LIQUIDVALUE DEVELOPMENT INC. This Form 10-K contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Form 10-K that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may", "will", "expect", "believe", "anticipate", "estimate" or "continue" or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include by are not limited to economic conditions generally and in the industries in which we may participate; competition within our chosen industry, including competition from much larger competitors; technological advances and failure to successfully develop business relationships.
Results of Operations Results of Operations for the Year EndedDecember 31, 2021 Compared to the Year EndedDecember 31, 2020 Year Ended December 31, December 31, 2021 2020 Revenue$ 14,213,380 $ 15,656,829 Cost of Revenue$ 11,551,301 $ 14,326,252 General and Administrative Expenses$ 1,498,052 $ 1,185,368 Net Income$ 922,353 $ 220,189 Revenue
Revenue was
Income from the sale of Front Foot Benefits ("FFBs"), assessed on
In the second quarter of 2021, the Company started renting homes to tenants.
Revenue from rental business was
Operating Expenses
All cost of revenue in the years ended on
General and Administrative Expenses
The general and administrative expenses increased from
Net Income
The Company had a net income of
Liquidity and Capital Resources
Our real estate assets have increased to
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As of
Our
On
On
The PPP Term Note is unsecured and guaranteed by the
During 2021 the Company signed multiple purchase agreements to acquire 109 homes
in
Our subsidiaries are reviewing plans for potential additional fundraising to fund single family rental operations and the acquisition of additional real estate projects.
The future development timeline of
The management believes that the available cash in bank accounts, favorable cash
revenue from real estate projects and availability of
Summary of Cash Flows
A summary of cash flows from operating, investing and financing activities for
the years ended
2021 2020
Net Cash Provided by Operating Activities $ 8,346,384 $ 2,434,714
Net Cash Used in Investing Activities $ (25,366,119 ) $ (4,181 )
Net Cash Provided by Financing Activities $ 16,371,217 $ 270,842
Net Change in Cash $ (648,518 ) $ 2,701,375 Cash and restricted cash at beginning of the year
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Cash Flows from Operating Activities
Cash flows from operating activities include costs related to assets which we
plan to sell, such as land purchased for development and resale, and costs
related to construction, which are capitalized in the book. In 2021, cash
provided by operating activities was
Cash Flows from Investing Activities
Cash flows used in investing activities in 2021 include the purchase of properties for our rental business, as well as small expenditures for purchases of office computer equipment.
Cash Flows from Financing Activities
In 2020 Alset EHome borrowed
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
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. The
Company adopted this new standard on
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In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods or services. The provisions of ASC 606 include a five-step process by which we determine revenue recognition, depicting the transfer of goods or services to customers in amounts reflecting the payment to which we expect to be entitled in exchange for those goods or services. ASC 606 requires us to apply the following steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, we satisfy the performance obligation. A detailed breakdown of the five-step process for the revenue recognition of our Ballenger project, which was approximately all the revenue of the Company in 2021 and 2020, is as follows:
? Identify the contract with a customer.
The Company has signed agreements with the builders for developing the raw land to ready to build lots. The contract has agreed upon prices, timelines, and specifications for what is to be provided.
? Identify the performance obligations in the contract.
Performance obligations of the company include delivering developed lots to the customer, which are required to meet certain specifications that are outlined in the contract. The customer inspects all lots prior to accepting title to ensure all specifications are met.
? Determine the transaction price.
The transaction price is specified in the contract. Any subsequent change orders or price changes are required to be approved by both parties.
? Allocate the transaction price to performance obligations in the contract.
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.
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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 year ended
Sale of the Front Foot Benefit Assessments
We have established a front foot benefit ("FFB") assessment on all of the NVR
lots. This is a 30-year annual assessment allowed in Frederick County which
requires homeowners to reimburse the developer for the costs of installing
public water and sewer to the lots. These assessments become effective as homes
are settled, at which time we can sell the collection rights to investors who
will pay an upfront lump sum, enabling us to more quickly realize the revenue.
The selling prices range from
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 and other related administrative costs. Utility expenses are paid directly by tenants.
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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
See following chart for details of the capitalized construction costs of
Ballenger and
As of December 31, 2021
Ballenger Run Black Oak Total
($) ($) ($)
Hard Construction Costs 29,244,223 3,126,907 32,371,130
Engineering 3,626,928 2,852,710 6,479,638
Consultation 340,528 109,826 450,354
Project Management 4,285,533 2,597,175 6,882,709
Legal 375,585 237,970 613,554
Taxes 1,326,734 985,440 2,312,174
Other Services 605,657 33,791 639,448
Impairment Reserve - (5,920,599 ) (5,920,599 )
Construction - Sold Lots (39,805,188 ) (1,364,805 ) (41,169,993 )
Total $ 0 $ 2,658,415 $ 2,658,415
Capitalized Finance Costs $ 4,066,259
Construction in Progress $ 6,724,674
As of December 31, 2020
Ballenger Run Black Oak Total
($) ($) ($)
Hard Construction Costs 26,542,028 3,647,973 30,190,001
Engineering 3,516,161 1,885,761 5,401,922
Consultation 340,528 105,667 446,195
Project Management 3,682,401 874,028 4,556,429
Legal 359,353 235,961 595,314
Taxes 1,273,587 770,983 2,044,570
Other Services 1,291,447 33,091 1,324,538
Impairment Reserve - (5,920,599 ) (5,920,599 )
Construction - Sold Lots (31,979,300 ) (1,364,805 ) (33,344,105 )
Total $ 5,026,205 $ 268,060 $ 5,294,265
Capitalized Finance Costs $ 4,945,132
Construction in Progress $ 10,239,397
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As of
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
The required time and expenses needed to complete the
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
Investments in
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
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