COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

16. COMMITMENTS AND CONTINGENCIES

Lots Sales Agreement

On November 23, 2015, SeD Maryland Development LLC completed the $15,700,000 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 a $15,000,000 assignable real estate sales contract with NVR, by which RBG Family, LLC would facilitate the sale of the 197 acres of Ballenger Run to NVR. On December 10, 2014, NVR assigned this contract to SeD Maryland Development, LLC through execution of an assignment and assumption agreement and entered into a series of lot purchase agreements by which NVR would purchase 443 subdivided residential lots from SeD Maryland Development, LLC. On December 31, 2018, SeD Maryland entered into the Third Amendment to the Lot Purchase Agreement for Ballenger Run with NVR. Pursuant to the Third Amendment, SeD Maryland will convert the 5.9 acre CCRC parcel to 36 lots (the 28 feet wide villa lot) and sell to NVR. SeD Maryland pursued the required zoning approval to change the number of such lots from 85 to 121, which was approved in July 2019. Subsequently, SeD Maryland Development signed Fourth Amendment to the Lot Purchase Agreement, pursuant to which NVR agreed to purchase all of the new 121 lots.

During the three months ended on September 30, 2021 and 2020, NVR purchased 18 lots and 26 lots, respectively. During the nine months ended on September 30, 2021 and 2020, NVR purchased 76 lots and 72 lots, respectively. Through September 30, 2021 and December 31, 2020, NVR had purchased a total of 464 and 388 lots, respectively.

Leases

The Company leases offices in Maryland, Singapore, Magnolia, Texas, Hong Kong and South Korea through leased spaces aggregating approximately 15,811 square feet, under leases expiring on various dates from October 2021 to March 2024. The leases have rental rates ranging from $2,265 to $23,297 per month. Our total rent expense under these office leases was $140,685 and $149,565 in the three months ended September 30, 2021 and 2020, respectively. Our total rent expense under these office leases was $405,677 and $278,143 in the nine months ended September 30, 2021 and 2020, respectively. The following table outlines the details of lease terms:

Office Location	Lease Term as of December 31, 2020	Renewed Lease term in 2021
Singapore	June 2020 to May 2021	June 2021 to May 2022
Hong Kong	October 2020 to October 2022
South Korea	August 2020 to August 2022
Magnolia, Texas, USA	November 2019 to April 2021	May 2021 to October 2021
Bethesda, Maryland, USA	August 2015 to December 2020	January 2021 to March 2024

The Company adopted ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) to recognize a right-of-use asset and a lease liability for all the leases with terms greater than twelve months. We elected the practical expedient to not recognize operating lease right-of-use assets and operating lease liabilities for lease agreements with terms less than 12 months. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As our leases do not provide a readily determinable implicit rates, we estimate our incremental borrowing rates to discount the lease payments based on information available at lease commencement. Our incremental borrowings rates are 3.9% in 2021 and at a range from 0.5% to 4.5% per annum in 2020, which were used as the discount rates. The balances of operating lease right-of-use assets and operating lease liabilities as of September 30, 2021 were $599,481 and $611,644 respectively. The balances of operating lease right-of-use assets and operating lease liabilities as of December 31, 2020 were $574,754 and $574,754, respectively.

The table below summarizes future payments due under these leases as of September 30, 2021.

For the Years Ended December 31:

2021	$	140,685
2022		356,038
2023		95,104
2024		24,430
Total Minimum Lease Payments		616,257
Less: Effect of Discounting		(4,613	)
Present Value of Future Minimum Lease Payments		611,644
Less: Current Obligations under Leases		(314,146	)
Long-term Lease Obligations	$	297,498