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 Six Months Ended June 30, 2021 and 2020:
Three- Months Ended Six-months Ended
June 30, June 30, June 30, June 30,
2021 2020 2021 2020
Revenue $ 4,584,542 $ 2,047,405 $ 8,478,673 $ 5,001,794
Cost of Sales $ 2,649,057 $ 1,756,846 $ 6,474,099 $ 4,257,090
General and Administrative $ 355,944 $ 230,760 $ 812,796 $ 507,267
Other Income (Expense) $ (27,198 ) $ 11,912 $ (26,990 ) $ 19,454
Provision for Income Taxes $ - $ 114,653 $ - $ 114,653
Net Income (Loss) $ 1,552,343 $ (42,942 ) $ 1,164,788 $ 142,238
Revenue
Revenue was $4,584,542 for the three months ended June 30, 2021 as compared to
$2,047,405 for the three months ended June 30, 2020. Revenue was $8,478,673 for
the six months ended June 30, 2021 as compared to $5,001,794 for the six months
ended June 30, 2020. This increase in revenue is caused by an increase in
property sales from the Ballenger project in the first half of 2021. In this
project, builders are required to purchase a minimum number of lots based on
their applicable sale agreements. We collect revenue only from the sale of lots
to builders. We are not involved in the construction of homes at the present
time.
Income from the sale of Front Foot Benefits ("FFBs"), assessed on Ballenger
project lots, increased from $74,879 in the three months ended June 30, 2020 to
$141,575 in the three months ended June 30, 2021. Income from the sale of FFBs
increased from $115,202 in the six months ended June 30, 2020 to $248,646 in the
six months ended June 30, 2021. The increase is a mixed result of the increased
sale of properties to homebuyers in 2021 and sale of FFBs of a higher value.
In second quarter of 2021, the Company started renting homes to tenants. Revenue
from rental business was $21,947 for the three and six months ended June 30,
2021. The company expects that the revenue from this business will continue to
increase as we acquire more rental houses and successfully rent them.
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Cost of Sales
All property sales revenue in the three months ended on June 30, 2020 came from
Ballenger and SeD Texas projects. The property sales revenue in the three months
ended on June 30, 2020 came from Ballenger project. The gross margin ratio for
Ballenger project in first six months of 2021 and 2020 were approximately 28%
and 15%, respectively. The different types of lots usually have different gross
margins, the main reason which led to the increase in 2021. The gross margin
ratio for SeD Texas project in first six months of 2021 and 2020 were
approximately 16% and 0%, respectively.
General and Administrative Expenses
General and administrative expenses increased from $230,760 in the three months
ended June 30, 2020 to $355,944 in the three months ended June 30, 2021. General
and administrative expenses increased from $507,267 in the six months ended June
30, 2020 to $812,796 in the six months ended June 30, 2021. The increase in
those expenses is caused mainly by the increase in the professional fees in
2021.
Net Income
In the three months ended June 30, 2021, the Company had net income of
$1,552,343 compared to net loss of $42,942 in the three months ended June 30,
2020. In the six months ended June 30, 2021, the Company had net income of
$1,164,788 compared to net income of $142,238 in the six months ended June 30,
2020. The increase in net income was caused by the increased sales in our
Ballenger Project in 2021.
Liquidity and Capital Resources
Our real estate assets under development have decreased to $16,053,300 as of
June 30, 2021 from $20,616,237 as of December 31, 2020. This decrease reflects
increase in sales of lots and a higher increase in cost of sales than in
capitalized costs related to the construction in progress. In the six months
ended June 30, 2021, we purchased 30 homes, which will be used in Company's
rental business. Our rental properties assets were $6,810,685 as of June 30,
2021.
Our liabilities increased from $2,691,098 at December 31, 2020 to $3,883,888 at
June 30, 2021. Our total assets have increased to $30,425,863 as of June 30,
2021 from $29,219,785 as of December 31, 2020.
As of June 30, 2021, we had cash of $1,981,249 and restricted cash of $4,757,477
compared to $2,237,180 and $5,729,067 as of December 31, 2020.
Our Ballenger Run project has a revolver loan from M&T Bank in the principal
amount not to exceed at any one time outstanding the sum of $8,000,000, with a
cumulative loan advance amount of $18,500,000. As of June 30, 2021 and December
31, 2020, the revolver loan balance was $0, respectively.
On June 18, 2020, Alset EHome Inc. (formerly known as SeD Home & REITs Inc. and
Alset iHome Inc.) entered into a Loan Agreement with M&T Bank. Pursuant to this
Loan Agreement, M&T Bank provided a non-revolving loan to Alset EHome Inc. in an
aggregate amount of up to $2,990,000. As of June 30, 2020, the M&T loan balance
was $685,896. The loan was paid off in May 2021.
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
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 ten months of principal and
interest deferred. On November 26, 2020, $64,502 of this loan was forgiven by
the United States Small Business Administration and $64,502 was recorded as
other income. The remaining balance of $4,000 was paid back in December 2020.
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On February 11, 2021, 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 sixteen months of
principal and interest deferred or until we apply for the loan forgiveness. 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 at least 60%
of payroll costs and other eligible payments incurred by the Company, 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.
On March 15 and May 11, 2021 Alset EHome, Inc. signed all together thirty
separate Purchase Agreements to acquire 30 homes in Montgomery County, Texas. By
June 30, 2021, all of the 30 homes were closed with the purchase cost of
$6,827,033. The Company borrowed $2,125,000 from SeD Intelligent Home Inc. to
fund part of this acquisition. All of these purchased homes are properties of
our rental business.
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 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.
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