UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________to _________
Commission file number
| (Exact name of registrant as specified in its charter) |
State or other jurisdiction of incorporation or organization |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act: None
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of October 31, 2024, there were shares of the registrant’s common stock $ par value per share, issued and outstanding.
Table of Contents
| PART I FINANCIAL INFORMATION | ||
| Item 1. | Condensed Consolidated Financial Statements (Unaudited) | |
| Condensed Consolidated Balance Sheets (Unaudited) | 3 | |
| Condensed Consolidated Statements of Operations (Unaudited) | 4 | |
| Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) | 5 | |
| Condensed Consolidated Statements of Cash Flows (Unaudited) | 6 | |
| Notes to Condensed Consolidated Financial Statements (Unaudited) | 7 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 |
| Item 3. | Quantitative and Qualitative Disclosure About Market Risk | 20 |
| Item 4. | Controls and Procedures | 20 |
| PART II OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 21 |
| Item 1A. | Risk Factors | 21 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 21 |
| Item 3. | Defaults Upon Senior Securities | 21 |
| Item 4. | Mine Safety Disclosures | 21 |
| Item 5. | Other Information | 21 |
| Item 6. | Exhibits | 21 |
| SIGNATURES | 22 | |
| 2 |
Part I. Financial Information
LiquidValue Development Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Audited) | |||||||
| Assets: | ||||||||
| Real Estate | ||||||||
| Construction in Progress | ||||||||
| Land Held for Development | ||||||||
| Other Properties, Net | ||||||||
| Cash | ||||||||
| Restricted Cash | ||||||||
| Other Receivable | ||||||||
| Reimbursement Receivable, Net | ||||||||
| Promissory Note Receivable - Related Party | ||||||||
| Fixed Assets, Net | ||||||||
| Deposits | ||||||||
| Operating Lease Right-Of-Use Asset, Net | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity: | ||||||||
| Liabilities: | ||||||||
| Accounts Payable | ||||||||
| Accrued Expenses | ||||||||
| Accrued Interest - Related Parties | ||||||||
| Deferred Revenue | ||||||||
| Security Deposit | ||||||||
| Operating Lease Liability | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity: | ||||||||
| Common Stock, at par $, shares authorized and issued, and outstanding at September 30, 2024 and December 31, 2023 | ||||||||
| 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 condensed consolidated financial statements.
| 3 |
LiquidValue Development Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2024 and 2023
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Operating Expenses | ||||||||||||||||
| Cost of Revenue | ||||||||||||||||
| General and Administrative | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Income (Loss) from Operations | ( | ) | ||||||||||||||
| Other (Expense) Income | ||||||||||||||||
| Interest Income | ||||||||||||||||
| Interest Expense | ( | ) | ||||||||||||||
| Other (Expense) Income | ( | ) | ||||||||||||||
| Total Other Income | ||||||||||||||||
| 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 (Loss) 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 condensed consolidated financial statements.
| 4 |
LiquidValue Development Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders’ Equity
For the Three- and Nine- Months Periods ended September 30, 2024 and 2023
(Unaudited)
| Common Stock | Additional Paid in | Accumulated | Total LiquidValue Development Inc. Stockholders’ | Non- controlling | Total Stockholders’ | |||||||||||||||||||||||
| Shares | Par Value $0.001 | Capital | Deficit | Equity | Interests | Equity | ||||||||||||||||||||||
| Balance at January 1, 2024 | $ | | $ | $ | ( | ) | $ | $ | $ | | ||||||||||||||||||
| Net Income (Loss) | - | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Net (Loss) | - | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Loan Forgiveness - Related Party | - | $ | $ | $ | ||||||||||||||||||||||||
| Net Income (Loss) | - | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Common Stock | Additional Paid in | Accumulated | Total Liquid Value Development Inc. Stockholders’ | Non- controlling | Total Stockholders’ | |||||||||||||||||||||||
| Shares | Par Value $0.001 | Capital | Deficit | Equity | Interests | Equity | ||||||||||||||||||||||
| Balance at January 1, 2023 | $ | | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||
| Gain on Disposal of Subsidiary to Related Party | - | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Net Loss | - | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Net Income (Loss) | - | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Net Income (Loss) | - | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
| 5 |
LiquidValue Development Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2024 and 2023
(Unaudited)
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net Income | $ | $ | ||||||
| Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | ||||||||
| Depreciation | ||||||||
| Noncash Lease Expense | ||||||||
| Changes in Operating Assets and Liabilities | ||||||||
| Real Estate Development | ||||||||
| Reimbursement Receivable | ( | ) | ( | ) | ||||
| Interest Receivable - Related Party | ( | ) | ||||||
| Prepaid Expenses | ( | ) | ||||||
| Other Receivable | ( | ) | ||||||
| Accounts Payable and Accrued Expenses | ( | ) | ( | ) | ||||
| Accrued Interest - Related Parties | ( | ) | ( | ) | ||||
| Operating Lease Liability | ( | ) | ( | ) | ||||
| Deferred Revenue | ||||||||
| Security Deposits | ||||||||
| Net Cash Provided by Continuing Operating Activities | ||||||||
| Net Cash Provided by Discontinued Operating Activities | ||||||||
| Net Cash Provided by Operating Activities | $ | $ | ||||||
| Cash Flows from Investing Activities | ||||||||
| Promissory Note Receivable - Related Party | ( | ) | ||||||
| Repayment from Promissory Note Receivable - Related Party | ||||||||
| Purchase of Fixed Assets | ( | ) | ||||||
| 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 Continuing Financing Activities | ( | ) | ( | ) | ||||
| Net Cash Provided by Discontinued Financing Activities | ||||||||
| Net Cash Used in Financing Activities | $ | ( | ) | $ | ( | ) | ||
| Net Increase (Decrease) in Cash and Restricted Cash | ( | ) | ||||||
| Cash and Restricted Cash - Beginning of Period | ||||||||
| Cash and Restricted Cash - End of Period | $ | $ | ||||||
| Cash - Continuing Operation | ||||||||
| Restricted Cash - Continuing Operation | ||||||||
| 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 | ||||||||
| Acquisition of new operating lease right of use asset | $ | $ | ||||||
| Sale of AHR to Related Party | $ | $ | ||||||
| Loan Forgiveness - Related Party | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
| 6 |
LiquidValue Development Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 2024
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
LiquidValue
Development Inc. (the “Company”) was incorporated in the State of Nevada on December 10, 2009. On 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. 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 Co-CEO, consider 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 112 rental properties, to Alset Inc. For further details on this transaction, refer to Note 4 to the Company’s Financial Statements – Related Party Transactions and Note 6 – Discontinued Operations.
Liquidity and Capital Resources
As
of September 30, 2024, the Company had cash in the amount of $
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
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 were contingent on certain conditions which the parties to such contracts had to meet and generated
approximately $
On
July 1, 2024, the Company has closed the sale of
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-Q. There is no guarantee that we will be able to execute on our plans as laid out above.
| 7 |
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 condensed consolidated financial statements include all accounts of the following entities as of the reporting period ending dates and for the reporting periods as follows:
| Name of consolidated subsidiary | State or other jurisdiction of incorporation or organization | Date of incorporation or formation | Attributable interest | |||||
| % | ||||||||
| % | ||||||||
| % | ||||||||
| % | ||||||||
| % | ||||||||
| % | ||||||||
| % | ||||||||
| % | ||||||||
| % | ||||||||
All intercompany balances and transactions have been eliminated. Non–controlling interest represents the minority equity investment in the Company’s subsidiaries, plus the minority investors’ share of the net operating results and other components of equity relating to the non–controlling interest.
The Company’s subsidiary Alset Solar Inc. was closed on June 21, 2024. The Company’s subsidiary SeD REIT Inc. was closed on August 26, 2024. The Company’s subsidiary SeD Builder LLC was closed on September 2, 2024. The closing of these three companies did not have any effect on the Company’s financial statements.
As of September 30, 2024 and December 31, 2023, the
aggregate non-controlling interest in Alset EHome Inc.’s subsidiaries was $
Basis of Presentation
The Company’s condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America.
The unaudited financial information furnished herein reflects all adjustments, consisting solely of normal recurring items, which in the opinion of management are necessary to fairly state the financial position of the Company and the results of its operations for the periods presented. This report should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2023, filed on April 1, 2024. The Company assumes that the users of the interim financial information herein have read or have access to the audited consolidated financial statements for the preceding fiscal year and the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The consolidated balance sheet at December 31, 2023 was derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the interim periods presented are not necessarily indicative of results for the year ending December 31, 2024.
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.
| 8 |
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 similarly to basic income (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial instruments issued or outstanding for the periods ended September 30, 2024 or 2023.
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 $
Reimbursement Receivable, Net
Reimbursement
receivable includes developer reimbursements for the Lakes at Black Oak project. The Company expects that approximately $
| 9 |
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. The Company would also apply a fair value-based impairment test to the net book value assets in the interim 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 nine months ended on September 30, 2024 and September 30, 2023.
On October 28, 2022, 150 CCM Black Oak Ltd. (“Black Oak”), a Texas Limited Partnership and subsidiary of the Company, entered into a Contract for Purchase and Sale and Escrow Instructions (the “Century Agreement”) with Century Land Holdings of Texas, LLC, a Colorado limited liability company (the “Buyer”). Pursuant to the terms of the Century Agreement, Black Oak 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 Century Agreement entered into an amendment to the Century 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. entered into a Purchase and Sale Agreement (the “Rausch Coleman Agreement”) with Rausch Coleman Homes Houston, LLC, a Texas limited liability company. Pursuant to the terms of the Rausch Coleman Agreement, Black Oak 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. entered into a Purchase and Sale Agreement (the “Davidson Agreement”) with Davidson Homes, LLC, an Alabama limited liability company. Pursuant to the terms of the Davidson Agreement, Black Oak 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.
On
July 1, 2024, 150 CCM Black Oak Ltd., closed the sale of
| 10 |
| ● | Rental of Model Houses |
In May 2023, the Company entered into a lease agreement for one of its model houses located in Montgomery County, Texas.
On
July 14, 2023, 150 CCM Black Oak Ltd entered into a model home lease agreement with Davidson Homes, LLC (“Davidson”). On
August 3, 2023, Black Oak entered into a development and construction agreement with Davidson to build a model house located in Montgomery
County, Texas. On January 4, 2024, Black Oak sent $
Revenue Recognition
| ● | Land Development Revenue Recognition |
ASC 606, Revenue from Contracts with Customers, 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 Lakes at Black Oak project, which earned majority of the Company’s revenue in the first nine months of 2024, is as follows:
| a. | Identify the contract with a customer. |
In the event of a sale the Company has signed agreements with the builders for developing the raw land 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 fixed and specified in the contract. Any subsequent change orders or price changes are required to be approved by both parties.
| d. | Allocate the transaction price to performance obligations in the contract. |
Each lot or a group of lots is considered to be a separate performance obligation, for which the specified price in the contract is allocated to.
| 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
| 11 |
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. At September 30, 2024 and December
31, 2023, deferred revenue was $
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.
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 repairs and maintenance, depreciation, property taxes and other related administrative costs. Utility expenses are paid directly by tenants.
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (FASB) issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires an enhanced disclosure of significant segment expenses on an annual and interim basis. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. We do not expect the adoption of this guidance to have 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 September 30, 2024 and December 31, 2023, uninsured cash and restricted
cash balances were $
| 12 |
3. NOTES PAYABLE
M&T Bank Loans
On
April 17, 2019, SeD Maryland Development LLC (“SeD Maryland”) 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 $
4. RELATED PARTY TRANSACTIONS
Loan from SeD Home Limited (now known as Alset Solar Limited)
Alset
EHome receives advances from SeD Home Limited (now known as Alset Solar Limited; a subsidiary 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 pays $
The
Company incurred expenses of $
Advances to Alset Inc.
The
Company provides working capital advances for Alset Inc., a related party under the common control of Chan Heng Fai, the Co-CEO of the
Company. The advances are interest free with no set repayment terms. On September 30, 2024 and December 31, 2023, the balance of these
advances was $
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Sale of Rental Business
On December 9, 2022, Alset EHome Inc., 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., 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
5. STOCKHOLDERS’ EQUITY
As of September 30, 2024 and December 31, 2023, there were shares of the registrant’s common stock $ par value per share, issued and outstanding.
6. DISCONTINUED OPERATIONS
On
December 9, 2022 Alset EHome Inc., a subsidiary of the Company, entered into stock purchase agreement with Alset International Limited
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 Inc. American Home REIT Inc. is the owner of 112 rental homes. Alset EHome Inc. is a majority-owned, indirect
subsidiary of Alset International Limited, while Alset International Limited is a majority-owned, indirect subsidiary of Alset Inc. The
purchase price of the transaction was established at $
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”. |
| 14 |
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 aggregate financial results of discontinued operations were as follows:
| Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | |||||||
| Rental Revenue | $ | $ | ||||||
| Expenses | ||||||||
| General and Administrative | ||||||||
| Cost of Revenues | ||||||||
| Depreciation Expense | ||||||||
| Total Operating Expenses | ||||||||
| Loss From Operations | ( | ) | ||||||
| Loss from Discontinued Operations | $ | $ | ( | ) | ||||
The cash flows attributable to the discontinued operations are as follows:
| Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | |||||||
| Operating | $ | $ | ||||||
| Investing | ||||||||
| Financing | ||||||||
| Net Change in Cash | $ | $ | ||||||
7. 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
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The
balance of the operating lease right-of-use asset and operating lease liability as of September 30, 2024 was $
The below table summarizes future payments due under these leases as of September 30, 2024.
For the Years Ending September 30:
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| Total Minimum Lease Payments | $ | |||
| Less: Effect of Discounting | ( | ) | ||
| Present Value of Future Minimum Lease Payments | ||||
| Less: Current Obligation under Lease | ||||
| Long-term Lease Obligation | $ |
The
Company’s weighted-average remaining lease term relating to its operating leases is
Lot Sale Agreements
| ● | Ballenger Project |
Certain
arrangements for the sale of buildable lots to NVR required 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 September 30, 2024 and December 31, 2023, the accrued balance due to NVR was $
| ● | Lakes at Black Oak Project |
| - | Agreement to Sell 142 Lots and 63 Lots |
On
November 13, 2023, 150 CCM Black Oak Ltd., 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, Black Oak has agreed to sell approximately 142 single-family detached
residential lots comprising a section of a residential community in the Lakes at Black Oak. The selling price of these lots is anticipated
to equal approximately $
8. SUBSEQUENT EVENTS
On
October 10, 2024, Black Oak closed the sale of
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Form 10-Q 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-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may”, “will”, “expect”, “believe”, “anticipate”, “estimate” or “continue” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include by are not limited to economic conditions generally and in the industries in which we may participate, competition within our chosen industry, including competition from much larger competitors, technological advances and failure to successfully develop business relationships.
Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023:
Revenue
Revenue was $3,827,902 for the three months ended September 30, 2024 as compared to $6,300 for the three months ended September 30, 2023. The increase in revenue in the three month period is mainly caused by the increase in property sales from the Lakes at Black Oak project in the three months ended September 30, 2024. Revenue was $8,886,207 for the nine months ended September 30, 2024 as compared to $18,197,250 for the nine months ended September 30, 2023. The decrease in revenue in the nine month period is mainly caused by the decrease in property sales from the Lakes at Black Oak project in the nine months ended September 30, 2024.
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 were contingent on certain conditions which the parties to such contracts had to meet and were expected to generate approximately $23 million of funds from operations, not including certain expenses that the Company was required to pay. The sale of 335 lots closed in the first six months of 2023 generating approximately $18.1 million revenue. The sale of remaining lots closed on January 4, 2024 generating approximately $5.0 million revenue.
On November 13, 2023, the Company entered into two contracts with builders to sell multiple lots from its Lakes at Black Oak and Alset Villa projects. The closing of these transactions depends on the satisfaction of certain conditions. The sale of the first 70 lots closed on July 1, 2024 generating approximately $3.8 million. The sale of the remaining 72 lots closed on October 10, 2024 generating approximately $3.9 million.
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 one of its model houses located in Montgomery County, Texas. The revenue from the lease was $6,300 and $6,300 in the three months ended September 30, 2024 and 2023, respectively. The revenue from the lease was $18,900 and $10,500 in the nine months ended September 30, 2024 and 2023, respectively.
In January 2024, the Company entered into lease agreement for another model house located in Montgomery County, Texas. The revenue from the lease was $6,602 and $19,807 in the three and nine months ended September 30, 2024, respectively.
Cost of Revenue
All cost of revenue in the three and nine months ended on September 30, 2024 and 2023 came from our Lakes at Black Oak project and model homes lease agreements. The gross margin ratio for Lakes at Black Oak project in the first nine months of 2024 and 2023 was approximately 37% and 40%, respectively. The increase in cost of revenue in the three month period is caused by the increase in property sales from the Lake at Black Oak project in 2024.The decrease in cost of revenue and decrease in gross margin in the nine month period is caused by the decrease in property sales from the Lakes at Black Oak project in 2024. The gross margin ratio for AHR Black Oak Lease Agreement in the first nine months of 2024 and 2023 was approximately 58% and 25%, respectively.
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General and Administrative Expenses
General and administrative expenses decreased from $370,730 in the three months ended September 30, 2023 to $324,309 in the three months ended September 30, 2024. General and administrative expenses decreased from $1,257,809 in the nine months ended September 30, 2023 to $1,157,856 in the nine months ended September 30, 2024. The decrease in general and administrative expenses is mainly caused by the decrease in consulting fees, resulting from decrease in bonus paid to a certain consultant.
Other Income
In the three months ended September 30, 2024, the Company’s other income was $250,436 as compared to other income of $88,231 in the three months ended September 30, 2023. In the nine months ended September 30, 2024, the Company’s other income was $746,870 as compared to other income of $365,087 in the nine months ended September 30, 2023. The increase in other income was caused by increase in interest income from related party promissory note and reduction in interest expense, as the Company’s loan from related party was repaid during 2023.
Loss from Discontinued Operations
In the three months ended September 30, 2024 and 2023, the discontinued operation loss from American Home REIT Inc. was $0 and $0, respectively. In the nine months ended September 30, 2024 and 2023, the discontinued operation loss from American Home REIT Inc. was $0 and $10,175, respectively.
Net Income (Loss)
In the three months ended September 30, 2024, the Company had net income of $2,030,756 as compared to net loss of $279,689 in the three months ended September 30, 2023. In the nine months ended September 30, 2024, the Company had net income of $2,835,450 as compared to net income of $6,334,639 in the nine months ended September 30, 2023. The decrease in net income was caused by decreased sales from the Lakes at Black Oak project.
Liquidity and Capital Resources
Our real estate assets have decreased to $7,126,059 as of September 30, 2024 from $10,727,530 as of December 31, 2023. This decrease is primarily caused by property sales from the Lakes at Black Oak project in 2024. Our liabilities decreased from $3,200,002 at December 31, 2023 to $2,025,992 at September 30, 2024. This decrease is primarily caused by the reduction in accounts payable and accrued expenses. Our total assets have increased to $33,989,014 as of September 30, 2024 from $32,099,017 as of December 31, 2023.
As of September 30, 2024, we had cash in the amount of $2,362,381, compared to cash of $1,774,314 as of December 31, 2023.
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 were contingent on certain conditions which the parties to such contracts had to meet and generated approximately $23 million of funds from operations, not including certain expenses that the Company was required to pay. The sale of 335 lots closed in the first six months of 2023 generating approximately $18.1 million revenue. The sale of remaining lots closed on January 4, 2024 generating approximately $5.0 million revenue.
On November 13, 2023, the Company 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 agreed to sell approximately 142 single-family detached residential lots 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 was anticipated to equal approximately $7.4 million. Pursuant to the other Agreement, the Seller agreed to sell 63 single-family detached residential lots 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. On July 1, 2024, the Seller closed the sale of 70 of the lots contemplated by that certain Agreement, generating approximately $3.8 million.
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On October 10, 2024, Black Oak closed the sale of 72 single-family detached residential lots comprising a section of the Lakes at Black Oak to Century Land Holdings of Texas, LLC pursuant to its November 13, 2023 Contract for Purchase and Sale and Escrow Instructions pertaining to the Lakes at Black Oak (the “Agreement”). The 72 lots covered by the aforementioned closing constitute the remainder of the lots contemplated by the Agreement. The lots were sold at a fixed per-lot price, and Black Oak also received a community enhancement fee for each lot sold. The aggregate purchase price and community enhancement fees, minus certain expenses, equaled a combined total of approximately $3.9 million.
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 is entitled to receive certain developer reimbursements for the Lakes at Black Oak project. The Company expects that approximately $7.7 million of the receivable will be collected within the next twelve months.
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-Q.
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 nine months ended September 30, 2024 and 2023 are as follows:
| 2024 | 2023 | |||||||
| Net Cash Provided by Operating Activities | $ | 3,184,148 | $ | 13,416,406 | ||||
| Net Cash Used in Investing Activities | $ | (1,650 | ) | $ | - | |||
| Net Cash Used in Financing Activities | $ | (2,594,351 | ) | $ | (13,505,021 | ) | ||
| Net Change in Cash | $ | 588,147 | $ | (88,616 | ) | |||
| Cash and restricted cash at beginning of the period | $ | 1,882,081 | $ | 1,343,830 | ||||
| Cash and restricted cash at end of the period | $ | 2,470,228 | $ | 1,255,214 | ||||
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 the nine months ended September 30, 2024, cash provided by operating activities was $3,184,148 compared to cash provided of $13,416,406 in the nine months ended September 30, 2023. The Company sold more lots from the Lakes at Black Oak project in 2023 than in 2024 generating more cash flows from operating activities in 2023 compared to 2024.
Cash Flows from Investing Activities
Cash flows used in investing activities in the nine months ended September 30, 2024 of $1,650 were for purchasing the office computer equipment. Additionally, in nine months ended September 30, 2024, the Company issued $2,443,692 in promissory note to related party and received a repayment of the full amount in that same period. There were no cash flows from investing activities during the nine months ended September 30, 2023.
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Cash Flows from Financing Activities
In the nine months ended September 30, 2024, the Company borrowed $3,776,308 and repaid $6,370,659 to a related party loan. In the nine months ended September 30, 2023, the Company repaid $18,105,021 and borrowed $4,600,000 from a related party loan.
Seasonality
The real estate business is subject to seasonal shifts in costs as certain work is more likely to be performed at certain times of year. This may impact the expenses of Alset EHome Inc. 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.
Critical Accounting Policy and Estimates
The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). For detail accounting policy and estimates information, please see Note 1 in the condensed consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As a “smaller reporting company” as defined by Item 10(f)(1) of Regulation S-K, the Company is not required to provide the information required by this Item.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officers and Chief Financial Officers, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our management, including our Chief Executive Officers and Chief Financial Officers concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (“SECs”) rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officers and Chief Financial Officers, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in the Company’s Internal Controls Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the quarterly period ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Part II. Other Information
Item 1. Legal Proceeding
The registrant is not a party to, and its property is not the subject of, any material pending legal proceedings.
Item 1A. Risk Factors
Not applicable to smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits
The following documents are filed as a part of this report:
* Filed herewith.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements 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. | ||
| October 31, 2024 | By: | /s/ Fai H. Chan |
| Fai H. Chan | ||
| Co-Chief Executive Officer and Director | ||
| (Principal Executive Officer) | ||
| October 31, 2024 | By: | /s/ Moe T. Chan |
| Moe T. Chan | ||
| Co-Chief Executive Officer and Director | ||
| (Principal Executive Officer) | ||
| October 31, 2024 | By: | /s/ Rongguo (Ronald) Wei |
| Rongguo (Ronald) Wei | ||
| Co-Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
| October 31, 2024 | By: | /s/ Alan W. L. Lui |
| Alan W. L. Lui | ||
| Co-Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
| 22 |