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, 2020 Compared to the Year EndedDecember 31, 2019 Year Ended December 31, December 31, 2020 2019 Revenue$15,656,829 $22,855,445 Cost of Sales$14,326,252 $20,364,293
General and Administrative
$5,920,599 Net Income (Loss)$220,189 $(4,674,119) Revenue
Revenue was
Income from the sale of Front Foot Benefits ("FFBs"), assessed on
Operating Expenses
Cost of sales decreased from
The general and administrative expenses increased from
We recorded approximately
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Net Loss
After a net loss of
Liquidity and Capital Resources
Our real estate assets have decreased to
As of
Currently the
Summary of Cash Flows
A summary of cash flows from operating, investing and financing activities for
the years ended
2020 2019
Net Cash Provided by Operating Activities $2,434,714 $7,586,441
Net Cash Used in Investing Activities $(4,181) $-
Net Cash Provided by (Used in) Financing Activities
$2,701,375 $757,708
Cash and restricted cash at beginning of the year
Cash Flows from Operating Activities
Cash flows from operating activities include costs related to assets which we
plan to sell, such as land purchased for development and resale, and costs
related to construction, which are capitalized in the book. In 2020, cash
provided by operating activities was
Cash Flows from Investing Activities
Cash flows used in investing activities in 2020 include purchases of office fixture and computer equipment.
Cash Flows from Financing Activities
In 2020 Alset EHome borrowed
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Seasonality
The real estate business is subject to seasonal shifts in costs as certain work in more likely to be performed at certain times of year. This may impact the expenses of Alset EHome from time to time. In addition, should we commence building homes, we are likely to experience periodic spikes in sales as we commence the sales process at a particular location.
Off-Balance Sheet Arrangements
As of
Critical Accounting Policies and Estimates
We have established various accounting policies under US GAAP. Some of these policies involve judgments, assumptions and estimates by management. We base these estimates on historical experience, available current market information and on various other assumptions that management believes are reasonable under the circumstances. Additionally, we evaluate the results of these estimates on an ongoing basis. We are subject to uncertainties such as the impact of future events, economic, environmental and political factors and changes in our business environment. Accordingly, actual results could differ from these estimates. The accounting policies that we deem most critical are as follows:
Revenue Recognition and Cost of Sales
Accounting Standards Codification ("ASC") 606, Revenue from Contracts with
Customers ("ASC 606"), establishes principles for reporting information about
the nature, amount, timing and uncertainty of revenue and cash flows arising
from the entity's contracts to provide goods or services to customers. The
Company adopted this new standard on
In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods or services. The provisions of ASC 606 include a five-step process by which we determine revenue recognition, depicting the transfer of goods or services to customers in amounts reflecting the payment to which we expect to be entitled in exchange for those goods or services. ASC 606 requires us to apply the following steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, we satisfy the performance obligation. A detailed breakdown of the five-step process for the revenue recognition of our Ballenger project, which was approximately all the revenue of the Company in 2020 and 2019, is as follows:
?
Identify the contract with a customer.
The Company has signed agreements with the builders for developing the raw land to ready to build lots. The contract has agreed upon prices, timelines, and specifications for what is to be provided.
?
Identify the performance obligations in the contract.
Performance obligations of the company include delivering developed lots to the customer, which are required to meet certain specifications that are outlined in the contract. The customer inspects all lots prior to accepting title to ensure all specifications are met.
?
Determine the transaction price.
The transaction price is specified in the contract. Any subsequent change orders or price changes are required to be approved by both parties.
?
Allocate the transaction price to performance obligations in the contract.
21Each lot is considered to be a separate performance obligation, for which the specified price in the contract is allocated to.
?
Recognize revenue when (or as) the entity satisfies a performance obligation.
The builders do the inspections to make sure all conditions/requirements are met before taking title of lots. The Company recognizes revenue when title is transferred. The Company does not have further performance obligations once title is transferred.
Contract Assets and Contract Liabilities
Based on our contracts, we invoice customers once our performance obligations have been satisfied, at which point payment is unconditional. Accordingly, our contracts do not give rise to contract assets or liabilities under ASC 606. Accounts receivable are recorded when the right to consideration becomes unconditional. We disclose receivables from contracts with customers separately on the balance sheets.
Cost of Sales
Land acquisition costs are allocated to each lot based on the size of the lot comparing to the total size of all lots in the project. Development costs and capitalized interest are allocated to lots sold based on the total expected development and interest costs of the completed project and allocating a percentage of those costs based on the selling price of the sold lot compared to the expected sales values of all lots in the project.
Real Estate Assets
Real estate assets are recorded at cost, except when real estate assets are
acquired that meet the definition of a business combination in accordance with
See following chart for details of the capitalized construction costs of
Ballenger and
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 $10,239,397
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As of December 31, 2019
Ballenger Run Black Oak Total
($) ($) ($)
Hard Construction Costs 18,857,552 3,366,525 22,224,077
Engineering 2,890,373 1,804,034 4,694,407
Consultation 330,387 105,267 435,654
Project Management 3,042,600 800,505 3,843,106
Legal 327,011 234,106 561,117
Taxes 1,092,247 556,194 1,648,441
Other Services 488,717 29,398 518,114
Impairment Reserve - (5,920,599) (5,920,599)Construction - Sold Lots (21,713,668) (1,364,805) (23,078,473)
Total $5,315,220 $(389,375) $4,925,845
Capitalized Finance Costs $6,159,624
Construction in Progress $11,085,469 The Company capitalized interest from related party borrowings of
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 following table shows the Company's forecasts of the phases of the
development and costs for each phase of development for the
Estimated Construction Costs
Black Oak Expected Completion Date
Phase 1 $7,080,000 $ Completed
Phase 2 $330,671 November 2022
Phase 3 $422,331 November 2022
Phase 4 $142,788 November 2022
Phase 5 $3,293,000 April 2022
Total $11,268,790 A property is classified as "held for sale" when all of the following criteria for a plan of sale have been met:
(1)
management, having the authority to approve the action, commits to a plan to
sell the property;
(2)
the property is available for immediate sale in its present condition, subject
only to terms that are usual and customary;
(3)
an active program to locate a buyer and other actions required to complete the
plan to sell, have been initiated;
(4)
the sale of the property is probable and is expected to be completed within one
year or the property is under a contract to be sold;
(5)
the property is being actively marketed for sale at a price that is reasonable
in relation to its current fair value; and
(6)
actions necessary to complete the plan of sale indicate that it is unlikely that
significant changes to the plan will be made or that the plan will be withdrawn.
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When all of these criteria have been met, the property is classified as "held
for sale". "Real estate held for sale" only included
In addition to our annual assessment of potential triggering events in accordance with ASC 360, Impairment Testing: Long- Lived Assets classified as held and used, the Company applies a fair value-based impairment test to the net book value assets on an annual basis and on an interim basis if certain events or circumstances indicate that an impairment loss may have occurred.
On
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