10-Q: LiquidValue Development Inc. Reports Net Income for Q3 2024, Revenue Declines Compared to Previous Year

LiquidValue Development Inc. announces net income for the third quarter of 2024, but revenue decreases compared to the same period in 2023 due to lower property sales.

Summary

• LiquidValue Development Inc. reported net income of $2,030,756 for the three months ended September 30, 2024, compared to a net loss of $279,689 for the same period in 2023.
• Revenue for the quarter was $3,827,902, a significant increase from $6,300 in the prior year, driven by property sales from the Lakes at Black Oak project.
• For the nine months ended September 30, 2024, the company reported net income of $2,835,450, compared to net income of $6,334,639 for the same period in 2023.
• Revenue for the nine-month period was $8,886,207, a decrease from $18,197,250 in the prior year, primarily due to decreased property sales from the Lakes at Black Oak project.
• The company closed the sale of 70 single-family detached residential lots on July 1, 2024, generating approximately $3.8 million in revenue.
• On October 10, 2024, the company closed the sale of 72 single-family detached residential lots, generating approximately $3.9 million.
• General and administrative expenses decreased to $324,309 for the three months ended September 30, 2024, from $370,730 in the same period of 2023.
• For the nine months ended September 30, 2024, general and administrative expenses decreased to $1,157,856 from $1,257,809 in the same period of 2023.
• The company's real estate assets decreased to $7,126,059 as of September 30, 2024, from $10,727,530 as of December 31, 2023, due to property sales.
• Liabilities decreased to $2,025,992 as of September 30, 2024, from $3,200,002 as of December 31, 2023, primarily due to a reduction in accounts payable and accrued expenses.
• Total assets increased to $33,989,014 as of September 30, 2024, from $32,099,017 as of December 31, 2023.
• As of September 30, 2024, the company had cash of $2,362,381, compared to $1,774,314 as of December 31, 2023.
• The company obtained a letter of financial support from Alset Inc., committing to provide additional funding if required and not demand repayment for the next twelve months.

Sentiment

Score: 6

Explanation: The sentiment is neutral. While the company reports net income for the quarter, the overall revenue is down for the year. The reliance on related party support also raises concerns.

Positives

• The company achieved net income of $2,030,756 in Q3 2024, a significant improvement from the net loss in Q3 2023.
• Revenue increased substantially in Q3 2024 due to property sales from the Lakes at Black Oak project.
• General and administrative expenses decreased in both the three and nine-month periods ended September 30, 2024.
• The company's cash position improved, increasing to $2,362,381 as of September 30, 2024.
• Alset Inc.'s commitment to provide financial support provides financial stability.

Negatives

• Net income for the first nine months of 2024 decreased compared to the same period in 2023.
• Revenue for the first nine months of 2024 decreased due to fewer property sales.
• The company's disclosure controls and procedures are not effective.

Risks

• The future development timeline of Lakes at Black Oak depends on raising capital, securing loans, and receiving government reimbursements.
• The company's financial statements do not include adjustments relating to the recoverability and classification of recorded asset amounts.
• The company's disclosure controls and procedures are not effective to ensure that information required to be disclosed is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions (SECs) rules and forms and to ensure that information required to be disclosed is accumulated and communicated to management, including the Chief Executive Officers and Chief Financial Officers, as appropriate to allow timely decisions regarding required disclosure.

Future Outlook

The company plans to continue its near-term focus on lot sales to regional and national builders, which is expected to improve liquidity, strengthen its financial position, and meet working capital requirements.

Industry Context

The company operates in the real estate industry, specifically focusing on land development and lot sales. The results reflect the cyclical nature of the real estate market, with revenue fluctuations based on the timing of property sales. The company's strategy of focusing on lot sales to regional and national builders aligns with industry trends of larger builders seeking to acquire developed lots to meet housing demand.

Comparison to Industry Standards

• It is difficult to compare LiquidValue Development Inc. directly to industry standards due to its unique business model and focus on land development rather than home building.
• Companies like NVR Inc., which purchases lots from developers, could be considered a customer and a point of comparison for lot sales agreements.
• However, without more detailed information on the specific terms of the lot sales agreements and the market conditions in the areas where LiquidValue Development Inc. operates, it is challenging to provide a comprehensive comparison.

Related Party Transactions

• The company receives advances from SeD Home Limited (now known as Alset Solar Limited; a subsidiary of Alset International), to fund development and operation costs.
• The company receives advances from or loans funds to SeD Intelligent Home, the owner of 99.99 % of the Company.
• MacKenzie Equity Partners, LLC, an entity owned by Charles MacKenzie, a Director of the Company, has a consulting agreement with a majority-owned subsidiary of the Company.
• The Company provides working capital advances for Alset Inc., a related party under the common control of Chan Heng Fai, the Co-CEO of the Company.
• On December 9, 2022, Alset EHome Inc., entered into an agreement with Alset International Limited and Alset Inc. pursuant to which Alset EHome Inc. agreed to sell its subsidiary American Home REIT Inc., which owns 112 single-family rental homes, to Alset Inc.

Stakeholder Impact

• Shareholders: The net income for the quarter is a positive sign, but the overall decrease in revenue for the year may be concerning.
• Employees: The company's focus on lot sales and financial support from Alset Inc. may provide job security.
• Customers: The company's focus on lot sales to regional and national builders may lead to increased housing options.
• Suppliers: The company's continued operations and development projects may provide opportunities for suppliers.

Next Steps

• The company plans to continue its near-term focus on lot sales to regional and national builders.
• The company expects to collect approximately $7.7 million in developer reimbursements for the Lakes at Black Oak project within the next twelve months.

Key Dates

Keywords

LiquidValue Development, real estate, property sales, net income, revenue, Lakes at Black Oak, financial results, land development