Notes to Condensed Consolidated
Financial Statements
September 30, 2020 (Unaudited)
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 July 8, 2020 the
Company changed its name from SeD Intelligent Home Inc. to
LiquidValue Development Inc. Alset iHome Inc., a Delaware
corporation, was incorporated on February 24, 2015 and was formerly
known as SeD Home & REITs Inc. Alset iHome Inc., a wholly-owned
subsidiary of the Company, is principally engaged in developing,
selling, managing, and leasing residential properties in the United
States, and may expand from residential properties to other
property types, including but not limited to commercial and retail
properties. 99.99% of the Company’s common stock is owned by
a wholly-owned subsidiary of Alset International Limited
(“Alset Ltd”), a multinational public company listed on
the Singapore Exchange Securities Trading Limited
(“SGXST”).
Principles of Consolidation
The
condensed consolidated financial statements include all accounts of
the following entities as of the reporting period ending dates and
for the reporting periods as follows:
|
Name of consolidated subsidiary
|
State or other jurisdiction of incorporation or
organization
|
Date
of incorporation or formation
|
Attributable
interest
|
|
Alset
iHome Inc.
|
Delaware
|
February
24, 2015
|
100%
|
|
SeD
USA, LLC
|
Delaware
|
August
20, 2014
|
100%
|
|
150
Black Oak GP, Inc.
|
Texas
|
January
23, 2014
|
100%
|
|
SeD
Development USA, Inc.
|
Delaware
|
March
13, 2014
|
100%
|
|
150 CCM
Black Oak Ltd.
|
Texas
|
March
17, 2014
|
100%
|
|
SeD
Ballenger, LLC
|
Delaware
|
July 7,
2015
|
100%
|
|
SeD
Maryland Development, LLC
|
Delaware
|
October
16, 2014
|
83.55%
|
|
SeD
Development Management, LLC
|
Delaware
|
June
18, 2015
|
85%
|
|
SeD
Builder, LLC
|
Delaware
|
October
21, 2015
|
100%
|
|
SeD
Texas Home, LLC
|
Delaware
|
June
16, 2015
|
100%
|
|
SedHome
Rental, Inc.
|
Texas
|
December
19, 2018
|
100%
|
|
SeD
REIT Inc.
|
Maryland
|
August
20, 2019
|
100%
|
|
Alset
Solar Inc.
|
Texas
|
September
21, 2020
|
100%
|
All
intercompany balances and transactions have been eliminated.
Non–controlling interest represents the minority equity
investment in the Company’s subsidiaries, plus the minority
investors’ share of the net operating results and other
components of equity relating to the non–controlling
interest.
As of
September 30, 2020 and December 31, 2019, the aggregate
non-controlling interest in Alset iHome Inc. was $2,185,425 and
$2,275,061, respectively, which is separately disclosed on the
Condensed Consolidated Balance Sheets.
Basis of Presentation
The
Company’s condensed consolidated financial statements have
been prepared in accordance with the accounting principles
generally accepted in the United States of America (“US
GAAP”).
The
unaudited financial information furnished herein reflects all
adjustments, consisting solely of normal recurring items, which in
the opinion of management are necessary to fairly state the
financial position of the Company and the results of its operations
for the periods presented. This report should be read in
conjunction with the Company’s consolidated financial
statements and notes thereto included in the Company’s Form
10-K for the year ended December 31, 2019 filed on March 30, 2020.
The Company assumes that the users of the interim financial
information herein have read or have access to the audited
financial statements for the preceding fiscal year and the adequacy
of additional disclosure needed for a fair presentation may be
determined in that context. The condensed consolidated balance
sheet at December 31, 2019 was derived from the audited financial
statements but does not include all disclosures required by
accounting principles generally accepted in the United States of
America. The results of operations for the interim periods
presented are not necessarily indicative of results for the year
ending December 31, 2020.
Use of Estimates
The
preparation of condensed consolidated financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and
assumptions that affect the reported amounts in the condensed
consolidated financial statements. The Company's significant
estimates are the valuation of real estate. Actual results could
differ from those estimates.
Earnings (Loss) per Share
Basic
income (loss) per share is computed by dividing the net loss
attributable to the common stockholders by weighted average number
of shares of common stock outstanding during the period. Fully
diluted loss per share is computed similarly to basic loss per
share except that the denominator is increased to include the
number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the
additional common shares were dilutive. There were no potentially
dilutive financial instruments issued or outstanding for the
periods ended September 30, 2020 or September 30,
2019.
Fair Value of Financial Instruments
For
purpose of this disclosure, the fair value of a financial
instrument is the amount at which the instrument could be exchanged
in a current transaction between willing parties, other than in a
forced sale or liquidation. The carrying amount of the
Company’s short-term financial instruments approximates fair
value due to the relatively short period to maturity for these
instruments.
Cash and Cash Equivalents
The
Company considers all highly liquid investments with a maturity of
three months or less at the date of acquisition to be cash
equivalents. There were no cash equivalents as of September 30,
2020 and December 31, 2019.
Restricted Cash
As a
condition to the loan agreement with the Union Bank (formerly known
as Xenith Bank, f/k/a The Bank of Hampton Roads), the Company was
required to maintain a minimum of $2,600,000 in an interest-bearing
account maintained by the lender as additional security for the
loan. The funds were required to remain as collateral for the loan
until the loan is paid off in full. The loan was fully paid off in
January 2019 and the collateral was released on April 19,
2019.
On
April 17, 2019, SeD Maryland Development, LLC entered into a
Development Loan Agreement with Manufacturers and Traders Trust
Company (“M&T Bank”). Based on the agreement, SeD
Maryland Development is required to maintain a minimum balance of
$2,600,000 as a security collateral fund in the interest-bearing
account maintained by the lender. As part of the agreement, NVR
deposits funds to M&T Bank directly from lot sales and keeps
any overpayment to apply to future borrowings. On September 30,
2020 and December 31, 2019, the total restricted cash held by
M&T Bank was $4,106,497 and $4,229,149,
respectively.
On July
20, 2018, Black Oak Ltd. received $4,592,079 of district
reimbursement for previous construction costs incurred in land
development. Of this amount, $1,650,000 will remain on deposit in
the District’s Capital Projects Fund for the benefit of Black
Oak Ltd. and will be released upon receipt of the evidence of: (a)
the execution of a purchase agreement between Black Oak Ltd. and a
home builder with respect to the Black Oak development and (b) the
completion, finishing and readying for home construction of at
least 105 unfinished lots in the Black Oak development. The
restricted cash balance on September 30, 2020 and December 31, 2019
was $0 and $90,394, respectively.
Accounts Receivable and Allowance for Doubtful
Accounts
Accounts
receivable include all receivables from buyers, contractors and all
other parties. The Company records an allowance for doubtful
accounts based on a review of the outstanding receivables,
historical collection information and economic conditions. No
allowance was necessary at either September 30, 2020 or December
31, 2019.
Property and Equipment and Depreciation
Property
and equipment are recorded at cost, less accumulated depreciation.
Expenditures for major additions and betterments that extend the
useful life or functionality are capitalized. Maintenance and
repairs are charged to operations as incurred. Depreciation is
computed by the straight-line method (after taking into account
their respective estimated residual values) over the estimated
useful lives, which are 3 years.
Real Estate Assets
Real
estate assets are recorded at cost, except when real estate assets
are acquired that meet the definition of a business combination in
accordance with Financial Accounting Standards Board
(“FASB”) ASC 805, “Business Combinations,”
which acquired assets are recorded at fair value. Interest,
property taxes, insurance and other incremental costs (including
salaries) directly related to a project are capitalized during the
construction period of major facilities and land improvements. The
capitalization period begins when activities to develop the parcel
commence and ends when the asset constructed is completed. The
capitalized costs are recorded as part of the asset to which they
relate and are reduced when lots are sold.
The
Company capitalized interest from related party borrowings of $0
and $79,662 for the nine months ended September 30, 2020 and 2019,
respectively. The Company capitalized interest from related party
borrowings of $0 for both, the three months ended September 30,
2020 and 2019. The Company capitalized interest from the
third-party borrowings of $0 and $3,822 for the nine months ended
September 30, 2020 and 2019, respectively. The Company capitalized
interest from the third-party borrowings of $0 for both the three
months ended September 30, 2020 and 2019.
In
addition to our annual assessment of potential triggering events in
accordance with ASC 360, the Company applies a fair-value based
impairment test to the net book value assets on an annual basis and
on an interim basis, if certain events or circumstances indicate
that an impairment loss may have occurred.
On October 12, 2018, 150 CCM Black Oak, Ltd. entered into an
Amended and Restated Purchase and Sale Agreement for 124 lots.
Pursuant to the Amended and Restated Purchase and Sale Agreement,
the purchase price remained $6,175,000. 150 CCM Black Oak, Ltd. was
required to meet certain closing conditions and the timing for the
closing was extended. On January 18, 2019, the sale of 124 lots at
the Company’s Black Oak project in Magnolia, Texas was
completed. After allocating costs of revenue to this sale, we had
estimated a loss of $2.4 million which was recorded as an
impairment of real estate in the last quarter of 2018.
On September 30, 2019, the Company recorded approximately $4.7
million of impairment on the Black Oak project based on discounted
estimated future cash flows.
On December 31, 2019, the Company recorded approximately $1.2
million of additional impairment on the Black Oak project based on
discounted estimated future cash flows.
The Company did not record impairment on any of its projects during
the three and nine months ended on September 30, 2020.
Revenue Recognition
Accounting
Standards Codification ("ASC") 606, Revenue from Contracts with
Customers ("ASC 606"), establishes principles for reporting
information about the nature, amount, timing and uncertainty of
revenue and cash flows arising from the entity's contracts to
provide goods or services to customers. The Company adopted this
new standard on January 1, 2018 under the modified retrospective
method. The adoption of this new standard did not have a material
effect on our financial statements.
In
accordance with ASC 606, revenue is recognized when a customer
obtains control of promised goods or services. The amount of
revenue recognized reflects the consideration to which we expect to
be entitled to receive in exchange for these goods or services. The
provisions of ASC 606 include a five-step process by which we
determine revenue recognition, depicting the transfer of goods or
services to customers in amounts reflecting the payment to which we
expect to be entitled in exchange for those goods or services. ASC
606 requires us to apply the following steps: (1) identify the
contract with the customer; (2) identify the performance
obligations in the contract; (3) determine the transaction price;
(4) allocate the transaction price to the performance obligations
in the contract; and (5) recognize revenue when, or as, we satisfy
the performance obligation. A detailed breakdown of the five-step
process for the revenue recognition of our Ballenger and Black Oak
projects, which were essentially all of the revenue of the Company
in 2020 and 2019, is as follows:
●
Identify
the contract with a customer.
The
Company has signed agreements with the builders for developing the
raw land to ready to build lots. The contract has agreed upon
prices, timelines, and specifications for what is to be
provided.
●
Identify
the performance obligations in the contract.
Performance
obligations of the Company include delivering developed lots to the
customer, which are required to meet certain specifications that
are outlined in the contract. The customer inspects all lots prior
to accepting title to ensure all specifications are
met.
●
Determine
the transaction price.
The
transaction price is fixed and specified in the contract. Any
subsequent change orders or price changes are required to be
approved by both parties.
●
Allocate
the transaction price to performance obligations in the
contract.
Each
lot or a group of lots is considered to be a separate performance
obligation, for which the specified price in the contract is
allocated to.
●
Recognize
revenue when (or as) the entity satisfies a performance
obligation.
The
builders do the inspections to make sure all
conditions/requirements are met before taking title of lots. The
Company recognizes revenue when title is transferred. The Company
does not have further performance obligations once title is
transferred.
Sale of the Front Foot Benefit Assessments.
We have
established a front foot benefit (“FFB”) assessment on
all of the lots sold to NVR. This is a 30-year annual assessment
allowed in Frederick County which requires homeowners to reimburse
the developer for the costs of installing public water and sewer to
the lots. These assessments become effective as homes are settled,
at which time we can sell the collection rights to investors who
will pay an upfront lump sum, enabling us to more quickly realize
the revenue. The selling prices range from $3,000 to $4,500 per
home depending the type of the home. Our total expected revenue
from the front foot benefit assessment is approximately $1 million.
To recognize revenue of the FFB assessment, both our and
NVR’s performance obligations have to be satisfied. Our
performance obligation is completed once we complete the
construction of water and sewer facilities and close the lot sales
with NVR, which inspects these water and sewer facilities prior to
the close of lot sales to ensure all specifications are met.
NVR’s performance obligation is to sell homes they build to
homeowners. Our FFB revenue is recognized upon NVR’s sales of
homes to homeowners. The agreement with these FFB investors is not
subject to amendment by regulatory agencies and thus our revenue
from FFB assessment is not either. During the nine months ended on
September 30, 2020 and 2019, we recognized revenue in the amounts
of $169,349 and $365,645 from FFB assessments, respectively. During
the three months ended on September 30, 2020 and 2019, we
recognized revenue in the amounts of $54,147 and $129,031 from FFB
assessments, respectively.
Cost of Sales
Land
acquisition costs are allocated to each lot based on the area
method, the size of the lot comparing to the total size of all lots
in the project. Development costs and capitalized interest are
allocated to lots sold based on the total expected development and
interest costs of the completed project and allocating a percentage
of those costs based on the selling price of the sold lot compared
to the expected sales values of all lots in the
project.
If
allocation of development costs and capitalized interest based on
the projection and relative expected sales value is impracticable,
those costs could also be allocated based on area method, the size
of the lot comparing to the total size of all lots in the
project.
Recent Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic
740), Simplifying the Accounting for Income Taxes. ASU 2109-12
eliminates certain exceptions to the guidance in Topic 740 related
to the approach for intra-period tax allocation, the methodology
for calculating income taxes in an interim period and the
recognition of deferred tax liabilities for outside basis
differences. The new guidance also simplifies aspects of the
accounting for franchise taxes, enacted change in tax laws or rates
and clarifies the accounting transactions that result in a step-up
in the tax basis of goodwill. The guidance is effective for fiscal
years beginning after December 15, 2020 and interim periods within
those fiscal years. We are currently in the process of evaluating
the effect that ASU 2019-12 will have on the Company's Consolidated
Financial Results.
In
March 2018, the FASB issued ASU 2018-05, “Income Taxes (Topic
740) – Amendments to SEC paragraphs Pursuant to SEC Staff
Accounting Bulletin (SAB) No. 118.” ASU 2018-05 amends the
Accounting Standards Codification to incorporate various SEC
paragraphs pursuant to the issuance of SAB 118, which addresses the
application of generally accepted accounting principles in
situations when a registrant does not have necessary information
available, prepared, or analyzed (including computation) in
reasonable detail to complete the accounting for certain income tax
effects of the Tax Cuts and Jobs Act. The ASU is not expected to
have a material impact on the Company.
In response to the COVID-19 pandemic, the Coronavirus Aid, Relief
and Economic Security Act (“CARES Act”) was signed into
law in March 2020. The CARES Act lifts certain deduction
limitations originally imposed by the Tax Cuts and Jobs Act of 2017
(“2017 Tax Act”). Corporate taxpayers may carryback net
operating losses (NOLs) originating between 2018 and 2020 for up to
five years, which was not previously allowed under the 2017 Tax
Act. The CARES Act also eliminates the 80% of taxable income
limitations by allowing corporate entities to fully utilize NOL
carryforwards to offset taxable income in 2018, 2019 or 2020.
Taxpayers may generally deduct interest up to the sum of 50% of
adjusted taxable income plus business interest income (30% limit
under the 2017 Tax Act) for 2019 and 2020. The CARES Act allows
taxpayers with alternative minimum tax credits to claim a refund in
2020 for the entire amount of the credits instead of recovering the
credits through refunds over a period of years, as originally
enacted by the 2017 Tax Act.
In addition, the CARES Act raises the corporate charitable
deduction limit to 25% of taxable income and makes qualified
improvement property generally eligible for 15-year cost-recovery
and 100% bonus depreciation. The enactment of the CARES Act did not
result in any material adjustments to our income tax provision for
the nine months ended September 30, 2020, or to our net deferred tax assets as
of September 30,
2020.
Subsequent Events
The
Company evaluated the events and transactions subsequent to
September 30, 2020, the balance sheet date, through November 13,
2020, the date the condensed consolidated financial statements were
available to be issued.
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, 2020 and December 31, 2019,
uninsured cash and restricted cash balances were $4,157,315 and
$4,558,582, respectively.
3. PROPERTY AND
EQUIPMENT
Property
and equipment stated at cost, less accumulated depreciation,
consisted of the following:
|
|
|
|
|
Computer
Equipment
|
$45,387
|
$41,597
|
|
Furniture
and Fixtures
|
24,785
|
24,393
|
|
|
70,172
|
65,990
|
|
Accumulated
Depreciation
|
(65,771)
|
(63,779)
|
|
Fixed
Assets Net
|
$4,401
|
$2,211
|
Depreciation
expense was $1,992 and $4,891 for the nine months ended September
30, 2020 and 2019, respectively. Depreciation expense was $603 and
$1,564 for the three months ended September 30, 2020 and 2019,
respectively.
4. BUILDER
DEPOSITS
In
November 2015, SeD Maryland Development, LLC (“SeD
Maryland”) entered into lot purchase agreements with NVR,
Inc. (“NVR”) relating to the sale of single-family home
and townhome lots to NVR in the Ballenger Run Project. The purchase
agreements were amended three times thereafter. Based on the
agreements, NVR is entitled to purchase 479 lots for a price of
approximately $64 million, which escalates 3% annually after June
1, 2018.
As part
of the agreements, NVR was required to give a deposit in the amount
of $5,600,000. Upon the sale of lots to NVR, 9.9% of the purchase
price is taken as payback of the deposit. A violation of the
agreements by NVR would cause NVR to forfeit the deposit. On
January 3, 2019 and April 28, 2020, NVR gave SeD Maryland two more
deposits in the amounts of $100,000 and $220,000, respectively,
based on the 3rd Amendment to the Lot Purchase Agreement. On
September 30, 2020 and December 31, 2019, there were $1,808,747 and
$2,445,269 held on deposit, respectively.
5. NOTES
PAYABLE
Union Bank Loan
On
November 23, 2015, SeD Maryland entered into a Revolving Credit
Note with the Union Bank in the original principal amount of
$8,000,000. During the term of the loan, cumulative loan advances
may not exceed $26,000,000. The line of credit bears interest at
LIBOR plus 3.8% with a floor rate of 4.5%. On April 17, 2019, SeD
Maryland Development LLC and Union Bank terminated the agreement
and the loan was paid off.
M&T Bank Loans
On
April 17, 2019, SeD Maryland Development LLC entered into a
Development Loan Agreement with Manufacturers and Traders Trust
Company (“M&T Bank”) in the principal amount not to
exceed at any one time outstanding the sum of $8,000,000, with a
cumulative loan advance amount of $18,500,000. The line of credit
bears interest of LIBOR plus 375 basis points. SeD Maryland
Development LLC was also provided with a Letter of Credit
(“L/C”) Facility in an aggregate amount of $900,000.
The L/C commission will be 1.5% per annum on the face amount of the
L/C. Other standard lender fees will apply in the event L/C is
drawn down. The L/C Facility is not a revolving loan, and amounts
advanced and repaid may not be re-borrowed. Repayment of the Loan
Agreement is secured by a $2.6 million collateral fund and a Deed
of Trust issued to the Lender on the property owned by SeD
Maryland.
As of
September 30, 2020 and December 31, 2019, the principal loan
balance was $0. As part of the transaction, the Company incurred
loan origination fees and closing fees in the amount of $381,823
and capitalized it into construction in process during
2019.
On June 18, 2020, Alset iHome Inc. (formerly known as SeD Home
& REITs Inc.) entered into a Loan Agreement with M&T Bank.
Pursuant to the Loan Agreement, M&T Bank provided a
non-revolving loan to Alset iHome Inc. in an aggregate amount of up
to $2,990,000. The line of credit bears interest rate on
LIBOR plus 375 basis points. Repayment
of this loan is secured by a Deed of Trust issued to M&T Bank
on the property owned by certain subsidiaries of Alset iHome Inc.
The maturity date of this Loan is July 1, 2022. The Company
together with one of its subsidiaries, SeD Maryland Development
LLC, are both the guarantors of this Loan.
As of September 30, 2020, the
loan balance was $670,281. As part of the transaction, the Company
incurred loan origination fees and closing fees in the amount of
$61,679 which are amortized over the term of the loan. As of
September 30, 2020, the remaining unamortized debt discount was
$50,952.
Paycheck Protection Program Loan
On
April 6, 2020, the Company entered into a term note with M&T
Bank with a principal amount of $68,502 pursuant to the Paycheck
Protection Program (“PPP Term Note”) under the
Coronavirus Aid, Relief, and Economic Security Act (the
“CARES Act”). The PPP Loan is evidenced by a promissory
note. The PPP Term Note bears interest at a fixed annual rate of
1.00%, with the first six months of principal and interest
deferred. Beginning in November 2020, the Company will make 18
equal monthly payments of principal and interest with the final
payment due in April 2022. The PPP Term Note may be accelerated
upon the occurrence of an event of default.
The PPP
Term Note is unsecured and guaranteed by the United States Small
Business Administration. The Company may apply to M&T Bank for
forgiveness of the PPP Term Note, with the amount which may be
forgiven equal to the sum of payroll costs, covered rent and
mortgage obligations, and covered utility payments incurred by the
Company during the eight-week period beginning upon receipt of PPP
Term Note funds, calculated in accordance with the terms of the
CARES Act. At this time, we are not in a position to quantify the
portion of the PPP Term Note that will be forgiven.
6. RELATED PARTY
TRANSACTIONS
Loan from SeD Home Limited
The
Company receives advances from SeD Home Limited, a subsidiary of
Alset Ltd, to fund development and operation costs. The Company is
99.99% owned by SeD Home International, which is wholly owned by
Alset Ltd. The advances bear interest of 10% and are payable on
demand. As of September 30, 2020 and December 31, 2019, Alset iHome
Inc. (formerly SeD Home & REITs Inc.) had outstanding principal
due of $0 and accrued interest of $228,557. During the three and
nine months ended September 30, 2020 and 2019, the Company did not
incur any interest from this related party.
Loan to/from SeD Intelligent Home Inc. (f.k.a. SeD Home
International)
The
Company receives advances from SeD Intelligent Home, the owner of
99.99% of the Company. The advances bore interest of 18% until
August 30, 2017 when the interest rate was adjusted to 5% and have
no set repayment terms. On December 31, 2019, there was $0 of
principal and $96,424 of accrued interest outstanding. On February
24, 2020 the Company repaid outstanding interest and at the same
time loaned $503,576 to SeD Intelligent Home. The advances bear
interest of 5%. On September 30, 2020, SeD Intelligent Home owed
the Company $458,680 in principal and $13,481 in accrued interest.
During the nine months ended September 30, 2020 and 2019, the
Company earned interest income of $13,481 and $0, respectively.
During the three months ended September 30, 2020 and 2019, the
Company earned interest income of $5,579 and $0,
respectively.
Management Fees
MacKenzie
Equity Partners, owned by Charles MacKenzie, a Director of the
Company, has a consulting agreement with the Company since 2015.
Per the terms of the agreement, as amended on January 1, 2018, the
Company pays a monthly fee of $15,000 with an additional $5,000 per
month due upon the close of the sale to Houston LD, LLC. From
January 2019, the Company pays a monthly fee of $20,000 for the
consulting services. The Company incurred expenses of $60,000 and
$180,000 for the three and nine months ended September 30, 2020 and
2019, respectively, which were capitalized as part of Real Estate
on the balance sheet as the services relate to property and project
management. On September 30, 2020 and December 31, 2019, the
Company owed $20,000 and $0, respectively, to this related
party.
Advances to HF Enterprises Inc.
The
Company pays some operating expenses for HF Enterprise Inc., a
related party under the common control of Chan Heng Fai, the CEO of
the Company. The advances are interest free with no set repayment
terms. On September 30, 2020 and December 31, 2019, the balance of
these advances was $352,790 and $211,271,
respectively.
Consulting Services
A law
firm, owned by Conn Flanigan, a Director of the Company, performs
legal consulting services for the Company. The Company incurred
expenses of $12,645 and $46,510 for the nine months ended September
30, 2020 and 2019, respectively. The Company incurred expenses of
$12,645 and $3,153 for the three months ended September 30, 2020
and 2019, respectively. On September 30, 2020 and December 31,
2019, the Company owed $0 to this related party.
7. STOCKHOLDERS’
EQUITY
Cash Dividend Distributions
On
February 21, 2020, the Board of Managers of SeD Maryland
Development LLC authorized the payment of distributions to its
members in the amount of $1,200,000. Accordingly, the minority member of SeD Maryland
Development LLC received a distribution in the amount of $197,400,
with the remainder being distributed to a subsidiary of the
Company, which is eliminated upon
consolidation.
8. COMMITMENTS AND
CONTINGENCIES
Lot Sale Agreements
On
February 19, 2018, SeD Maryland entered into a contract to sell the
Continuing Care Retirement Community Assisted Independent Living
(“CCRC”) parcel to Orchard Development Corporation. It
was agreed that the purchase price for the 5.9-acre lot would be
$2,900,000 with a $50,000 deposit. It was also agreed that Orchard
Development Corporation would have the right to terminate the
transaction during the feasibility study period, which would last
through May 30, 2018, and receive a refund of its deposit. On April
13, 2018, Orchard Development Corporation indicated that it would
not be proceeding with the purchase of the CCRC parcel. On December
31, 2018, SeD Maryland entered into the Third Amendment to the Lot
Purchase Agreement for Ballenger Run with NVR. Pursuant to the
Third Amendment, SeD Maryland was obliged to convert the 5.9-acre
CCRC parcel to 36 lots (these will be 28 feet wide villa lots) and
sell such lots to NVR. SeD Maryland received the required zoning
approval to change the number of such lots from 85 to 121 in July
2019.
9. SUBSEQUENT EVENTS
Cash Dividend Distributions
On
November 6, 2020, the Board of Managers of SeD Maryland Development
LLC approved the payment of a distribution to members and paid
$82,250 in distributions to the non-controlling
shareholder.
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