland. Lease of our
Texas office expires in 2021, while lease of our Maryland expires
on December 31, 2020. We signed new office lease in Maryland
starting from January 1, 2021. The monthly rental payments ranged
between $2,265 and $8,143, respectively. Rent expense was $113,651
and $113,884 for the year ended December 31, 2020 and 2019,
respectively. The below table summarizes future payments due under
these leases as of December 31, 2020.
The balance of the operating lease right-of-use asset and operating
lease liability as of December 31, 2020 was $0.
41
Supplemental Cash Flow and Other Information Related to Operating
Leases are as follows:
|
|
Year
Ended
December
31,
2020
|
|
Weighted Average
Remaining Operating Lease Term (in years)
|
0.33
|
The below table summarizes future payments due under these leases
as of December 31, 2020.
For the
Years Ended December 31:
|
2021
|
9,994
|
|
Total
|
$9,994
|
Lot Sale Agreements
On
November 23, 2015, SeD Maryland Development LLC completed the
$15,700,000 acquisition of Ballenger Run, a 197-acre land
sub-division development located in Frederick County, Maryland.
Previously, on May 28, 2014, the RBG Family, LLC entered into a
$15,000,000 assignable real estate sales contract with NVR, by
which RBG Family, LLC would facilitate the sale of the 197 acres of
Ballenger Run to NVR. On December 10, 2015, NVR assigned this
contract to SeD Maryland Development, LLC through execution of an
assignment and assumption agreement and entered into a series of
lot purchase agreements by which NVR would purchase 443 subdivided
residential lots from SeD Maryland Development, LLC. During years
ended December 31, 2020 and 2019, NVR has purchased 121 and 123
lots, respectively.
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 villa lots from 85 to
121.
On July 3, 2018, 150 CCM Black Oak entered into a Purchase and Sale
Agreement with Houston LD, LLC for the sale of 124 lots located at
its Black Oak project. Pursuant to the Purchase and Sale Agreement,
it was agreed that 124 lots would be sold for a range of prices
based on the lot type. In addition, Houston LD, LLC agreed to
contribute a “community enhancement fee” for each lot,
collectively totaling $310,000, which is currently held in escrow.
150 CCM Black Oak will apply these funds exclusively towards an
amenity package on the property. The closing of the transactions
contemplated by the Purchase and Sale Agreement was subject to
Houston LD, LLC completing due diligence to its satisfaction. On
October 12, 2018, 150 CCM Black Oak Ltd entered into an Amended and
Restated Purchase and Sale Agreement (the “Amended and
Restated Purchase and Sale Agreement”) for these 124 lots.
Pursuant to the Amended and Restated Purchase and Sale Agreement,
the purchase price remained $6,175,000, 150 CCM Black Oak Ltd was
required to meet certain closing conditions and the timing for the
closing was extended.
On
January 18, 2019, the sale of 124 lots in Magnolia, Texas was
completed.
42
9.
INCOME
TAXES
The components of income tax expense and the effective tax rates
for the years ended December 31, 2020 and 2019 are as
follows:
|
|
Year Ended December 31,
|
|
|
|
2020
|
2019
|
|
Current:
|
|
|
|
Federal
|
$-
|
$251,266
|
|
State
|
11,633
|
180,122
|
|
Total
Current
|
11,633
|
431,388
|
|
Deferred:
|
|
|
|
Federal
|
(1,316,680)
|
(1,443,564)
|
|
State
|
(563,779)
|
(618,108)
|
|
Total
Deferred
|
(1,880,459)
|
(2,061,672)
|
|
Valuation
Allowance
|
1,880,459
|
2,061,672
|
|
Total
Income Tax Expense
|
$11,633
|
$431,388
|
|
|
|
|
|
Pre-tax
Income (Loss)
|
$229,812
|
$(4,242,731)
|
|
|
|
|
|
Effective
Income Tax Rate
|
5%
|
-10%
|
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,
|
|
|
|
2020
|
2019
|
|
Tax
at the Statutory Federal Rate
|
$126,884
|
$(868,486)
|
|
State
Income Taxes (Net of Federal Benefit)
|
65,962
|
(328,309)
|
|
Changes
in Valuation Allowance, Net
|
(181,213)
|
1,628,183
|
|
Total
Income Tax Expense
|
$11,633
|
$431,388
|
Deferred tax assets (liabilities) consist of the following at
December 31, 2020 and 2019:
|
|
Year Ended December 31,
|
|
|
|
2020
|
2019
|
|
Interest
Income
|
$(5,083,992)
|
$(4,574,401)
|
|
Interest
Expense
|
4,664,342
|
4,327,741
|
|
Depreciation
and Amortization
|
(6,362)
|
(5,802)
|
|
Management
Fee
|
-
|
531,968
|
|
Impairment
|
2,253,228
|
1,924,305
|
|
Accrued
Expense
|
8,895
|
105,175
|
|
Partnership
Gain (Loss)
|
13,175
|
(263,152)
|
|
Others
|
31,173
|
15,838
|
|
Total
|
1,880,459
|
2,061,672
|
|
Valuation
Allowance
|
(1,880,459)
|
(2,061,672)
|
|
Net
Deferred Tax Asset
|
$-
|
$-
|
43
As of
December 31, 2020 and 2019, the Company has Federal and Maryland
State net operating loss carry-forwards of approximately $97,000
and $0, respectively. 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, 2020, the valuation allowance decreased by
$181,213.
As of December 31, 2020, total current tax liability is $11,633,
including federal income tax liability of $0 and Maryland state
income tax liability of $11,633. As of December 31, 2019, total
current tax liability is $420,327, including federal income tax
liability of $251,266 and Maryland state income tax liability of
$169,061. The deferred tax asset cannot be used to offset the
current tax liability.
The
federal income tax returns of the Company are subject to
examination by the IRS, generally for three years after they are
filed.
10.
SUBSEQUENT
EVENTS
Distribution to Minority Shareholders
On
January 11, 2021, 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 $500,000.
Accordingly, the minority member of SeD Maryland Development LLC
received a distribution in the amount of $82,250, with the
remainder being distributed to a subsidiary of the Company, which
is eliminated upon consolidation.
44
Item
9. Changes in and Disagreements
with Accountants on Accounting and Financial
Disclosure.
Not Applicable.
Item
9A. Controls and
Procedures.
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of our Report on Form 10-K, an
evaluation was carried out by management, with the participation of
our Chief Executive Officers and Chief Financial Officers, of the
effectiveness of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934 (Exchange Act) as of December 31, 2020. Disclosure controls
and procedures are designed to ensure that information required to
be disclosed in reports filed or submitted under the Exchange Act
is recorded, processed, summarized and reported within the time
periods specified, and that such information is accumulated and
communicated to management, including the Chief Executive Officers
and Chief Financial Officers, to allow timely decisions regarding
required disclosure.
During evaluation of disclosure controls and procedures as of
December 31, 2020 conducted as part of our annual audit and
preparation of our annual financial statements, management
conducted an evaluation of the effectiveness of the design and
operations of our disclosure controls and procedures and concluded
that our disclosure controls and procedures were ineffective for
those reasons set forth below.
Management’s Report on Internal Control over Financial
Reporting
Management is responsible for the preparation and fair presentation
of the financial statements included in this annual report. The
financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of
America and reflect management’s judgment and estimates
concerning effects of events and transactions that are accounted
for or disclosed.
Management is also responsible for establishing and maintaining
adequate internal control over financial reporting. Our internal
control over financial reporting includes those policies and
procedures that pertain to our ability to record, process,
summarize and report reliable data. Management recognizes that
there are inherent limitations in the effectiveness of any internal
control over financial reporting, including the possibility of
human error and the circumvention or overriding of internal
control. Accordingly, even effective internal control over
financial reporting can provide only reasonable assurance with
respect to financial statement presentation. Further, because of
changes in conditions, the effectiveness of internal control over
financial reporting may vary over time.
In order to ensure that our internal control over financial
reporting is effective, management regularly assesses controls and
did so most recently for its financial reporting as of December 31,
2020. This assessment was based on criteria for effective internal
control over financial reporting described in the Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations (COSO) of the Treadway Commission. In connection
with management’s evaluation of the effectiveness of the
Company’s internal control over financial reporting as of
December 31, 2020, management determined that the Company did not
maintain effective controls over financial reporting due to limited
staff with U.S. GAAP and SEC Reporting experience. Management
determined that the ineffective controls over financial reporting
constitute a material weakness.
This annual report filed on Form 10-K does not include an
attestation report of the Company’s registered public
accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation
by our registered public accounting firm pursuant to temporary
rules of the Securities and Exchange Commission that permit us to
provide only management’s report in this annual
report.
Changes in Internal Control over Financial Reporting
We continue taking steps to enhance and improve the design of our
internal controls over financial reporting. During the period
covered by this Annual Report on Form 10-K, we have not been able
to completely remediate the material weaknesses identified above.
To remediate such weaknesses, we plan to appoint additional
qualified personnel to the audit committee with financial
accounting, GAAP, and SEC experience.
Item
9B. Other
Information.
Not Applicable.
45
PART III
Item 10. Directors, Executive Officers
and Corporate Governance.
Identification of directors and executive officers
On December 31, 2013 Conn Flanigan was appointed as Chief Executive
Officer and Chief Financial Officer of the Company and a member of
our board of directors. On January 10, 2017, our board of directors
appointed Fai H. Chan as Director to hold office until the next
annual meeting of shareholders and until his successor is duly
elected and qualified or until his resignation or removal. On March
10, 2017, Mr. Conn Flanigan resigned as the Chief Financial
Officer. Mr. Flanigan continues to serve as the Secretary of
the Company, and as a member of our board of directors. Effective
as of March 10, 2017, Mr. Rongguo (Ronald) Wei, CPA, was appointed
as Chief Financial Officer of the Company.
In connection with the acquisition of Alset EHome on December 29,
2017, the Company appointed new officers and directors. Fai H. Chan
and Moe T. Chan serve as co-Chief Executive Officers; Rongguo
(Ronald) Wei and Alan W. L. Lui serve as Co-Chief Financial
Officers, and our Board of Directors include Fai H. Chan, Moe T.
Chan, Conn Flanigan and Charles MacKenzie.
The board of directors has no nominating or compensation
committees. The company’s Audit Committee consists of Conn
Flanigan.
The name, age and position of our officers and directors are set
forth below:
|
Name
|
Age
|
Position(s)
|
|
Fai H.
Chan
|
76
|
Co-Chief
Executive Officer and Chairman of the Board of
Directors
|
|
Moe T.
Chan
|
42
|
Co-Chief
Executive Officer and Member of the Board of Directors
|
|
Conn
Flanigan
|
52
|
Secretary
and Member of the Board of Directors
|
|
Charles
MacKenzie
|
50
|
Member
of the Board of Directors
|
|
Rongguo
(Ronald) Wei
|
49
|
Co-Chief
Financial Officer
|
|
Alan W.
L. Lui
|
50
|
Co-Chief
Financial Officer
|
The mailing address for each of the officers and directors named
above is c/o of the Company at: 4800 Montgomery Lane, Suite
210, Bethesda, MD, 20814.
Business Experience
Fai H. Chan. Mr. Chan has served as a member of our Board of
Directors since January 10, 2017 and has served as Co-Chief
Executive Officer of the Company since December 29, 2017. Mr. Chan
is an expert in banking and finance, with 45 years of experience in
these industries. He has also restructured numerous companies in
various industries and countries during the past 40 years. Mr. Chan
has served as the Chief Executive Officer of Alset International
Limited, a diversified holding company listed on the Catalist of
the Singapore Exchange Securities Trading Limited, since April
2014, and has served as a director of that company since May of
2013. Since March, 2018, Mr. Chan has served as a Chairman of the
Board and Chief Executive Officer of Alset EHome International
Inc., a Nasdaq listed company. Additionally, Mr. Chan has served as
a member of the Board of Directors of GigWorld Inc., a technology
company since October of 2014, as Executive Chairman since December
2017 and served as the Acting Chief Executive Officer of GigWorld
Inc. from August 2018 until September 2019, having previously
served as Chief Executive Officer from December of 2014 until June
of 2017. He has served as a director of Document Security Systems,
Inc., an NYSE listed company, since January 2017 and as Chairman of
the Board since March of 2019. Mr. Chan has also served as a
non-executive director of Holista CollTech Ltd., an ASX listed
company, since July 2013 and has served as a director of Vivacitas
Oncology Inc. since May of 2017. Mr. Chan has served as a director
of OptimumBank Holdings, Inc. and Optimum Bank since June 2018. Mr.
Chan has served as a member of the Board of Directors of Sharing
Services Global Corporation since April of 2020.
46
Mr. Chan’s previous experiences include serving as Managing
Chairman of Zensun Enterprises Limited (formerly known as ZH
International Holdings Limited and Heng Fai Enterprises Limited),
an investment holding company listed on the HKSE, from 1992 to
2015. Mr. Chan was formerly the Managing Director of SingHaiyi
Group Ltd., a property development, investment and management
company listed on the Singapore Exchange Mainboard, from March 2003
to September 2013, and the Executive Chairman of China Gas Holdings
Limited, a Hong Kong listed investor and operator of city gas
pipeline infrastructure in China from 1997 to 2002. Mr. Chan served
on the Board of RSI International Systems, Inc., the developer of
RoomKeyPMS, a web-based property management system, from June 2014
to February 2019.
Mr. Chan has also served as a director of Global Medical REIT Inc.,
a healthcare facility real estate company, from December 2013 to
July 2015. He was a director of American Housing REIT Inc. from
October of 2013 to July of 2015. He served as a director of Skywest
Ltd., a public Australian airline company from 2005 to 2006. Mr.
Chan was a director of Global Med Technologies, Inc., a medical
company engaged in the design, development, marketing and support
information for management software products for healthcare-related
facilities, from May 1998 until December 2005.
Director Qualifications of Fai H. Chan:
The board of directors appointed Mr. Chan in recognition of his
abilities to assist the Company in expanding its business and the
contributions he can make to the Company’s strategic
direction.
Moe T.
Chan. Moe Chan was appointed Co-Chief Executive Officer of our
Company and a member of our Board of Directors on December 29,
2017. Moe Chan also serves as the Group Chief Development Officer
and Executive Director of Alset International. Moe Chan is
responsible for Alset International’s international property
development business (including serving as Co-Chief Executive
Officer and a member of the Board of Alset EHome). Moe Chan has
served as a director of Document Security Systems, Inc., a NYSE
listed company, since September 2020. From April 2014 to June 2015
Moe Chan was the Chief Operating Officer of HKSE listed ZH
International Holdings Limited (formerly known as Heng Fai
Enterprises Limited) and was responsible for that company’s
global business operations consisting of REIT ownership and
management, property development, hotels and hospitality, as well
as property and securities investment and trading. Prior to that,
he was an executive director (from March 2006 to February 2014) and
the Chief of Project Development (from April 2013 to February 2014)
of Singapore Exchange Mainboard listed SingHaiyi Group Ltd,
overseeing its property development projects. He was also a
non-executive director of the Toronto Stock Exchange-listed RSI
International Systems Inc., a hotel software company, from July
2007 to August 2016.
Moe T.
Chan has a diverse background and experience in the fields of
property, hospitality, investment, technology and consumer finance.
He holds a Master’s Degree in Business Administration with
honors from the University of Western Ontario, a Master’s
Degree in Electro-Mechanical Engineering with honors and a
Bachelor’s Degree in Applied Science with honors from the
University of British Columbia. Moe Chan is the son of Fai H.
Chan.
Director
Qualifications of Moe T. Chan:
The
board of directors appointed Moe Chan in recognition of his
extensive knowledge of real estate and ability to assist the
Company in expanding its business.
Conn Flanigan. Mr. Flanigan is a member of our Board of Directors
and a practicing attorney specializing in corporate, real estate,
and securities law. Mr. Flanigan is a legal advisor to Alset
International and has served as officer and director to several US
subsidiaries of Alset International. Mr. Flanigan served as the
Secretary and General Counsel for Global Medical REIT Inc.
(NYSE:GMRE) from December 2013 to May 2017. From September 2013 to
May 2017, Mr. Flanigan also served as Chief Executive Officer,
General Counsel and Secretary, and as a director, of American
Housing REIT Inc. Mr. Flanigan served as a member of the Board
Directors of Amarantus Bioscience Holdings, Inc., a biotech
company, from February 2017 until May 2017. Mr. Flanigan served as
a director of GigWorld Inc. from October 2014 until September 2018
and as legal counsel and Secretary from December 2014 until
September 2018. From February 2000 until May 2017, Mr. Flanigan was
employed as General Counsel by subsidiaries of ZH International
Holdings, Ltd., including eBanker USA.com, Inc. and ZH USA,
LLC. In this role, he served as General Counsel and Secretary
for other ZH International Holdings, Ltd.
subsidiaries. Mr. Flanigan received a B.A. in
International Relations from the University of San Diego in 1990
and a Juris Doctor Degree from the University of Denver Sturm
College of Law in 1996.
47
Director Qualifications of Conn Flanigan:
Mr. Flanigan’s service as an officer, director and employee
of various entities has provided him with significant knowledge and
experience regarding corporate financial and governance
matters.
Charles MacKenzie. Mr. MacKenzie has served as a member of the
Company’s Board of Directors since December 29, 2017 and
serves as the Chief Development Officer for SeD Development
Management, a subsidiary of Alset EHome, since July of 2015. Mr.
MacKenzie also has served as a member of the Board of Directors of
Alset EHome since October of 2017 and as Chief Executive Officer
– United States since April 2020. In December 2019 Mr.
MacKenzie was appointed the Chief Development Officer of Alset
EHome International Inc., a Nasdaq listed company. He was
previously the Chief Development Officer for Inter- American
Development (IAD), a subsidiary of Heng Fai Enterprises (now known
as Zensun Enterprises Limited) from April of 2014 to June of 2015.
Mr. MacKenzie was the Founder and President of MacKenzie Equity
Partners, specializing in mixed-use real estate investments as well
as the owner of Smartbox Portable Storage, a residential moving and
storage company from October 2006 to a successful sale in February
2017. Mr. MacKenzie focuses on acquisitions and development of
residential and mixed-use projects within the United States. Mr.
MacKenzie specializes in site selection, contract negotiations,
marketing and feasibility analysis, construction and management
oversight, building design and investor relations. Mr. MacKenzie
has developed over 1,300 residential units inclusive of
single-family homes, multi-family, and senior living dwellings
totaling more than $110M and over 650,000 square feet of commercial
valued at over $100M. Mr. MacKenzie received a BA and graduate
degree from St. Lawrence University where he served on Board of
Trustees from 2003-2007.
Director
Qualifications of Charles MacKenzie:
The
board of directors appointed Charles MacKenzie in recognition of
his extensive knowledge of real estate and ability to assist the
Company in expanding its business.
Rongguo (Ronald) Wei. Mr. Wei has served as the Company’s
Chief Financial Officer since March 10, 2017. Mr. Wei is a finance
professional with more than 15 years of experience working in
public and private corporations in the United States. As the Chief
Financial Officer of SeD Development Management LLC, Mr. Wei is
responsible for oversight of all finance, accounting, reporting,
and taxation activities for that company. Prior to joining SeD
Development Management LLC in August of 2016, Mr. Wei worked for
several different US multinational and private companies including
serving as Controller at American Silk Mill, LLC, a textile
manufacturing and distribution company, from August of 2014 to July
of 2016, serving as a Senior Financial Analyst at Air Products
& Chemicals, Inc., a manufacturing company, from January of
2013 to June of 2014 and serving as a Financial/Accounting Analyst
at First Quality Enterprise, Inc., a personal products company,
from 2011 to 2012. Before Mr. Wei came to United States, he worked
as an equity analyst in Hong Yuan Securities, an investment bank,
in Beijing, China, concentrating on industrial and public company
research and analysis. Mr. Wei is a Certified Public Accountant and
received his Master of Business Administration from the University
of Maryland and a Master of Business Taxation from the University
of Minnesota. Mr. Wei also holds a Master in Business degree from
Tsinghua University and a Bachelor degree from Beihang University.
Mr. Wei served as a member of the Board Directors of Amarantus
Bioscience Holdings, Inc., a biotech company, from February 2017
until May 2017, and has served as Chief Financial Officer of such
company since February, 2017 to November, 2017. Mr. Wei has also
served as Co-Chief Financial Officer of Alset EHome International
Inc., a Nasdaq listed company, since March, 2018.
Alan W. L. Lui. Mr. Lui has served as the Company’s Co-Chief
Financial Officer since December 29, 2017 and has served as the
Co-Chief Financial Officer of Alset EHome since October of 2017.
Mr. Lui has served as Chief Financial Officer of GigWorld Inc., a
technology company since May 12, 2016 and has served as a director
of one of GigWorld’s subsidiaries since July of 2016. Mr. Lui
has been Chief Financial Officer of Alset International, the
Company’s majority shareholder since November 1, 2016 and
served as its Acting Chief Financial Officer since June 22, 2016.
Mr. Lui has served as an Executive Director of Alset International
since July 2020. Since October of 2016, Mr. Lui has also served as
a director of BMI Capital Partners International Ltd, a Hong Kong
investment consulting company. He has also served as a
director of LiquidValue Asset Management Pte Limited (formerly
known as Hengfai Asset Management Pte. Ltd.), a Singapore fund
management company, since April, 2018. Mr. Lui has also served a Co-Chief Financial
Officer of Alset EHome International Inc., a Nasdaq listed company,
since March, 2018. From June of 1997 through March of 2016, Mr. Lui
served in various executive roles at ZH International Holdings Ltd.
(a Hong Kong-listed company formerly known as Heng Fai Enterprises
Ltd), including as Financial Controller. Mr. Lui oversaw the
financial and management reporting and focusing on its financing
operations, treasury investment and management. He has extensive
experience in financial reporting, taxation and financial
consultancy and management in Hong Kong. He also managed all
financial forecasts and planning. Mr. Lui is a Certified Practicing
Accountant in Australia and received a Bachelor’s Degree in
Business Administration from the Hong Kong Baptist University in
1993.
48
Section 16(a) Beneficial Ownership Reporting
Compliance
To our knowledge, no director, officer or beneficial owner of more
than ten percent of any class of our equity securities, failed to
file on a timely basis reports required by Section 16(a) of the
Exchange Act during the fiscal year ended December 31,
2020.
Code of Ethics
We have not yet adopted a code of ethics that applies to our
principal executive officer, principal financial officer, principal
accounting officer or controller or persons performing similar
functions. We intend to adopt a code of ethics in the immediate
future.
Corporate Governance
There have been no changes in any state law or other procedures by
which security holders may recommend nominees to our board of
directors. We do not have a nominating committee, however we intend
to appoint one in the immediate future.
Audit Committee
Our board of directors had an Audit Committee consisting of Mr.
Flanigan. The Audit Committee does not at the present time have an
audit committee financial expert serving on its Audit Committee;
however, our board intends to appoint an audit committee financial
expert in the immediate future.
Family Relationships
Fai H. Chan, our Co-Chief Executive Officer, Chairman of our Board
and Chairman of the Board and Chief Executive Officer of our
majority shareholder and its corporate parent is the father of Moe
T. Chan, our other Co-Chief Executive Officer and a Member of our
Board.
Involvement in Certain Legal Proceedings
None of our directors, executive officers and control persons has
been involved in any of the following events during the past ten
years:
●
Any
bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the
time of the bankruptcy or within two years prior to that
time,
●
Any
conviction in a criminal proceeding or being subject to any pending
criminal proceeding (excluding traffic violations and other minor
offenses);
●
Being
subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his or her involvement in any type
of business, securities or banking activities; or
●
Being
found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended, or vacated.
Conflicts of Interest
Except as provided for in Article XI of the Company’s
By-Laws: Board Director Compensation, no officer, director or
security holder of the company may be involved in pecuniary
interest in any investment acquired or disposed of by the
registrant or in any transaction to which the registrant or any of
its subsidiaries is party or has an interest.
None of the directors, officers, security holders or affiliates of
the registrant may engage, for their own account, business
activities of the types conducted by the registrant and its
subsidiaries.
49
Item 11. Executive
Compensation.
At the present time, neither LiquidValue Development Inc. nor Alset
EHome and its subsidiaries is a party to any compensation
arrangements with any officer or director of either entity and has
made no provisions for paying cash or non-cash compensation to such
officers and directors, except for Charles MacKenzie and Rongguo
(Ronald) Wei. A subsidiary of Alset EHome is paying salaries to
four employees at the present time, which includes Mr. Wei, and has
consulting arrangements with certain individuals, including Mr.
MacKenzie.
In 2020, Mr. Wei was compensated by SeD Development Management LLC
for his services to Alset EHome at a rate of $116,184 per year. Mr.
Wei has been compensated by SeD Development Management LLC since
2016. Mr. Wei was not paid by LiquidValue Development Inc.
prior to its acquisition of Alset EHome. SeD Development Management
LLC will continue to compensate Mr. Wei at the same rate, and he
will perform services for LiquidValue Development Inc. as well as
its subsidiary Alset EHome.
A company controlled by Mr. MacKenzie was paid consulting fees of
approximately $20,000 per month in 2019 and 2020, which includes
payment for his services to Alset EHome and its
subsidiaries.
Mr. Flanigan serves in various director and officer positions with
subsidiaries of Alset International. Mr. Flanigan’s law firm
has been paid legal fees by various subsidiaries of Alset
International in the past, including those fees paid to his
law firm by Alset EHome and its subsidiaries that are described in
Item 13.
Mr. Fai H. Chan is compensated by Alset International, where he
serves as Chief Executive Officer. Mr. Alan Lui is also employed
and compensated by Alset International. Mr. Moe T. Chan served as a
consultant to Alset International and in August of 2020 the
consulting agreement was terminated and he became an employee of
Alset International. As part of their duties as officers or
consultants of Alset International, each of these three individuals
works on a number of matters for Alset International, including
devoting various amounts of time to the management of Alset
International’s various subsidiaries and divisions, such as
LiquidValue Development and Alset EHome. The amount of time each of
these individuals spends on matters related to LiquidValue
Development and Alset EHome has varied greatly based on the
Company’s needs, and no definite statement may be made as to
what percentage of these three individuals’ time has been
spent or will be spent in the future on matters related to
LiquidValue Development and Alset EHome. LiquidValue Development
and Alset EHome and its subsidiaries do not compensate these three
individuals for their services. Neither LiquidValue Development
Inc. nor Alset EHome and its subsidiaries is charged for the
services of Fai H. Chan, Moe T. Chan and Alan Lui. On December 29,
2020, the Company entered into a Management Services Agreement with
Alset International, pursuant to which the Company will pay Alset
International a one-time payment of $360,000 for the services of
certain Alset International staff members the Company received in
2020, and will pay Alset International $30,000 per month for
services to be provided in 2021.
In connection with the acquisition of Alset EHome by LiquidValue
Development Inc., LiquidValue Development Inc. and its subsidiaries
intend to enter into revised compensation agreements with officers,
directors and certain employees in the immediate
future.
The table below summarizes all compensation awarded to, earned by,
or paid to LiquidValue Development Inc.’s named executive
officer for all services rendered in all capacities to us for the
period from January 1, 2019 through December 31, 2020.
50
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
Non-Equity
|
Nonqualified
defered
|
|
|
|
|
|
|
|
Stock
|
Option
|
Incentive
|
Comp
|
All
Other
|
|
|
Name
and Principal Position (1)
|
Year
|
Salary
|
Bonus
|
Awards
|
Awards
|
Plan
Comp
|
Earnings
|
Comp
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Fai H. Chan
(2)
|
2020
|
|
|
|
|
|
|
|
|
|
Chairman of the Board
and Co-Chief Executive Officer
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Moe T. Chan
(2)
|
2020
|
|
|
|
|
|
|
|
|
|
Director and Co-Chief
Executive Officer
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conn
Flanigan
|
2020
|
|
|
|
|
|
|
$12,645(3)
|
$12,645(3)
|
|
Director and Former
Chief Executive Officer
|
2019
|
|
|
|
|
|
|
$38,584(3)
|
$38,584(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Rongguo (Ronald)
Wei
|
2020
|
$118,800
|
|
|
|
|
|
|
$118,800
|
|
Co-Chief Financial
Officer
|
2019
|
$118,800
|
|
|
|
|
|
|
$118,800
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan W. L. Lui
(2)
|
2020
|
|
|
|
|
|
|
|
|
|
Co-Chief Financial
Officer
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles
MacKenzie
|
2020
|
|
|
|
|
|
|
$240,000(4)
|
$240,000(4)
|
|
Director
|
2019
|
|
|
|
|
|
|
$240,000(4)
|
$240,000(4)
|
(1)
Effective
as of December 29, 2017, Mr. Fai H. Chan was appointed as our
Chairman and Co-Chief Executive Officer; Moe T. Chan was appointed
as a member of our Board and as Co-Chief Executive Officer; Rongguo
(Ronald) Wei and Alan W. L. Lui were appointed as our Co-Chief
Financial Officers; and Charles MacKenzie joined the
Company’s Board of Directors.
(2)
Alset
International compensates Mr. Fai H. Chan, Mr. Moe T. Chan and Mr.
Lui for their services to a number of divisions and subsidiaries of
Alset International. Each of these three individuals works on a
number of matters for Alset International, including devoting
various amounts of time to matters related to LiquidValue
Development Inc. LiquidValue Development Inc. does not compensate
these individuals but on December 29, 2020, the Company entered
into a Management Services Agreement with Alset International,
pursuant to which the Company will pay Alset International a
one-time payment of $360,000 for the services of certain Alset
International staff members the Company received in 2020, and will
pay Alset International $30,000 per month for services to be
provided in 2021.
(3)
Mr. Flanigan’s law firm was paid
$38,584 in total fees by various
subsidiaries of Alset EHome for Mr. Flanigan’s services in
2019 and $12,645 in
2020.
(4)
A
company controlled by Mr. MacKenzie was paid total consulting fees
of $240,000 in each of 2019 and 2020 by Alset EHome.
51
As of the date of this Report, the Company does not have any stock
option plans, retirement, pension, or profit-sharing plans for the
benefit of any of our officers or directors.
Outstanding Equity Awards at Fiscal Year-End
There were no grants of stock options through the date of this
report.
We do not have any long-term incentive plans that provide
compensation intended to serve as incentive for
performance.
The board of directors of the Company has not adopted a stock
option plan. The Company has no plans to adopt it but may choose to
do so in the future. If such a plan is adopted, this may be
administered by the board or a committee appointed by the board
(the “Committee”). The Committee would have the power
to modify, extend or renew outstanding options and to authorize the
grant of new options in substitution therefore, provided that any
such action may not impair any rights under any option previously
granted. The Company may develop an incentive-based stock option
plan for its officers and directors.
Stock Awards Plan
The company has not adopted a Stock Awards Plan but may do so in
the future. The terms of any such plan have not been
determined.
Item
12. Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder
Matters.
Security Ownership
The following table sets forth, as of December 31, 2020, and as of
March 22, 2021, the number and percentage of our outstanding shares
of common stock owned by (i) each person known to us to
beneficially own more than 5% of its outstanding common stock, (ii)
each director, (iii) each named executive officer and significant
employee, and (iv) all officers and directors as a
group.
52
The number of shares listed below includes shares that each
shareholder listed in the table has the right to acquire beneficial
ownership of within 60 days.
|
Name and Address (2)
|
Number of Common Shares
Beneficially Owned
|
Percentage of Outstanding
Common Shares (1)
|
|
Fai
H. Chan (3)
|
704,015,730
|
99.99%
|
|
Moe
T. Chan
|
0
|
0.00%
|
|
Conn
Flanigan
|
0
|
0.00%
|
|
Charles
MacKenzie
|
0
|
0.00%
|
|
Rongguo
(Ronald) Wei
|
0
|
0.00%
|
|
Alan
W. L. Lui
|
0
|
0.00%
|
|
All
Directors and Officers (6 individuals)
|
704,015,730
|
99.99%
|
|
Alset
International Limited (3)
|
704,015,730
|
99.99%
|
|
SeD
Intelligent Home, Inc. (3)
|
704,015,730
|
99.99%
|
(1)
Based
upon 704,043,324 outstanding common shares as of December 31, 2020
and March 22, 2021.
(2)
The
mailing address for each individual and entity set forth above is
c/o LiquidValue Development Inc., 4800 Montgomery Lane, Suite 210,
MD 20814.
(3)
Fai H. Chan may be
deemed to be the beneficial owner of those 704,015,730 shares held
by Alset International Limited’s wholly-owned subsidiary SeD
Intelligent Home, Inc. Mr. Chan is the Chairman and Chief Executive
Officer of Alset International Limited, a diversified holding
company listed on the Catalist of the Singapore Exchange Securities
Trading Limited and the Chairman and Chief Executive Officer of
Alset EHome International Inc., a Nasdaq listed company. The
majority of Alset International Limited is owned by a wholly-owned
subsidiary of Alset EHome International Inc. Mr. Chan owns a
majority of the issued and outstanding shares of Alset EHome
International Inc. through HFE Holdings Limited, a holding company
owned by Mr. Chan.
Change of Control
The Company is not aware of any arrangement which may at a
subsequent date result in a change in control of the
Company.
Item
13. Certain Relationships and
Related Transactions, and Director
Independence.
Family Relationships
Fai H. Chan, our Co-Chief Executive Officer, Chairman of our Board
and Chairman of the Board and Chief Executive Officer of our
majority shareholder and its corporate parent is the father of Moe
T. Chan, our other Co-Chief Executive Officer and a Member of our
Board.
Policies and Procedures for Transactions with Related
Persons
Our board of directors intends to adopt a written related person
transaction policy to set forth the policies and procedures for the
review and approval or ratification of related person transactions.
Related persons include any executive officer, director or a holder
of more than 5% of our common stock, including any of their
immediate family members and any entity owned or controlled by such
persons. Related person transactions refer to any transaction,
arrangement or relationship, or any series of similar transactions,
arrangements or relationships in which (i) we were or are to be a
participant, (ii) the amount involved exceeds $120,000, and (iii) a
related person had or will have a direct or indirect material
interest. Related person transactions include, without limitation,
purchases of goods or services by or from the related person or
entities in which the related person has a material interest,
indebtedness, guarantees of indebtedness, and employment by us of a
related person, in each case subject to certain exceptions set
forth in Item 404 of Regulation S-K under the Securities
Act.
53
We expect that the policy will provide that in any related person
transaction, our audit committee and board of directors will
consider all of the available material facts and circumstances of
the transaction, including: the direct and indirect interests of
the related persons; in the event the related person is a director
(or immediate family member of a director or an entity with which a
director is affiliated), the impact that the transaction will have
on a director’s independence; the risks, costs and benefits
of the transaction to us; and whether any alternative transactions
or sources for comparable services or products are available. After
considering all such facts and circumstances, our audit committee
and board of directors will determine whether approval or
ratification of the related person transaction is in our best
interests. For example, if our audit committee determines that the
proposed terms of a related person transaction are reasonable and
at least as favorable as could have been obtained from unrelated
third parties, it will recommend to our board of directors that
such transaction be approved or ratified. Our audit committee will recommend that our board
of directors reject any transaction if it could affect our ability
to comply with securities laws and regulations.
Transactions with Related Persons, Promoters, and Certain Control
Persons
Loan from SeD Home Limited
Alset
EHome receives advances from SeD Home Limited (an affiliate of
Alset International), to fund development and operation costs. The
advances bear interest at 10% and are payable on demand. As of
December 31, 2020 and 2019, Alset EHome had outstanding principal
due of $0 and $0 and accrued interest of $228,557 and $228,557,
respectively.
Loan to/from SeD Intelligent Home Inc. (f.k.a. SeD Home
International)
The Company receives advances from or loans to SeD Intelligent
Home, the owner of 99.99% of the Company. The advances or the loans
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 advance principal and $96,425 of accrued
advance interest outstanding. On December 31, 2020, SeD Intelligent
Home owed the Company $98,680 in loan principal and $19,262 in
accrued loan interest. During the years ended December 31, 2020 and
2019, the Company earned interest income of $19,262 and $0,
respectively.
Management Fees
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 2020 and 2019, which were capitalized as part of Real
Estate on the balance sheet as the services relate to property and
project management. On December 31, 2020 and 2019, the Company owed
this related party $0.
On December 29, 2020, the Company entered into a Management
Services Agreement (the “Management Services
Agreement”) with Alset International, pursuant to which the
Company will pay Alset International a one-time payment of $360,000
for the services of certain Alset International staff members the
Company received in 2020, and will pay Alset International $30,000
per month for services to be provided in 2021. This Management
Services Agreement has a term that ends December 31, 2021, and can
be cancelled by either party on thirty days’ notice. Alset
International will provide the Company with services related to the
development of the Black Oak and Ballenger Run real estate projects
near Houston, Texas and in Frederick, Maryland, respectively, and
the potential development of future real estate projects. During
year ended December 31, 2020 the Company incurred expense of
$360,000 and owned this related party $360,000 as of December 31,
2020.
Advance to Alset EHome International Inc.
The Company pays some operating expenses for Alset EHome
International 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, 2020 and December
31, 2019, the balance of these advances was $0 and $211,271,
respectively.
54
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 $12,645 and $38,584 for the years ended December 31, 2020 and
2019, respectively. On December 31, 2020 and December 31, 2019, the
Company owed this related party $0.
Item
14. Principal Accounting Fees
and Services
The following table indicates the fees paid by us for services
performed for the years ended December 31, 2020 and December 31,
2019:
|
|
Year Ended
December 31,
2020
|
Year Ended
December 31,
2019
|
|
|
|
|
|
Audit
Fees
|
$61,500
|
$61,500
|
|
Audit-Related
Fees
|
$0
|
$0
|
|
Tax
Fees
|
$25,000
|
$25,000
|
|
All
Other Fees
|
$0
|
$0
|
|
Total
|
$86,500
|
$86,500
|
Audit Fees. This category includes the aggregate fees
billed for professional services rendered by the independent
auditors during the years ended December 31, 2020 and December 31,
2019 for the audit of our financial statements and review of
previous years’ Form 10-Qs.
Tax Fees. This category includes the aggregate fees
billed for tax services rendered in the preparation of our federal
and state income tax returns.
All Other Fees. This category includes the aggregate fees
billed for all other services, exclusive of the fees disclosed
above, rendered during the year ended December 31, 2020 and
December 31, 2019.
55
PART IV
Item 15. Exhibits, Financial Statement
Schedules
(a)(1) List of Financial statements included in Part II
hereof:
Balance Sheets as of December 31, 2020 and December 31,
2019
Statements of Operations for the twelve months ended December 31,
2020 and December 31, 2019
Statements of Stockholders' Equity (Deficit) for the period
December 31, 2019 through December 31, 2020
Statements of Cash Flows for the twelve months ended December 31,
2020 and December 31, 2019
(a)(2) List of Financial Statement schedules included in Part IV
hereof:
None.
(a)(3) Exhibits
The following exhibits are filed with this report or incorporated
by reference:
|
Exhibit No.
|
Description
|
|
Acquisition Agreement and Plan of Merger dated December 29, 2017 by
and among SeD Intelligent Home Inc., SeD Acquisition Corp., SeD
Home International, Inc. and SeD Home Inc. incorporated herein by
reference to Exhibit 2.1 to the Company’s Current Report on
Form 8-K filed with the Securities and Exchange Commission on
December 29, 2017.
|
|
|
Certificate of Incorporation of the Company, incorporated herein by
reference to Exhibit 3.1 to the Company’s Registration
Statement on Form S-11 filed with the Securities and Exchange
Commission on October 20, 2010.
|
|
|
Bylaws of the Company, incorporated herein by reference to Exhibit
3.2 to the Company’s Registration Statement on Form S-11
filed with the Securities and Exchange Commission on October 20,
2010.
|
|
|
Amendment to the Company’s Articles of Incorporation,
incorporated herein by reference to Exhibit 3.3 to Company’s
Quarterly Report on Form 10-Q, filed with the Securities and
Exchange Commission on November 2, 2017.
|
|
|
Certificate of Incorporation of SeD Home & REITs Inc.
incorporated herein by reference to Exhibit 3.4 to the
Company’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on December 29,
2017.
|
|
|
Bylaws of SeD Home & REITs Inc. incorporated herein by
reference to Exhibit 3.5 to the Company’s Current Report on
Form 8-K filed with the Securities and Exchange Commission on
December 29, 2017.
|
|
|
Amendment to the Company’s Articles of Incorporation,
incorporated herein by reference to Exhibit 3.6 to the
Company’s Quarterly Report on Form 10-Q, filed with the
Securities and Exchange Commission on August 11, 2020.
|
|
|
Agreement of Limited Partnership of 150 CCM Black Oak, Ltd., dated
as of March 20, 2014, by and between 150 Black Oak GP, Inc. and CCM
Development USA Corporation, American Real Estate Investments, LLC
and the Fogarty Family Trust II incorporated herein by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed with the Securities and Exchange Commission on December 29,
2017.
|
|
|
Amendment of Agreement of Limited Partnership of 150 CCM Black Oak,
Ltd., dated as of November 7, 2014, by and between 150 Black Oak
GP, Inc. and CCM Development USA Corporation, American Real Estate
Investments, LLC and the Fogarty Family Trust II incorporated
herein by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K filed with the Securities and Exchange
Commission on December 29, 2017.
|
|
|
Amendment of Agreement of Limited Partnership of 150 CCM Black Oak,
Ltd., by and between 150 Black Oak GP, Inc. and CCM Development USA
Corporation, American Real Estate Investments, LLC and the Fogarty
Family Trust II incorporated herein by reference to Exhibit 10.3 to
the Company’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on December 29,
2017.
|
56
|
Amendment
of Agreement of Limited Partnership of 150 CCM Black Oak, Ltd.,
dated as of September 26, 2014, by and between 150 Black Oak GP,
Inc. and CCM Development USA Corporation, American Real Estate
Investments, LLC and the Fogarty Family Trust II incorporated
herein by reference to Exhibit 10.4 to the Company’s Current
Report on Form 8-K filed with the Securities and Exchange
Commission on December 29, 2017.
|
|
|
Form
of Lot Purchase Agreement for Ballenger Run, entered into as of
December 10, 2014, by and among SeD Maryland Development, LLC and
NVR, Inc. d/b/a Ryan Homes incorporated herein by reference to
Exhibit 10.5 to the Company’s Current Report on Form 8-K
filed with the Securities and Exchange Commission on December 29,
2017.
|
|
|
Management
Agreement, entered into as of July 15, 2015, by and between SeD
Maryland Development, LLC and SeD Development Management, LLC
incorporated herein by reference to Exhibit 10.6 to the
Company’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on December 29,
2017.
|
|
|
Amended
and Restated Limited Liability Company Agreement of SeD Maryland
Development, LLC, dated as of September 16, 2015, by and between
SeD Maryland Development, LLC and SeD Development Management, LLC
incorporated herein by reference to Exhibit 10.7 to the
Company’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on December 29,
2017.
|
|
|
Consulting
Services Agreement, dated as of May 1, 2017, between SeD
Development Management LLC and MacKenzie Equity Partners LLC
incorporated herein by reference to Exhibit 10.8 to the
Company’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on June 1, 2018.
|
|
|
Project
Development and Management Agreement for Ballenger Run PUD, dated
as of February 25, 2015 by and between MacKenzie Development
Company, LLC and Cavalier Development Group, LLC, incorporated
herein by reference to Exhibit 10.9 to the Company’s
Quarterly Report on Form 10-Q, filed with the Securities and
Exchange Commission on May 15, 2018.
|
|
|
Assignment
and Assumption Agreement, dated as of September 15, 2017, by and
between MacKenzie Development Company, LLC and Adams-Aumiller
Properties, LLC, incorporated herein by reference to Exhibit 10.10
to the Company’s Quarterly Report on Form 10-Q, filed with
the Securities and Exchange Commission on May 15,
2018.
|
|
|
Lot
Purchase Agreement, dated as of July 20, 2016, by and between SeD
Maryland Development, LLC and Orchard Development Corporation,
incorporated herein by reference to Exhibit 10.11 to the
Company’s Quarterly Report on Form 10-Q, filed with the
Securities and Exchange Commission on November 14,
2018.
|
|
|
Partnership
Interest Purchase Agreement, dated as of July 23, 2018, by and
between SeD Development USA, Inc. and American Real Estate
Investors, LLC, incorporated herein by reference to Exhibit 10.12
to the Company’s Quarterly Report on Form 10-Q, filed with
the Securities and Exchange Commission on November 14,
2018.
|
|
|
Partnership
Interest Purchase Agreement, dated as of July 23, 2018, by and
between SeD Development USA, Inc. and Fogarty Family Trust II,
incorporated herein by reference to Exhibit 10.13 to the
Company’s Quarterly Report on Form 10-Q, filed with the
Securities and Exchange Commission on November 14,
2018.
|
|
|
Purchase
and Sale Agreement, by and among 150 CCM Black Oak, Ltd. and
Houston LD, LLC, dated as of July 3, 2018, incorporated herein by
reference to Exhibit 10.14 to the Company’s Annual Report on
Form 10-K, filed with the Securities and Exchange Commission on
April 1, 2019.
|
|
|
|
Amended
and Restated Purchase and Sale Agreement, by and among 150 CCM
Black Oak, Ltd. and Houston LD, LLC, dated as of October 12, 2018,
incorporated herein by reference to Exhibit 10.15 to the
Company’s Annual Report on Form 10-K, filed with the
Securities and Exchange Commission on April 1, 2019.
|
|
Development
Loan Agreement, dated as of April 17, 2019, by and between SeD
Maryland Development, LLC and Manufacturers and Traders Trust
Company, incorporated herein by reference to Exhibit 10.16 to the
Company’s Quarterly Report on Form 10-Q, filed with the
Securities and Exchange Commission on November 12, 2019.
|
57
|
Loan Agreement, dated as of June 18, 2020, by and
between SeD Home & REITs Inc. and Manufacturers and Traders
Trust Company, incorporated herein by reference to Exhibit 10.17
to the Company’s Quarterly Report on Form 10-Q, filed with
the Securities and Exchange Commission on August 11,
2020.
|
|
|
Management
Services Agreement between LiquidValue Development Inc. and Alset
International Limited, dated December 29, 2020.
|
|
|
21*
|
Subsidiaries
of the Company.
|
|
Certification
of Co-Chief Executive Officer Pursuant to Rules 13a-14(a) and
15d-14(a) under the Securities Exchange Act of 1934, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
Certification
of Co-Chief Executive Officer Pursuant to Rules 13a-14(a) and
15d-14(a) under the Securities Exchange Act of 1934, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
Certification
of Co-Chief Financial Officer Pursuant to Rules 13a-14(a) and
15d-14(a) under the Securities Exchange Act of 1934, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
Certification
of Co-Chief Financial Officer Pursuant to Rules 13a-14(a) and
15d-14(a) under the Securities Exchange Act of 1934, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
32.1**
|
Certification of
Chief Executive Officers and Chief Financial Officers Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
101.INS
|
XBRL
Instance Document
|
|
101.SCH
|
XBRL
Taxonomy Extension Schema Document
|
|
101.CAL
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF
|
XBRL
Taxonomy Extension Definition Linkbase Document
|
|
101.LAB
|
XBRL
Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
XBRL
Taxonomy Extension Presentation Linkbase Document
|
* Filed
herewith.
**
Furnished herewith.
Item 16.
Form 10-K Summary
None.
58
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
|
LiquidValue Development Inc.
|
|
|
|
|
|
|
Dated: March 22, 2021
|
By:
|
/s/ Rongguo (Ronald) Wei
|
|
|
|
Name: Rongguo (Ronald)
Wei
|
|
|
|
Title: Co-Chief Financial Officer
|
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ Fai
H. Chan
|
|
Co-Chief Executive Officer, Director
|
|
March 22, 2021
|
|
Fai H. Chan
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
/s/ Moe
T. Chan
|
|
Co-Chief Executive Officer, Director
|
|
March 22, 2021
|
|
Moe T. Chan
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
/s/ Conn
Flanigan
|
|
Secretary, Director
|
|
March 22, 2021
|
|
Conn Flanigan
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Charley
MacKenzie
|
|
Director
|
|
March 22, 2021
|
|
Charley MacKenzie
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Rongguo
(Ronald) Wei
|
|
Co-Chief Financial Officer
|
|
March 22, 2021
|
|
Rongguo (Ronald) Wei
|
|
(Principal Financial Officer and
Principal Accounting Officer)
|
|
|
|
|
|
|
|
|
|
/s/ Alan
W. L. Lui
|
|
Co-Chief Financial Officer
|
|
March 22, 2021
|
|
Alan W. L. Lui
|
|
(Principal Financial Officer and
Principal Accounting Officer)
|
|
|
59