10-Q: LiquidValue Development Shifts to F&B, Reports Q2 Loss

LiquidValue Development Inc. reported a significant Q2 2025 net loss and revenue decline, while announcing a transformative merger into the food and beverage sector and a spin-off of its real estate assets.

Summary

• Reported a net loss of $983,241 for the six months ended June 30, 2025, a significant decline from a net income of $804,694 in the same period of 2024.
• Revenue plummeted to $17,811 for the six months ended June 30, 2025, down from $5,058,305 in the prior year period, primarily due to the sale of all remaining real estate lots in 2024.
• Entered into an Acquisition Agreement and Plan of Merger on May 30, 2025, to merge with Winning Group, a Hong Kong-based food and beverage company known for its Wing Nin brand.
• As part of the merger, existing real estate assets (Alset EHome Inc.) will be transferred to a new subsidiary, Alset Real Estate Holdings Inc., and then distributed pro rata to current stockholders.
• Post-merger, Winning Holdings will own 80% of the company, Pure Talent Group Limited 5%, and existing stockholders 15%.
• Management identified substantial doubt about the company's ability to continue as a going concern due to the lack of significant revenue-generating assets, though this is mitigated by expected reimbursements of approximately $7.8 million and financial support from Alset Inc.
• Cash increased to $3,136,533 as of June 30, 2025, from $2,762,935 at December 31, 2024.
• Total assets decreased to $36,847,183 from $38,792,674, and total liabilities decreased to $2,029,125 from $2,991,375.
• Disclosure controls and procedures were deemed not effective by management.

Sentiment

Score: 3

Explanation: The company reported significant financial deterioration with a substantial net loss and near-zero revenue from its former core business, leading to going concern doubts. While the announced merger represents a strategic pivot and potential future growth, the immediate financial results are very poor, and the ineffective disclosure controls are a concern. The future is highly dependent on the success of the new F&B business and the integration process.

Positives

• Cash balance increased to $3,136,533 as of June 30, 2025, from $2,762,935 at December 31, 2024.
• Total liabilities decreased by approximately $962,250 from December 31, 2024, to June 30, 2025.
• Received a $1,700,000 repayment on a note receivable from a related party (SeD Intelligent Home) during the six months ended June 30, 2025.
• The company secured a letter of financial support from Alset Inc., committing to provide additional funding and not demand repayment for the next twelve months, which alleviates going concern doubt.
• Expected collection of approximately $7.8 million in developer reimbursements for the Lakes at Black Oak and Alset Villas projects.
• Forgiveness of $228,557 in outstanding interest from a related party loan (SeD Home Limited) in October 2024.

Negatives

• Reported a net loss of $983,241 for the six months ended June 30, 2025, a significant deterioration from a net income of $804,694 in the same period of 2024.
• Revenue declined drastically to $17,811 for the six months ended June 30, 2025, from $5,058,305 in the prior year, primarily due to the completion of real estate lot sales in 2024.
• Operating activities resulted in a cash outflow of $1,326,348 for the six months ended June 30, 2025, compared to a cash inflow of $570,024 in the prior year.
• Gross margin ratio for model homes lease agreements was approximately (25)% for the six months ended June 30, 2025, down from 56% in the prior year.
• An out-of-period adjustment of $450,000 was recorded to increase other non-operating expenses due to an overpayment error by a title company in December 2024.

Risks

• Substantial doubt about the ability to continue as a going concern due to the lack of significant revenue-generating assets after selling all real estate lots.
• Reliance on ongoing financial support from Alset Inc. and the collection of developer reimbursements to meet future obligations.
• Disclosure controls and procedures were concluded to be not effective, indicating potential weaknesses in financial reporting and information communication.
• The success of the proposed merger with Winning Group (Wing Nin) and the transition into the food and beverage industry is subject to various risks, including integration challenges and market acceptance of the new business.
• The company's real estate business is subject to seasonal shifts in costs, which may impact expenses.
• The company's cash balances at financial institutions may exceed federal insurance limits, posing a concentration of credit risk.

Future Outlook

The company is undergoing a significant strategic transformation, shifting its primary business focus from real estate development to the food and beverage industry through a merger with Winning Group (Wing Nin). Concurrently, its existing real estate assets will be spun off to current stockholders. The company anticipates continued financial support from its indirect owner, Alset Inc., and expects to collect approximately $7.8 million in developer reimbursements, which management believes will be sufficient to meet obligations for the foreseeable future despite current operational losses. The company plans to increase its authorized common shares to 5 billion to facilitate the merger.

Management Comments

• In the three and six months ended June 30, 2025, we incurred net losses, losses from operations and negative cash flow from operations as we sold remaining lots in our real estate business during 2024.
• The Company sold the remainder of its lots during 2024, leaving no significant revenue-generating assets to fund ongoing operations.
• While the Company continues to generate some income from two rental homes, this revenue is insufficient to sustain operations.
• These conditions raise substantial doubt about the Company's ability to continue as a going concern. However, this doubt is alleviated by expected cash flow from reimbursements and ongoing financial support from Alset Inc., which management believes will be sufficient to meet the Company's obligations for the foreseeable future.
• Management intends to procure a new tenant to occupy the premises [of the model house], after the office used for real estate sales is converted back to a garage.
• The decrease in net income was mostly caused by the decrease in property sales. All remaining lots in Lakes at Black Oak and Alset Villas projects were sold during 2024.
• Our management, including our Chief Executive Officers and Chief Financial Officers concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's (SEC's) rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officers and Chief Financial Officers, as appropriate to allow timely decisions regarding required disclosure.

Industry Context

The filing indicates a complete pivot from the real estate development sector, where the company has divested its primary revenue-generating assets, to the food and beverage industry through the acquisition of Wing Nin, a Hong Kong-based cart noodle brand. This move suggests a strategic shift away from the cyclical and capital-intensive nature of real estate development, especially given the company's stated liquidity concerns in its former business. The F&B industry, particularly in a specific niche like cart noodles, presents different market dynamics, competitive landscapes, and growth opportunities, potentially aiming for a more stable or scalable revenue stream. The spin-off of existing real estate assets to current shareholders suggests a clean break for the 'new' company to focus solely on the F&B business.

Comparison to Industry Standards

• The company's current financial performance, marked by a significant net loss and near-zero revenue from its former core real estate business, is not comparable to established, revenue-generating real estate developers, as the company has effectively exited this segment.
• For the new F&B business (Wing Nin), direct comparisons are difficult without specific financial data for Wing Nin itself. However, the Hong Kong F&B market is highly competitive, with numerous local and international players. Wing Nin's reported 'eleven locations across Hong Kong' suggests a regional presence, but its scale relative to major F&B chains or publicly traded restaurant groups would likely be small.
• The gross margin ratio for the remaining model home lease agreements at (25)% is significantly below typical real estate rental or sales margins, indicating operational inefficiencies or specific asset issues.
• The disclosure of 'not effective' disclosure controls and procedures is a red flag, falling below standard corporate governance practices for publicly traded companies, regardless of industry.

Corporate Governance

Legal Proceedings

• The registrant is not a party to, and its property is not the subject of, any material pending legal proceedings.

Related Party Transactions

• Loan from SeD Home Limited (now Alset Solar Limited): Outstanding interest of $228,557 was forgiven on October 22, 2024, resulting in a gain recorded in equity.
• Loan to/from SeD Intelligent Home Inc.: Received repayment of $1,700,000 in H1 2025. SeD Intelligent Home owed the company $10,807,788 as of June 30, 2025. Accrued $314,922 of interest in H1 2025, offset against interest payable.
• Management Fees (MacKenzie Equity Partners, LLC): A subsidiary paid $225,000 in consulting expenses to MacKenzie Equity Partners, LLC (an entity owned by Director Charles MacKenzie) in H1 2025. The company owed $25,000 to this related party as of June 30, 2025.
• Note from Alset Inc.: The company holds an $11,350,933 note from Alset Inc. (indirect owner) with a 7.2% interest rate, maturing January 13, 2028. Accrued $405,275 interest income in H1 2025.
• Financial Support from Alset Inc.: Alset Inc. committed to provide any additional funding required and not demand repayment for the next twelve months, alleviating going concern doubts.
• Merger and Spin-off: The merger involves SeD Intelligent Home Inc. (majority shareholder), and the spin-off of Alset EHome Inc. to Alset Real Estate Holdings Inc. and then to existing stockholders are significant related-party transactions given Alset Inc.'s indirect ownership.

Stakeholder Impact

• Shareholders: Will experience a significant change in the company's core business from real estate to food and beverage. Existing shareholders will receive shares in a new entity (Alset Real Estate Holdings Inc.) holding the former real estate assets, effectively spinning off the old business. The value of their existing shares will be diluted by the massive issuance of new shares to the acquiring entities in the merger, but they will also gain exposure to the new F&B business.
• Employees: Potential changes in operational focus and management structure due to the business pivot.
• Customers (of former real estate business): Minimal direct impact as the company has sold its revenue-generating real estate lots.
• Customers (of new F&B business, Wing Nin): No direct impact from this filing, but the merger could bring new capital or management strategies to the Wing Nin brand.
• Creditors: The going concern doubt, while alleviated by parent support, still highlights financial fragility. The decrease in liabilities is positive.
• Regulatory Authorities: The 'not effective' disclosure controls and procedures are a concern that may attract regulatory scrutiny.

Next Steps

• Complete the merger with Winning Group, which will result in the company's primary business shifting to the food and beverage sector (Wing Nin).
• Increase authorized common shares from 1 billion to 5 billion to accommodate the merger share issuance.
• Transfer ownership of Alset EHome Inc. (existing real estate assets) to Alset Real Estate Holdings Inc.
• Conduct a pro rata distribution of Alset Real Estate Holdings Inc. shares to existing stockholders of LiquidValue Development Inc. prior to the merger closing.
• Procure a new tenant for the model house in Montgomery County, Texas, after converting the office back to a garage.
• Address the identified ineffectiveness of disclosure controls and procedures.

Key Dates

Recommendation

The company is undergoing a complete business transformation, exiting its real estate development activities which have ceased generating significant revenue and resulted in substantial losses and going concern doubts. While the merger into the food and beverage sector (Wing Nin) offers a new strategic direction, the immediate financial performance is very poor, and the disclosure of 'not effective' internal controls is a significant red flag. The massive share issuance for the merger will heavily dilute existing shareholders, and the spin-off of the old assets creates complexity. Given the severe financial deterioration, the high uncertainty of the new business venture, and governance concerns, a seasoned investor would likely recommend selling or avoiding the stock until the new business model demonstrates clear profitability and improved financial controls.

Keywords

Real Estate Development, Food and Beverage, Merger, Spin-off, Going Concern, SEC Filing, 10-Q, LiquidValue Development Inc., Wing Nin, Hong Kong, Property Management, Financial Reporting, Corporate Governance, Alset Inc.