UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the fiscal year ended
or
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Securities registered pursuant to Section 12(b) of the Act: None
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by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
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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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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
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of April 1, 2024, there were shares outstanding of the registrant’s common stock, $0.001 par value.
DOCUMENTS INCORPORATED BY REFERENCE
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, 2023
Table of Contents
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PART I
Item 1. Business.
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 December 29, 2017, our board of directors appointed Moe T. Chan as a Director and Co-Chief Executive Officer. On December 29, 2017, our board of directors appointed Charles MacKenzie as a Director. On December 29, 2017, Fai H. Chan was appointed as Chief Executive Officer of the Company. On December 29, 2017, Lui Wai Leung Alan was appointed as Co-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 $0.001). 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.
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 project is a land sub-division development located north of Houston, Texas. Our Lakes at Black Oak project initially consisted of 162 acres; in January of 2021, this project was expanded with the purchase of an approximately 6.3 acre tract of land. 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 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.
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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. Alset EHome will continue to focus on off-market deals and raise appropriate financing.
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.
During 2021 and 2022, the Company purchased 112 homes in Texas from builders in different communities for our rental business. This rental business was under one of the Company’s subsidiaries, American Home REIT Inc. On December 9, 2022, Alset EHome entered into Stock Purchase Agreement with Alset International Limited and Alset Inc., pursuant to which Alset EHome agreed to sell all shares of American Home REIT Inc. to Alset Inc. For further details on this transaction, refer to Note 5 to Company’s Financial Statements – Related Party Transactions and Note 7 – Discontinued Operations.
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. The company intends to continue to explore other projects in and around Houston, Texas and bring this concept to other strategic parts of the US.
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision–making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision-maker is the CEO. Both land development projects and rental business are included in our only reporting segment – real estate. In determination of segments, the Company, together with its chief decision maker, considers factors that include the nature of business activities, allocation of resources and management structure.
As of December 31, 2023, we had total assets of $32,099,017 and total liabilities of $3,200,002. Total assets as of December 31, 2022 were $52,703,365 and total liabilities were $30,289,784.
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Employees
At the present time, the Company has six 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.
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 $71,431 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.
Intellectual Property
At the present time, an entity affiliated with the Company has registered the trademark “Alset” in the United States and certain other countries. We anticipate filing additional trademark applications as we expand into new areas of business.
Corporate Organization
The following chart describes the Company’s ownership of various subsidiaries:
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Lakes at Black Oak
Our Lakes at Black Oak project is a land infrastructure development and sub-division project situated in Magnolia, Texas north of Houston. On July 3, 2018, our subsidiary 150 CCM Black Oak Ltd. entered into a Purchase and Sale Agreement with Houston LD, LLC for the sale of 124 lots within the Lakes at Black Oak project (the “Lakes at Black Oak Purchase Agreement”). Pursuant to the Lakes at 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.
On October 12, 2018, 150 CCM Black Oak, Ltd. entered into an Amended and Restated Purchase and Sale Agreement (the “Amended and Restated Lakes at Black Oak Purchase Agreement”) for these 124 lots. Pursuant to the Amended and Restated Lakes at 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 Lakes 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.
On July 20, 2018, Lakes at Black Oak 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 and to be released upon receipt of the evidence of the: (a) execution of a purchase agreement between Black Oak and a home builder with respect to the Lakes at Black Oak development and (b) of the completion, finishing and making ready for home construction of at least 105 unfinished lots in the Lakes at 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.
On November 4, 2021, Black Oak received $750,000 reimbursement from Aqua Texas pursuant to a contractual agreement whereby Aqua is obligated to pay 150 CCM Black Oak $6,000 for each connection made to an individual single-family home upon sale to the end customer.
On January 13, 2021, 150 CCM Black Oak, Ltd. purchased an approximately 6.3 acre tract of land in Montgomery County, Texas.
On October 28, 2022, 150 CCM Black Oak Ltd. (the “Seller”), a Texas Limited Partnership and subsidiary of the Company, entered into a Contract for Purchase and Sale and Escrow Instructions (the “Agreement”) with Century Land Holdings of Texas, LLC, a Colorado limited liability company (the “Buyer”). Pursuant to the terms of the Agreement, the Seller agreed to sell approximately 242 single-family detached residential lots comprising a residential community in the city of Magnolia, Texas known as the “Lakes at Black Oak.” On November 28, 2022, the parties to the Agreement entered into an amendment to the Agreement (the “Amendment”). Pursuant to the Amendment, the parties agreed that the Buyer would purchase approximately 131 single-family detached residential lots, instead of 242 lots. This transaction closed on April 13, 2023.
On March 16, 2023, 150 CCM Black Oak Ltd. (the “Seller”) entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with Rausch Coleman Homes Houston, LLC, a Texas limited liability company (“Rausch Coleman”). Pursuant to the terms of the Purchase and Sale Agreement, the Seller has agreed to sell approximately 110 single-family detached residential lots which comprise a section of the Lakes at Black Oak. The transaction closed on May 15, 2023.
On March 17, 2023, 150 CCM Black Oak Ltd. (the “Seller”) entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with Davidson Homes, LLC, an Alabama limited liability company (“Davidson”). Pursuant to the terms of the Purchase and Sale Agreement, the Seller has agreed to sell approximately 189 single-family detached residential lots developed within section 2 of Black Oak project. The sale of the first 94 lots closed on May 30, 2023. The sale of remaining lots closed on January 4, 2024.
On November 13, 2023, 150 CCM Black Oak Ltd. (the “Seller”), a Texas Limited Partnership, entered into two Contracts for Purchase and Sale and Escrow Instructions (each an “Agreement,” collectively, the “Agreements”) with Century Land Holdings of Texas, LLC, a Colorado limited liability company (the “Buyer”). Pursuant to the terms of one of the aforementioned Agreements, the Seller has agreed to sell approximately 142 single-family detached residential lots (the “Section 4 Agreement”) comprising a section of a residential community in the city of Magnolia, Texas known as the “Lakes at Black Oak.” The selling price of these lots is anticipated to equal approximately $7.4 million. Pursuant to the other Agreement, the Seller has agreed to sell 63 single-family detached residential lots (the “Alset Villas Agreement”) in the city of Magnolia, Texas. In 2021, our subsidiary Alset EHome Inc. acquired approximately 19.5 acres of partially developed land near Houston, Texas which was used to develop a community named Alset Villas (“Alset Villas”). Alset EHome was in the process of developing the 63 lots at Alset Villas in 2023. The selling price of these lots is anticipated to equal approximately $3.3 million. The closing of the transactions described above depends on the satisfaction of certain conditions, and is expected to take place during the second quarter of 2024.
Pursuant to the terms of each of the agreements, the lots will be sold at a fixed per-lot price, and the Seller will also be entitled to receive a community enhancement fee for each lot sold. The aggregate purchase price and community enhancement fees are anticipated to equal a combined total of $11 million for the two Agreements together; however, the purchase prices for each of the Agreements will be adjusted accordingly, if the total number of lots increases or decreases prior to the closing of the transactions contemplated by the Agreements.
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. The Ballenger Run project is nearly complete, as all lots have been sold and the Company is completing its final tasks related to the project.
Additional Information
The Company is subject to the information requirements of the Exchange Act, and, in accordance therewith, files annual, quarterly, and special reports, proxy statements and other information with the Commission. The Commission maintains an internet website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the Commission. The periodic reports, proxy statements and other information that the Company files with the Commission are available for inspection on the Commission’s website free of charge as soon as reasonably practicable after they are electronically filed with or furnished to the Commission.
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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. As a “smaller reporting company”, the Company is not required to provide the information required by this item, but below are the risk factors the Company believes investors should consider before purchasing any of the Company’s securities.
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, 2023. 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, 2023, 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, 2023, we had a material weakness that relates to the relatively small number of staff. 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, 2023, 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.
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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.
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.
Members of our management may face competing demands relating to their time, and this may cause our operating results to suffer.
Fai H. Chan and Moe T. Chan, our Co-Chief Executive Officers and each a director of our Company, are involved in a number of projects other than our Company’s real estate business. Both 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, and only one of our Co-Chief Financial Officers resides and works in the United States.
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.
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.
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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 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.
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.
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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.
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.
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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.
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.
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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.
Item 1B. Unresolved Staff Comments.
Not Applicable.
Item 1C. Cybersecurity.
Risk Management and Strategy
We recognize the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our data.
Managing Material Risks & Integrated Overall Risk Management
We have strategically integrated cybersecurity risk management into our broader risk management framework to promote a company-wide culture of cybersecurity risk management. This integration ensures that cybersecurity considerations are an integral part of our decision-making processes at every level. Our management team continuously evaluate and addresses cybersecurity risks in alignment with our business objectives and operational needs.
Risks from Cybersecurity Threats
We have not encountered cybersecurity challenges that have materially impaired our operations or financial standing.
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Item 2. Properties.
Lakes at Black Oak
The Lakes at 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 initially consisted of approximately 162 acres. On January 13, 2021, 150 CCM Black Oak, Ltd. purchased an approximately 6.3 acre tract of land in Montgomery County. The Company has sold off residential lots at this location. CCM Black Oak Ltd is the primary developer responsible for all infrastructure development. This property is included in Harris County Improvement District #17.
Alset Villas
In 2021, our subsidiary Alset EHome Inc. acquired approximately 19.5 acres of partially developed land near Houston, Texas which will be used to develop a community named Alset Villas (“Alset Villas”). Alset EHome is in the process of developing 63 lots at Alset Villas. Sale of the 63 lots is pending closing of a Contract for Purchase and Sale and Escrow Instructions, entered into by the Company’s subsidiary 150 CCM Black Oak, Ltd. and Century Land Holdings of Texas, LLC on November 13, 2023.
Rental Properties
Recently, the Company expanded its real estate portfolio to single family rental houses. During 2021 and 2022, the Company, through its subsidiaries, acquired 112 homes in Montgomery and Harris Counties, Texas.
In the first 96 of the 112 rental homes that were acquired, as part of our commitment to advancing smart and healthy sustainable living, we installed Tesla PV solar panels and Powerwalls. In addition, we added technologies at many of the single-family rental homes such as (i) smart solar, thermostat, and energy usage controls; (ii) smart lighting controls; (iii) smart locks and security; and (iv) smart home automation devices. We believe these and other technologies will be attractive to renters.
On December 9, 2022, Alset EHome entered into Stock Purchase Agreement with Alset International Limited and Alset Inc., pursuant to which Alset EHome agreed to sell all shares of American Home REIT Inc., the company holding all of the 112 rental properties, to Alset Inc. For further details on this transaction, refer to Note 5 to Company’s Financial Statements – Related Party Transactions and Note 7 – Discontinued Operations.
Office Space
At the present time, the Company is renting offices in Bethesda, Maryland through Alset EHome. The lease for the Company’s Texas office was terminated on January 31, 2023. 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.
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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 April 1, 2024, 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
None.
Purchases of Equity Securities by the issuer and affiliated purchasers
The Company did not repurchase any shares of the Company’s common stock during 2023.
Item 6. [RESERVED]
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, including, without limitation, statements under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, 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. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
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Results of Operations
Results of Operations for the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022
| Year Ended | ||||||||
| December 31, 2023 | December 31, 2022 | |||||||
| Revenue | $ | 18,203,550 | $ | 665,291 | ||||
| Cost of Revenue | $ | 11,462,218 | $ | 476,499 | ||||
| General and Administrative Expenses | $ | 1,116,429 | $ | 1,395,415 | ||||
| Other Income (Expense) | $ | 596,502 | $ | (913,092 | ) | |||
| Loss from Discontinued Operations | $ | 10,175 | $ | 367,994 | ||||
| Net Income (Loss) | $ | 6,211,230 | $ | (2,487,709 | ) | |||
Revenue
Revenue was $18,203,550 for the year ended December 31, 2023 as compared to $665,291 for the year ended December 31, 2022. The increase in revenue is mainly caused by the increase in property sales from the Lakes at Black Oak project in 2023.
In late 2022 and early 2023, the Company entered into three contracts with builders to sell multiple lots from its Lakes at Black Oak project. The sales contemplated by these contracts are contingent on certain conditions which the parties to such contracts will need to meet and are expected to generate approximately $22 million of funds from operations, not including certain expenses that the Company will be required to pay. The sale of 335 lots closed in the first six months of 2023 generating approximately $18.2 million revenue.
The Company plans to continue its near-term focus on lot sales to regional and national builders. Funds from such lot sales will substantially improve the Company’s liquidity, strengthen its financial position and meet is working capital requirements.
In May 2023, the Company entered into lease agreement for its model house located in Montgomery County, Texas (AHR Black Oak Lease Agreement”). The revenue from the lease was $16,800 in the year ended December 31, 2023.
In the year ended December 31, 2022 the last three homes in Ballenger Project were sold. In this project, builders were required to purchase a minimum number of lots based on their applicable sale agreements. We collected revenue only from the sale of lots to builders. We are not involved in the construction of homes at the present time.
Income from the sale of Front Foot Benefits (“FFBs”), assessed on Ballenger Run project lots, decreased from $126,737 in the year ended December 31, 2022 to $0 in year ended December 31, 2023. The decrease is a result of the decreased sale of properties to homebuyers in 2023.
Cost of Revenue
All cost of revenue in the years ended on December 31, 2023 and 2022 came from our Ballenger project, Lakes at Black Oak project and AHR Black Oak Lease Agreement. The gross margin for Ballenger project in year ended December 31, 2022 was 31%. The gross margin ratio for Lakes at Black Oak project in year ended 2023 was approximately 37%. The increase in cost of revenue and increase in gross margin is caused by the increase in property sales from the Lakes at Black Oak project in 2023. The Company sold remaining lots in its Ballenger project during 2022.The gross margin ratio for AHR Black Oak Lease Agreement in year ended December 31, 2023 was approximately 32%.
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General and Administrative Expenses
The general and administrative expenses decreased from $1,395,415 for the year ended December 31, 2022 to $1,116,429 for the year ended December 31, 2023 mostly due to decreased depreciation expenses.
Other Income and Expenses
In the year ended December 31, 2023, the Company had other income of $596,502 compared to other expense of $913,092 in the year ended December 31, 2022. The increase in other income was caused by increase in interest income from related party promissory note.
Loss from Discontinued Operations
In the years ended December 31, 2023 and 2022, the discontinued operation loss from American Home REIT Inc. was $10,175 and $367,994, respectively.
Net Income (Loss)
The Company had a net loss of $2,487,709 for the year ended December 31, 2022 and a net income of $6,211,230 for the year ended on December 31, 2023. The increase in net income was caused by increased sales from the Lakes at Black Oak project.
Liquidity and Capital Resources
Our real estate assets have decreased to $10,727,530 as of December 31, 2023 from $23,970,911 as of December 31, 2022. This decrease is primarily caused by property sales from the Lakes at Black Oak project in 2023. Our liabilities decreased from $30,289,784 at December 31, 2022 to $3,200,002 at December 31, 2023. This decrease is primarily caused by the repayment of related party note payable. Our total assets have decreased to $32,099,017 as of December 31, 2023 from $52,703,365 as of December 31, 2022.
As of December 31, 2023, we had cash in the amount of $1,660,074, compared to $1,034,611as of December 31, 2022.
Our Ballenger Run project had a revolver loan from 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. This loan has expired in 2022.
The future development timeline of Lakes at Black Oak will be based on multiple conditions, including the amount of funds which may be raised from capital markets, the loans we may secure 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.
In late 2022 and early 2023, the Company entered into three contracts with builders to sell multiple lots from its Lakes at Black Oak project. The sales contemplated by these contracts are contingent on certain conditions which the parties to such contracts will need to meet and are expected to generate approximately $22 million of funds from operations, not including certain expenses that the Company will be required to pay. In addition, the Company will be entitled to receive certain reimbursements in the year ended December 31, 2024. The sale of 335 lots closed in the first six months of 2023 generating approximately $18.1 million revenue.
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On November 13, 2023, 150 CCM Black Oak Ltd. (the “Seller”), a Texas Limited Partnership, entered into two Contracts for Purchase and Sale and Escrow Instructions (each an “Agreement,” collectively, the “Agreements”) with Century Land Holdings of Texas, LLC, a Colorado limited liability company (the “Buyer”). Pursuant to the terms of one of the aforementioned Agreements, the Seller has agreed to sell approximately 142 single-family detached residential lots (the “Section 4 Agreement”) comprising a section of a residential community in the city of Magnolia, Texas known as the “Lakes at Black Oak.” The selling price of these lots is anticipated to equal approximately $7.4 million. Pursuant to the other Agreement, the Seller has agreed to sell 63 single-family detached residential lots (the “Alset Villas Agreement”) in the city of Magnolia, Texas. In 2021, our subsidiary Alset EHome Inc. acquired approximately 19.5 acres of partially developed land near Houston, Texas which was used to develop a community named Alset Villas (“Alset Villas”). Alset EHome was in the process of developing the 63 lots at Alset Villas in 2023. The selling price of these lots is anticipated to equal approximately $3.3 million. The closing of the transactions described above depends on the satisfaction of certain conditions, and is expected to take place during the second quarter of 2024. In addition, the Company will be entitled to receive certain reimbursements in the year ended December 31, 2024 and 2025.
Pursuant to the terms of each of the agreements, the lots will be sold at a fixed per-lot price, and the Seller will also be entitled to receive a community enhancement fee for each lot sold. The aggregate purchase price and community enhancement fees are anticipated to equal a combined total of $11 million for the two Agreements together; however, the purchase prices for each of the Agreements will be adjusted accordingly, if the total number of lots increases or decreases prior to the closing of the transactions contemplated by the Agreements.
The Company has obtained a letter of financial support from Alset Inc., an indirect owner of the Company. Alset Inc. committed to provide any additional funding required by the Company and would not demand repayment for the next twelve months from the filing of this Form 10-K.
These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
Summary of Cash Flows
A summary of cash flows from operating, investing and financing activities for the years ended December 31, 2023 and 2022 are as follows:
| 2023 | 2022 | |||||||
| Net Cash Provided by (Used in) Operating Activities | $ | 12,644,484 | $ | (10,082,104 | ) | |||
| Net Cash Used in Investing Activities | $ | (749,836 | ) | $ | (1,493,137 | ) | ||
| Net Cash (Used in) Provided by Financing Activities | $ | (12,543,055 | ) | $ | 6,650,000 | |||
| Net Change in Cash | $ | (648,407 | ) | $ | (4,925,241 | ) | ||
| Cash and restricted cash at beginning of the year | $ | 2,530,488 | $ | 7,455,729 | ||||
| Cash and restricted cash at end of the year | $ | 1,882,081 | $ | 2,530,488 | ||||
Cash Flows from Operating Activities
Cash flows from operating activities include costs related to assets ultimately planned to be sold, including land purchased for development and resale, and costs related to construction, which were capitalized in the book. In 2023, cash provided by operating activities was $12,644,484 compared to cash used in operating activities of $10,082,104 in 2022. Included in these amounts was cash provided by discontinued operations of $10,175 and $1,540,681 for the years ended December 31, 2023 and 2022, respectively. Property sales from the Lakes at Black Oak project in 2023 were the main reason for the cash provided by operating activities in 2023.
Cash Flows from Investing Activities
In 2023 the Company received $1,000,000 from the sale of subsidiary, lent $563,178 to related parties and disposed $1,186,658 cash with the sale of a subsidiary. Cash flows used in investing activities in 2022 include the purchase of properties and improvements for our discontinued operations, as well as small expenditures for purchases of office computer equipment. The cash used by discontinued operations in 2022 for investing activities was $1,490,054.
Cash Flows from Financing Activities
In 2022, the Company borrowed $7,650,000 from related party and at the same time repaid $1,000,000 of related party loan. In 2023, the Company borrowed $6,020,000 from related party and at the same time repaid $18,563,055 of related party loan. There were no cash flows from financing activities in discontinued operations in either 2022 or 2023.
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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, 2023, 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 Revenue
Land Development Revenue Recognition
Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers.
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 and Lakes at Black Oak project, which were essentially most of the Company’s revenue in 2022 and 2023, respectively, 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.
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| ● | 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.
Rental Revenue Recognition
The Company leases real estate properties to its tenants under leases that are predominately classified as operating leases, in accordance with ASC 842, Leases (“ASC 842”). Real estate rental revenue is comprised of minimum base rent and revenue from the collection of lease termination fees.
Rent from tenants is recorded in accordance with the terms of each lease agreement on a straight-line basis over the initial term of the lease. Rental revenue recognition begins when the tenant controls the space and continues through the term of the related lease. Generally, at the end of the lease term, the Company provides the tenant with a one year renewal option, including mostly the same terms and conditions provided under the initial lease term, subject to rent increases.
The Company defers rental revenue related to lease payments received from tenants in advance of their due dates. These amounts are presented within deferred revenues and other payables on the Company’s consolidated balance sheets.
Rental revenue is subject to an evaluation for collectability on several factors, including payment history, the financial strength of the tenant and any guarantors, historical operations and operating trends of the property, and current economic conditions. If our evaluation of these factors indicates that it is not probable that we will recover substantially all of the receivable, rental revenue is limited to the lesser of the rental revenue that would be recognized on a straight-line basis (as applicable) or the lease payments that have been collected from the lessee. Differences between rental revenue recognized and amounts contractually due under the lease agreements are credited or charged to straight-line rent receivable or straight-line rent liability, as applicable. For the years ended December 31, 2023 and 2022, deferred revenue was $2,100 and $0, respectively.
Sale of the Front Foot Benefit Assessments
We 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. During the years ended December 31, 2023 and 2022, we recognized revenue of $0 and $126,737 from FFB assessment, respectively.
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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 Revenue
| ● | Cost of Real Estate Sale |
All of the costs of real estate sales are from our land development business. Land acquisition costs are allocated to each lot based on the area method, the size of the lot comparing to the total size of all lots in the project. Development costs and capitalized interest are allocated to lots sold based on the total expected development and interest costs of the completed project and allocating a percentage of those costs based on the selling price of the sold lot compared to the expected sales values of all lots in the project.
If allocation of development costs and capitalized interest based on the projection and relative expected sales value is impracticable, those costs could also be allocated based on area method, the size of the lot comparing to the total size of all lots in the project.
| ● | Cost of Rental Revenue |
Cost of rental revenue consists primarily of the costs associated with management and leasing fees to our management company, repairs and maintenance, depreciation, property taxes and other related administrative costs. Utility expenses are paid directly by tenants.
Real Estate Assets
Land Development 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 Lakes at Black Oak projects as of December 31, 2023 and 2022:
| As of December 31, 2023 | ||||||||||||
| Black Oak | Brandy Villas | Total | ||||||||||
| ($) | ($) | ($) | ||||||||||
| Hard Construction Costs | 14,549,098 | 63,079 | 14,612,177 | |||||||||
| Engineering | 3,563,359 | 206,998 | 3,770,357 | |||||||||
| Consultation | 114,073 | 17,450 | 131,523 | |||||||||
| Project Management | 5,481,101 | - | 5,481,101 | |||||||||
| Legal | 288,863 | 2,485 | 291,348 | |||||||||
| Taxes | 1,365,155 | 117,950 | 1,483,105 | |||||||||
| Other Services | 78,701 | 11,891 | 90,592 | |||||||||
| Impairment | (5,920,599 | ) | - | (5,920,599 | ) | |||||||
| Construction - Sold Lots | (14,871,140 | ) | - | (14,871,140 | ) | |||||||
| Total | $ | 4,648,611 | $ | 419,853 | $ | 5,068,464 | ||||||
| Capitalized Finance Costs | $ | 1,642,268 | ||||||||||
| Construction in Progress | $ | 6,710,732 | ||||||||||
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| As of December 31, 2022 | ||||||||||||||||
| Ballenger Run | Black Oak | Brandy Villas | Total | |||||||||||||
| ($) | ($) | ($) | ($) | |||||||||||||
| Hard Construction Costs | 29,253,317 | 10,960,927 | - | 40,214,245 | ||||||||||||
| Engineering | 3,632,588 | 3,306,281 | 194,510 | 7,133,379 | ||||||||||||
| Consultation | 340,528 | 121,698 | 16,950 | 479,176 | ||||||||||||
| Project Management | 4,335,183 | 2,702,175 | - | 7,037,359 | ||||||||||||
| Legal | 375,672 | 256,693 | - | 632,365 | ||||||||||||
| Taxes | 1,325,086 | 1,204,186 | 43,770 | 2,573,042 | ||||||||||||
| Other Services | 627,487 | 47,276 | - | 674,763 | ||||||||||||
| Impairment | - | (5,920,599 | ) | - | (5,920,599 | ) | ||||||||||
| Construction - Sold Lots | (39,889,863 | ) | (1,364,805 | ) | - | (41,254,668 | ) | |||||||||
| Total | $ | 0 | $ | 11,313,832 | $ | 255,230 | $ | 11,569,062 | ||||||||
| Capitalized Finance Costs | $ | 4,047,195 | ||||||||||||||
| Construction in Progress | $ | 15,616,257 | ||||||||||||||
As of December 31, 2023 and 2022, total capitalized finance related costs were $1,642,268 and $4,047,195, 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 $350,000. The expected completion date for the final phases of the Ballenger Run project is July of 2024.
The required time and expenses needed to complete the Lakes at Black Oak and Alset Villas projects will be impacted by the strategy, or mix of strategies, we utilize at each project.
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. The Company did not record impairment on any of its projects during the years ended on December 31, 2023 and 2022.
Investments in Single-Family Residential Properties
The Company accounts for its investments in single-family residential properties as asset acquisitions and records these acquisitions at their purchase price. The purchase price is allocated between land, building, improvements and existing leases based upon their relative fair values at the date of acquisition. The purchase price for purposes of this allocation is inclusive of acquisition costs which typically include legal fees, title fees, property inspection and valuation fees, as well as other closing costs.
Building improvements and buildings are depreciated over estimated useful lives of approximately 10 to 27.5 years, respectively, using the straight-line method.
The Company assesses its investments in single-family residential properties for impairment whenever events or changes in business circumstances indicate that carrying amounts of the assets may not be fully recoverable. When such events occur, management determines whether there has been impairment by comparing the asset’s carrying value with its fair value. Should impairment exist, the asset is written down to its estimated fair value. The Company did not recognize any impairment losses during the years ended December 31, 2023 and 2022.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable to smaller reporting companies.
| 21 |
Item 8. Financial Statements and Supplementary Data
LiquidValue Development Inc. and Subsidiaries
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023 and 2022
| 22 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
LiquidValue Development Inc. and Subsidiaries
Bethesda, Maryland
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of LiquidValue Development Inc. and Subsidiaries (the Company) as of December 31, 2023 and 2022, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, 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.
Emphasis of Matter
The Company has significant transactions with related parties which are described in Note 5 of the consolidated financial statements. Transactions involving related parties cannot be presumed to be carried out on an arm’s length basis, as the requisite condition of competitive, free market dealings may not exist.
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 as of December 31, 2023 aggregated to $10.7 million. Real estate assets consist of construction in progress, land held for development, and other properties.
We identified the valuation of real estate assets as a critical audit matter due to the assets’ relative materiality to the financial statements and because auditing management’s valuation assertion involved a high degree of subjective and complex auditor judgement.
How the Critical Audit Matter Was Addressed in the Audit
We obtained an understanding of the Company’s process to support its real estate asset valuation assertion, including controls over management’s review of the significant assumptions. We considered the material weaknesses relating to management’s internal controls in determining the nature, timing and extent of audit tests applied in our audit.
Our primary substantive audit procedures included the following. We evaluated management’s quantitative analyses of fair value by evaluation of the reasonableness of methods and assumptions used by the Company’s valuation specialist and testing of the underlying data used by the Company in such analyses.
We involved a specialist to assist in assessing the reasonableness of the underlying methods and assumptions used by the Company in performing necessary fair-value estimates for the real estate assets, and assessing the reasonableness of the comparable sales data or other market data driving cash flow assumptions of real estate assets used in the Company’s fair value analyses.
We have served as the Company’s auditor since 2022.
April 1, 2024
| 23 |
LiquidValue Development Inc. and Subsidiaries
Consolidated Balance Sheets
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Assets: | ||||||||
| Real Estate | ||||||||
| Construction in Progress | ||||||||
| Land Held for Development | ||||||||
| Other Properties | ||||||||
| Cash | ||||||||
| Restricted Cash | ||||||||
| Other Receivable | ||||||||
| Reimbursement Receivable, net | ||||||||
| Promissory Note Receivable - Related Party | ||||||||
| Prepaid Expenses | ||||||||
| Fixed Assets, Net | ||||||||
| Deposits | ||||||||
| Operating Lease Right-Of-Use Asset, net | ||||||||
| Assets held for sale - discontinued operations | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity: | ||||||||
| Liabilities: | ||||||||
| Accounts Payable | $ | $ | ||||||
| Accrued Expenses | ||||||||
| Accrued Interest - Related Parties | ||||||||
| Deferred Revenue | ||||||||
| Security Deposit | ||||||||
| Operating Lease Liability | ||||||||
| Note Payable - Related Parties | ||||||||
| Liabilities held for sale - discontinued operations | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 8) | ||||||||
| Stockholders’ Equity: | ||||||||
| Common Stock, at par $, shares authorized and issued, and outstanding at December 31, 2023 and December 31, 2022 | ||||||||
| Additional Paid in Capital | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Total LiquidValue Development Inc. Stockholders’ Equity | ||||||||
| Non-controlling Interests | ||||||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
| 24 |
LiquidValue Development Inc. and Subsidiaries
Consolidated Statements of Operations
For the Years Ended December 31, 2023 and 2022
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenue | ||||||||
| Property | ||||||||
| Operating Expenses | ||||||||
| Cost of Revenue | ||||||||
| General and Administrative | ||||||||
| Total Operating Expenses | ||||||||
| Income (Loss) From Operations | ( | ) | ||||||
| Other Income & Expense | ||||||||
| Interest Income – related party | ||||||||
| Interest Expense – related party | ( | ) | ( | ) | ||||
| Other Income | ||||||||
| Total Other Income & Expense | ( | ) | ||||||
| Net Income (Loss) from Continuing Operations Before Income Taxes | ( | ) | ||||||
| Income Tax Expense | ||||||||
| Net Income (Loss) from Continuing Operations | ( | ) | ||||||
| Loss from Discontinued Operations, Net of Tax | ( | ) | ( | ) | ||||
| Net Income (Loss) | ( | ) | ||||||
| Net Income Attributable to Non-controlling Interests | ||||||||
| Net Income (Loss) Attributable to Common Stockholders | $ | $ | ( | ) | ||||
| Net Income (Loss) Per Share - Basic and Diluted | ||||||||
| Continuing Operations | $ | $ | ( | ) | ||||
| Discontinued Operations | $ | ( | ) | $ | ( | ) | ||
| Net Income (Loss) per Share | $ | $ | ) | |||||
| Weighted Average Common Shares Outstanding - Basic and Diluted | ||||||||
See accompanying notes to consolidated financial statements.
| 25 |
LiquidValue Development Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
for the Years Ended on December 31, 2023 and 2022
| Common Stock | Total LiquidValue | |||||||||||||||||||||||||||
| Shares | Par Value $0.001 | Additional Paid in Capital | Accumulated Deficit | Development Inc. Stockholders’ Equity | Non-controlling Interests | Total Stockholders’ Equity | ||||||||||||||||||||||
| Balance at January 1, 2022 | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||
| Net (Loss) Income | - | $ | $ | ( | ) | ( | ) | $ | $ | ( | ) | |||||||||||||||||
| Balance at December 31, 2022 | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||
| Gain on Disposal of Subsidiary to Related Party | - | |||||||||||||||||||||||||||
| Net Income | - | |||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
| 26 |
LiquidValue Development Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2023 and 2022
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net Income (Loss) | $ | $ | ( | ) | ||||
| Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By (Used In) Operating Activities: | ||||||||
| Depreciation | ||||||||
| Non-cash Lease Expense | ||||||||
| PPP Loan Forgiveness | ( | ) | ||||||
| Changes in Operating Assets and Liabilities | ||||||||
| Real Estate Development | ( | ) | ||||||
| Accounts Receivable | ||||||||
| Reimbursement Receivable, net | ( | ) | ||||||
| Related Party Receivable | ||||||||
| Interest on Promissory Note Receivable – Related Party | ( | ) | ||||||
| Prepaid Expenses | ||||||||
| Other Receivable | ( | ) | ||||||
| Accounts Payable | ( | ) | ||||||
| Accrued Expenses | ( | ) | ( | ) | ||||
| Accrued Interest - Related Parties | ||||||||
| Operating Lease Liability | ( | ) | ( | ) | ||||
| Deferred Revenue | ||||||||
| Security Deposits | ||||||||
| Builder Deposits | ( | ) | ||||||
| Net Cash Provided by (Used in) Continuing Operating Activities | ( | ) | ||||||
| Net Cash Provided by Discontinued Operating Activities | ||||||||
| Net Cash Provided by (Used in) Operating Activities | ( | ) | ||||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of Fixed Assets | ( | ) | ||||||
| Promissory Note Receivable – Related Party | ( | ) | ||||||
| Proceeds from sale of Subsidiary | ||||||||
| Cash disposed as a result of sale of subsidiary | ( | ) | ||||||
| Net Cash Used in Continuing Investing Activities | ( | ) | ( | ) | ||||
| Net Cash Used in Discontinued Investing Activities | ( | ) | ||||||
| Net Cash Used in Investing Activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Borrowing from Notes Payable - Related Parties | ||||||||
| Repayment to Notes Payable - Related Parties | ( | ) | ( | ) | ||||
| Net Cash (Used in) Provided by Continuing Financing Activities | ( | ) | ||||||
| Net Cash Provided by Discontinued Financing Activities | ||||||||
| Net Cash (Used in) Provided by Financing Activities | ( | ) | ||||||
| Net Decrease in Cash and Restricted Cash | ( | ) | ( | ) | ||||
| Cash and Restricted Cash - Beginning of Year | ||||||||
| Cash and Restricted Cash - End of Year | $ | $ | ||||||
| Cash - Continuing Operation | ||||||||
| Restricted Cash - Continuing Operation | ||||||||
| Cash - Discontinued Operations | $ | $ | ||||||
| Total Cash and Restricted Cash | $ | $ | ||||||
| Supplementary Cash Flow Information | ||||||||
| Cash Paid for Interest | $ | $ | ||||||
| Cash Paid for Taxes | $ | $ | ||||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||||||||
| Gain on Sale of AHR to Related Party | $ | $ | ||||||
| Forgiveness of Loan by Related Party in Exchange for Sale of AHR | $ | $ | ||||||
| Promissory Note Receivable Obtained in Exchange for Sale of AHR | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
| 27 |
LiquidValue Development Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2023
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
The Company’s current operations concentrate around land development projects, included in our only reporting segment – real estate. In determination of segments, the Company, together with its chief operating decision maker, who is also our CEO, considers factors that include the nature of business activities, allocation of resources and management structure.
The Company was also in the business of renting homes, however, on December 9, 2022, Alset EHome entered into a Stock Purchase Agreement with Alset International Limited and Alset Inc., pursuant to which Alset EHome agreed to sell all of the shares of American Home REIT Inc., the company holding all of the 112 rental properties, to Alset Inc. For further details on this transaction, refer to Note 5 to Company’s Financial Statements – Related Party Transactions and Note 7 – Discontinued Operations.
Liquidity and Capital Resources
As
of December 31, 2023, the Company had cash in the amount of $
The future development timeline of Lakes at Black Oak will be based on multiple conditions, including the amount of funds which may be raised from capital markets, the loans we may secure 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.
In
late 2022 and early 2023, the Company entered into three contracts with builders to sell multiple lots from its Lakes at Black Oak
project. The sales contemplated by these contracts are contingent on certain conditions which the parties to such contracts will
need to meet and are expected to generate approximately $
| 28 |
The Company has obtained a letter of financial support from Alset Inc., an indirect owner of the Company. Alset Inc. committed to provide any additional funding required by the Company and would not demand repayment for the next twelve months from the filing of this Form 10-K.
There is no guarantee that we will be able to execute on our plans as laid out above.
These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
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, 2023 | Attributable interest as of December 31, 2022 | ||||||||
| % | % | |||||||||||
| % | % | |||||||||||
| % | % | |||||||||||
| % | % | |||||||||||
| % | % | |||||||||||
| % | % | |||||||||||
| % | % | |||||||||||
| % | % | |||||||||||
| % | % | |||||||||||
| % | % | |||||||||||
| % | % | |||||||||||
| % | % | |||||||||||
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, 2023 and 2022, the aggregate noncontrolling interest was $
| 29 |
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.
When
the Company purchases properties but does not receive the assessment information from the county, the Company allocates the values between
land and building based on the data of similar properties. The Company makes appropriate adjustments once the assessment from the county
is received. At the same time, any necessary adjustments to depreciation expense are made in the income statement. On December 31, 2023
and 2022 the Company adjusted $
Basic income (loss) per share is computed by dividing the net income (loss) attributable to the common stockholders by weighted average number of shares of common stock outstanding during the period. Fully diluted income (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial instruments issued or outstanding for the years ended December 31, 2023 or 2022.
Fair Value of Financial Instruments
The carrying value of cash, restricted cash, accounts payable and accrued expenses, and short-term borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the consolidated financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The authoritative guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Company classifies and discloses assets and liabilities carried at fair value in one of the following three categories:
● Level 1 – quoted prices in active markets for identical assets and liabilities;
● Level 2 – observable market-based inputs or unobservable inputs that are corroborated by market data; and
● Level 3 – significant unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
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
Restricted Cash
As
a condition to the loan agreement with the Manufacturers and Traders Trust Company (“M&T Bank”), the Company was required
to maintain a minimum of $
Accounts Receivable
Accounts receivable include all receivables from buyers, contractors and all other parties. The Company records an allowance for credit losses based on a review of the outstanding receivables, historical collection information and economic conditions. No allowance was necessary at December 31, 2023 and 2022.
| 30 |
Reimbursement Receivable, Net
Reimbursement receivable includes developer reimbursements for Black Oak project. The Company records an allowance for credit losses based on previous collection experiences, the creditability of the organizations that are supposed to reimburse us, the forecasts from the third-party engineering company and Moody’s credit ratings. The allowance amount for these reimbursements was immaterial at December 31, 2023.
Fixed Assets, Net
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
Real Estate Assets
| ● | Land Development 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.
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.
The Company did not record impairment on any of its projects during the year ended on December 31, 2023, nor for the year ended December 31, 2022.
On October 28, 2022, 150 CCM Black Oak Ltd. (the “Seller”), a Texas Limited Partnership and subsidiary of the Company, entered into a Contract for Purchase and Sale and Escrow Instructions (the “Agreement”) with Century Land Holdings of Texas, LLC, a Colorado limited liability company (the “Buyer”). Pursuant to the terms of the Agreement, the Seller agreed to sell approximately 242 single-family detached residential lots comprising a residential community in the city of Magnolia, Texas known as the “Lakes at Black Oak.” On November 28, 2022, the parties to the Agreement entered into an amendment to the Agreement (the “Amendment”). Pursuant to the Amendment, the parties agreed that the Buyer would purchase approximately 131 single-family detached residential lots, instead of 242 lots. This transaction closed on April 13, 2023.
On March 16, 2023, 150 CCM Black Oak Ltd. (the “Seller”) entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with Rausch Coleman Homes Houston, LLC, a Texas limited liability company (“Rausch Coleman”). Pursuant to the terms of the Purchase and Sale Agreement, the Seller has agreed to sell approximately 110 single-family detached residential lots which comprise a section of the Lakes at Black Oak. The transaction closed on May 15, 2023.
On March 17, 2023, 150 CCM Black Oak Ltd. (the “Seller”) entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with Davidson Homes, LLC, an Alabama limited liability company (“Davidson”). Pursuant to the terms of the Purchase and Sale Agreement, the Seller has agreed to sell approximately 189 single-family detached residential lots developed within section 2 of Lakes at Black Oak project. The sale of the first 94 lots closed on May 30, 2023. The sale of remaining lots closed on January 4, 2024.
| 31 |
| ● | Investments in Single-Family Residential Properties |
The Company accounts for its investments in single-family residential properties as asset acquisitions and records these acquisitions at their purchase price. The purchase price is allocated between land, building, improvements and existing leases based upon their relative fair values at the date of acquisition. The purchase price for purposes of this allocation is inclusive of acquisition costs which typically include legal fees, title fees, property inspection and valuation fees, as well as other closing costs.
Building
improvements and buildings are depreciated over estimated useful lives of approximately
The Company assesses its investments in single-family residential properties for impairment whenever events or changes in business circumstances indicate that carrying amounts of the assets may not be fully recoverable. When such events occur, management determines whether there has been impairment by comparing the asset’s carrying value with its fair value. Should impairment exist, the asset is written down to its estimated fair value. The Company did not recognize any impairment losses during the years ended on December 31, 2023 and 2022.
Revenue Recognition
| ● | Land Development 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.
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 and Lakes at Black Oak project, which earned majority of the Company’s revenue in 2022 and 2023, respectively, is as follows:
a) 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.
b) 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.
c) 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.
| 32 |
d) 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.
e) 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. Revenue is recognized at a point in time.
| ● | Rental Revenue Recognition |
The Company leases real estate properties to its tenants under leases that are predominately classified as operating leases, in accordance with ASC 842, Leases (“ASC 842”). Real estate rental revenue is comprised of minimum base rent and revenue from the collection of lease termination fees.
Rent from tenants is recorded in accordance with the terms of each lease agreement on a straight-line basis over the initial term of the lease. Rental revenue recognition begins when the tenant controls the space and continues through the term of the related lease. Generally, at the end of the lease term, the Company provides the tenant with a one year renewal option, including mostly the same terms and conditions provided under the initial lease term, subject to rent increases.
The Company defers rental revenue related to lease payments received from tenants in advance of their due dates. These amounts are presented within deferred revenue on the Company’s consolidated balance sheets.
Rental
revenue is subject to an evaluation for collectability on several factors, including payment history, the financial strength of the tenant
and any guarantors, historical operations and operating trends of the property, and current economic conditions. If our evaluation of
these factors indicates that it is not probable that we will recover substantially all of the receivable, rental revenue is limited to
the lesser of the rental revenue that would be recognized on a straight-line basis (as applicable) or the lease payments that have been
collected from the lessee. Differences between rental revenue recognized and amounts contractually due under the lease agreements are
credited or charged to straight-line rent receivable or straight-line rent liability, as applicable. For the years ended December 31, 2023 and 2022, deferred revenue was $
Sale of the Front Foot Benefit Assessments
We
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 $
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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 Revenue
| ● | Cost of Real Estate Sale |
All of the costs of real estate sales are from our land development business. 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.
| ● | Cost of Rental Revenue |
Cost of rental revenue consists primarily of the costs associated with management and leasing fees to our management company, repairs and maintenance, depreciation, property taxes and other related administrative costs. Utility expenses are paid directly by tenants.
Income Taxes
Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carry-forwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The differences relate primarily to net operating loss carryforward from date of acquisition and to the use of the cash basis of accounting for income tax purposes. The Company records an estimated valuation allowance on its deferred income tax assets if it is more likely than not that these deferred income tax assets will not be realized.
The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company has not recorded any unrecognized tax benefits.
The Company’s tax returns for 2022, 2021 and 2020 remain open to examination.
Recent Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of Reference Rate Reform on Financial Reporting. The amendments in this Update provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The Company’s line of credit agreement provides procedures for determining a replacement or alternative rate in the event that LIBOR is unavailable. The amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2024. The Company doesn’t believe that ASU 2020-04 will have significant impact on its future consolidated financial statements.
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Recently Adopted Pronouncements
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires the company acquiring contract assets and contract liabilities obtained in a business combination to recognize and measure them in accordance with ASC 606, “Revenue from Contracts with Customers”. At the acquisition date, the company acquiring the business should record related revenue, as if it had originated the contract. Before the update such amounts were recognized by the acquiring company at fair value. The amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. The Company adopted these requirements prospectively, effective on the first day of year 2023. The application of the ASU 2021-08 has not had a material impact on our consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Among other things, ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date, based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. This measurement takes place at the time the financial asset is first added to the balance sheet and updated quarterly thereafter. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The Company adopted these requirements using the modified retrospective approach, effective on the first day of year 2023. The impact to the Company’s accumulated deficit at January 1, 2023 was immaterial. The application of the ASU 2016-13 has not had a material impact on our consolidated financial statements.
2. CONCENTRATION OF CREDIT RISK
The
group maintains cash balances at various financial institutions. These balances are secured by the Federal Deposit Insurance Corporation.
At times, these balances may exceed the federal insurance limits. At December 31, 2023 and December 31, 2022, uninsured cash and restricted
cash balances were $
3. 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 $
As
part of the agreements, NVR was required to give a deposit in the amount of $
4. NOTES PAYABLE
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 $
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Paycheck Protection Program Loan
On
February 11, 2021, the Company entered into a five year note with M&T Bank with a principal amount of $
The
PPP Term Note is unsecured and guaranteed by the United States Small Business Administration. The Company may apply to M&T Bank for
forgiveness of the PPP Term Note, with the amount which may be forgiven equal to at least
The Company may be subject to CARES Act specific lookbacks and audits of the loan forgiveness as part of the SBA’s audit process.
5. 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
Loan to/from SeD Intelligent Home Inc.
The
Company receives advances from or loans funds to SeD Intelligent Home, the owner of
Management Fees
MacKenzie
Equity Partners, LLC, an entity owned by Charles MacKenzie, a Director of the Company, has a consulting agreement with a majority-owned
subsidiary of the Company. Pursuant to an agreement entered into in June of 2022, as supplemented in August, 2023, the Company’s
subsidiary has paid $
The
Company incurred expenses of $
On
December 29, 2020, the Company entered into a Management Services Agreement (the “Management Services Agreement”) with Alset
International, pursuant to which the Company paid Alset International a one-time payment of $
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Advance to Alset Inc.
The
Company provides working capital advances for Alset 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, 2023 and December 31, 2022, the balance of these advances
was $
Sale of Rental Business
On December 9, 2022, Alset EHome Inc., a subsidiary of LiquidValue Development Inc. (the “Company”), entered into an agreement with Alset International Limited and Alset Inc. pursuant to which Alset EHome Inc. agreed to sell its subsidiary American Home REIT Inc. (“AHR”), which owns 112 single-family rental homes, to Alset Inc. The closing of the transaction contemplated by this agreement was completed on January 13, 2023.
Alset
EHome Inc. sold AHR for a total consideration of $
Alset
Inc. owns
6. SHAREHOLDERS’ EQUITY
As of December 31, 2023 and 2022, there were shares of the registrant’s common stock $ par value per share, issued and outstanding.
7. DISCONTINUED OPERATIONS
On
December 9, 2022 Alset EHome Inc. (Alset EHome), a subsidiary of the Company, entered into stock purchase agreement with Alset International
Limited (“Alset International”) and Alset Inc., pursuant to which Alset Inc. agreed to purchase all of the outstanding shares
of American Home REIT Inc., a wholly owned subsidiary of Alset EHome. American Home REIT Inc. is the owner of 112 rental homes. Alset
EHome is a majority-owned, indirect subsidiary of Alset International, while Alset International is a majority-owned, indirect subsidiary
of Alset Inc. The purchase price of the transaction was established at $
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Under ASU 2014-08, a disposal transaction meets the definition of a discontinued operation if all of the following criteria are met:
| 1. | The disposal group constitutes a component of an entity or a group of components of an entity. | |
| 2. | The component of an entity (or group of components of an entity) meets the held-for-sale classification criteria, is disposed of by sale, or is disposed of other than by sale (e.g., “by abandonment, in an exchange measured based on the recorded amount of the nonmonetary asset relinquished, or in a distribution to owners in a spinoff”). | |
| 3. | The disposal of a component of an entity (or group of components of an entity) “represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results”. |
American Home REIT Inc., is the owner of all rental properties of the Company’s rental business. The transaction described above is a disposal by sale and has a major effect on our financial results. Since it meets all of the test criteria set forth above, we have treated this disposal transaction as a discontinued operations in our financial statements.
The closing of this transaction was completed on January 13, 2023.
The composition of assets and liabilities included in discontinued operations are as follows:
| January 13, 2023 | December 31,2022 | |||||||
| ($) | ($) | |||||||
| Assets: | ||||||||
| Real Estate | ||||||||
| Land | $ | $ | ||||||
| Building and Improvements | ||||||||
| Less: Accumulated Depreciation | ( | ) | ||||||
| Total Real Estate | ||||||||
| Cash | ||||||||
| Accounts Receivable | ||||||||
| Related Party Receivable | ||||||||
| Prepaid Expenses | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities: | ||||||||
| Accounts Payable and Accrued Expenses | $ | $ | ||||||
| Total Liabilities | $ | $ | ||||||
The aggregate financial results of discontinued operations were as follows:
Period Ended January 13, 2023 | Year Ended December 31, 2022 | |||||||
| Rental Revenue | $ | $ | ||||||
| Expenses | ||||||||
| General and Administrative | ||||||||
| Cost of Revenues | ||||||||
| Depreciation Expense | ||||||||
| Total Operating Expenses | ||||||||
| Loss From Operations | ( | ) | ( | ) | ||||
| Bank Charges | ||||||||
| Total Other Expense | ||||||||
| Loss from Discontinued Operations | $ | ( | ) | $ | ( | ) | ||
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The cash flows attributable to the discontinued operations are as follows:
Period Ended January 13, 2023 | Year Ended December 31, 2022 | |||||||
| Operating | $ | $ | ||||||
| Investing | ( | ) | ||||||
| Financing | ||||||||
| Net Change in Cash | $ | $ | ( | ) | ||||
8. COMMITMENTS AND CONTINGENCIES
Leases
The
Company leases office space in Maryland. The lease for the Company’s Texas office was terminated on January 31, 2023 while the
lease of the Company’s Maryland office expires on
The
balance of the operating lease right-of-use asset and operating lease liability as of December 31, 2023 was $
Supplemental Cash Flow and Other Information Related to Operating Leases are as follows:
| Year Ended December 31, 2023 | ||||
| Weighted Average Remaining Operating Lease Term (in years) | ||||
| Weighted Average Discount Rate | % | |||
The below table summarizes future payments due under these leases as of December 31, 2023.
For the Years Ended December 31:
| 2024 | ||||
| Total Minimum Lease Payments | $ | |||
| Less: Effect of Discounting | ( | ) | ||
| Present Value of Future Minimum Lease Payments | ||||
| Less: Current Obligation under Lease | ||||
| Long-term Lease Obligation | $ |
Lot Sale Agreements
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| ● | Ballenger Project |
On
November 23, 2015, SeD Maryland Development LLC completed the $
Certain
arrangements for the sale of buildable lots to NVR require the Company to credit NVR with an amount equal to one year of the FFB assessment.
Under ASC 606, the credits to NVR are not in exchange for a distinct good or service and accordingly, the amount of the credit was recognized
as the reduction of revenue. As of December 31, 2023 and 2022, the accrued balance due to NVR was $
| ● | Lakes at Black Oak Project |
| - | Agreement to Sell 142 and 63 Lots |
On
November 13, 2023, 150 CCM Black Oak Ltd. (the “Seller”), a Texas Limited Partnership, entered into two Contracts for
Purchase and Sale and Escrow Instructions (each an “Agreement,” collectively, the “Agreements”) with Century
Land Holdings of Texas, LLC, a Colorado limited liability company (the “Buyer”). Pursuant to the terms of one of the
aforementioned Agreements, the Seller has agreed to sell approximately 142 single-family detached residential lots (the
“Section 4 Agreement”) comprising a section of a residential community in the city of Magnolia, Texas known as the
“Lakes at Black Oak.” The selling price of these lots is anticipated to equal approximately $
Security Deposits
Our
rental-home lease agreements require tenants to provide a one-month security deposits. The property management company collects all security
deposits and maintains them in a trust account. The Company also has obligation to refund these deposits to the renters at the time of
lease termination. As of December 31, 2022, the security deposits held in the trust account were $
9. INCOME TAXES
The components of income tax expense and the effective tax rates for the years ended December 31, 2023 and 2022 are as follows:
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Current: | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Total Current | ||||||||
| Deferred: | ||||||||
| Federal | ( | ) | ||||||
| State | ( | ) | ||||||
| Total Deferred | ( | ) | ||||||
| Valuation Allowance | ( | ) | ||||||
| Total Income Tax Expense | $ | $ | ||||||
| Pre-tax Income (Loss) from Continuing Operations | ( | ) | ||||||
| Pre-tax (Loss) from Discontinuing Operations | ( | ) | ( | ) | ||||
| Pre-tax Income (Loss) | $ | $ | ( | ) | ||||
| Effective Income Tax Rate | % | % | ||||||
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A reconciliation of our income tax expense at federal statutory income tax rate of 21.0% to our income tax expense at the effective tax rate is as follows:
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Tax at the Statutory Federal Rate | % | % | ||||||
| Capitalized Construction Costs | - | % | % | |||||
| Deferred Finance Cost | % | - | % | |||||
| Miscellaneous Permanent Items | % | % | ||||||
| Valuation Allowance | - | % | - | % | ||||
| Effective Income Tax Rate | % | % | ||||||
Deferred tax assets (liabilities) consist of the following at December 31, 2023 and 2022:
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Deferred tax assets: | ||||||||
| Accrued Interest Expense | ||||||||
| Accrued Expense | ||||||||
| Partnership Gain | ||||||||
| Real Estate Impairment | ||||||||
| Others | ||||||||
| Net Operating Loss | ||||||||
| Total deferred tax assets: | ||||||||
| Deferred tax liabilities: | ||||||||
| Accrued Interest Income | ( | ) | ( | ) | ||||
| Accumulated Depreciation and Amortization | ( | ) | ( | ) | ||||
| Total deferred tax liabilities: | ( | ) | ( | ) | ||||
| Deferred Tax Assets / (Liabilities), net | ||||||||
| Less valuation allowance | ( | ) | ( | ) | ||||
| Deferred Tax Asset c/f | ||||||||
As
of December 31, 2023, the Company has Federal and Maryland State net operating loss carry-forwards of approximately $
As
of December 31, 2023, total tax receivable is $
We are subject to U.S. federal income tax as well as income tax of certain state jurisdictions. We have substantially concluded all U.S. federal income tax and state tax matters through 2019. However, our federal tax returns for the years 2020 through 2022 remain open to examination. State tax jurisdiction tax years remain open to examination as well, though we believe that any additional assessment would be immaterial to the Consolidated Financial Statements.
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10. SUBSEQUENT EVENTS
The Company has evaluated events that have occurred after the balance sheet date through the date of this report and determined that there were no subsequent events or transactions that required recognition or disclosure in the consolidated financial statements except as follows:
150
CCM Black Oak Ltd. (the “Seller”), a Texas Limited Partnership and a wholly owned subsidiary of LiquidValue Development Inc.,
has sold
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(b), 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act) as of December 31, 2023. 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, 2023 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 Annual 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.
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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, 2023. 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, 2023, management determined that the Company did not maintain effective controls over financial reporting due to limited staff. This limited number of staff prevents us from segregating duties within our internal control system. 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 with financial accounting, GAAP, and SEC experience.
Item 9B. Other Information.
Not Applicable.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not Applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Identification of directors and executive officers
The name, age and position of our officers and directors are set forth below:
| Name | Age | Position(s) | ||
| Fai H. Chan | 79 | Co-Chief Executive Officer and Chairman of the Board of Directors | ||
| Moe T. Chan | 45 | Co-Chief Executive Officer and Member of the Board of Directors | ||
| Charles MacKenzie | 53 | Member of the Board of Directors | ||
| Rongguo (Ronald) Wei | 52 | Co-Chief Financial Officer | ||
| Alan W. L. Lui | 53 | 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 2017 and has served as Co-Chief Executive Officer of the Company since December 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 Inc., a Nasdaq listed company. Mr. Chan has served as the Chairman of HWH International Inc. (formerly known as Alset Capital Acquisition Corp.), a Nasdaq listed company, since October 2021. Additionally, Mr. Chan has served as a member of the Board of Directors of Hapi Metaverse Inc. (formerly known as GigWorld Inc.), a technology company since October of 2014, as Executive Chairman since December 2017 and served as the Acting Chief Executive Officer of Hapi Metaverse Inc. from August 2018 until September 2020, having previously served as Chief Executive Officer from December of 2014 until June of 2017. He has served as an Executive Chairman of the Board of Directors of DSS, Inc., an NYSE listed company, since January 2017 and as Chairman of the Board since March of 2019. Mr. Chan served as a non-executive director of Holista CollTech Ltd., an ASX listed company, from July 2013 to June 2021. Mr. Chan served as a director of OptimumBank Holdings, Inc. from June 2018 to April 2022. Mr. Chan has served as a member of the Board of Directors of Sharing Services Global Corporation since April of 2020.
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. (now known as SingHaiyi Group Pte. Ltd.), a property development company in Singapore which was 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., a Toronto Stock Exchange-listed, 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.
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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 in December 2017. Moe Chan also serves as the Co-Chief Executive 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-International and a member of the Board of Alset EHome). Moe Chan has served as an Executive Director of Alset Inc., a Nasdaq listed company, since October 2022 and also as Co-Chief Executive Officer since July 2021. Moe Chan has served as a director of DSS, Inc., a NYSE listed company, since September 2020. From April 2014 to June 2015 Moe Chan was the Chief Operating Officer of Zensun Enterprises Limited (formerly known as ZH International Holdings Limited and Heng Fai Enterprises Limited), an investment holding company listed on the HKSE 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 SingHaiyi Group Ltd (now known as SingHaiyi Group Pte. Ltd.), a property development company in Singapore which was listed on the Singapore Exchange Mainboard, 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 and the developer of RoomKeyPMS, a web-based property management system, 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.
Charles MacKenzie. Mr. MacKenzie has served as a member of the Company’s Board of Directors since December 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 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 since 2006, and served in various brokerage and development roles with MacKenzie Commercial Real Estate Services from 1997 to 2006. 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 $100 million. Mr. MacKenzie received a BA and graduate degree from St. Lawrence University where he served on the 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 2017. Mr. Wei is a finance professional with more than 15 years of experience working in public and private corporations in the United States. Mr. Wei has also served as Co-Chief Financial Officer of Alset Inc., a Nasdaq listed company, since March 2018 and has served as Chief Financial Officer of HWH International Inc. (formerly known as Alset Capital Acquisition Corp.), a Nasdaq listed company, since October of 2021. As the Chief Financial Officer of our subsidiary 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. Mr. Wei also 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 served as Chief Financial Officer of such company from February, 2017 to November, 2017.
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Alan W. L. Lui. Mr. Lui has served as the Company’s Co-Chief Financial Officer since December 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 Hapi Metaverse Inc. (formerly known as GigWorld Inc.), a technology company since May 2016 and has served as a director of one of Hapi Metaverse’s subsidiaries since July of 2016. Mr. Lui has been Chief Financial Officer of Alset International, the Company’s majority shareholder since November 2016 and served as its Acting Chief Financial Officer since June 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. Mr. Lui has also served a Co-Chief Financial Officer of Alset Inc., a Nasdaq listed company, since March, 2018. From June of 1997 through March of 2016, Mr. Lui served in various executive roles at Zensun Enterprises Limited (formerly known as ZH International Holdings Limited and Heng Fai Enterprises Limited), an investment holding company listed on the HKSE 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.
The board of directors has no audit, nominating or compensation committees.
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, 2023.
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.
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.
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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.
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 six employees at the present time, which includes Mr. Wei, and has consulting arrangements with certain individuals, including Mr. MacKenzie.
In 2023, Mr. Wei was compensated by SeD Development Management LLC for his services to Alset EHome at a rate of $176,517 per year. In 2022, Mr. Wei was compensated by SeD Development Management LLC for his services to Alset EHome at a rate of $156,184 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 $25,000 per month (and $100,000 additional bonus) in 2023, which includes payment for his services to Alset EHome and its subsidiaries.
Fai H. Chan is compensated by Alset International, where he serves as Chief Executive Officer. He is also compensated by Alset Inc., which owns the majority of Alset International. Alan Lui is employed and compensated by Alset International. Moe T. Chan is also employed and compensated by Alset International. Moe T. Chan is also compensated by Alset Business Development Pte. Ltd., a 100% owned indirect subsidiary of Alset Inc. 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.
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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, 2022 through December 31, 2023.
SUMMARY COMPENSATION TABLE
| Non-Equity | Nonqualified | |||||||||||||||||||||||||||||||||||
| Incentive | deferred | All | ||||||||||||||||||||||||||||||||||
| Name and Principal Position (1) | Year | Salary | Bonus | Stock Awards | Option Awards | Plan Comp | Comp Earnings | Other Comp | Total | |||||||||||||||||||||||||||
| Fai H. Chan (2) | 2023 | |||||||||||||||||||||||||||||||||||
| Chairman of the Board and Co-Chief Executive Officer | 2022 | |||||||||||||||||||||||||||||||||||
| Moe T. Chan (2) | 2023 | |||||||||||||||||||||||||||||||||||
| Director and Co-Chief Executive Officer | 2022 | |||||||||||||||||||||||||||||||||||
| Rongguo (Ronald) Wei | 2023 | $ | 176,517 | $ | 176,517 | |||||||||||||||||||||||||||||||
| Co-Chief Financial Officer | 2022 | $ | 156,184 | $ | 156,184 | |||||||||||||||||||||||||||||||
| Alan W. L. Lui (2) | 2023 | |||||||||||||||||||||||||||||||||||
| Co-Chief Financial Officer | 2022 | |||||||||||||||||||||||||||||||||||
| Charles MacKenzie | 2023 | $ | 400,000 | (3) | $ | 400,000 | (3) | |||||||||||||||||||||||||||||
| Director | 2022 | $ | 350,000 | (3) | $ | 350,000 | (3) | |||||||||||||||||||||||||||||
| (1) | Effective as of December 29, 2017, 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 Fai H. Chan, Moe T. Chan and Alan W. L. Lui for their services to a number of divisions and subsidiaries of Alset International. Each of these three individuals work 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. |
| (3) | A company controlled by Mr. MacKenzie was paid total consulting fees of $350,000 in 2022 and $400,000 in 2023 by Alset EHome. |
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.
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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, 2023, and as of April 1, 2024, 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.
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 | % | |||||
| 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, 2023 and April 1, 2024. |
| (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 Inc., a Nasdaq listed company. The majority of Alset International Limited is owned by a wholly-owned subsidiary of Alset Inc. Mr. Chan is the largest shareholder of Alset Inc. both directly and 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.
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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.
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, 2023 and 2022, 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 funds 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, 2023 and 2022, the Company owed $868,301 and $27,597,517 to SeD Intelligent Home, respectively.
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Management Fees
MacKenzie Equity Partners, LLC, an entity owned by Charles MacKenzie, a Director of the Company, has a consulting agreement with a majority-owned subsidiary of the Company. Pursuant to an agreement entered into in June of 2022, as supplemented in August, 2023, the Company’s subsidiary has paid $25,000 per month for consulting services. In addition, MacKenzie Equity Partners has been paid certain bonuses, including (i) a sum of $50,000 in June, 2022; (ii) a sum of $50,000 in August, 2023; and (iii) a sum of $50,000 in December, 2023.
The Company incurred expenses of $400,000 and $350,000 in the years ended December 31, 2023 and 2022, respectively, which were capitalized as part of Real Estate on the balance sheet as the services relate to property and project management. On December 31, 2023 and 2022, the Company owed this related party $27,535 and $25,000, respectively.
On December 29, 2020, the Company entered into a Management Services Agreement (the “Management Services Agreement”) with Alset International, pursuant to which the Company paid Alset International a one-time payment of $360,000 for the services of certain Alset International staff members the Company received in 2020, and agreed to pay Alset International $30,000 per month for services to be provided in 2021. This Management Services Agreement had a term that ended December 31, 2021. Alset International provided the Company with services related to the development of the Lakes at 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 the years ended December 31, 2023 and 2022 the Company incurred expense of $0 and owed this related party $0 and $720,000 as of December 31, 2023 and 2022, respectively. This balance due is included in the loan amount from SeD Intelligent Home Inc., which in turn owes the funds to Alset International.
Advance to Alset Inc.
The Company provides working capital advances for Alset 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, 2023 and December 31, 2022, the balance of these advances was $21,212 and $0, respectively.
Sale of American Home REIT Inc.
On December 9, 2022, Alset EHome Inc., a subsidiary of the Company, entered into an agreement with Alset International Limited and Alset Inc. pursuant to which Alset EHome Inc. agreed to sell its subsidiary American Home REIT Inc. (“AHR”), which owns 112 single-family rental homes, to Alset Inc. The closing of the transaction contemplated by this agreement was completed on January 13, 2023.
Alset EHome Inc. sold AHR for a total consideration of $26,250,933, including the forgiveness of debt in the amount of $13,900,000, a promissory note in the amount of $11,350,933 and a cash payment of $1,000,000. This purchase price represents the book value of AHR as of November 30, 2022. The closing of this transaction was approved by the stockholders of Alset International Limited.
Alset Inc. owns 85.4% of Alset International Limited, and Alset International Limited indirectly owns approximately 99.9% of the Company. Certain members of the Company’s Board of Directors and management are also members of the Board of Directors and management of each of Alset International Limited and Alset Inc. Chan Heng Fai, the Chairman, Chief Executive Officer and majority stockholder of Alset Inc., is also the Chairman and Chief Executive Officer of both the Company and Alset International Limited; Chan Tung Moe is the Co-Chief Executive Officer and a member of the Board of Directors of Alset Inc., Alset International Limited and the Company; and Charles MacKenzie, a director of the Company, is also an officer of Alset Inc.
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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, 2023 and December 31, 2022:
| Year
Ended December 31, 2023 |
Year
Ended December 31, 2022 |
|||||||
| Audit Fees | $ | 124,328 | $ | 100,181 | ||||
| Audit-Related Fees | $ | 25,688 | $ | - | ||||
| Tax Fees | $ | - | $ | - | ||||
| All Other Fees | $ | - | $ | - | ||||
| Total | $ | 150,016 | $ | 100,181 | ||||
Audit Fees. This category includes the aggregate fees billed for professional services rendered by the independent auditors during the years ended December 31, 2023 and December 31, 2022 for the audit of our financial statements and review of previous years’ Form 10-Qs.
Audit-Related Fees. This category includes the aggregate fees billed for professional services rendered by the independent auditors during the years ended December 31, 2023 and December 31, 2022 that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” In 2023 such fees were related to expenses incurred in relation to additional services the auditors performed per request of the foreign auditor of one of our subsidiaries.
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, 2023 and December 31, 2022.
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PART IV
Item 15. Exhibit and Financial Statement Schedules
(a)(1) List of Financial statements included in Part II hereof:
Balance Sheets as of December 31, 2023 and December 31, 2022
Statements of Operations for the twelve months ended December 31, 2023 and December 31, 2022
Statements of Stockholders’ Equity (Deficit) for the period December 31, 2022 through December 31, 2023
Statements of Cash Flows for the twelve months ended December 31, 2023 and December 31, 2022
(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:
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* Filed herewith.
** Furnished herewith.
(1) Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
(2) Portions of this exhibit (indicated by asterisks) have been omitted under rules of the SEC permitting the confidential treatment of select information. The Registrant agrees to furnish a copy of all omitted information to the SEC upon its request.
Item 16. Form 10-K Summary
None.
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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: April 1, 2024 | 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 | April 1, 2024 | ||
| Fai H. Chan | (Principal Executive Officer) | |||
| /s/ Moe T. Chan | Co-Chief Executive Officer, Director | April 1, 2024 | ||
| Moe T. Chan | (Principal Executive Officer) | |||
| /s/ Charley MacKenzie | Director | April 1, 2024 | ||
| Charley MacKenzie | ||||
| /s/ Rongguo (Ronald) Wei | Co-Chief Financial Officer | April 1, 2024 | ||
| Rongguo (Ronald) Wei | (Principal Financial Officer and Principal Accounting Officer) |
|||
| /s/ Alan W. L. Lui | Co-Chief Financial Officer | April 1, 2024 | ||
| Alan W. L. Lui | (Principal Financial Officer and Principal Accounting Officer) |
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