UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark
One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year ended December 31, 2017
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: 000-55038
SED INTELLIGENT HOME INC.
(Exact
name of registrant as specified in its charter)
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Nevada
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27-1467606
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification Number)
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4800 Montgomery Lane, Suite 210
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Bethesda, MD 20814
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301-971-3940
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(Address of Principal Executive Offices)
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Registrant’s telephone number,
including
area code
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Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to section 12(g) of the Act: Common Stock,
$0.001 par value
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Yes
☐
No
☒
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes
☐
No
☒
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.
Yes
☒
No
☐
Indicate
by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§ 229.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Yes
☐
No
☐
Indicate
by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.
☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange
Act.
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Large accelerated filer
☐
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Accelerated filer
☐
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Non-accelerated filer
☐
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Smaller reporting company
☒
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Emerging growth
company
☒
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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
☒
State
the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at
which the common equity was last sold, or the average bid and asked
price of such common equity, as of the last business day of the
registrant’s most recently completed second fiscal quarter.
The Company’s common stock did not trade during the year
ended December 31, 2017; as of June 30, 2017, 20,534 shares were
held by non-affiliates, which had been sold to such non-affiliates
for total proceeds of $2,053.
Indicate
the number of shares outstanding of each of the registrant’s
classes of common stock, as of the latest practicable date. As of
April 17, 2018, there were 704,043,324 shares outstanding of the
registrant’s common stock, $0.001 par value.
DOCUMENTS
INCORPORATED BY REFERENCE
None.
Throughout this Report on Form 10-K, the terms the
“Company,” “we,” “us” and
“our” refer to SeD Intelligent Home Inc., and
“our board of directors” refers to the board of
directors of SeD Intelligent Home Inc.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION
This Annual Report on Form 10-K contains forward-looking statements
regarding, among other things, our future operating results and
financial position, our business strategy, and other objectives for
our future operations. The words “anticipate,”
“believe,” “intend,” “expect,”
“may,” “estimate,” “predict,”
“project,” “potential” and similar
expression are intended to identify forward-looking statements,
although not all forward-looking statements contain these
identifying words. We have based these forward-looking statements
largely on our current expectations and projections about future
events and financial trends that we believe may affect our
business, financial condition and results of operations. There are
a number of important risks and uncertainties that could cause our
actual results to differ materially from those indicated by
forward-looking statements. We may not actually achieve the plans,
intentions or expectations disclosed in our forward-looking
statements, and you should not place undue reliance on our
forward-looking statements. Actual results or events could differ
materially from the plans, intentions and expectations disclosed in
the forward-looking statements we make. Our forward-looking
statements do not reflect the potential impact of any future
acquisitions, mergers, dispositions, joint ventures or investments
that we may make.
You should read this Report on Form 10-K and the documents that we
have filed as exhibits to this Report on Form 10-K completely
and with the understanding that our actual future results may be
materially different from what we expect. The forward-looking
statements contained in this Report on Form 10-K are made as of the
date of this Report on Form 10-K, and we do not assume
any obligation to update any forward-looking statements, whether as
a result of new information, future events or otherwise, except as
required by applicable law.
2
Table of Contents
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Page
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PART
I
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Item
1.
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Business
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4
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Item
1A.
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Risk
Factors
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12
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Item
1B.
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Unresolved
Staff Comments
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17
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Item
2.
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Properties
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17
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Item
3.
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Legal
Proceedings
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18
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Item
4.
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Mine
Safety Disclosures
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18
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PART
II
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Item
5.
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Market
for Registrant’s Common Equity, Related Stockholder Matters,
and Issuer Purchases of Equity Securities
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19
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Item
6.
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Selected
Financial Data
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19
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Item
7.
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations
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19
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Item
7A.
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Quantitative
and Qualitative Disclosures About Market Risk
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23
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Item
8.
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Financial
Statements
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24
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Item
9.
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosures
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26
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Item
9A.
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Controls
and Procedures
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26
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Item
9B.
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Other
Information
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26
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PART
III
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Item
10.
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Directors,
Executive Officers and Corporate Governance
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27
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Item
11.
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Executive
Compensation
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31
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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33
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Item
13.
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Certain
Relationships and Related Transactions, and Director
Independence
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35
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Item
14.
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Principal
Accounting Fees and Services
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36
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PART
IV
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Item
15.
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Exhibits,
Financial Statement Schedules
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37
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Item
16.
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Form
10-K Summary
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38
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Signatures
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39
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3
General
SeD Intelligent Home Inc., formerly known as Homeownusa, was
incorporated in the State of Nevada on December 10, 2009 with the
intention of entering into the home equity lease/rent to own
business. The Company is no longer pursuing this business plan. Our
address is 4800 Montgomery Lane, Suite 210, Bethesda, MD, 20814.
Our telephone number is 301-971-3940.
On December 31, 2013, the Company’s sole director and officer
and nine other shareholders sold their interest in the Company to
CloudBiz International Pte, Ltd (“CloudBiz”), a
Singapore corporation. The total number of shares purchased was
15,730 which represented a 69% interest in the Company’s
issued and outstanding common stock (the
“Transaction”). Along with the Transaction, the sole
director and officer resigned and Mr. Conn Flanigan was appointed
as the Company’s Chief Executive Officer and sole director.
On July 7, 2014 CloudBiz invested $37,000 in the Company. For such
investment, CloudBiz received an additional 74 million shares of
the Company’s common stock. In October 2014, the Company
issued 20,534 shares to 30 new investors for total proceeds of
$2,053. On December 22, 2016 Cloudbiz International Pte. Ltd
transferred 74,015,730 common shares to Singapore eDevelopment.
Singapore eDevelopment subsequently contributed its ownership in
the Company to its subsidiary SeD Home International, Inc. (which
also owned SeD Home until December 29, 2017, at which time SeD Home
International, Inc. contributed its shares of SeD Home to the
Company). The majority of the Company’s common stock
continues to be owned by SeD Home International, Inc. On January
10, 2017, our board of directors appointed Fai H. Chan as Director.
On March 10, 2017, Mr. Rongguo (Ronald) Wei, CPA, was appointed as
Chief Financial Officer of the Company.
On March 10, 2017, our board of directors approved and ratified a
change in the Company's fiscal year end from January 31st to
December 31st, effective immediately as of the date of the board
approval. On September 5, 2017, the Company changed its name to SeD
Intelligent Home Inc., and increased its number of authorized
shares to 1,000,000,000 (the par value per share remained
$.001).
On
December 29, 2017, the Company, SeD Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of the Company (the
“Merger Sub”), SeD Home Inc. (“SeD Home”),
a Delaware corporation, and SeD Home International, Inc., a
Delaware corporation entered into an Acquisition Agreement and Plan
of Merger (the “Agreement”) pursuant to which the
Merger Sub was merged with and into SeD Home, with SeD Home
surviving as a wholly-owned subsidiary of the Company. The closing
of this transaction (the “Closing”) also took place on
December 29, 2017 (the “Closing Date”). Effective as of
the Closing, the Company is no longer a “shell company”
as that term is defined in Rule 405 of the Securities Act and Rule
12b-2 of the Exchange Act. The Company’s business operations
are now those operations that SeD Home is currently conducting, and
may conduct in the future.
In connection with the acquisition of SeD Home, the Company has
appointed new officers and directors. Fai H. Chan and Moe T. Chan
serve now as co-Chief Executive Officers; Rongguo (Ronald) Wei
and Alan W. L. Lui serve as Co-Chief Financial Officers, and
our Board of Directors includes Fai H. Chan, Moe T. Chan, Conn
Flanigan and Charley MacKenzie.
With the completion of the Company’s acquisition of SeD Home,
we are now in the business of land development. While the Company
will own real estate, the Company does not intend to be a REIT for
federal tax purposes.
SeD Home was incorporated in Delaware on February 24, 2015, and was
named SeD Home USA, Inc. before changing its name in May of
2015.
Prior to the Closing, SeD Home was entirely owned and
controlled by Singapore eDevelopment and certain of its
subsidiaries since its incorporation. Since SeD Home’s
incorporation, the management and funding of SeD Home has been
directed by Singapore eDevelopment’s management, including
Singapore eDevelopment’s Chief Executive Officer and
controlling shareholder, Fai H. Chan.
The officers and directors of SeD Home are the
same six individuals who are the officers and directors of the
Company (listed above). SeD Home’s Black Oak project is a
162-acre land sub-division development north of Houston, Texas. SeD
Home’s Ballenger Run project is a 197-acre sub-division
development near Washington D.C. in Frederick County, Maryland. SeD
Home conducts its operations through nine wholly and partially
owned subsidiaries. SeD Home’s affiliates will provide
project and asset management via separate agreements with
consultants.
4
The land development business involves converting undeveloped land
into buildable lots. When possible, in future projects we will
attempt to mitigate risk by attempting to enter into contracts with
strategic home building partners for the sale of lots to be
developed. In such circumstances, it is our intention that (i) we
will conduct a feasibility study on a particular land development;
(ii) both SeD Home and the strategic home building partners will
work together in connection with acquisition of the appropriate
land; (iii) strategic home building partners will typically agree
to enter into agreements to purchase up to 100% of the buildable
lots to be developed; (iv) SeD Home and the strategic home building
partners will enter into appropriate agreements; and (v) SeD Home
will proceed to acquire the land for development and will be
responsible for the infrastructure development, ensuring the
completion of the project and delivery of buildable lots to the
strategic home building partner.
We also intend, to the fullest extent practicable, to source land
where local government agencies (including county, district and
other municipalities) and public authorities, such as improvement
districts, will reimburse the majority of infrastructure costs
incurred by the land developer for developing the land to build
taxable properties. The developers and public authorities enter
into agreements whereby the developers are reimbursed for their
costs of infrastructure.
The Company will also consider the potential to purchase
foreclosure property development projects from banks, if attractive
opportunities should arise.
The Company, utilizing the extensive business network of its
management and majority shareholder, may from time to time attempt
to forge joint ventures with other parties. Through its
subsidiaries, SeD Home may manage such joint ventures.
In addition to the completion of our current projects, we intend to
seek additional land development projects in diverse regions across
the United States. Such projects may be within both the for-sale
and for-rent markets, and we may expand from residential properties
to other property types, including but not limited to commercial
and retail properties. We will consider projects in diverse regions
across the United States, however, SeD Home and its management and
consultants have longstanding relationships with local owners,
brokers, managers, lenders, tenants, attorneys and accountants to
help it source deals throughout Maryland and Texas. SeD Home will
continue to focus on off-market deals and raise appropriate
financing.
SeD Home, via a subsidiary, is presently exploring opportunities to
expand its current portfolio by developing communities solely
designed for renters. SeD Home is exploring the potential to pursue
this new endeavor in part to improve cash flow and smooth out the
inconsistencies of income in residential land development. SeD will
continue to attempt to mitigate risk and maximize returns.
At the present time, SeD Home owns one home through its subsidiary
SeD USA, LLC that is available for rent. Previously, SeD Home owned
other homes for rent which have been sold.
Entering into the business of building homes with the intention of
owning and renting those homes would provide an opportunity for SeD
Home to create value by (i) acquiring properties for horizontal and
vertical development; (ii) providing fee generation via property
management and leasing; and (iii) capturing rent escalations over
long term periods. SeD Home and its affiliates would provide
property management for customers seeking to offload home
maintenance and lawn care.
Through our subsidiaries, we will explore the potential to pursue
other business opportunities related to real estate. The Company is
evaluating the potential to enter into activities related to real
estate and home technologies, although we note that these potential
opportunities remain at the exploratory stage, and we may not
pursue these opportunities at the discretion of our management. The
Company is particularly exploring opportunities related to smart
home and eco-friendly home technologies.
We also intend to enlarge the scope of property-related services.
Additional planned activities, which we intend to be carried out
through SeD Home, include financing, home management, realtor
services, insurance and home title validation. We may particularly
provide these services in connection with homes we build. These
activities are also in the planning stages.
The
Company has expended minimal resources on the projects currently
being explored as potential additions to our core land development
business, consisting primarily of management time, payments for
market studies and expenditures for the development of proposed
floor plans for potential residential developments. The Company has
not yet determined the estimated time frame for when it might
commence operations in any such new business
opportunities.
As of
December 31, 2017, we had total assets of $58,166,606 and total
liabilities of $24,561,292. Total assets as of December 31, 2016
were $56,133,810 and total liabilities were
$27,047,413.
5
Employees
At the present time, our subsidiary SeD Development Management LLC
has four full time employees, and no part time employees. Much of
our work is done by contractors retained for projects, and at the
present time we have no full or part time employees outside of SeD
Development Management LLC.
Compliance with Government Regulation
The development of our real estate projects will require the
Company to comply with federal, state and local environmental
regulations.
In connection with this compliance, our real
estate acquisition and development projects will require
environmental studies. To date, the Company has spent approximately
$42,356 on environmental studies and compliance.
Such costs are reflected in construction progress
costs in our financial statements.
The cost of
complying with governmental regulations is
significant and will increase if we
add additional real estate projects and become involved in
homebuilding in the future. We will incur additional expenses
related to complying with U.S. securities reporting requirements
now that SeD Home is owned by SeD Intelligent Home
Inc.
At the present time, we believe that we have all of the material
government approvals that we need to conduct our business as
currently conducted. We are subject to periodic local permitting
that must be addressed, but we do not anticipate that such
requirements for government approval will have a material impact on
our business as presently conducted. We are required to comply with
government regulations and to make filings from time to time with
various government entities. Such work is typically handled by
outside contractors we retain.
Intellectual Property
At the present time, the Company does not own any trademarks, but
we anticipate filing trademark applications as we expand into new
areas of business.
6
Corporate Organization
The following chart describes the Company’s ownership of
various subsidiaries:
7
Black Oak
Black Oak is a 162-acre land infrastructure development and
sub-division project situated in Magnolia, Texas north of
Houston.
150 Black Oak LP was a partnership formed by our
current partner prior to our investment. 150 Black Oak LP had
contracts to purchase seven contiguous parcels of land. Our initial
equity investment was US$4.3 million for 60% ownership in the
partnership. Upon this initial investment in February 2014, we
changed the name of the partnership to 150 CCM Black Oak, Ltd (the
“Black Oak LP”). Since then we have increased our
ownership in the Black Oak LP to 69%. Black Oak LP is owned by a
general partner and three limited partners. Black Oak LP is
controlled by SeD Home through its indirect ownership and control
of the general partner and a majority of the limited partnership
interests. The general partner of Black Oak LP, a Texas corporation
called 150 Black Oak GP, Inc., is wholly owned by SeD USA, LLC,
which in turn is wholly owned by SeD Home. A majority of the
limited partnership interests are owned by SeD Development USA,
Inc., which is wholly owned by SeD Home. 150 Black Oak GP, Inc. was
previously jointly owned with a partner, but is now entirely owned
by SeD USA LLC. The limited partners in Black Oak LP include SeD
Development USA, Inc., American Real Estate Investments LLC and the
Fogarty Family Trust II. As the only Class A limited partner, SeD
Development USA, Inc. is entitled to a preferred return of five
percent (5%) on its capital contribution prior to distributions to
any other limited partner. As of December 31, 2017, Black Oak had
total outstanding debts of $11,980,427 to SeD Development USA, Inc.
and $ 6,541,465 to SeD Builder, Inc., each of which is one of our
subsidiaries. Such loans are at an annual interest rate of 15% per
year and are secured by deeds on the Black Oak
property.
Black
Oak LP is obligated under the Limited Partnership Agreement (as
amended) to pay a $6,500 per month management fee to Arete Real
Estate and Development Company (Arete), a related party through
common ownership and $2,000 per month to American Real Estate
Investments LLC (AREI), a related party through common ownership.
The Company incurred fees of $102,000 and $102,000 for the years
ended December 31, 2017 and 2016, respectively. These fees were
capitalized as part of Real Estate on the consolidated balance
sheet.
Arete
is also entitled to a developer fee of 3% of all development costs
excluding certain costs. The fees are to be accrued until
$1,000,000 is received in revenue and/or builder deposits relating
to the Black Oak Project. At December 31, 2017 and 2016, there were
$133,130 and $0 capitalized as Real Estate relating to these
costs.
At
December 31, 2017 and 2016, the Company had $314,630 and $103,700
owed to Arete in accounts payable and accrued
expenses.
At
December 31, 2017 and 2016, the Company had $48,000 and $24,000
owed to AREI in accounts payable and accrued expenses.
The
site plan at Black Oak is being revised to allow for approximately
420-500 residential lots of varying sizes. We anticipate that our
involvement in land development aspects of this project will take
approximately three to five additional years to complete. Since
February of 2015, we have completed several important tasks related
to the project, including clearing certain portions of the
property, paving certain roads within the project and complying
with the local improvement district to ensure reimbursement of
these costs. We project selling lots and the construction of homes
will take place in 2018. We are presently in negotiations with
multiple builders for lot takedowns or in some cases entire phases
of the project.
The
Black Oak project is applying for reimbursement of certain
construction of roads, sewer, water etc. While we may be entitled
to reimbursements from a local improvement district, the amount and
timing of such payments is uncertain. The timing of such potential
reimbursements will be impacted by certain bond sales by the Harris
County Improvement District #17.
In October 2015, the project obtained a US$6.0 million construction
loan from Revere High Yield Fund, LP. This loan was paid off in
October of 2017.
In August of 2017, we entered into a listing agreement for the
Black Oak project with a nationally recognized land broker in
Houston, Texas. Should we receive an acceptable offer for all or
part of this project, we would strongly consider selling the
project. There can be no guarantee that we will receive an offer at
an acceptable amount. We continue to move forward with our
development plans. If we are able to sell this project at an
attractive price, we anticipate utilizing the net proceeds from
such sale for the development of new projects and our expansion
into new areas of business.
At the
present time, the Company is also considering expanding its current
policy of selling buildable lots to include a strategy of building
housing for sale or rent, particularly at our Black Oak
property.
Ballenger Run
In November 2015, we completed the US$15.65 million acquisition of
Ballenger Run, a 197-acre land sub-division development located in
Frederick County, Maryland.
Previously, on May 28, 2014, the
RBG Family, LLC entered into the Assignable Real Estate Sales
Contract with NVR, Inc. (“NVR”) by which RBG Family,
LLC would sell the 197 acres for $15,000,000 to NVR. On December
10, 2014, NVR assigned this contract to SeD Maryland Development,
LLC in the Assignment and Assumption Agreement and entered into a
series of Lot Purchase Agreements by which NVR would purchase
subdivided lots from SeD Maryland Development, LLC.
SeD
Maryland Development’s
acquisition
of the 197 acres
was funded in part from a US$5.6 million deposit
from NVR Inc. (“NVR”). The balance of US$10.05 million
was derived from a total equity contribution of US$15.2 million by
SeD Ballenger LLC (“SeD Ballenger”) and CNQC Maryland
Development LLC (a unit of Qingjian International Group Co, Ltd,
China, “CNQC”). The project is owned by SeD Maryland
Development, LLC (“SeD Maryland”). SeD Maryland is
83.55% owned by SeD Ballenger and 16.45% by
CNQC.
8
One of
our subsidiaries, SeD Development Management, LLC is the manager of
Ballenger Run pursuant to a Management Agreement. Under the
Management Agreement, SeD Development Management, LLC shall manage,
operate and administer SeD Maryland’ s daytoday
operations, business and affairs, subject to the supervision of SeD
Maryland, and shall have only such functions and authority as SeD
Maryland may delegate to it. For performing these services, SeD
Development Management, LLC is entitled to a base management fee of
five percent of the gross revenue (including reimbursements) of
Ballenger Run. The base management fee shall be earned and paid in
monthly installments of $38,650 before gross revenue is determined.
When the gross revenue shall be determined, the parties will make
adjustments for underpayment or overpayment as necessary to ensure
the five percent of the gross revenue. SeD Development Management,
LLC may also earn incentive compensation of twenty percent of any
profit distributions to SeD Maryland above a 30% pre-tax internal
rate of return.
SeD
Maryland entered into a Project Development and Management
Agreement for Ballenger Run with MacKenzie Development Company, LLC
and Cavalier Development Group, LLC on February 25, 2015. MacKenzie
Development Company, LLC assigned its rights and obligations to
this agreement to Adams Aumiller Properties, LLC on September 9,
2017. Pursuant to this Project Development and Management
Agreement, Adams Aumiller, LLC and Cavalier Development Group, LLC
coordinate and manage the construction, financing, and development
of Ballenger Run. SeD Maryland compensates Adams Aumiller LLC and
Cavalier Development Group, LLC with a monthly aggregate fee of
$14,667 until all single family and townhome lots have been sold.
The monthly aggregate fee will then adjust to $11,000 which will
continue for approximately eight months to allow all close out
items to be finished including the release of guarantees and
securities as required by the government authorities. The Project
Development and Management Agreement for Ballenger Run also
requires SeD Maryland to pay a fee of $1200 and $500 for each
single-family and townhome, respectively, sold to a third party.
Finally, SeD Maryland will also pay a fee of $50,000 upon the sale
of the parcel underlying the multi-family lots and for the CCRC
parcel.
This property is
zoned for 443 entitled Residential Lots, 210 entitled
Multifamily Units and 200 entitled Continuing Care Retirement
Community (“CCRC”) units approved for twenty (20) years
from the date of a Developers Rights & Responsibilities
Agreement dated October 8, 2014, as amended on September 6, 2016.
We anticipate that the completion of our involvement in this
project will take approximately five years from the date of this
Annual Report.
Revenue from Ballenger Run is anticipated to come from four main
sources:
●
The
sale of 443 entitled and constructed residential lots to
NVR;
●
The
sale of the lot for the 210 entitled multi-family
units;
●
The
sale of the lot for the 200 entitled CCRC units; and
●
The
sale of 443 front foot benefit assessments.
The total project revenue is estimated to be approximately $68
million (prior to costs). Revenues may be lower, however, if we
fail to attain certain goals and meet certain
conditions.
Financing from Xenith Bank (f/k/a The Bank of Hampton Roads or
Shore Bank) closed simultaneous with the settlement on the land on
November 23, 2015, pursuant to a subsequent amendment to the terms
of this loan, the loan provides (i) for a maximum of $11 million
outstanding; (ii) that the maturity of this loan will be December
31, 2019; and (iii) includes an $800,000 letter of credit facility,
with an annual rate of 1.5% on all issued letters of
credit.
This loan is to fund the development of the first 276 lots, the
multi-family parcel and senior living parcel, the amenities
associated with these phases, and certain Ballenger Creek Pike
improvements.
Expenses from Ballenger Run include, but not be limited to costs
associated with land prices, closing costs, hard development costs,
cost in lieu of construction, soft development costs and interest
costs. We presently estimate these costs to be between $58 and $60
million. We may also encounter expenses which we have not
anticipated, or which are higher than presently
anticipated.
This project will have four phases. The first phase has been
completed and the second phase has begun.
The
following chart describes the various phases of this
project:
Phase 1
construction of all infrastructure was complete as of December 31,
2017. The initial model lot sales with NVR began in May 2017 and
all lot sales of varying types as outlined in the chart set forth
above are continuing through the first quarter of 2018. In the
fourth quarter of 2017 all improvement plans and cost estimates
were approved for Phases 2A, 2B, 2C and 2D. Phase 2B is the next
phase of lot takedowns for NVR. Phase 2B plat recordation and final
construction began in March of 2018. Lot sales to NVR also began in
March of 2018. Phases 2A, C and D plat recordation and final
construction are anticipated by June of 2018.
9
Sale of Residential Lots
The 443
Residential Lots were contracted for sale under a Lot Purchase
Agreement to NVR, a company based in the US and listed on the New
York Stock Exchange. NVR is a home builder which is engaged in the
construction and sale of single family detached homes,
townhouses and condominium buildings. It also operates a mortgage
banking and title services business. Under the Lot Purchase
Agreements, NVR provided SeD Home with an upfront deposit of
$5.6
million and has agreed to purchase the lots at a range of prices.
The total estimated revenue to be received pursuant to these Lot
Purchase Agreements, if all lots are sold, is approximately $59
million based on our projection that the lot selling prices will
increase 3% per annum on a quarterly basis after June 1, 2018 . The
lot types and quantities to be sold to NVR under the Lot Purchase
Agreements include the following:
|
Lot Type
|
Quantity
|
|
Single
Family Detached Large
|
85
|
|
Single
Family Detached Small
|
89
|
|
Single
Family Detached Neo Traditional
|
33
|
|
Single
Family Attached 28’ Villa
|
85
|
|
Single
Family Attached 20’ End Unit
|
46
|
|
Single
Family Attached 16’ Internal Unit
|
105
|
|
Total
|
443
|
There are five different types of Lot Purchase Agreements
(“LPAs”), which are essentially the same except for the
price and unit details for each type of lot. Under the LPAs, NVR
shall purchase 30 available lots per quarter. The LPAs provide
several conditions related to preparation of the lots which must be
met so that a lot can be made available for sale to NVR. SeD
Maryland is to provide customary lot preparation including but not
limited to as survey, grading, utilities installation, paving, and
other infrastructure and engineering. The sale of 13 model lots to
NVR began in May of 2017. As of December 31, 2017, total 42 lots
were sold. NVR has started marketing lots and has commenced sales.
In the event NVR did not purchase the lots under the LPAs, SeD
Maryland would be entitled to keep the NVR deposit and terminate
the LPAs. Should SeD Maryland breach the LPAs, it would have to
return the remainder of the NVR deposit that has not already been
credited to NVR for any sales of lots under the LPAs and NVR would
be able to seek specific performance of the LPAs as well as any
other rights available at law or in equity.
Sale of Lots for the Multi-family Units
In June 2016, SeD Maryland Development, LLC
(“Maryland”) entered into a lot purchase agreement with
Orchard Development Corporation (“Orchard”) relating to
the sale of 210 multi-family units in the Ballenger Run Project for
a total purchase price of $5,250,000 with a closing date of March
31, 2018. Based on the agreement, Orchard must put $100,000 into a
third-party escrow account upon signing of the agreement and an
additional $150,000 upon completion of the feasibility study, which
occurred in November 2016. As of December 31, 2017 and 2016,
$250,000 in deposits is held in the escrow account. Since the
monies are held in an escrow account and not entitled to the
Company, there is no deposit recorded by the Company. As of March
31, 2018, the agreement was amended to extend the closing date 30
days for an additional deposit of $25,000. The extension also
provides two additional 30-day extensions which if exercised will
require an additional $25,000 deposit each.
Sale of the Front Foot Benefit Assessments
We have established a front foot benefit assessment on all of the
NVR lots. This is a 30-year annual assessment allowed in Frederick
County which requires homeowners to pay the developer to reimburse
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 the assessments to investors who
will pay a lump sum up front so we can realize the revenue sooner.
Overall, we project that these front foot benefits will result in
additional profits of approximately $900,000. Front foot benefit
assessments are subject to amendment by regulatory agencies,
legislative bodies, and court rulings, and any changes to front
foot benefit assessments could cause us to reassess these
projections.
10
CCRC Parcel
On
February 19, 2018, SeD Maryland Development, LLC entered into a
contract to sell the CCRC parcel to Orchard Development
Corporation. It was agreed that the purchase price for the 5.9 acre
lot would be $2,900,000.00 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. The Company will seek to find alternative purchasers
for the CCRC parcel.
Wetland Impact Permit
The
Ballenger project will require a joint wetland impact permit, which
requires the review of several state and federal agencies,
including the US Army Corps of Engineers. The permit is primarily
required for Phase 3 construction which will not start until 2019
or later but it also affects a pedestrian trail at the Ballenger
project and the multi-family sewer connection. The US Army Corps of
Engineers allowed us to proceed with construction on Phase 1 but
required archeological testing. As of the date of this report, the
archeological testing has been completed with no further
recommendations on Phase 1 of the project. Required architectural
studies on the final phase of development will likely result in the
loss of only one lot, however, we cannot be certain of future
reviews and their impact on the project.
K-6 Grade School Site
In connection with getting the necessary approvals for the
Ballenger Project, we agreed to transfer thirty acres of land that
abuts the development for the construction of a local K-6 grade
school. We will not be involved in the construction of such
school.
Home Incubation Project
Recognizing that large land sub-division projects have a longer
time horizon, we previously introduced a home incubation initiative
to market completed U.S. single-family homes, with existing
tenants, to investors in Asia (the “Home Incubation
Project”).
Under the Home Incubation Project, we purchased 27 homes, mostly
located in Texas. We sold 24 of the homes by the end of 2016 and an
additional two in 2017.
SeD Home retains only one rental
home at the present time.
The Group
also purchased a terrace residential property in Washington, DC,
and renovated and sold the property in 2017.
Competition
There are a number of companies engaged in the development of land.
Should we expand our operations into the business of constructing
homes ourselves, we will face increased competition, including
competition from large, established and well-financed companies,
some of which may have considerable ties and experience in the
geographical areas in which we seek to operate. Similarly, as we
consider other opportunities we may wish to pursue in addition to
our current land development business, we anticipate that we will
face experienced competitors.
We will compete in part on the basis of the skill, experience and
innovative nature of our management team, and their track record of
success in diverse industries.
11
Emerging Growth Company
We
qualify as an Emerging Growth Company as defined in the Jumpstart
Our Business Startups (JOBS) Act. As an “Emerging Growth
Company” under the JOBS Act, we are permitted to rely on
exemptions from certain disclosure requirements. For so long as we
are an emerging growth company, we will not be required
to:
●
have an auditor
report on our internal controls over financial reporting pursuant
to Section 404(b) of the Sarbanes-Oxley Act;
●
provide an auditor
attestation with respect to management’s report on the
effectiveness of our internal controls over financial
reporting;
●
comply with any
requirement that may be adopted by the Public Company Accounting
Oversight Board regarding mandatory audit firm rotation or a
supplement to the auditor’s report providing additional
information about the audit and the financial statements (i.e., an
auditor discussion and analysis);
●
submit certain
executive compensation matters to shareholder advisory votes, such
as “say-on-pay” and “say-on-frequency;”
and
●
disclose certain
executive compensation related items such as the correlation
between executive compensation and performance and comparisons of
the Chief Executive’s compensation to median employee
compensation.
In
addition, Section 107 of the JOBS Act also provides that an
emerging growth company can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities
Act for complying with new or revised accounting standards. In
other words, an emerging growth company can delay the adoption of
certain accounting standards until those standards would otherwise
apply to private companies. We have elected to take advantage of
the benefits of this extended transition period. Our financial
statements may therefore not be comparable to those of companies
that comply with such new or revised accounting
standards.
We will
remain an “emerging growth company” until the last day
of the fiscal year of the issuer following the fifth anniversary of
the date of the first sale of common equity securities pursuant to
an effective registration statement (in the case of the Company,
this date will be December 31, 2018). The applicable rules also
provide that we would cease to be an emerging growth company at the
earliest to occur of (i) the last day of the first fiscal year in
which our total annual gross revenues is $1 billion; (ii) the date
that we become a “large accelerated filer” as defined
in Rule 12b-2 under the Securities Exchange Act of 1934, which
would occur if the market value of our ordinary shares that is held
by non-affiliates is $700 million as of the last business day of
our most recently completed second fiscal quarter; or (iii) the
date on which we have issued more than $1 billion in
non-convertible debt during the preceding three year
period.
Until
such time, however, we cannot predict if investors will find our
common stock less attractive because we may rely on these
exemptions. If some investors find our common stock less attractive
thus, there may be a less active trading market for our common
stock and our stock price may be more volatile.
An investment in our common stock involves a high degree of risk.
You should carefully consider the risks described below and the
other information in this report before making a decision to invest
in our common stock. If any of the following risks and
uncertainties develop into actual events, our business, results of
operations and financial condition could be adversely affected. In
those cases, the trading price of our common stock could decline
and you may lose all or part of your investment.
12
Risks Related to Our Company
We will need additional capital to expand our current operations or
to enter into new fields of operations.
Both the expansion of our current land development operations into
new geographic areas and the proposed expansion of the Company into
new businesses in the real estate industry will require additional
capital. We will need to seek additional financing either through
borrowing, private offerings of our securities or through strategic
partnerships and other arrangements with corporate partners. We
cannot be assured that additional financing will be available to
us, or if available, will be available to us on terms favorable to
us. If adequate additional financing is not available on acceptable
terms, we may not be able to implement our business development
plan or expand our operations.
We must retain key personnel for the success of our
business.
Our success is highly dependent on the skills and knowledge of our
management team, including their knowledge of our projects and
network of relationships. If we are unable to retain the members of
such team, or adequate substitutes, this could have a material
adverse effect on our business and financial
condition.
If we fail to effectively manage our growth our future business
results could be harmed and our managerial and operational
resources may be strained.
As we proceed with the expansion of our operations, we expect to
experience significant and rapid growth in the scope and complexity
of our business. We will need to hire additional personnel in order
to successfully advance our operations. This growth is likely to
place a strain on our management and operational resources. The
failure to develop and implement effective systems, or to hire and
retain sufficient personnel for the performance of all of the
functions necessary to effectively service and manage our potential
business, or the failure to manage growth effectively, could have a
materially adverse effect on our business and financial
condition.
There are risks related to conflicts of interest with our
partners.
The two projects will be dependent upon SeD Development
Management LLC, a subsidiary of SeD Home,
for the services required for their operations.
The interlocking interests of our officers and directors create a
number of conflicts of interest between our Company and our
partners in the two projects. Neither of the two current projects
has any employees and these projects will be dependent upon SeD
Development
Management LLC
and
its affiliates for the services required for their
operations.
The
Company, through SeD Development Management LLC, will receive fees
and reimbursements for the services it provides to the limited
partnerships and may realize income from operations and upon the
liquidation of the limited partnerships. The agreements and
arrangements between the limited partnerships and SeD Development
Management LLC and its affiliates, including those relating to
compensation, were not negotiated at arm’slength.
Although the aggregate amount of reimbursements SeD Development
Management LLC may receive is limited by the limited
partnership’s Management Agreement, the amount of services
that SeD Development Management LLC provides, and therefore the
amount of reimbursement it receives within these limits, will be
determined in the first instance by SeD Development Management
LLC.
SeD
Development Management LLC manages Ballenger Run for SeD Maryland.
Potential conflict between SeD Development Management, LLC and CNQC
regarding the management of Ballenger Run could undermine our
ability to effectively implement our vision for these projects, and
could result in costly and time-consuming litigation.
SeD
Development USA, LLC, a wholly owned subsidiary of SeD Home, serves
as the General Partner of 150 CCM Black Oak Ltd. Pursuant to the
Limited Partnership Agreement and the Bylaws of the General
Partner, SeD Development Management, as General Partner, shall
manage the construction and development of the property at Black
Oak. Potential conflict between SeD Development Management, LLC and
the limited partners of Black Oak LP, Fogarty Family Trust II and
American Real Estate Investments, LLC, regarding the management of
Black Oak could undermine our ability to effectively implement our
vision for these projects, and could result in costly and
time-consuming litigation.
Members of our management may face competing demands relating to
their time, and this may cause our operating results to
suffer.
Our Co-Chief Executive Officers, Fai H. Chan and Moe T. Chan, are
both officers and directors of Singapore eDevelopment, the entity
which owns SeD Home International, Inc., our majority shareholder.
They are involved in a number of other projects other than our
Company’s real estate business and will continue to be so
involved. Both of our Co-Chief Executive Officers have their
primarily residences and business offices in Asia, and accordingly,
there will be limits on how often they are able to visit the
locations of our real estate investments. Similarly, our Co- Chief
Financial Officers are both also engaged in non-real estate
activities of Singapore eDevelopment, and only one of our Co-Chief
Financial Officers resides and works in the United States (at an
office located in Bethesda, MD).
13
Our relationship with our majority shareholder and its parent and
affiliates may be on terms which are perceived by investors as more
or less favorable than those that could be obtained from third
parties.
Our majority shareholder, SeD Home International, Inc., presently
owns 99.99% of our issued and outstanding common stock. While we
anticipate that such percentage will be diluted over time, our
majority shareholder, its parent and affiliates will be perceived
as having influence over our management and operations, and any
loans or other agreements which we may enter into with our majority
shareholder and its parents and affiliates may be perceived by
investors as being on terms that are less favorable than we could
otherwise receive; such perception could adversely impact the price
of our common stock. Similarly, such agreements could be perceived
as being on terms more favorable than those that could be obtained
from third parties, and any unwillingness by our majority
shareholder and its parent and affiliates to engage with our common
stock could discourage investors.
Risks Relating to the Real Estate Industry
The market for Real Estate is subject to fluctuations that may
impact the value of the land or housing inventory that we hold,
which may impact the price of our common stock.
Investors should be aware that the value of any real estate we own
may fluctuate from time to time in connection with broader market
conditions and regulatory issues which we cannot predict or
control, including interest rates, the availability of credit, the
tax benefits of homeownership and wage growth, unemployment and
demographic trends in the regions in which may conduct business.
Should the price of real estate decline in the areas in which we
have purchased land decline, the price at which we will be able to
sell lots to home builders, or if we build houses, the price at
which can sell such houses to buyers, will decline.
The regulation of mortgages could adversely impact home buyers
willingness to buy new homes which we may be involved in building
and selling.
If we become active in the construction and sale of homes to
customers, the ability of home buyers to get mortgages could have
an impact on our sales, as we anticipate that the majority of home
buyers will be financed through mortgage financing.
An increase in interest rates will cause a decrease in the
willingness of buyers to purchase land for building homes and
completed homes.
An increase in interest rates will likely impact sales, reducing
both the number of homes and lots we can sell and the price at
which we can sell them.
Our business, results of operations and financial condition could
be adversely impacted by significant inflation or
deflation.
Significant inflation could have an adverse impact on us by
increasing the costs of land, materials and labor. We may not be
able to offset cost increases caused by inflation. In addition, our
costs of capital, as well as those of our future business partners,
may increase in the event of inflation, which may cause us to need
to cancel projects. Significant deflation could cause the value of
our inventories of land or homes to decline, which could sharply
impact our profits.
New environmental regulations could create new costs for our land
development business, and other business in which we may commence
operations.
At the present time, we are subjected to a number of environmental
regulations. If we expand into the business of building homes
ourselves, we will be subjected to an increasing number of
environmental regulations. The number and complexity of local,
state and federal regulations may increase over time. Additional
environmental regulations can add expenses to our existing
business, and to businesses which we may enter into the future,
which may reduce our profits.
14
Zoning and land use regulations impacting the land development and
homebuilding industries may limit our activities and increase our
expenses, which would adversely affect our profits.
We must comply with zoning and land use regulations impacting the
land development and home building industries. We will need to
obtain the approval of various government agencies to expand our
operations as currently into new areas and to commence the building
of homes. Our ability to gain the necessary approvals is not
certain, and the expense and timing of approval processes may
increase in ways that adversely impact our profits.
The availability and cost of skilled workers in the building trades
may impact the timing and profitability of projects that we
participate in.
Should there be a lack of skilled workers to be retained by our
Company and its partners, the ability to complete land development
and potential construction projects may be delayed.
Shortages in required materials could impact the profitability of
construction partnerships we may participate in.
Should a shortage of required materials occur, such shortage could
cause added expense and delays that will undermine our
profits.
Our ability to have a positive relationship with local communities
could impact our profits.
Should we develop a poor relationship with the communities in which
we will operate, such relationship will impact our
profits.
We may face litigation in connection with either our current
activities or activities which we may conduct in the
future.
As we expand our activities, the likelihood of litigation shall
increase. The expenses of such litigation may be substantial. We
may be exposed to litigation for environmental, health, safety,
breach of contract, defective title, construction defects, home
warranty and other matters. Such litigation could include expensive
class action matters. We could be responsible for matters assigned
to subcontractors, which could be both expensive and difficult to
predict.
As we expand operations, we will incur greater insurance costs and
likelihood of uninsured losses.
If we expand our operations into home building, we may experience
material losses for personal injuries and damage to property in
excess of insurance limits. In addition, our premiums may
raise.
Health and safety incidents that occur in connection with our
potential expansion into the home building business could be
costly.
If we commence operations in the homebuilding business, we will be
exposed to the danger of health and safety risks to our employees
and contractors. Health and safety incidents could result in the
loss of the services of valued employees and contractors and expose
us to significant litigation and fines. Insurance may not cover, or
may be insufficient to cover, such losses.
Adverse weather conditions, natural disasters and man-made
disasters may delay our projects or cause additional
expenses.
The land development operations which we currently conduct and the
construction projects which we may become involved in at a later
date may be adversely impacted by unexpected weather and natural
disasters, including but not limited to storms, hurricanes,
tornados, floods, blizzards, fires, earthquakes. Man-made disasters
including terrorist attacks, electrical outages and cyber-security
incidents may also impact the costs and timing of the completion of
our projects. Cyber-security incidents, including those that result
in the loss of financial or other personal data, could expose us to
litigation and reputational damage. If insurance is unavailable to
us on acceptable terms, or if our insurance is not adequate to
cover business interruptions and losses from the conditions
described above and similar incidents, or results of operations
will be adversely affected. In addition, damage to new homes caused
by these conditions may cause our insurance costs to
increase.
15
Risks Associated with Real Estate Related Debt and Other
Investments
Any real estate debt security that we originate or purchase is
subject to the risks of delinquency and foreclosure.
We may originate and purchase real estate debt securities, which
are subject to numerous risks including delinquency and
foreclosure. We will not have recourse to the personal assets of
our tenants. The ability of a lessee to pay rent depends primarily
upon the successful operation of the property, rather than upon the
existence of independent income or assets of the
tenant.
Any hedging strategies we utilize may not be successful in
mitigating our risks.
We may enter into hedging transactions to manage, for example, the
risk of interest rate or price changes. To the extent that we may
occasionally use derivative financial instruments, we will be
exposed to credit, basis and legal enforceability risks. Derivative
financial instruments may include interest rate swap contracts,
interest rate cap or floor contracts, futures or forward contracts,
options or repurchase agreements. In this context, credit risk is
the failure of the counterparty to perform under the terms of the
derivative contract. If the fair value of a derivative contract is
positive, the counterparty owes us, which creates credit risk for
us. Basis risk occurs when the index upon which the contract is
based is more or less variable than the index upon which the hedged
asset or liability is based, thereby making the hedge less
effective. Finally, legal enforceability risks encompass general
contractual risks, including the risk that the counterparty will
breach the terms of, or fail to perform its obligations under, the
derivative contract. We may not be able to manage these risks
effectively.
Risks Related to Our Potential Expansion into New Fields of
Operations
If we pursue the development of new technologies, we will be
required to respond to rapidly changing technology and customer
demands.
In the event that the Company enters the business of developing
“Smart Home” and similar technologies (an area which we
are presently exploring), the future success of such operation will
depend on our ability to adapt to technological advances,
anticipate customer demands and develop new products. We may
experience technical or other difficulties that could delay or
prevent the development, introduction or marketing of products.
Also, we may not be able to adapt new or enhanced services to
emerging industry standards, and our new products may not be
favorably received.
Risks Related to Our Common Stock
The shares of our common stock are currently not being traded and
there can be no assurance that there will be an active market in
the future.
Our shares of common stock are not publicly traded, and if trading
commences, the price may not reflect our value. There can be no
assurance that there will be an active market for our shares of
common stock in the future. As a result, investors may not be able
to liquidate their investment or liquidate it at a price that
reflects the value of the business.
It is possible that we will not establish an active market unless
our stock is listed for trading on an exchange, and we cannot
assure you that we will ever satisfy exchange listing
requirements.
It is possible that a significant trading market for our shares
will not develop unless the shares are listed for trading on a
national exchange. Exchange listing would require us to satisfy a
number of tests as to corporate governance, public float,
shareholders, equity, assets, market makers and other matters, some
of which we do not currently meet. We cannot assure you that we
will ever satisfy listing requirements for a national exchange or
that there ever will be significant liquidity in our
shares.
If we issue additional shares of our common stock, you will
experience dilution of your ownership interest.
We may issue shares of our authorized but unissued equity
securities in the future. Such shares may be issued in connection
with raising capital, acquiring assets or firing or retaining
employees or consultants. If we issue such shares, your ownership
will be diluted.
16
We do not intend to pay dividends in the foreseeable future, and
investors should not purchase our stock expecting to receive
dividends.
We have not paid any dividends on our common stock in the past, and
we do not anticipate that we will pay dividends in the foreseeable
future. Accordingly, some investors may decline to invest in our
common stock, and this may reduce the liquidity of our
stock.
The limitations on liability for officers, directors and employees
under the laws of the State of Nevada and the existence of
indemnification rights for our officers, directors and employees
could result in substantial expenditures by the Company and could
discourage lawsuits against our officers, directors and
employees.
Our Articles of Incorporation contain a specific provision that
eliminates the liability of our officers and directors for monetary
damages to our company and shareholders. Further, we intend to
provide indemnification to our officers and directors to the
fullest extent permitted by the laws of the State of Nevada. We may
also enter into employment and other agreements in the future
pursuant to which we will have indemnification obligations. The
foregoing indemnification obligations could result in the Company
incurring substantial expenditures to cover the cost of settlement
or damage awards against officers and directors. These obligations
may discourage the filing of derivative litigation by our
shareholders against our officers and directors even where such
litigation may be perceived as beneficial by our
shareholders.
SeD Home will incur increased costs and compliance risks as a
result of becoming a public company.
As a public company, SeD Home will incur significant legal,
accounting and other expenses that SeD Home did not occur prior to
being acquired by the Company.
Not
Applicable to Smaller Reporting Companies.
Black Oak
The Black Oak property is located in Montgomery County in Magnolia,
Texas. This property is located east of FM 2978 via Standard Road
to Dry Creek Road and South of the Woodlands, one of the most
successful, fastest growing master planned communities in Texas.
This residential land development consists of 450 lots on
162
acres. Black Oak LP is the primary developer
responsible for all infrastructure development. This property is
included in Harris County Improvement District
#17.
Ballenger Run
Ballenger Run is a residential land development project located in
Frederick County in Frederick, Maryland. This property is located
approximately 40 miles from Washington, DC, 50 miles from Baltimore
and is located less than four miles from I-70 and I-270. Ballenger
Run is situated on approximately 197 acres of land and entitled for
853 residential units consisting of 443 residential Lots, 210
multi-family units and 200 age restricted units. SeD Development
Management is the primary developer responsible for all
infrastructure development.
Development of Properties
At the
present time, the Company is considering expanding its current
policy of selling buildable lots to include a strategy of building
housing for sale or rent, particularly at our Black Oak
property.
Office Space
At the present time, the Company is renting offices in Houston,
Texas and Bethesda, Maryland through SeD Home. At the present time,
our office space is sufficient for our operations as presently
conducted, however, as we expand into new projects and into new
areas of operations we anticipate that we will require additional
office space.
17
The Company is not a party to any pending legal proceedings, and no
such proceedings are known to be contemplated.
There are no material proceedings to which any director, officer or
affiliate of the Company, or any owner of record or beneficially of
more than five percent of any class of voting securities of the
Company, or any associate of any such director, officer, affiliate
of the Company, or security holder is a party adverse to the
Company or any of its subsidiaries or has a material interest
adverse to the Company or any of its subsidiaries.
Not
applicable.
18
Market Information
There
is presently no established public trading market for our shares of
common stock. We do plan to reapply for quoting of our common
stock on the OTC Bulletin Board. However, we can provide no
assurance that our shares of common stock will be quoted on
the Bulletin Board or, if traded, that a public market will
materialize. In connection with the change of the Company’s
name from Homeownusa to SeD Intelligent Home Inc., the
Company’s symbol changed from HMUS to SEDH on December 13,
2017.
Holders
At April 17, 2018, the Company had 53
shareholders
.
Dividends
Since inception we have not paid any dividends on our common stock.
We currently do not anticipate paying any cash dividends in the
foreseeable future on our common stock. Although we intend to
retain our earnings, if any, to finance the exploration and growth
of our business, our board of directors will have the discretion to
declare and pay dividends in the future. Payment of dividends in
the future will depend upon our earnings, capital requirements, and
other factors, which our board of directors may deem
relevant.
Securities authorized for issuance under equity compensation
plans.
The Company does not have securities authorized for issuance under
any equity compensation plans
Performance graph
Not
applicable to smaller reporting companies.
Recent sales of unregistered securities; use of proceeds from
registered securities
On December 29, 2017, we issued 630,000,000 shares of our Common
Stock to SeD Home International, Inc., the sole shareholder of SeD
Home, in exchange for all 500,000,000 of the issued and outstanding
shares of SeD Home. Such securities were not registered under the
Securities Act of 1933 and were issued pursuant to the exemption
under Section 4(2) of the Securities Act.
Purchases of Equity Securities by the issuer and affiliated
purchasers
The Company did not repurchase any shares of the Company’s
common stock during 2017.
Not
applicable to smaller reporting companies.
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.
19
Results of Operations
Results of Operations for the Year Ended December 31, 2017 Compared
to the Year Ended December 31, 2016
|
|
Year Ended
|
|
|
|
December 31,
2017
|
December 31,
2016
|
|
Revenue
|
$
6,957,042
|
$
1,030,059
|
|
Operating
Expenses
|
$
7,336,319
|
$
2,183,426
|
|
Net
Loss
|
$
(249,769
)
|
$
(1,111,622
)
|
Revenue
Revenue
was $6,957,042 for the period ended December 31, 2017 as compared
to $1,030,059 for the period ended December 31, 2016. This increase
in revenue is primarily attributable to the Company having an
increase in property sales from the Ballenger Project, starting in
May of 2017. We anticipate a higher level of revenue from sales in
2018. Builders are required to purchase minimum numbers of lots
based on sales agreements we enter into with them. We collect
revenue from the sale of lots to builders; we do not build any
houses ourselves at the present time.
Rental
income declined from $230,059 in the period ended December 31, 2016
to $88,438 in the period ended December 31, 2017 as certain rental
properties were sold (we now own only one rental property). Unless
we acquire additional rental-income producing assets, such rental
income may decline further in 2018 if this remaining rental home is
sold.
Operating Expenses
Operating
expenses increased to $7,336,319 for the period ended December 31,
2017 from $2,183,426 for the period ended December 31, 2016. This
increase is caused by increased costs relating to increased sales,
which cost of sales increased from $970,397 in the period ended
December 31, 2016 to $6,217,779 in the period ended December 31,
2017. Accrued construction expenses were allocated to lot sales. We
anticipate total cost of sales will increase as revenue
increases.
Net Loss
Net
loss decreased from $1,111,622 to $249,769 in the period ended
December 31, 2016 to December 31, 2017, in large part because of
our increased property sales. In 2018, we anticipate further
decline in losses relating to our current operations, however, the
addition of new operations may cause new expenses that delay any
profitability.
20
Liquidity and Capital Resources
Our
real estate assets have increased to $ 54,543,092 as of December
31, 2017 from $52,915,566 as of December 31, 2016. This increase
largely reflects an increase in construction in progress to
$30,104,201 as of December 31, 2017 from $26,146,557. Our
liabilities declined from $27,047,413 at December 31, 2016 to
$24,561,292 at December 31, 2017. Our total assets have increased
to $58,166,606 as of December 31, 2017 from $56,133,810 as of
December 31, 2016.
As of
December 31, 2017, we had cash $358,233, compared to $424,548 as of
December 31, 2016. Our Ballenger Run revolver loan balance from
Hampton Road Bank is approximately $ 8.1 million and the credit
limit is $11 million as of December 31, 2017. At December 31, 2016,
the revolver loan balance is approximate $7.2 million and credit
limit is $8 million. In addition, we owed $6 million to Revere High
Yield Fund, which was paid off in October 2017 with related party
debt. The interest of related party loans is accruing and the due
date of these loans could be extended.
Based
on the sales projection of Ballenger run by sales contract with NVR
and Orchard Development Corporation, the 2018 revenue is expected
to be approximately $20 million. The majority of the loan from
Xenith Bank will be repaid and the balance closes to less than $1
million at end of 2018. The credit line of revolver loan is $11
million. At the same time, we expect that the restricted cash $2.6
million will release to us around September 2018 after we satisfy
the terms on the loan agreement. In 2018, Ballenger will distribute
about $2.7 million cash back to SeD Home.
Currently
the Black Oak project does not have any financing from third
parties. The future development timeline of Black Oak is based on
multiple limiting conditions, such as the amount of the funds
raised from capital market, the loans from third party financial
institutions, and the government reimbursements, etc. The
development will be step by step and expenses will be contingent on
the amount of funding we will receive.
Summary of Cash Flows
A
summary of cash flows from operating, investing and financing
activities for the years ended December 31, 2017 and 2016 are as
follows:
|
|
2017
|
2016
|
|
Net cash Used in
Operating Activities
|
$
(2,688,056
)
|
$
(12,034,820
)
|
|
Net Cash Used in
Investing Activities
|
$
(32,801
)
|
$
(42,947
)
|
|
Net Cash Provided
by Financing Activities
|
$
2,654,542
|
$
10,209,538
|
|
Net Decrease in
Cash
|
$
(66,315
)
|
$
(1,868,229
)
|
|
Cash at beginning
of the year
|
$
424,548
|
$
2,292,777
|
|
Cash at end of the
year
|
$
358,233
|
$
424,548
|
Cash Flows from Operating Activities
Cash flows from operating activities include costs related to
assets ultimately planned to be sold, including land development
and property purchased for resale. In the year 2017, cash used in
operating activities was $2,688,056 compared with $12,034,820 in
2016. The decease of the development costs in 2017 is the main
reason of decrease of the cash used in operating activities. With
the completion of the part of phase one of Black Oak project,
development speed was adjusted with our development funding
conditions and development costs went down as well. Ballenger
development costs also went down in the year of 2017 compared that
period in 2016 because of the different development stages and the
reduction by the allocated costs of sold lots.
Cash Flows from Investing Activities
Cash flows used in investing activities primarily includes
purchases of office fixture and computer equipment and money market
deposit required by Hampton Road Bank as the revolver loan
collateral.
21
Cash Flows from Financing Activities
In 2016, most of loans were from third party financial institutes,
Revere Loan for Black Oak project and Hampton Loan for Ballenger
Run project. In 2017, SeD Home borrowed $7.5 million from SeD Home
International to pay off Revere Loan of $6 million and to support
the land development of Black Oak and Ballenger projects. Ballenger
Run also borrowed about $1 million from the Hampton Road Bank for
its land development.
Seasonality
The
real estate business is subject to seasonal shifts in costs as
certain work in more likely to perform at certain times of year.
This may impact the expenses of SeD Home 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
December 31, 2017, we did not have any off balance sheet
arrangements, as defined under applicable SEC rules.
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. therefore, actual results could differ from these
estimates. The accounting policies that we deem most critical as
follows:
Revenue
Recognition and Cost of Sales
The
Company recognizes sales of lots only upon closing under the full
accrual method. Revenue is recognized when ownership of the lots is
transferred to the buyer (HUDs are executed).
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 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
$211,005 and $2,662,189 for the years ended December 31, 2017 and
2016, respectively. The Company capitalized interest from the
third-party borrowings of $1,008,220 and $911,764 for the years
ended December 31, 2017 and 2016, respectively.
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. When all of these criteria
have been met, the property is classified as “held for
sale”. “Real estate held for sale” only includes
El Tesoro project and D street project.
Valuation
and impairment of the project
Through
December 31, 2017, it was the Company’s policy to obtain an
independent third-party valuation for each project every two years
to test for impairment. Every reporting period, the Company
compared the book value to the fair value obtained in the most
recent valuation and looks at market conditions to see if there are
any indicators of impairment. If any indicators are noted, the
Company will obtain a new valuation and compare the fair value to
the book value.
Beginning in 2018,
it is the Company’s policy to obtain annual independent
third-party valuations as of December 31 for each property and
compare the fair value from the valuation to the book value to
determine if there any impairment.
At
December 31, 2016, the Company recognized $29,281 of impairment
related to the D Street Home Remodeling Project. There was no
impairment for the Black Oak or Ballenger Run
Projects.
At
December 31, 2017, there was no impairment recognized for any of
the projects.
22
Not
applicable to smaller reporting companies.
23
SeD Intelligent Home Inc. and Subsidiaries
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
|
Contents
|
|
Page(s)
|
|
|
|
|
|
Independent Accountant’s Audit Report
|
|
F-1
|
|
|
|
|
|
Consolidated Balance Sheets
|
|
F-2
|
|
|
|
|
|
Consolidated Statements of Operations
|
|
F-3
|
|
|
|
|
|
Consolidated Statements of Stockholders’ Deficit
|
|
F-4
|
|
|
|
|
|
Consolidated Statements of Cash Flows
|
|
F-5
|
|
|
|
|
|
Notes to Consolidated Financial Statements
|
|
F-6 -
F-12
|
24
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the
Board of Directors and
Stockholders of SeD
Intelligent Home Inc. and Subsidiaries
Opinion on the Consolidated Financial Statements
We have
audited the accompanying consolidated balance sheets of SeD
Intelligent Home Inc. and Subsidiaries (the Company) as of December
31, 2017 and 2016, and the related statements of operations,
stockholders’ equity, and cash flows for each of the years in
the two-year period ended December 31, 2017, and the related notes
(collectively referred to as the consolidated financial
statements). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of
the Company as of December 31, 2017 and 2016, and the results of
its operations and its cash flows for each of the years in the
two-year period ended December 31, 2017, in conformity with
accounting principles generally accepted in the United States of
America.
Basis for Opinion
These
consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements
based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation
of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
|
/s/
Rosenberg Rich Baker Berman, P.A.
|
|
|
|
|
|
We have
served as the Company’s auditor since 2014.
|
|
|
|
|
|
Somerset,
New Jersey
|
|
|
|
|
|
April
17, 2018
|
|
25
SeD Intelligent Home Inc. and Subsidiaries
|
|
December 31,
|
December 31,
|
|
|
2017
|
2016
|
|
|
|
|
|
Assets:
|
|
|
|
Real
Estate
|
|
|
|
Construction
in Progress
|
$
30,104,201
|
$
26,146,557
|
|
Land
Held for Development
|
24,302,643
|
25,449,641
|
|
Real
Estate Held For Sale
|
136,248
|
1,319,368
|
|
|
54,543,092
|
52,915,566
|
|
|
|
|
|
Cash
|
358,233
|
424,548
|
|
Restricted
Cash
|
2,656,670
|
2,631,761
|
|
Other
Receivable
|
513,043
|
-
|
|
Rent
Receivable
|
-
|
18,260
|
|
Prepaid
Expenses
|
49,903
|
85,449
|
|
Fixed
Assets, Net
|
22,062
|
34,623
|
|
Deposits
|
23,603
|
23,603
|
|
|
|
|
|
Total
Assets
|
$
58,166,606
|
$
56,133,810
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders' Equity
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
Accounts
Payable and Accrued Expenses
|
$
1,131,116
|
$
1,493,224
|
|
Accrued
Interest - Related Parties
|
1,935,222
|
6,284,302
|
|
Tenant
Security Deposits
|
2,625
|
5,175
|
|
Builder
Deposits
|
5,356,718
|
5,900,000
|
|
Notes
Payable, Net of Debt Discount
|
8,132,020
|
12,864,712
|
|
Notes
Payable - Related Parties, Net of Debt Discount
|
8,003,591
|
500,000
|
|
Total
Liabilities
|
24,561,292
|
27,047,413
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
Common
Stock, at par $0.001, 1,000,000,000 shares authorized and
704,043,324 issued, and outstanding at
December
31, 2017 and 2016, respectively
|
704,043
|
704,043
|
|
Additional
Paid In Capital
|
32,739,017
|
27,970,331
|
|
Accumulated
Deficit
|
(2,092,837
)
|
(1,865,859
)
|
|
Total
Stockholders' Equity
|
31,350,223
|
26,808,515
|
|
Non-controlling
Interests
|
2,255,091
|
2,277,882
|
|
Total
Stockholders' Equity
|
33,605,314
|
29,086,397
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
$
58,166,606
|
$
56,133,810
|
See accompanying notes to the consolidated financial
statements.
F-2
SeD Intelligent Home Inc. and Subsidiaries
For the Years Ended December 31, 2017 and 2016
|
|
2017
|
2016
|
|
Revenue
|
|
|
|
Rental
Income
|
$
88,438
|
$
230,059
|
|
Property
Sales
|
6,868,604
|
800,000
|
|
|
6,957,042
|
1,030,059
|
|
Operating
Expenses
|
|
|
|
Cost
of Sales
|
6,217,779
|
970,397
|
|
General
and Administrative Expenses
|
1,118,540
|
1,213,029
|
|
|
7,336,319
|
2,183,426
|
|
|
|
|
|
Loss
From Operations
|
(379,277
)
|
(1,153,367
)
|
|
|
|
|
|
Other
Income
|
|
|
|
Interest
Income
|
24,909
|
31,761
|
|
Other
Income
|
104,599
|
9,984
|
|
|
129,508
|
41,745
|
|
|
|
|
|
Net
Loss Before Income Taxes
|
(249,769
)
|
(1,111,622
)
|
|
|
|
|
|
Provision
for Income Taxes
|
-
|
-
|
|
|
|
|
|
Net
Loss
|
(249,769
)
|
(1,111,622
)
|
|
|
|
|
|
Net
Loss Attributable to Non-controlling Interests
|
(22,791
)
|
(148,191
)
|
|
|
|
|
|
Net
Loss Attributable to Common Stockholders
|
$
(226,978
)
|
$
(963,431
)
|
|
|
|
|
|
Net
Loss Per Share - Basic and Diluted
|
$
(0.00
)
|
$
(0.00
)
|
|
|
|
|
|
Weighted
Average Common Shares Outstanding - Basic and Diluted
|
704,043,324
|
704,043,324
|
See accompanying notes to the consolidated financial
statements.
F-3
SeD Intelligent Home Inc. and Subsidiaries
Consolidated
Statements of Stockholders’ Deficit
For the period December 31, 2015 through December 31,
2017
|
|
Common Stock
|
|
|
|
|
|
|
|
|
Shares
|
Par Value $0.001
|
Discount on Common Stock
|
Additional Paid in Capital
|
Accumulated
Deficits
|
Non-controlling Interests
|
Total Stockholders Equity
|
|
Balance
at December 31, 2015
|
704,043,324
|
$
704,043
|
$
(37,000
)
|
$
72,125
|
$
(902,428
)
|
$
2,426,073
|
$
2,262,813
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from majority stockholders
|
|
|
37,000
|
21,000
|
|
|
58,000
|
|
|
|
|
|
|
|
|
|
|
Imputed
interest on related party note
|
|
|
|
963,681
|
|
|
963,681
|
|
|
|
|
|
|
|
|
|
|
Forgiveness
of debt - related party
|
|
|
|
26,913,525
|
|
|
26,913,525
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
(963,431
)
|
(148,191
)
|
(1,111,622
)
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2016
|
704,043,324
|
704,043
|
-
|
27,970,331
|
(1,865,859
)
|
2,277,882
|
29,086,397
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from majority stockholders
|
|
|
|
178,601
|
|
|
178,601
|
|
|
|
|
|
|
|
|
|
|
Forgiveness
of debt -related party
|
|
|
|
4,590,085
|
|
|
4,590,085
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
(226,978
)
|
(22,791
)
|
(249,769
)
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2017
|
704,043,324
|
$
704,043
|
$
-
|
$
32,739,017
|
$
(2,092,837
)
|
$
2,255,091
|
$
33,605,314
|
See accompanying notes to the consolidated financial
statements.
F-4
SeD Intelligent Home Inc. and Subsidiaries
For the Years Ended December 31,2017 and 2016
|
|
2017
|
2016
|
|
|
|
|
|
Cash
Flows From Operating Activities
|
|
|
|
Net
Loss
|
$
(249,769
)
|
$
(1,111,622
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
Depreciation
|
20,453
|
15,959
|
|
Impairment
of Real Estate
|
-
|
29,281
|
|
Changes
in Operating Assets and Liabilities
|
|
|
|
Rent
Receivable
|
18,260
|
10,597
|
|
Other
Receivable
|
(513,043
)
|
-
|
|
Prepaid
Expenses
|
35,546
|
(18,783
)
|
|
Accounts
Payable and Accrued Expenses
|
(362,108
)
|
166,068
|
|
Accrued
Interest - Related Parties
|
211,005
|
2,662,189
|
|
Tenant
Security Deposits
|
(2,550
)
|
(5,725
)
|
|
Real
Estate Purchases and Development Costs
|
(1,302,568
)
|
(13,782,784
)
|
|
Builder
Deposits
|
(543,282
)
|
-
|
|
Net
Cash Used In Operating Activities
|
(2,688,056
)
|
(12,034,820
)
|
|
|
|
|
|
Cash
Flows From Investing Activities
|
|
|
|
Cash
Paid for Deposits
|
-
|
(2,112
)
|
|
Change
in Restricted Cash
|
(24,909
)
|
(31,761
)
|
|
Purchase
of Fixed Assets
|
(7,892
)
|
(9,074
)
|
|
Net
Cash Used In Investing Activities
|
(32,801
)
|
(42,947
)
|
|
|
|
|
|
Cash
Flows From Financing Activities
|
|
|
|
Capital
Contribution - Related Party
|
178,601
|
58,000
|
|
Proceeds
from Notes Payable
|
1,052,350
|
9,941,942
|
|
Repayments
to Note Payable
|
(6,000,000
)
|
-
|
|
Financing
Fees Paid
|
(110,000
)
|
(109,285
)
|
|
Net
Proceeds from Notes Payable - Related Parties
|
7,533,591
|
318,881
|
|
Net
Cash Provided By Financing Activities
|
2,654,542
|
10,209,538
|
|
|
|
|
|
Net
Decrease in Cash
|
(66,315
)
|
(1,868,229
)
|
|
Cash
- Beginning of Year
|
424,548
|
2,292,777
|
|
Cash
- End of Year
|
$
358,233
|
$
424,548
|
|
|
|
|
|
Supplementary
Cash Flow Information
|
|
|
|
Cash
Paid For Interest
|
$
905,376
|
$
896,690
|
|
Cash
Paid For Taxes
|
$
-
|
$
-
|
|
|
|
|
|
Supplemental
Disclosure of Non-Cash Investing and Financing
Activities
|
|
|
|
Debt
Discount From Related Party Imputed Interest
|
$
-
|
$
963,681
|
|
Forgiveness
of Notes Payable - Related Parties
|
$
4,590,085
|
$
26,913,525
|
|
Amortization
of Debt Discount Capitalized
|
$
324,958
|
$
608,125
|
See accompanying notes to the consolidated financial
statements.
F-5
SeD Intelligent Home Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1.
NATURE
OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature of Operations
SeD
Intelligent Home Inc. (the Company), formerly known as Homeownusa,
was incorporated in the State of Nevada on December 10, 2009. On
December 29, 2017, the Company, acquired SeD Home Inc. (“SeD
Home”) by reverse merger. SeD Home, a Delaware corporation,
formed on February 24, 2015, is principally engaged in developing,
selling, managing, and leasing commercial properties in the United
States. The Company is 99.99% owned by SeD Home International,
Inc., which is wholly – owned by Singapore eDevelopment
Limited, a multinational public company, listed on the Singapore
Exchange Securities Trading Limited
(“SGX-ST”).
Principles of Consolidation
The
consolidated financial statements include all accounts of the
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
|
|
SeD
Home Inc.
|
|
The
State of Delaware, U.S.A.
|
|
February
24, 2015
|
|
100%
|
|
SeD
USA, LLC
|
|
The
State of Delaware, U.S.A.
|
|
August 20,
2014
|
|
100%
|
|
150
Black Oak GP, Inc.
|
|
The
State of Texas, U.S.A.
|
|
January 23,
2014
|
|
100%
|
|
SeD
Development USA, Inc.
|
|
The
State of Delaware, U.S.A.
|
|
March 13,
2014
|
|
100%
|
|
150
CCM Black Oak Ltd.
|
|
The
State of Texas, U.S.A.
|
|
January 23,
2014
|
|
69%
|
|
SeD
Ballenger, LLC
|
|
The
State of Delaware, U.S.A.
|
|
July
7, 2015
|
|
100%
|
|
SeD
Maryland Development, LLC
|
|
The
State of Delaware, U.S.A.
|
|
October 16,
2014
|
|
83.55%
|
|
SeD
Development Management, LLC
|
|
The
State of Delaware, U.S.A.
|
|
June
18, 2015
|
|
85%
|
|
SeD
Builder, LLC
|
|
The
State of Delaware, U.S.A.
|
|
October 21,
2015
|
|
100%
|
|
SeD
Texas Home, LLC
|
|
The
State of Delaware, U.S.A.
|
|
June
16, 2015
|
|
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
December 31, 2017, the aggregate non-controlling interest in SeD
Home, Inc. was, $2,255,091 which is separately disclosed on the
Consolidated Balance Sheet.
On
December 29, 2017, the Company, SeD Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of the Company (the
“Merger Sub”), SeD Home, Inc. (“SeD Home”),
a Delaware corporation, and SeD Home International, Inc., a
Delaware corporation entered into an Acquisition Agreement and Plan
of Merger (the “Agreement”) pursuant to which the
Merger Sub was merged with and into SeD Home, with SeD Home
surviving as a wholly-owned subsidiary of the Company. The closing
of this transaction (the “Closing”) also took place on
December 29, 2017 (the “Closing Date”). Prior to the
Closing, SeD Home International, Inc. was the owner of 100% of the
issued and outstanding common stock of SeD Home and was also the
owner of 99.96% of the Company’s issued and outstanding
common stock. The Company acquired all of the outstanding common
stock of SeD Home from SeD Home International, Inc. in exchange for
issuing to SeD Home International, Inc. 630,000,000 shares of the
Company’s common stock. Accordingly, SeD Home International,
Inc. remains the Company’s largest shareholder, and the
Company is now the sole shareholder of SeD Home. The Agreement and
the transactions contemplated thereby were approved by the Board of
Directors of each of the Company, the Merger Sub, SeD Home
International, Inc., and SeD Home.
F-6
The Agreement is considered a business combination of companies
under common control and therefore, the consolidated financial
statements include the financial statements of both
companies.
The accompanying consolidated financial
statements have been retrospectively restated as a result of an
acquisition of another company under common control with the
Company.
Basis of Presentation
The Company’s consolidated financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States of America (“US
GAAP”).
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.
Loss per Common Share
Basic 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 similar 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 dilutive financial
instruments issued or outstanding for the periods ended December
31, 2017 or 2016.
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 December 31, 2017
and 2016.
Restricted Cash
As a
condition to the loan agreement with The Bank of Hampton Roads, the
Company is required to maintain a minimum of $2,600,000 in an
interest-bearing account maintained by the lender as additional
security for the loans. The funds will remain as collateral for the
loans until the loans are paid off in full.
Rent Receivable
Rent
receivables are the result of outstanding rent due from tenants.
Management reviews each receivable individually for collectability
to determine if an allowance for doubtful accounts is needed. The
allowance for doubtful accounts at December 31, 2017 and December
31, 2016 was $0.
Other Receivables
Other
receivables include all receivables from buyers, vendors,
contractors and all other third parties. The balance at December
31, 2017 is primarily a lot sale receivable for which no allowance
is necessary.
F-7
Property and Equipment
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 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
$211,005 and $2,662,189 for the years ended December 31, 2017 and
2016, respectively. The Company capitalized interest from the
third-party borrowings of $1,008,220 and $911,764 for the years
ended December 31, 2017 and 2016, respectively.
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. When all of these criteria
have been met, the property is classified as “held for
sale”. “Real estate held for sale” only includes
El Tesoro project and D street project.
Through
December 31, 2017, it was the Company’s policy to obtain an
independent third-party valuation for each project every two years
to test for impairment. Every reporting period, the Company
compared the book value to the fair value obtained in the most
recent valuation and looks at market conditions to see if there are
any indicators of impairment. If any indicators are noted, the
Company will obtain a new valuation and compare the fair value to
the book value.
Beginning
in 2018, it is the Company’s policy to obtain annual
independent third-party valuations as of December 31 for each
property and compare the fair value from the valuation to the book
value to determine if there any impairment.
At
December 31, 2016, the Company recognized $29,281 of impairment
related to the D Street Home Remodeling Project. There was no
impairment for the Black Oak or Ballenger Run
Projects.
At
December 31, 2017, there was no impairment recognized for any of
the projects.
Revenue Recognition and Cost of Sales
The
Company recognizes sales of lots only upon closing under the full
accrual method. Revenue is recognized when ownership of the lots is
transferred to the buyer (HUDs are executed).
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.
F-8
Income Taxes
Deferred
income tax assets and liabilities are determined based on the
estimated future tax effects of net operating loss and credit
carry-forwards and temporary differences between the tax basis of
assets and liabilities and their respective financial reporting
amounts measured at the current enacted tax rates. The differences
relate primarily to net operating loss carryforward from date of
acquisition and to the use of the cash basis of accounting for
income tax purposes. The Company records an estimated valuation
allowance on its deferred income tax assets if it is more likely
than not that these deferred income tax assets will not be
realized.
The
Company recognizes a tax benefit from an uncertain tax position
only if it is more likely than not that the tax position will be
sustained on examination by taxing authorities, based on the
technical merits of the position. The tax benefits recognized in
the consolidated financial statements from such a position are
measured based on the largest benefit that has a greater than 50%
likelihood of being realized upon ultimate settlement. The Company
has not recorded any unrecognized tax benefits.
The
Company’s tax returns for 2017, 2016, 2015 and 2014 remain
open to examination.
Subsequent Events
The
Company evaluated the events and transactions subsequent to
December 31, 2017, the balance sheet date, in accordance with FASB
ASC 855-10-50, through April 17, 2018, which to the date the
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 December 31, 2017 and 2016, uninsured cash
balances were $2,514,903 and $2,406,597 respectively.
3.
PROPERTY
AND EQUIPMENT
Property
and equipment stated at cost, less accumulated depreciation and
amortization, consisted of the following:
|
|
December 31,
2017
|
December 31,
2016
|
|
Computer
Equipment
|
$
41,597
|
$
34,755
|
|
Furniture
and Fixtures
|
21,393
|
20,343
|
|
|
62,990
|
55,098
|
|
Accumulated
Depreciation
|
(40,928
)
|
(20,475
)
|
|
|
$
22,062
|
$
34,623
|
Depreciation
expense was $20,453 and $15,959 for the years ended December 31,
2017 and 2016, respectively.
4.
BUILDER
DEPOSITS
In
November 2015, SeD Maryland Development, LLC
(“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. Based
on the agreements, NVR is entitled to purchase 443 lots for a price
of approximately $56M over a 21-year period, which escalates 3%
annually after June 1, 2018.
F-9
As part
of the agreements, NVR provided 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 from the deposit. A violation of the
agreements by NVR would cause NVR to forfeit the deposit. At
December 31, 2017 and 2016, there was $5,056,718 and $5,600,000
outstanding, respectively.
Black
Oak LP received a deposit of $300,000 from Lexington 26 LP
(Colina), a building company located in Texas. At December 31, 2017
and 2016, there was $300,000 outstanding, respectively. In February
2018, the deposit $300,000 was refunded to Colina since both sides
agreed to the changed development plan of Colina.
5.
NOTES
PAYABLE
On
October 7, 2015, the Company entered into a note for $6,000,000,
bearing interest at 13%, with a maturity date of October 7, 2016
with Revere Bank. In connection with the loan, the Company incurred
origination and closing fees of $524,233, which were recorded as
debt discount and are amortized over the life of the loan. The loan
is secured by a deed of trust on the property and a Limited
Guarantee Agreement with an owner of the Company. On October 1,
2016, the loan was extended to April 1, 2017 for fees of $109,285.
These fees were recorded as a debt discount under debt modification
accounting are amortized over the extension period. As of December
31, 2016, there was $6,000,000 of principal outstanding and $54,652
of unamortized debt discount remaining. On April 1, 2017, the loan
was again extended until October 1, 2017 for a fee of $110,000.
These fees were recorded as a debt discount under debt modification
accounting and were amortized over the extension period. As of
September 30, 2017, the loan was fully repaid and there is no
outstanding principal or unamortized debt discount.
On
November 23, 2015, SeD Maryland Development LLC entered into a
Revolving Credit Note with The Bank of Hampton Roads 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%. The interest rate at December 31, 2017 was 5.1875%. Beginning
December 1, 2015, interest-only payments are due on the outstanding
principal balance. The entire unpaid principal and interest sum is
due and payable on November 22, 2018, with the option of one
twelve-month extension period. The loan secured by a deed of trust
on the property, $2,600,000 of collateral cash, a Limited Guaranty
Agreement with the Company and a letter of credit of $800,000. The
letter of credit is due on November 22, 2018 and bears interest at
15%. In September 2017, Maryland Development LLC and the Bank of
Hampton Roads modified the Revolving Credit Note, which increased
the original principal amount from $8,000,000 to $11,000,000 and
extended the maturity date of the loan and letter of credit to
December 31, 2019.
As of
December 31, 2017 and 2016, the principal balance is $8,272,297 and
$7,219,947, respectively. As part of the transaction, the Company
incurred loan origination fees and closing fees, totaling $480,947,
which were recorded as debt discount and are amortized over the
life of the loan. The unamortized debt discount was $140,277 and
$300,592 at December 31, 2017 and 2016, respectively.
6.
RELATED
PARTY TRANSACTIONS
Notes Payable
SeD
Home receives advances from Singapore eDevelopment Ltd (100% owner
of the Company) to fund development costs and operation costs. The
advances are unsecured, bear interest at 18% per annum and are
payable on demand. As of December 31, 2015, the Company had
outstanding principal due of $12,293,715 and accrued interest of
$2,161,055 due to this related party.
SeD
Home receives advances from SCDPL (owned 100% by Singapore
eDevelopment) to fund development costs and operation costs. The
advances are unsecured, bear interest at 18% per annum and are
payable on demand. As of December 31, 2015, the Company had
outstanding principal due of $4,300,930 and accrued interest of
$1,461,058 due to this related party.
F-10
On
September 30, 2015, SeD Home received $10,500,000 interest free
loan, with a maturity date of March 31, 2016, from Hengfai Business
Development Pte, Ltd, owned by the Chief Executive Officer of
Singapore eDevelopment Ltd and is also the majority shareholder of
Singapore eDevelopment Ltd, specifically for Ballenger Run project.
SeD Home imputed interest at 13%, which is the interest rate on the
Revere Loan noted in Note 5. The imputed interest resulted in a
debt discount of $622,431 which is amortized over the life of the
note. At December 31, 2015, SeD Home had $10,500,000 outstanding on
the note and unamortized debt discount of $311,216. On April 1,
2016, SeD Home extended the note on the same terms through December
31, 2016. This resulted in an additional $933,647 of new imputed
interest which was amortized during 2016.
At
December 31, 2016, considering the longterm development and
shortterm debt repayment, SeD Home restructured the loans
from these affiliates. The restructuring process was done to
transfer the principal of the loans to Singapore eDevelopment Ltd.
(100% owner of the Company), which was then forgiven and recorded
into additional paid in capital. The principal forgiven was
$26,913,525. SeD Home still maintained the accrued interest of
$6,283,207. The remaining accrued interest does not bear interest.
On August 30, 2017, an additional $4,560,085 of this interest was
forgiven and recorded into additional paid in capital. At December
31, 2017, $1,723,122of accrued interest is outstanding relating to
this transaction.
SeD
Home receives advances from SeD Home Limited (an affiliate of
Singapore eDevelopment), to fund development and operation costs.
The advances bear interest at 10% and are payable on demand. As of
December 31, 2017 and December 31, 2016, SeD Home had outstanding
principal due of $1,050,000 and $500,000 and accrued interest of
$86,425 and $1,095.
SeD
Home receives advances from SeD Home International. (an affiliate
through common ownership). The advances bore interest at 18% until
August 30, 2017 when the interest rate was adjusted to 5% and have
no set repayment terms. At December 31, 2017, there was $6,953,591
of principal and $125,675 of accrued interest outstanding. There
were no amounts outstanding at December 31, 2016.
During
2017, prior to the reverse merger, SeD Intelligent Home Inc.
borrowed $30,000 from SeD Home International Inc. The borrowings
did not bear any interest. In November 2017, the debt was forgiven
by SeD Home International Inc. and was recognized into additional
paid in capital.
Other Transactions
On
November 29, 2016 an affiliate of SeD Home entered into three
$500,000 bonds for a total of $1.5 million that are to incur annual
interest at eight percent and the principal shall be paid in full
on November 29, 2019. SeD Home agreed to guarantee the payment
obligations of these bonds. Further, at the maturity date, the
bondholder has the right to propose to acquire a property built by
SeD Home, and SeD will facilitate that transaction. The proposed
acquisition purchase price would be at SeD Home's cost. If the cost
price is more than $1.5 million, the proposed acquirer would pay
the difference, and if the cost price is below $1.5 million, the
affiliate of SeD would pay the difference in cash.
Reverse Merger
As
described in Note 1, the reverse merger was done with a related
party through common control and ownership.
Management Fees
Black
Oak LP is obligated under the Limited Partnership Agreement (as
amended) to pay a $6,500 per month management fee to Arete Real
Estate and Development Company (Arete), a related party through
common ownership and $2,000 per month to American Real Estate
Investments LLC (AREI), a related party through common ownership.
The Company incurred fees of $102,000 and $102,000 for the years
ended December 31, 2017 and 2016, respectively. These fees were
capitalized as part of Real Estate on the consolidated balance
sheet.
Arete
is also entitled to a developer fee of 3% of all development costs
excluding certain costs. The fees are to be accrued until
$1,000,000 is received in revenue and/or builder deposits relating
to the Black Oak Project. At December 31, 2017 and 2016, there were
$133,130 and $0 capitalized as Real Estate relating to these
costs.
At December 31, 2017 and 2016, the Company had $314,630 and
$103,700 owed to Arete in accounts payable and accrued
expenses.
F-11
At
December 31, 2017 and 2016, the Company had $48,000 and $24,000
owed to AREI in accounts payable and accrued expenses.
SeD
Maryland Development LLC is obligated under the terms of a Project
Development and Management Agreement with Mackenzie Development
Company LLC (MacKenzie) and Cavalier Development Group LLC
(Cavalier) (together, the Developers) to provide various services
for the development, construction and sale of the Project.
Mackenzie is partially owned by a family member of a Director of
the Company. The agreement is for an estimated initial term of
seventy-eight (78) months based on the completion time for the
Project and may be extended if necessary. The developers are
entitled to certain fees based on time and performance related
milestones. The Company incurred fees of $176,000 and $176,000 for
the years ended December 31, 2017 and 2016, respectively. These
fees were capitalized as part of Real Estate on the consolidated
balance sheet. There were no amounts owed to this related party at
December 31, 2017 or 2016.
MacKenzie
Equity Partners, owned by a Charlie MacKenzie, a Director of the
Company, has a consulting agreement with the Company since 2015.
Per the terms of the agreement the Company must pay a monthly fee
of $12,500 and a 2% management fee. In May 2017, the agreement was
amended to increase the monthly fee to $20,000. The Company
incurred expenses of $222,930 and $186,095 for the years ended
December 31, 2017 and 2016, respectively, which were capitalized as
part of Real Estate on the balance sheet as the services relate to
property and project management. There were no amounts owed to this
related party at December 31, 2017 or 2016.
Consulting Services
A law
firm, owned by Conn Flanigan, a Director of the Company, performs
consulting services for the Company. The Company incurred expenses
of $110,334 and $96,000 for the years ended December 31, 2017 and
2016, respectively. At December 31, 2017 and 2016, the Company owed
this related party $17,730 and $8,000, respectively.
7.
STOCKHOLDERS’
EQUITY
On August 28, 2017 the Company increased its authorized shares from
75,000,000 to 1,000,000,000 common shares with a par value of
$0.001 per share. No preferred shares have been authorized or
issued.
On July 7, 2014 CloudBiz invested $37,000 in the Company. For such
investment, CloudBiz received an additional 74 million common
shares. The 74 million common shares were issued below par at a
discount. The discount of $37,000 was recorded as a “discount
on common stock” in equity.
In February of 2016, the Company received an additional $18,000
from Cloudbiz International Pte. Ltd., its majority shareholder, to
assist the Company in paying for operating expenses. The $18,000
was applied to "discount on common stock". In October of 2016, The
Company received an additional $40,000 from Cloudbiz International
Pte. Ltd., its majority shareholder, to assist the Company in
paying for operating expenses. Of the $58,000 of proceeds received
from Cloudbiz International Pte. Ltd, $37,000 were applied to
"discount on common stock" and the remaining proceeds were applied
to additional paid-in-capital. On December 22, 2016 Cloudbiz
International Pte. Ltd transferred 74,015,730 common shares to
Singapore eDevelopment Ltd. Such shares are presently owned by SeD
Home International, Inc., a wholly-owned subsidiary of Singapore
eDevelopment Ltd.
Effective
September 30, 2015, the Company entered into a non-interest bearing
note with a related party (see Note 6), for which interest was
imputed. Imputed interest recorded to additional paid in capital
for the years ended December 31, 2016 and 2015 was $622,431 and
$963,681, respectively.
As
discussed in Note 6, on December 31, 2016, $26,913,525 of related
party notes payable was forgiven and recorded as additional paid in
capital.
In
2017, SeD International, a related party through common ownership,
contributed $178,600 into the Company. The related party also
forgave $4,560,085 of accrued interest as of August 30,
2017.
Per
Note 1, 630,000,000 shares of common stock were issued on December
29, 2017 in connection with the reverse merger.
8.
COMMITMENTS
AND CONTINGENCIES
F-12
Leases
The
Company leases office space in Texas and Maryland. The leases
expire in 2018 and 2020, respectively and have monthly rental
payments ranging between $2,050 and $8,205. Rent expense was
$112,293 and $89,382 for the years ended December 31, 2017 and
2016, respectively. The below table summarizes future payments due
under these leases as of December 31, 2017.
For the
Years Ended December 31:
|
2018
|
112,919
|
|
2019
|
94,325
|
|
2020
|
96,924
|
|
Total
|
$
304,167
|
Lot Sale Agreements
In June
2016, SeD Maryland Development, LLC (“Maryland”)
entered into a lot purchase agreement with Orchard Development
Corporation (“Orchard”) relating to the sale of 210
multi-family units in the Ballenger Run Project for a total
purchase price of $5,250,000 with a closing date of March 31, 2018.
Based on the agreement, Orchard must put $100,000 into a
third-party escrow account upon signing of the agreement and an
additional $150,000 upon completion of the feasibility study, which
occurred in November 2016. As of December 31, 2017 and 2016,
$250,000 in deposits is held in the escrow account. Since the
monies are held in an escrow account and not entitled to the
Company, there is no deposit recorded by the Company. As of March
31, 2018, the agreement was amended to extend the closing date 30
days for an additional deposit of $25,000. The extension also
provides two additional 30-day extensions which if exercised will
require an additional $25,000 deposit each.
In
February 2018, Maryland entered into a lot purchase agreement with
Orchard relating to the sale of the Continuing Care Retirement
Community Assisted Independent Living lot in the Ballenger Run
Project for a total purchase price of $2,900,000 with a closing
date of December 15, 2019. Based on the agreement, the Orchard must
put $50,000 into a third-party escrow account upon signing of the
agreement and an additional $100,000 upon completion of the
feasibility study. The initial deposit of $50,000 is refundable
until completion of the feasibility study, which is expected to be
completed in May 2018.
9. INCOME TAXES
On
December 22, 2017, President Trump signed into law the
“
Tax Cuts and
Jobs Act” (TCJA) that significantly reformed the Internal
Revenue Code of 1986, as amended. The TCJA reduces the corporate
tax rate to 21 percent beginning with years starting January 1,
2018. Because a change in tax law is accounted for in the period of
enactment, the deferred tax assets and liabilities have been
adjusted to the newly enacted U.S. corporate rate, and the related
impact to the tax expense has been recognized in the current
year.
Deferred tax assets
and (liabilities) consist of the following at December 31,
2017:
|
|
2017
|
2016
|
|
Interest
Income
|
(2,957,688
)
|
(2,177,407
)
|
|
Interest
Expense
|
2,990,036
|
2,786,256
|
|
Depreciation and
Amortization
|
(2,548
)
|
(1,408
)
|
|
Management
Fees
|
170,569
|
218,670
|
|
Others
|
310,907
|
400,191
|
|
Net Operating
Loss
|
1,260,810
|
545,305
|
|
|
1,772,086
|
1,771,607
|
|
Valuation
Allowance
|
(1,772,086
)
|
(1,771,607
)
|
|
Net Deferred Tax
Asset
|
-
|
-
|
At
December 31, 2017, the Company has federal net operating loss
carryforwards of approximately $4.7 million, which will begin
to expire in 2037. The Maryland net operating loss
carryforwards of approximately $4.3 million will begin to
expire in 2037. The full utilization of the deferred tax assets in
the future is dependent upon the Company’s ability to
generate taxable income;accordingly, a valuation allowance of an
equal amount has been established. During the years ended December
31, 2017 and 2016, the valuation allowance increased by $479 and
$3,297,921, respectively.
F-13
Not
Applicable.
Evaluation of Disclosure Controls and Procedures
In
connection with the preparation of our Report on Form 10-K, an
evaluation was carried out by management, with the participation of
our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934 (Exchange Act) as of December 31, 2017. Disclosure controls
and procedures are designed to ensure that information required to
be disclosed in reports filed or submitted under the Exchange Act
is recorded, processed, summarized and reported within the time
periods specified, and that such information is accumulated and
communicated to management, including the Chief Executive Officer
and Chief Financial Officer, to allow timely decisions regarding
required disclosure.
During
evaluation of disclosure controls and procedures as of December 31,
2017 conducted as part of our annual audit and preparation of our
annual financial statements, management conducted an evaluation of
the effectiveness of the design and operations of our disclosure
controls and procedures and concluded that our disclosure controls
and procedures were ineffective for those reasons set forth
below.
Management’s Report on Internal Control over Financial
Reporting
Management
is responsible for the preparation and fair presentation of the
financial statements included in this annual report. The financial
statements have been prepared in conformity with accounting
principles generally accepted in the United States of America and
reflect management’s judgment and estimates concerning
effects of events and transactions that are accounted for or
disclosed.
Management
is also responsible for establishing and maintaining adequate
internal control over financial reporting. Our internal control
over financial reporting includes those policies and procedures
that pertain to our ability to record, process, summarize and
report reliable data. Management recognizes that there are inherent
limitations in the effectiveness of any internal control over
financial reporting, including the possibility of human error and
the circumvention or overriding of internal control. Accordingly,
even effective internal control over financial reporting can
provide only reasonable assurance with respect to financial
statement presentation. Further, because of changes in conditions,
the effectiveness of internal control over financial reporting may
vary over time.
In
order to ensure that our internal control over financial reporting
is effective, management regularly assesses controls and did so
most recently for its financial reporting as of December 31, 2017.
This assessment was based on criteria for effective internal
control over financial reporting described in the Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations (COSO) of the Treadway Commission.
In
connection with management’s evaluation of the effectiveness
of the Company’s internal control over financial reporting as
of December 31, 2017, management determined that the Company did
not maintain effective controls over financial reporting due to
limited staff with US GAAP and SEC Reporting experience. Management
determined that the ineffective controls over financial reporting
constitute a material weakness.
This
annual report filed on Form 10-K does not include an attestation
report of the Company’s registered public accounting firm
regarding internal control over financial reporting.
Management’s report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of
the Securities and Exchange Commission that permit us to provide
only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
As of
September 30, 2017, we had a material weakness that related to the
relatively small number of employees who had bookkeeping and
accounting functions and therefore prevented us from segregating
duties within our internal control system. There was a change in
our internal control over financial reporting (as defined in Rules
13a15(f) and 15(d)15(f) under the Exchange Act) that occurred
during the quarterly period ended December 31, 2017 that has
materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting, as follows. As of
December 29, 2017, the Company acquired SeD Home, and accordingly,
expanded its staff to include additional employees who had
bookkeeping and accounting functions.
We
continue taking steps to enhance and improve the design of our
internal controls over financial reporting. During the period
covered by this Annual Report on Form 10-K, we have not been able
to completely remediate the material weaknesses identified above.
To remediate such weaknesses, we plan to appoint additional
qualified personnel to the audit committee with financial
accounting, GAAP, and SEC experience.
Not
Applicable.
26
Identification of directors and executive officers
On
December 31, 2013 Pieter du Plooy resigned as an officer and
director of the Company. There were no disagreements with Mr. du
Plooy. Immediately prior to Mr. du Plooy’s resignation the
Company’s board of directors appointed Conn Flanigan as a
director until the next annual meeting of shareholders and until
his successor is duly elected and qualified or until his
resignation or removal. In addition, the board of directors then
appointed Conn Flanigan as Chief Executive Officer and Chief
Financial Officer.
On
January 10, 2017, our board of directors appointed Fai H. Chan as
Director to hold office until the next annual meeting of
shareholders and until his successor is duly elected and qualified
or until his resignation or removal. On March 10, 2017, Mr. Conn
Flanigan resigned as the Chief Financial Officer. Mr. Flanigan
continues to serve as the President and Secretary of the Company,
and as a member of our board of directors. Effective as of March
10, 2017, Mr. Rongguo (Ronald) Wei, CPA, has been appointed as
Chief Financial Officer of the Company.
In
connection with the acquisition of SeD Home on December 29, 2017,
the Company has appointed new officers and directors. Fai H. Chan
and Moe T. Chan serve as co-Chief Executive Officers; Rongguo
(Ronald) Wei and Alan W. L. Lui serve as Co-Chief Financial
Officers, and our Board of Directors include Fai H. Chan, Moe T.
Chan, Conn Flanigan and Charley MacKenzie.
The
board of directors has no nominating or compensation committees.
The company’s current Audit Committee consists of Conn
Flanigan.
The
name, age and position of our officers and directors are set forth
below:
|
Name
|
|
Age
|
|
Position(s)
|
|
Fai
H. Chan
|
|
73
|
|
Co-Chief
Executive Officer and Chairman of the Board of
Directors
|
|
Moe
T. Chan
|
|
39
|
|
Co-Chief
Executive Officer and Member of the Board of Directors
|
|
Conn
Flanigan
|
|
49
|
|
Secretary and
Member of the Board of Directors
|
|
Charley
MacKenzie
|
|
46
|
|
Member of the
Board of Directors
|
|
Rongguo (Ronald)
Wei
|
|
46
|
|
Co-Chief
Financial Officer
|
|
Alan
W. L. Lui
|
|
47
|
|
Co-Chief
Financial Officer
|
The mailing address for each of the officers and directors named
above is c/o of the Company at: 4800 Montgomery Lane, Suite
210, Bethesda, MD, 20814.
27
Business Experience
Fai H.
Chan. Fai H. Chan has served as a member of our Board of Directors
since January 10, 2017 and has served as Co-Chief Executive Officer
of the Company since December 29, 2017. Mr. Chan is an expert in
banking and finance, with years of experience in these industries.
He has also restructured 35 companies in various industries and
countries in the past 40 years. Mr. Chan serves as the CEO of
Singapore eDevelopment, a limited company listed on the Catalist of
the Singapore Exchange Securities Trading Limited. Singapore
eDevelopment is a diversified holding company. He was appointed
director of Singapore eDevelopment on March 1, 2014. He is also
Non-Executive Director of ASX-listed bio-technology company Holista
Colltech Ltd, a position he has held since July of 2013. Mr. Chan
served as a member of the Board of Directors of HotApp Blockchain
Inc., a technology company since October of 2014 and served as the
Company’s CEO from December of 2014 until June of 2017. From
September of 1992 until July of 2015, Mr. Chan also served as
Managing Chairman of HKSE-listed Heng Fai Enterprises Limited, a
holding company now known as ZH International Holdings, Ltd. He
also served as director of Global Medical REIT Inc. (NYSE: GMRE)
from December of 2013 until July of 2015 and as director of
American Housing REIT Inc. from October of 2013 to July of 2015.
Mr. Chan was also formerly (i) the Managing Director of SGX
Catalist-listed SingHaiyi Group Ltd from November of 2003 until
September of 2013, which under his leadership, transformed from a
failing store-fixed business provider with net asset value of less
than S$10 million into a property trading and investment company
and finally to a property development company with net asset value
over S$150 million before Mr. Chan ceded controlling interest in
late 2012; (ii) the Executive Chairman of China Gas Holdings
Limited, a formerly failing fashion retail company listed on SEHK
which, under his direction, was restructured to become one of a few
large participants in the investment in and operation of city gas
pipeline infrastructure in China; (iii) a director of Global Med
Technologies, Inc., a medical company listed on NASDAQ engaged in
the design, development, marketing and support information for
management software products for healthcare-related facilities;
(iv) a director of Skywest Ltd, an ASX-listed airline company; and
(v) the Chairman and Director of American Pacific
Bank.
Director Qualifications of Fai H. Chan:
The board of directors appointed Mr. Chan in recognition of his
abilities to assist the Company in expanding its business and the
contributions he can make to the Company’s strategic
direction.
Moe T.
Chan. Moe Chan was appointed Co-Chief Executive Officer of our
Company and a member of our Board of Directors on December 29,
2017. Moe Chan has served as the Group Chief Development Officer of
Singapore eDevelopment since July of 2015 and is responsible for
Singapore eDevelopment’s international property development
business (including serving as Co-Chief Executive Officer and a
member of the Board of SeD Home). Moe Chan has served as an
Executive Director of Singapore eDevelopment since January of 2016.
From April 2014 to June 2015 Moe Chan was the Chief Operating
Officer of SEHK-listed ZH International Holdings Ltd (formerly
known as Heng Fai Enterprises Limited) and was responsible for that
company’s global business operations consisting of REIT
ownership and management, property development, hotels and
hospitality, as well as property and securities investment and
trading. Prior to that, he was an executive director (from March
2006 to February 2014) and the Chief of Project Development (from
April 2013 to February 2014) of SGX-ST Catalist-listed SingHaiyi
Group Ltd, overseeing its property development projects. He was
also a non-executive director of the Toronto Stock Exchange-listed
RSI International Systems Inc., a hotel software company, from July
2007 to August 2016.
Moe T.
Chan has a diverse background and experience in the fields of
property, hospitality, investment, technology and consumer finance.
He holds a Master’s Degree in Business Administration with
honors from the University of Western Ontario, a Master’s
Degree in Electro-Mechanical Engineering with honors and a
Bachelor’s Degree in Applied Science with honors from the
University of British Columbia. Moe Chan is the son of Fai H.
Chan.
Director Qualifications of Moe T. Chan:
The board of directors appointed Moe Chan in recognition of his
extensive knowledge of real estate and ability to assist the
Company in expanding its business.
28
Conn
Flanigan. Mr. Flanigan is a member of our Board of Directors and a
practicing attorney specializing in corporate, real estate, and
securities law. Mr. Flanigan is a legal advisor to Singapore
eDevelopment and has served as officer and director to several US
subsidiaries of Singapore eDevelopment. Mr. Flanigan served as the
Secretary and General Counsel for Global Medical REIT Inc.
(NYSE:GMRE) from December 2013 to May 2017. From September 4, 2013
to May 2017, Mr. Flanigan also served as General Counsel and
Secretary, and as a director, of American Housing REIT Inc. Mr.
Flanigan served as a member of the Board Directors of Amarantus
Bioscience Holdings, Inc., a biotech company, from February 23,
2017 until May 12, 2017. Mr. Flanigan has served a director of
HotApp Blockchain Inc. since October 23, 2014 and as legal counsel
and secretary since December 31, 2014. From February 2000 until May
2017, Mr. Flanigan was employed as General Counsel by subsidiaries
of ZH International Holdings, Ltd., including eBanker USA.com, Inc.
and ZH USA, LLC. In this role, he served as General Counsel
and Secretary for other ZH International Holdings, Ltd.
subsidiaries such as Global Medical REIT Inc. (July 2013 through
May 2017). Mr. Flanigan received a B.A. in International
Relations from the University of San Diego in 1990 and a Juris
Doctor Degree from the University of Denver Sturm College of Law in
1996.
Director Qualifications of Conn Flanigan:
Mr. Flanigan’s service as an officer, director and employee
of various entities has provided him with significant knowledge and
experience regarding corporate financial and governance
matters.
Charley
MacKenzie. Mr. MacKenzie has served as a member of the
Company’s Board of Directors since December 29, 2017 and
served as the Chief Development Officer for SeD Development
Management, a subsidiary of SeD Home, since July of 2015. Mr.
MacKenzie has also served as a member of the Board of Directors of
SeD Home since October of 2017. He was previously the Chief
Development Officer for Inter-American Development (IAD), a
subsidiary of Heng Fai Enterprises from April of 2014 to June of
2015. Mr. MacKenzie is also a member of real estate investment
company MacKenzie Equity Partners since June 2005 and was the owner
of moving and storage company Smartbox Portable Storage from
October 2006 to February 2017. Mr. MacKenzie focuses on
acquisitions and development of residential and mixed-use projects
within the United States. Mr. MacKenzie specializes in site
selection, contract negotiations, marketing and feasibility
analysis, construction and management oversight, building design
and investor relations. Mr. MacKenzie has developed over 1,300
residential units inclusive of single family homes, multi-family,
and senior living dwellings totaling more than $110M and over
650,000 square feet of commercial valued at over $100M. Mr.
MacKenzie received a BA and graduate degree from St. Lawrence
University where he served on Board of Trustees from
2003-2007.
Director Qualifications of Charley MacKenzie:
The board of directors appointed Charley MacKenzie in recognition
of his extensive knowledge of real estate and ability to assist the
Company in expanding its business.
Rongguo
(Ronald) Wei. Mr. Wei has served as the Company’s Chief
Financial Officer since March 10, 2017. Mr. Wei is a finance
professional with more than 15 years of experience working in
public and private corporations in the United States. As the Chief
Financial Officer of SeD Development Management LLC, Mr. Wei is
responsible for oversight of all finance, accounting, reporting,
and taxation activities for that company. Prior to joining SeD
Development Management LLC in August of 2016, Mr. Wei worked for
several different US multinational and private companies including
serving as Controller at American Silk Mill, LLC, a textile
manufacturing and distribution company, from August of 2014 to July
of 2016, serving as a Senior Financial Analyst at Air Products
& Chemicals, Inc., a manufacturing company, from January of
2013 to June of 2014 and serving as a Financial/Accounting Analyst
at First Quality Enterprise, Inc., a personal products company,
from 2011-2012. Before Mr. Wei came to US, he worked as an equity
analyst in Hong Yuan Securities, an investment bank, in Beijing,
China, concentrating on industrial and public company research and
analysis. Mr. Wei is a Certified Public Accountant and received his
MBA from the University of Maryland and a Master of Business
Taxation from the University of Minnesota. Mr. Wei also holds a
Master in Business degree from Tsinghua University and a Bachelor
degree from Beihang University. Mr. Wei served as a member of the
Board Directors of Amarantus Bioscience Holdings, Inc., a biotech
company, from February 23, 2017 until May 3, 2017, and has served
as Chief Financial Officer of such company since February 23,
2017.
29
Alan W.
L. Lui has served as the Company’s Co-Chief Financial Officer
since December 29, 2017 and has served as the Co-Chief Financial
Officer of SeD Home since October of 2017. Mr. Lui has served as
Chief Financial Officer of HotApp Blockchain Inc., a technology
company since May 12, 2016 and has served as a director of one of
HotApp’s subsidiaries since July of 2016. Mr. Lui has been
Chief Financial Officer of Singapore eDevelopment, the
Company’s majority shareholder since November 1, 2016 and
served as its Acting Chief Financial Officer since June 22, 2016.
Since October of 2016, Mr. Lui has also served as a director of BMI
Capital Partners International Ltd, a Hong Kong investment
consulting company. From June of 1997 through March of 2016, Mr.
Lui served in various executive roles at ZH International Holdings
Ltd. (a Hong Kong-listed company formerly known as Heng Fai
Enterprises Ltd), including Financial Controller. Mr. Lui oversaw
the financial and management reporting and focusing on its
financing operations, treasury investment and management. He has
extensive experience in financial reporting, taxation and financial
consultancy and management in Hong Kong. He also managed all
financial forecasts and planning. Mr. Lui is a certified CPA in
Australia and received a Bachelor’s Degree in Business
Administration from the Hong Kong Baptist University in
1993.
Section 16(a) Beneficial Ownership Reporting
Compliance
To our
knowledge, no director, officer or beneficial owner of more than
ten percent of any class of our equity securities, failed to file
on a timely basis reports required by Section 16(a) of the Exchange
Act during the fiscal year ended December 31, 2017, except as
follows:
On
December 22, 2016, Singapore eDevelopment purchased 74,015,730
common shares of the Company from Cloudbiz International Pte., Ltd.
Singapore eDevelopment did not file its report pursuant to Section
16(a) of the Exchange Act during the period ended December 31, 2016
or the period ended December 31, 2017.
On
December 29, 2017, we issued 630,000,000 shares of our Common Stock
to SeD Home International, Inc., the sole shareholder of SeD Home,
in exchange for all 500,000,000 of the issued and outstanding
shares of SeD Home. SeD Home International, Inc. is a subsidiary of
Singapore eDevelopment.
On
January 10, 2017, our board of directors appointed Fai H. Chan as
Director, and on December 29, 2017, Fai H. Chan was appointed as
the Company’s Co-Chief Executive Officer. Fai H. Chan is also
Singapore eDevelopment’s Chief Executive
Officer.
Accordingly,
Singapore eDevelopment and Fai H. Chan, failed to file a Form 4 to
report one transaction that occurred during the fiscal year ended
December 31, 2016 and a Form 4 to report one transaction that
occurred during the fiscal year ended December 31,
2017.
Moe T.
Chan was appointed our Co-Chief Executive Officer On December 29,
2017. His Form 3 was filed late.
Code of Ethics
We have
not yet adopted a code of ethics that applies to our principal
executive officer, principal financial officer, principal
accounting officer or controller or persons performing similar
functions. We intend to adopt a code of ethics in the immediate
future.
Corporate Governance
There
have been no changes in any state law or other procedures by which
security holders may recommend nominees to our board of directors.
We do not have a nominating committee, however we intend to appoint
one in the immediate future.
Audit Committee
Our
board of directors has an Audit Committee consisting of Mr.
Flanigan. The Audit Committee does not at the present time have an
audit committee financial expert serving on its Audit Committee;
however, our board intends to appoint an audit committee financial
expert in the immediate future.
30
Family Relationships
Fai H. Chan, our Co-Chief Executive Officer, Chairman of our Board
and Chairman of the Board and Chief Executive Officer of our
majority shareholder and its corporate parent is the father of Moe
T. Chan, our other Co-Chief Executive Officer and a Member of our
Board.
Involvement in Certain Legal Proceedings
None of
our directors, executive officers and control persons has been
involved in any of the following events during the past ten
years:
●
Any bankruptcy
petition filed by or against any business of which such person was
a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time,
●
Any conviction in a
criminal proceeding or being subject to any pending criminal
proceeding (excluding traffic violations and other minor
offenses);
●
Being subject to
any order, judgment or decree, not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting
his or her involvement in any type of business, securities or
banking activities; or
●
Being found by a
court of competent jurisdiction (in a civil action), the Commission
or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment
has not been reversed, suspended, or vacated.
Conflicts of Interest
Except
as provided for in Article XI of the Company’s By-Laws: Board
Director Compensation, no officer, director or security holder of
the company may be involved in pecuniary interest in any investment
acquired or disposed of by the registrant or in any transaction to
which the registrant or any of its subsidiaries is party or has an
interest.
None of
the directors, officers, security holders or affiliates of the
registrant may engage, for their own account, business activities
of the types conducted by the registrant and its
subsidiaries.
At the present time, neither SeD Intelligent Home Inc. nor SeD Home
and its subsidiaries is a party to any compensation arrangements
with any officer or director of either entity and has made no
provisions for paying cash or non-cash compensation to such
officers and directors, except for Charley MacKenzie and Rongguo
(Ronald) Wei. A subsidiary of SeD Home is paying salaries to four
employees at the present time, which includes Mr. Wei, and has
consulting arrangements with certain individuals, including Mr.
MacKenzie.
Prior
to the Closing, Mr. Wei was compensated by SeD Development
Management LLC for his services to SeD Home at a rate of $112,800
per year, plus benefits valued at approximately $10,000 per year.
Mr. Wei has been compensated by SeD Development Management LLC
since 2016.
Prior to the
Closing Date, Mr. Wei was not paid by SeD Intelligent Home Inc. SeD
Development Management LLC will now continue to compensate Mr. Wei
at the same rate, and he will perform services for SeD Intelligent
Home Inc. as well as its subsidiary SeD Home.
A company controlled by Mr. MacKenzie is paid consulting fees of
approximately $20,000 per month, which includes payment for his
services to SeD Home and its subsidiaries.
Mr. Flanigan serves in various director and officer positions with
subsidiaries of Singapore eDevelopment. Mr. Flanigan’s law
firm has been paid legal fees by various subsidiaries of Singapore
eDevelopment
in the past, including those fees paid to his
law firm by SeD Home and its subsidiaries that are described in
Item 13.
31
Mr. Fai
H. Chan is compensated by Singapore eDevelopment, where he serves
as Chief Executive Officer. Mr. Moe T. Chan and Mr. Alan Lui are
also employed and Compensated by Singapore eDevelopment. As part of
their duties as officers of Singapore eDevelopment, each of these
three individuals works on a number of matters for Singapore
eDevelopment, including devoting various amounts of time to the
management of Singapore eDevelopment’s various subsidiaries
and divisions, such as SeD Intelligent Home and SeD Home. The
amount of time each of these individuals spends on matters related
to SeD Intelligent Home and SeD Home has varied greatly based on
the Company’s needs, and no definite statement may be made as
to what percentage of these three individuals’ time has been
spent or will be spent in the future on matters related to SeD
Intelligent Home and SeD Home. SeD Intelligent Home and SeD Home
and its subsidiaries do not compensate these three individuals for
their services. Neither SeD Intelligent Home Inc. nor SeD Home and
its subsidiaries is charged for the services of Fai H. Chan, Moe T.
Chan and Alan Lui and Singapore eDevelopment does not have a
management contract with SeD Intelligent Home, SeD Home or any of
its subsidiaries. Neither SeD Intelligent Home Inc. nor SeD Home
and its subsidiaries is charged for the services of Fai H. Chan,
Moe T. Chan and Alan Lui and Singapore eDevelopment does not have a
management contract with SeD Intelligent Home, SeD Home or any of
its subsidiaries.
In connection with the acquisition of SeD Home by SeD Intelligent
Home Inc., SeD Intelligent Home Inc. and its subsidiaries intend to
enter into revised compensation agreements with officers, directors
and certain employees in the immediate future.
The table below summarizes all compensation awarded to, earned by,
or paid to SeD Intelligent Home Inc.’s named executive
officer for all services rendered in all capacities to us for the
period from January 1, 2015 through December 31, 2017.
SUMMARY COMPENSATION TABLE
|
Name and
Principal Position (1)(2)(3)
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
|
Non-Equity
Incentive Plan Comp
|
Nonqualified
deferred Comp Earnings
|
All Other
Comp
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Fai H. Chan
(4)
|
2017
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Chairman of the Board
and
|
2016
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Co-Chief Executive
Officer
|
2015
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Moe T. Chan
(4)
|
2017
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Director
and
|
2016
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Co-Chief Executive
Officer
|
2015
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Conn Flanigan
(5)
|
2017
|
-
|
-
|
-
|
-
|
-
|
-
|
$
110,334
(6)
|
$
110,334
(6)
|
|
Director
and
|
2016
|
-
|
-
|
-
|
-
|
-
|
-
|
$
96,000
(6)
|
$
96,000
(6)
|
|
Former Chief Executive
Officer
|
2015
|
-
|
-
|
-
|
-
|
-
|
-
|
$
40,000
(6)
|
$
40,000
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Rongguo (Ronald) Wei (7)
|
2017
|
$
112,800
|
-
|
-
|
-
|
-
|
-
|
$
10,000
|
$
122,800
|
|
Co-Chief Financial
Officer
|
2016
|
$
47,000
|
-
|
-
|
-
|
-
|
-
|
-
|
$
47,000
|
|
|
2015
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
Alan W. L. Lui
(4)(8)
|
2017
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Co-Chief Financial
Officer
|
2016
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
2015
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
Charley MacKenzie (9)
|
2017
|
-
|
-
|
-
|
-
|
-
|
-
|
$
222,930
(10)
|
$
222,930
(10)
|
|
Director
|
2016
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
2015
|
-
|
-
|
-
|
-
|
-
|
-
|
|
-
|
(1)
SeD Intelligent
Home Inc. did not pay any salaries to any officer, director or
employee in the fiscal years ended December 31, 2015 and December
31, 2016.
(2)
SeD Home also did
not compensate its executive officers and directors in the fiscal
years ended December 31, 2015 and December 31, 2016, only employees
and consultants.
(3)
Effective as of
December 29, 2017, Mr. Fai H. Chan was appointed as our Chairman
and Co-Chief Executive Officer; Moe T. Chan was appointed as a
member of our Board and as Co-Chief Executive Officer; Rongguo
(Ronald) Wei and Alan W. L. Lui were appointed as our Co-Chief
Financial Officers; and Charley MacKenzie joined the
Company’s Board of Directors.
32
(4)
Singapore
eDevelopment compensates Mr. Fai H. Chan, Mr. Moe T. Chan and Mr.
Lui for their services to a number of divisions and subsidiaries of
Singapore eDevelopment. Each of these three individuals works on a
number of matters for Singapore eDevelopment, including devoting
various amounts of time to matters related to SeD Intelligent Home
Inc. SeD Intelligent Home Inc. does not compensate these
individuals and Singapore eDevelopment does not charge SeD
Intelligent Home Inc. for their services.
(5)
Mr. Flanigan was
the sole officer and director of SeD Intelligent Home Inc. in 2015
and 2016; he resigned as Chief Executive Officer on December 29,
2017 but continues to serve as a member of our Board of
Directors.
(6)
Mr.
Flanigan’s law firm was paid $40,000 in total fees by various
subsidiaries of SeD Home for Mr. Flanigan’s legal services in
2015, $96,000 in 2016 and $110,334 in 2017.
(7)
Mr. Wei was
compensated by SeD Home’s subsidiary SeD Development
Management LLC in 2016 and 2017, beginning on August 1, 2016, but
did not commence serving as an officer of SeD Home until October of
2017.
(8)
Mr. Lui was
appointed Co-Chief Financial Officer of SeD Home in October of
2017.
(9)
Mr. MacKenzie
joined SeD Home’s Board of Directors in October of
2017.
(10)
A company
controlled by Mr. MacKenzie was paid total consulting fees of
$222,930 in 2017 by SeD Home. This company is currently paid
consulting fees of approximately $20,000 per month, which includes
payment for his services to SeD Home and its
subsidiaries.
As of
the date of this Report, the Company does not have any stock option
plans, retirement, pension, or profit sharing plans for the benefit
of any of our officers or directors.
Outstanding Equity Awards at Fiscal Year-End
There were no grants of stock options through the date of this
report.
We do not have any long-term incentive plans that provide
compensation intended to serve as incentive for
performance.
The board of directors of the Company has not adopted a stock
option plan. The company has no plans to adopt it but may choose to
do so in the future. If such a plan is adopted, this may be
administered by the board or a committee appointed by the board
(the “Committee”). The committee would have the power
to modify, extend or renew outstanding options and to authorize the
grant of new options in substitution therefore, provided that any
such action may not impair any rights under any option previously
granted. The Company may develop an incentive based stock option
plan for its officers and directors.
Stock Awards Plan
The company has not adopted a Stock Awards Plan but may do so in
the future. The terms of any such plan have not been
determined.
Pre-Closing Security Ownership
The
following table sets forth, as of December 29, 2017, prior to the
Closing, the number and percentage of our outstanding shares of
common stock owned by (i) each person known to us to beneficially
own more than 5% of its outstanding common stock, (ii) each
director, (iii) each named executive officer and significant
employee, and (iv) all officers and directors as a
group.
33
The
number of shares listed below includes shares that each shareholder
listed in the table has the right to acquire beneficial ownership
of within 60 days.
|
Name and
Address (2)
|
Number of
Common Shares Beneficially Owned
|
Percentage of
Outstanding Common Shares (1)
|
|
Fai H. Chan
(3)
|
74,015,730
|
99.96
%
|
|
Conn
Flanigan
|
0
|
0.00
%
|
|
Rongguo (Ronald)
Wei
|
0
|
0.00
%
|
|
All Directors and
Officers (3 individuals)
|
74,015,730
|
99.96
%
|
|
Singapore
eDevelopment (3)
|
74,015,730
|
99.96
%
|
|
SeD Home
International, Inc. (3)
|
74,015,730
|
99.96
%
|
(1)
Based upon
74,043,324 outstanding common shares as of December 29, 2017, prior
to the Closing.
(2)
The mailing address
for each individual and entity set forth above is c/o SeD
Intelligent Home Inc., 4800 Montgomery Lane, Suite 210, MD
20814.
(3)
Fai H. Chan may be
deemed to be the beneficial owner of those 74,015,730 shares held
by Singapore eDevelopment’s subsidiary SeD Home
International, Inc. prior to the Closing, as he is the Chief
Executive Officer and majority shareholder of Singapore
eDevelopment.
Post-Closing Security Ownership
The following table sets forth, as of December 31, 2017, following
the Closing and the issuance of 630,000,000 shares of our common
stock, and as of March 29, 2018, the number and percentage of our
outstanding shares of common stock owned by (i) each person known
to us to beneficially own more than 5% of its outstanding common
stock, (ii) each director, (iii) each named executive officer and
significant employee, and (iv) all officers and directors as a
group.
The number of shares listed below includes shares that each
shareholder listed in the table has the right to acquire beneficial
ownership of within 60 days.
|
Name and Address (2)
|
Number of Common Shares
Beneficially Owned
|
Percentage of Outstanding Common Shares (1)
|
|
Fai
H. Chan (3)
|
704,015,730
|
99.99
%
|
|
Moe
T. Chan
|
0
|
0.00
%
|
|
Conn
Flanigan
|
0
|
0.00
%
|
|
Charley
MacKenzie
|
0
|
0.00
%
|
|
Rongguo
(Ronald) Wei
|
0
|
0.00
%
|
|
Alan
W. L. Lui
|
0
|
0.00
%
|
|
All
Directors and Officers (6 individuals)
|
704,015,730
|
99.99
%
|
|
Singapore
eDevelopment (3)
|
704,015,730
|
99.99
%
|
|
SeD
Home International, Inc. (3)
|
704,015,730
|
99.99
%
|
(1) Based upon 704,043,324 outstanding common shares as of
December 31, 2017 and March 29, 2018.
(2) The
mailing address for each individual and entity set forth above is
c/o SeD Intelligent Home Inc., 4800 Montgomery Lane, Suite 210, MD
20814.
(3) Fai
H. Chan may be deemed to be the beneficial owner of those
704,015,730 shares held by Singapore eDevelopment’s
subsidiary SeD Home International, Inc. following the Closing, as
he is the Chief Executive Officer and majority shareholder of
Singapore eDevelopment
34
Change of Control
The Company is not aware of any arrangement which may at a
subsequent date result in a change in control of the
Company.
Family Relationships
Fai H.
Chan, our Co-Chief Executive Officer, Chairman of our Board and
Chairman of the Board and Chief Executive Officer of our majority
shareholder and its corporate parent is the father of Moe T. Chan,
our other Co-Chief Executive Officer and a Member of our
Board.
Transactions with Related Persons, Promoters, and Certain Control
Persons
SeD
Home receives advances from Singapore eDevelopment Ltd (100% owner
of the Company) to fund development costs and operation costs. The
advances are unsecured, bear interest at 18% per annum and are
payable on demand. As of December 31, 2015, the Company had
outstanding principal due of $12,293,715 and accrued interest of
$2,161,055 due to this related party.
SeD
Home receives advances from SCDPL (owned 100% by Singapore
eDevelopment) to fund development costs and operation costs. The
advances are unsecured, bear interest at 18% per annum and are
payable on demand. As of December 31, 2015, the Company had
outstanding principal due of $4,300,930 and accrued interest of
$1,461,058 due to this related party.
On
September 30, 2015, SeD Home received $10,500,000 interest free
loan, with a maturity date of March 31, 2016, from Hengfai Business
Development Pte, Ltd, owned by the Chief Executive Officer of
Singapore eDevelopment Ltd and is also the majority shareholder of
Singapore eDevelopment Ltd, specifically for Ballenger Run project.
SeD Home imputed interest at 13%, which is the interest rate on the
Revere Loan noted in Note 5. The imputed interest resulted in a
debt discount of $622,431 which is amortized over the life of the
note. At December 31, 2015, SeD Home had $10,500,000 outstanding on
the note and unamortized debt discount of $311,216. On April 1,
2016, SeD Home extended the note on the same terms through December
31, 2016. This resulted in an additional $933,647 of new imputed
interest which was amortized during 2016.
At
December 31, 2016, considering the longterm development and
short-term debt repayment, SeD Home restructured the loans
from these affiliates. The restructuring process was done to
transfer the principal of the loans to Singapore eDevelopment Ltd.
(100% owner of the Company), which was then forgiven and recorded
into additional paid in capital. The principal forgiven was
$26,913,525. SeD Home still maintained the accrued interest of
$6,283,207. The remaining accrued interest does not bear interest.
On August 30, 2017, an additional $4,560,085 of this interest was
forgiven and recorded into additional paid in capital. At December
31, 2017, $1,723,122of accrued interest is outstanding relating to
this transaction.
SeD
Home receives advances from SeD Home Limited (an affiliate of
Singapore eDevelopment), to fund development and operation costs.
The advances bear interest at 10% and are payable on demand. As of
December 31, 2017 and December 31, 2016, SeD Home had outstanding
principal due of $1,050,000 and $500,000 and accrued interest of
$86,425 and $1,095.
SeD
Home receives advances from SeD Home International. (an affiliate
through common ownership). The advances bore interest at 18% until
August 30, 2017 when the interest rate was adjusted to 5% and have
no set repayment terms. At December 31, 2017, there was $6,953,591
of principal and $125,675 of accrued interest outstanding. There
were no amounts outstanding at December 31, 2016.
During
2017, prior to the reverse merger, SeD Intelligent Home Inc.
borrowed $30,000 from SeD Home International Inc. The borrowings
did not bear any interest. In November 2017, the debt was forgiven
by SeD Home International Inc. and was recognized into additional
paid in capital.
SeD
Home International Inc. contributed $178,601 to SeD Home Inc. prior
to the reverse merger. The contribution was recorded into
additional paid in capital.
35
As
described in Item 1, the reverse merger was done with a related
party through common control and ownership.
Black
Oak LP is obligated under the Limited Partnership Agreement (as
amended) to pay a $6,500 per month management fee to Arete Real
Estate and Development Company (Arete), a related party through
common ownership and $2,000 per month to American Real Estate
Investments LLC (AREI), a related party through common ownership.
The Company incurred fees of $102,000 and $102,000 for the years
ended December 31, 2017 and 2016, respectively. These fees were
capitalized as part of Real Estate on the consolidated balance
sheet.
Arete
is also entitled to a developer fee of 3% of all development costs
excluding certain costs. The fees are to be accrued until
$1,000,000 is received in revenue and/or builder deposits relating
to the Black Oak Project. At December 31, 2017 and 2016, there were
$133,130 and $0 capitalized as Real Estate relating to these
costs.
At
December 31, 2017 and 2016, the Company had $314,630 and $103,700
owed to Arete in accounts payable and accrued
expenses.
At
December 31, 2017 and 2016, the Company had $48,200 and $24,200
owed to AREI in accounts payable and accrued expenses.
SeD
Maryland Development LLC is obligated under the terms of a Project
Development and Management Agreement with MacKenzie Development
Company LLC (MacKenzie) and Cavalier Development Group LLC
(Cavalier) (together, the Developers) to provide various services
for the development, construction and sale of the Project.
MackKenzie is partially owned by a family member of a Director of
the Company. The agreement is for an estimated initial term of
seventy-eight (78) months based on the completion time for the
Project and may be extended if necessary. The developers are
entitled to certain fees based on time and performance related
milestones. The Company incurred fees of $176,000 and $176,000 for
the years ended December 31, 2017 and 2016, respectively. These
fees were capitalized as part of Real Estate on the consolidated
balance sheet. There were no amounts owed to this related party at
December 31, 2017 or 2016.
MacKenzie Equity
Partners, owned by a Charlie MacKenzie, a Director of the Company,
has a consulting agreement with the Company since 2015. Per the
terms of the agreement the Company must pay a monthly fee of
$12,500 and a 2% management fee. In May 2017, the agreement was
amended to increase the monthly fee to $20,000. The Company
incurred expenses of $222,930 and $186,095 for the years ended
December 31, 2017 and 2016, respectively, which were capitalized as
part of Real Estate on the balance sheet as the services relate to
property and project management. There were no amounts owed to this
related party at December 31, 2017 or 2016.
On
November 29, 2016 an affiliate of SeD Home entered into three
$500,000 bonds for a total of $1.5 million that are to incur annual
interest at eight percent and the principal shall be paid in full
on November 29, 2019. SeD Home agreed to guarantee the payment
obligations of these bonds. Further, at the maturity date, the
bondholder has the right to propose to acquire a property built by
SeD Home, and SeD will facilitate that transaction. The proposed
acquisition purchase price would be at SeD Home's cost. If the cost
price is more than $1.5 million, the proposed acquirer would pay
the difference, and if the cost price is below $1.5 million, the
affiliate of SeD would pay the difference in cash.
Mr. Fai H. Chan is
compensated by Singapore eDevelopment, where he serves as Chief
Executive Officer. Mr. Moe T. Chan and Mr. Alan Lui are also
employed and compensated by Singapore eDevelopment. As part of
their duties as officers of Singapore eDevelopment, each of these
three individuals works on a number of matters for Singapore
eDevelopment, including devoting various amounts of time to the
management of Singapore eDevelopment’s various subsidiaries
and divisions, such as SeD Intelligent Home and SeD Home. The
amount of time each of these individuals spends on matters related
to SeD Intelligent Home and SeD Home has varied greatly based on
the Company’s needs, and no definite statement may be made as
to what percentage of these three individuals’ time has been
spent or will be spent in the future on matters related to SeD
Intelligent Home and SeD Home. SeD Intelligent Home and SeD Home
and its subsidiaries do not compensate these three individuals for
their services. Neither SeD Intelligent Home Inc. nor SeD Home and
its subsidiaries is charged for the services of Fai H. Chan, Moe T.
Chan and Alan Lui and Singapore eDevelopment does not have a
management contract with SeD Intelligent Home, SeD Home or any of
its subsidiaries.
A law
firm, owned by Conn Flanigan, a Director of the Company, performs
consulting services for the Company. The Company incurred expenses
of $110,334 and $96,000 for the years ended December 31, 2017 and
2016, respectively. At December 31, 2017 and 2016, the Company owed
this related party $17,730 and $8,000, respectively.
The following table indicates the fees paid by us for services
performed for the years ended December 31, 2017 and December 31,
2016:
|
|
Year Ended
December 31,
2017
|
Year Ended
December 31,
2016
|
|
|
|
|
|
Audit
Fees
|
$
52,455
|
$
28,500
|
|
Audit-Related
Fees
|
$
0
|
$
0
|
|
Tax
Fees
|
$
57,000
|
$
53,020
|
|
All
Other Fees
|
$
0
|
$
0
|
|
Total
|
$
109,455
|
$
81,520
|
Audit Fees
.
This category includes the aggregate fees
billed for professional services rendered by the independent
auditors during the years ended December 31, 2017 and December 31,
2016 for the audit of our financial statements and review of
previous years’ Form 10-Qs.
Tax Fees
.
This category includes the aggregate fees
billed for tax services rendered in the preparation of our federal
and state income tax returns.
All Other Fees
.
This category includes the aggregate fees
billed for all other services, exclusive of the fees disclosed
above, rendered during the year ended December 31, 2017 and
December 31, 2016.
36
(a)(1)
List of Financial statements included in Part II
hereof:
Balance
Sheets as of December 31, 2017 and December 31, 2016
Statements
of Operations for the twelve months ended December 31, 2017 and
December 31, 2016
Statements
of Stockholders' Equity (Deficit) For the period December 31, 2016
through December 31, 2017
Statements
of Cash Flows for the twelve months ended December 31, 2017 and
December 31, 2016
(a)(2)
List of Financial Statement schedules included in Part IV
hereof:
None.
37
(a)(3)
Exhibits
The
following exhibits are filed with this report or incorporated by
reference:
|
Exhibit No.
|
|
Description
|
|
|
Acquisition Agreement and Plan of Merger dated December 29, 2017 by
and among SeD Intelligent Home Inc., SeD Acquisition Corp., SeD
Home International, Inc. and SeD Home Inc. incorporated herein by
reference to Exhibit 2.1 to the Company’s Current Report on
Form 8-K filed with Securities and Exchange Commission on December
29, 2017
|
|
|
|
Certificate of Incorporation of the Company, incorporated herein by
reference to Exhibit 3.1 to the Company’s Registration
Statement on Form S-11 filed with the Securities and Exchange
Commission on October 20, 2010.
|
|
|
|
Bylaws of the Company, incorporated herein by reference to Exhibit
3.2 to the Company’s Registration Statement on Form S-11
filed with the Securities and Exchange Commission on October 20,
2010.
|
|
|
|
Amendment to the Company’s Articles of Incorporation,
incorporated herein by reference to Exhibit 3.3 to Company’s
Quarterly Report on Form 10-Q, filed with the Securities and
Exchange Commission on November 2, 2017.
|
|
|
|
Certificate of Incorporation of SeD Home Inc. incorporated herein
by reference to Exhibit 3.4 to the Company’s Current Report
on Form 8-K filed with Securities and Exchange Commission on
December 29, 2017
|
|
|
|
Bylaws of SeD Home Inc. incorporated herein by reference to Exhibit
3.5 to the Company’s Current Report on Form 8-K filed with
Securities and Exchange Commission on December 29,
2017
|
|
|
|
Agreement of Limited Partnership of 150 CCM Black Oak, Ltd., dated
as of March 20, 2014, by and between 150 Black Oak GP, Inc. and CCM
Development USA Corporation, American Real Estate Investments, LLC
and the Fogarty Family Trust II incorporated herein by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed with Securities and Exchange Commission on December 29,
2017
|
|
|
|
Amendment of Agreement of Limited Partnership of 150 CCM Black Oak,
Ltd., dated as of November 7, 2014, by and between 150 Black Oak
GP, Inc. and CCM Development USA Corporation, American Real Estate
Investments, LLC and the Fogarty Family Trust II incorporated
herein by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K filed with Securities and Exchange Commission on
December 29, 2017
|
|
|
|
Amendment of Agreement of Limited Partnership of 150 CCM Black Oak,
Ltd., by and between 150 Black Oak GP, Inc. and CCM Development USA
Corporation, American Real Estate Investments, LLC and the Fogarty
Family Trust II incorporated herein by reference to Exhibit 10.3 to
the Company’s Current Report on Form 8-K filed with
Securities and Exchange Commission on December 29,
2017
|
|
|
|
Amendment of Agreement of Limited Partnership of 150 CCM Black Oak,
Ltd., dated as of September 26, 2014, by and between 150 Black Oak
GP, Inc. and CCM Development USA Corporation, American Real Estate
Investments, LLC and the Fogarty Family Trust II incorporated
herein by reference to Exhibit 10.4 to the Company’s Current
Report on Form 8-K filed with Securities and Exchange Commission on
December 29, 2017
|
|
|
|
Form of Lot Purchase Agreement for Ballenger Run, entered into as
of December 10, 2014, by and among SeD Maryland Development, LLC
and NVR, Inc. d/b/a Ryan Homes incorporated herein by reference to
Exhibit 10.5 to the Company’s Current Report on Form 8-K
filed with Securities and Exchange Commission on December 29,
2017
|
|
|
|
Management Agreement, entered into as of July 15, 2015, by and
between SeD Maryland Development, LLC and SeD Development
Management, LLC incorporated herein by reference to Exhibit 10.6 to
the Company’s Current Report on Form 8-K filed with
Securities and Exchange Commission on December 29,
2017
|
|
|
|
Amended and Restated Limited Liability Company Agreement of SeD
Maryland Development, LLC, dated as of September 16, 2015, by and
between SeD Maryland Development, LLC and SeD Development
Management, LLC incorporated herein by reference to Exhibit 10.7 to
the Company’s Current Report on Form 8-K filed with
Securities and Exchange Commission on December 29,
2017
|
|
|
|
Consulting Services Agreement, dated as of May 1, 2017, between SeD
Development Management LLC and MacKenzie Equity Partners LLC
incorporated herein by reference to Exhibit 10.8 to the
Company’s Current Report on Form 8-K filed with Securities
and Exchange Commission on December 29, 2017
|
|
|
|
Subsidiaries of the Company
|
|
|
|
Certification of Co-Chief Executive Officer Pursuant to Rules
13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934,
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
Certification of Co-Chief Executive Officer Pursuant to Rules
13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934,
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
Certification of Co-Chief Financial Officer Pursuant to Rules
13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934,
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
Certification of Co-Chief Financial Officer Pursuant to Rules
13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934,
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
Certification
of Chief Executive Officers and Chief Financial Officers Pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
|
|
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101.INS
|
|
XBRL Instance Document
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
None.
38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
|
|
SeD Intelligent Home Inc.
|
|
|
|
|
|
|
|
| Dated: April 17, 2018 |
By:
|
/s/
Rongguo
(Ronald) Wei
|
|
|
|
|
Name:
Rongguo
(Ronald) Wei
|
|
|
|
|
Title:
Co-Chief Financial
Officer
|
|
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
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/s/
Fai
H. Chan
|
|
Co-Chief Executive Officer, Director |
|
April 17,
2018
|
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Fai
H. Chan
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
|
|
/s/
Moe
T. Chan
|
|
Co-Chief Executive Officer, Director |
|
April 17,
2018
|
|
Moe
T. Chan
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
|
|
/s/
Conn
Flanigan
|
|
Secretary, Director
|
|
April
17, 2018
|
|
Conn
Flanigan
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Charley
MacKenzie
|
|
Director
|
|
April
17, 2018
|
|
Charley
MacKenzie
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Rongguo
(Ronald) Wei
|
|
Co-Chief
Financial Officer
|
|
April
17, 2018
|
|
Rongguo
(Ronald) Wei
|
|
(Principal
Financial Officer and
Principal
Accounting Officer)
|
|
|
|
|
|
|
|
|
|
/s/
Alan W. L. Lui
|
|
Co-Chief Financial Officer
|
|
April
17, 2018
|
|
Alan W. L. Lui
|
|
(Principal
Financial Officer and
Principal Accounting Officer)
|
|
|
39
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Mine Safety DisclosuresPart IIItem 5. Market For Company S Common Equity, Related Stockholder Matters and Small Business Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial StatementsItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accounting Fees and ServicesPart IVItem 15. Exhibits, Financial Statement SchedulesItem 16. Form 10-k Summary