Attached files
| file | filename |
|---|---|
| EX-32.2 - Hubilu Venture Corp | ex32-2.htm |
| EX-32.1 - Hubilu Venture Corp | ex32-1.htm |
| EX-31.2 - Hubilu Venture Corp | ex31-2.htm |
| EX-31.1 - Hubilu Venture Corp | ex31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] quarterly REPORT under SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2020
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 000-55611
Hubilu Venture Corporation
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 47-3342387 | |
| (State
or other Jurisdiction of Incorporation or Organization) |
(I.R.S.
Employer Identification No.) |
| 205 South Beverly Drive, Suite 205 | ||
| Beverly Hills, CA | 90212 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (310) 308-7887
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 preceding12 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 [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§230.405 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 [X] No [ ]
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 file,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [ ] | Accelerated filer [ ] |
| Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | HBUV | OTC Pink |
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section l2, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date’s As of April 21, 2021 the number of shares outstanding of the issuer’s sole class of common stock, $0.001 par value per share, is 26,237,125.
table of contents
| 2 |
Part I – FINANCIAL INFORMATION
Consolidated Balance Sheets
| September 30, 2020 | December 31, 2019 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Real Estate, at cost | ||||||||
| Land | $ | 6,288,629 | $ | 5,361,429 | ||||
| Building and capital improvements | 2,602,776 | 2,163,626 | ||||||
| 8,891,405 | 7,525,055 | |||||||
| Accumulated Depreciation | (207,549 | ) | (138,356 | ) | ||||
| 8,683,856 | 7,386,699 | |||||||
| Cash | 182,579 | 145,593 | ||||||
| Funds held in escrow | - | 3,205 | ||||||
| Other current assets | 25,950 | 6,600 | ||||||
| Prepaid expenses | - | 8,746 | ||||||
| TOTAL ASSETS | $ | 8,892,385 | $ | 7,550,843 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| LIABILITIES | ||||||||
| Property indebtedness | $ | 8,212,156 | $ | 7,000,810 | ||||
| Accounts payable | 3,865 | 3,973 | ||||||
| Security deposits | 124,319 | 60,285 | ||||||
| Promissory notes payable- related party | 182,056 | 182,055 | ||||||
| Loans payable- EDIL | 4,000 | - | ||||||
| Loans payable-investor | 149,612 | - | ||||||
| Preferred shares | 586,264 | 567,567 | ||||||
| Due to related party | 492,500 | 492,500 | ||||||
| TOTAL LIABILITIES | 9,754,772 | 8,307,190 | ||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Common Stock Authorized 100,000,000 common shares, $0.001 par, 26,237,125 issued and outstanding on September 30, 2020 (December 31, 2019: 26,237,125) | 26,238 | 26,238 | ||||||
| Additional paid-in capital | 733,867 | 707,987 | ||||||
| Accumulated Deficit | (1,622,492 | ) | (1,490,572 | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | (862,387 | ) | (756,347 | ) | ||||
| TOTAL LIABILITIES & STOCKHOLDERS’ DEFICIT | $ | 8,892,385 | $ | 7,550,843 | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 3 |
Consolidated Statements of Operations
(unaudited)
| Three months ended September 30, 2020 | Three months ended September 30, 2019 | Nine months ended September 30, 2020 | Nine months ended September 30, 2019 | |||||||||||||
| Rental Income | $ | 257,588 | $ | 120,293 | $ | 629,889 | $ | 311,792 | ||||||||
| Expenses | ||||||||||||||||
| General & administrative | 40,494 | 4,201 | 140,809 | 36,545 | ||||||||||||
| Consulting | - | 7,633 | - | 254,500 | ||||||||||||
| Depreciation | 24,179 | 13,906 | 69,850 | 36,951 | ||||||||||||
| Professional fees | - | 1,360 | 447 | 17,653 | ||||||||||||
| Property taxes | 19,158 | 20,206 | 51,120 | 30,313 | ||||||||||||
| Rent | 3,900 | 7,350 | 11,250 | 21,450 | ||||||||||||
| Repairs and maintenance | - | 7,202 | 2,122 | 11,864 | ||||||||||||
| Wages and benefits | 27,126 | 29,400 | 99,403 | 61,600 | ||||||||||||
| Transfer agent and filing fees | 300 | 4,535 | 1,401 | 5,215 | ||||||||||||
| Utilities | 15,539 | 5,820 | 36,071 | 13,473 | ||||||||||||
| Operating Expenses | 130,696 | 101,613 | 412,473 | 489,564 | ||||||||||||
| Income (Loss) before other income (expense) | 126,892 | 18,680 | 217,416 | (177,772 | ) | |||||||||||
| Other Income (Expense) | ||||||||||||||||
| Dividends accrued for preferred shares | (6,255 | ) | (6,255 | ) | (18,697 | ) | (18,765 | ) | ||||||||
| Write-off of loan receivable | - | - | - | (5,000 | ) | |||||||||||
| Imputed interest | (8,643 | ) | - | (25,880 | ) | - | ||||||||||
| Promissory note interest | (36,776 | ) | (15,518 | ) | (89,285 | ) | (39,213 | ) | ||||||||
| Mortgage interest | (77,771 | ) | (39,115 | ) | (215,474 | ) | (115,280 | ) | ||||||||
| Total Other Income (Expense) | (129,445 | ) | (60,888 | ) | (349,336 | ) | (178,258 | ) | ||||||||
| Net loss for the period | $ | (2,553 | ) | $ | (42,208 | ) | $ | (131,920 | ) | $ | (356,030 | ) | ||||
| Basic and diluted loss per share | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||
| Weighted average shares outstanding | 26,237,125 | 25,952,125 | 26,237,125 | 25,926,147 | ||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 4 |
Consolidated Statement of Stockholders’ Deficit
(unaudited)
| Common Stock | Additional Paid-In | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance, December 31, 2018 | 25,730,500 | $ | 25,731 | $ | 298,719 | $ | (913,315 | ) | $ | (588,865 | ) | |||||||||
| Shares issued for services rendered | 506,625 | 507 | 374,793 | - | 375,300 | |||||||||||||||
| Imputed interest | - | - | 34,475 | - | 34,475 | |||||||||||||||
| Net loss | - | - | - | (577,257 | ) | (577,257 | ) | |||||||||||||
| Balance, December 31, 2019 | 26,237,125 | 26,238 | 707,987 | (1,490,572 | ) | (756,347 | ) | |||||||||||||
| Imputed interest | - | - | 25,880 | - | 25,880 | |||||||||||||||
| Net loss | - | - | - | (131,920 | ) | (131,920 | ) | |||||||||||||
| Balance, September 30, 2020 | 26,237,125 | $ | 26,238 | $ | 733,867 | $ | (1,622,492 | ) | $ | (862,387 | ) | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 5 |
Consolidated Statements of Cash Flows
(unaudited)
| For the nine months ended September 30, 2020 | For the nine months ended September 30, 2019 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (131,920 | ) | $ | (356,030 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used for) operations: | ||||||||
| Depreciation | 69,850 | 36,951 | ||||||
| Imputed interest | 25,880 | 23,309 | ||||||
| Dividends accrued for preferred shares | 18,697 | 18,765 | ||||||
| Stock-based compensation | - | 177,300 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Other current assets | (16,145 | ) | - | |||||
| Prepaid expenses | 8,746 | - | ||||||
| Accounts Payable | (107 | ) | 2,591 | |||||
| Security deposits | 64,034 | 31,315 | ||||||
| Net cash (used in) provided by operating activities | 39,035 | (65,799 | ) | |||||
| INVESTING ACTIVITIES: | ||||||||
| Building improvements | (208,007 | ) | (152,472 | ) | ||||
| Net cash used in investing activities | (208,007 | ) | (152,472 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Advance from investors | 149,612 | |||||||
| Advance from related party | - | 8,845 | ||||||
| Loans payable- EDIL | 4,000 | (12,000 | ) | |||||
| Property indebtedness, net | 52,346 | 230,322 | ||||||
| Net Cash Provided By Financing activities | 205,958 | 227,167 | ||||||
| NET (DECREASE) INCREASE IN CASH | 36,986 | 8,896 | ||||||
| Cash, beginning of period | 145,593 | 2,310 | ||||||
| Cash, end of period | $ | 182,579 | $ | 11,206 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Interest paid | $ | 322,407 | $ | 131,183 | ||||
| Taxes paid | $ | - | $ | - | ||||
| SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS Acquisition of assets financed through debt | 1,159,000 | 600,000 | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 6 |
Notes to the Consolidated Financial Statements
September 30, 2020
(unaudited)
NOTE 1 – NATURE OF BUSINESS
Hubilu Venture Corporation (“the Company”) was incorporated under the laws of the state of Delaware on March 2, 2015 and is a publicly traded real estate consulting, asset management and business acquisition company, which specializes in acquiring student housing income properties and development/business opportunities located near the Los Angeles Metro/subway stations and within the Los Angeles area.
NOTE 2 – BASIS OF PRESENTATION AND ABILITY TO CONTINUE AS A GOING CONCERN
The accompanying consolidated financial statements include the accounts of the Company and each of its wholly owned subsidiaries: Akebia Investments LLC, Zinnia Investments, LLC, Sunza Investments, LLC, Lantana Investments LLC, Elata Investments, LLC, Trilosa Investments, LLC, and Boabab Investments, LLC. All intercompany transactions have been eliminated on consolidation.
The financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) on the basis that the Company will continue as a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for the next year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At September 30, 2020, the Company had not yet achieved profitable operations, had an accumulated deficit of $1,622,492 and expects to incur further losses in the development of its business, all of which casts substantial doubt upon the Company’s ability to continue as a going concern and, therefore, that it may be unable to realize its assets and discharge its liabilities in the normal course of business. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. Management intends to focus on raising additional funds either by way of debt or equity issuances in order to continue operations. The Company cannot provide any assurance or guarantee that it will be able to obtain additional financing or generate revenues sufficient to maintain operations.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Preparation and Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with Securities and Exchange Commission rules and regulations and generally accepted accounting principles in the United States of America (“US GAAP”) and in the opinion of management contain all adjustments necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
Fair Value Measurements
The fair value hierarchy under GAAP is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:
| Level 1 | quoted prices (unadjusted) in active markets for identical assets or liabilities; |
| Level 2 | observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and |
| Level 3 | assets and liabilities whose significant value drivers are unobservable by little or no market activity and that are significant to the fair value of the assets or liabilities. |
New Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board, or FASB, established Topic 842, Leases, by issuing Accounting Standards Update (“ASU”) No. 2016-02, which requires lessors to classify leases as a sales-type, direct financing, or operating lease and requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The Company adopted the new standard effective January 1, 2019 and elected the effective date method for the transition. The Company elected the following practical expedients:
| ● | Transition method practical expedient – permits the Company to use the effective date as the date of initial application. Upon adoption, the Company did not have a cumulative-effect adjustment to the opening balance of retained earnings. Financial information and disclosures for periods before January 1, 2019 were not updated. | |
| ● | Short-term lease practical expedient – permits the Company not to recognize leases with a term equal to or less than 12 months. |
| 7 |
Lessor Accounting
The accounting for lessors under the new standard remained relatively unchanged with a few targeted updates impacting the Company, which included: (i) narrower definition of initial direct costs that requires certain costs to be expensed rather than capitalized, and (ii) provisions for uncollectible rents to be recorded as a reduction in revenue rather than as bad debt expense.
Lessee Accounting
The new standard requires lessees to recognize a right-of-use asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating at inception, with classification affecting the pattern and recording of expenses in the statement of operations. There was no impact on the Company’s financial statements on the adoption of Topic 842 given that its office lease does not exceed 12 months in duration.
NOTE 4- PROPERTY ACQUISITIONS- Related Party
On February 22, 2020 we completed our acquisition, through our subsidiary Trilosa Investments, LLC,, the real property located at 3906 Denker Avenue in Los Angeles (“Denker”). The property was vacant at time of purchase. The acquisition was for $535,000 (“Purchase Price”). Terms of the acquisition as follows:
(1) A first position note with payment on principal balance of $416,000 issued by the Property Owner, Trilosa, owing to lender, Visio Financial Services, Inc, whose terms of payments due are principle and interest, on unpaid principal at the rate of 6% per annum. Principal and interest payable in monthly installments of $2,494.13 or more starting on April 1, 2020 and continuing until the 1st day of March 2050, at which time the entire principal balance together with interest due thereon, shall become due and payable.
The initial fixed interest rate will change to an adjustable interest rate on the 1st day of March 2025, and the adjustable interest rate may change on that day every 12th month thereafter. The date on which the initial fixed interest rate changes to an adjustable interest rate, and each date on which my adjustable interest rate could change. (2) A $185,000 second position note owing by Trilosa, whose terms of payments due were interest only, payable on unpaid principal at the rate of 6.00% per annum. Interest only payable in monthly installments of $700.00 or more on the 15th day of each month beginning on the 15th day of March 2020 and continuing until the 14th day of February 2025, at which time the entire principal balance together with interest due thereon, shall become due and payable.
On July 24, 2020 we completed our acquisition, through our subsidiary Lantana Investments, LLC, the real property located at Budlong Avenue in Los Angeles (“Budlong”). The property was vacant at time of purchase. The acquisition was for $624,000.00 (“Purchase Price”). Terms of the acquisition as follows:
(1) A first position note with payment on principal balance of $470,000 issued by the Property Owner, Lantana, owing to lender, Golden Empire Mortgage, whose terms of payments due are principle and interest, on unpaid principal at the rate of 5% per annum. Principal and interest payable in monthly installments of $1,958.33 or more starting on August 24, 2020 and continuing until the 24th day of July 2021, at which time the entire principal balance together with interest due thereon, shall become due and payable.
(2) A $175,000 second position note owing by Lantana, whose terms of payments due were interest only, payable on unpaid principal at the rate of 5.00% per annum. Interest only payable in monthly installments of $729.17 or more on the 23rd day of each month beginning on the 23rd day of August 2020 and continuing until the 22nd day of July 2025, at which time the entire principal balance together with interest due thereon, shall become due and payable.
NOTE 5- INVESTMENTS IN REAL ESTATE
The change in the real estate property investments for the nine months ended September 30, 2020 and the year ended December 31, 2019 is as follows:
| Nine months ended September 30, 2020 | Year ended December 31, 2019 | |||||||
| Balance, beginning of the period | $ | 7,525,055 | $ | 3,463,528 | ||||
| Acquisitions: | 1,159,000 | 3,993,553 | ||||||
| 8,684,055 | 7,457,081 | |||||||
| Capital improvements | 207,350 | 67,974 | ||||||
| Balance, end of the period | $ | 8,891,405 | $ | 7,525,055 | ||||
The change in the accumulated depreciation for the nine months ended September 30, 2020 and 2019 is as follows:
September 30, 2020 | September 30, 2019 | |||||||
| Balance, beginning of the period | $ | 137,699 | $ | 88,867 | ||||
| Depreciation charge for the period | 69,850 | 36,951 | ||||||
| Balance, end of the period | $ | 207,549 | $ | 125,818 | ||||
The Company’s real estate investments as of September 30, 2020 is summarized as follows:
| Initial Cost to the Company | Capital | Accumulated | Security | |||||||||||||||||||||
| Land | Building | Improvements | Depreciation | Encumbrances | Deposits | |||||||||||||||||||
| 3711 South Western Ave | $ | 508,571 | $ | 383,716 | $ | 16,795 | $ | 68,837 | $ | 566,115 | $ | 12,404 | ||||||||||||
| 2909 South Catalina | 565,839 | 344,856 | 5,609 | 60,366 | 466,362 | 14,400 | ||||||||||||||||||
| 3910 Wisconsin Ave | 337,500 | 150,000 | 88,378 | 16,013 | 484,421 | 11,500 | ||||||||||||||||||
| 3910 Walton Ave | 318,098 | 191,902 | 2,504 | 17,137 | 560,871 | 11,000 | ||||||||||||||||||
| 1557 West 29th | 496,609 | 146,891 | 17,163 | 10,830 | 643,500 | 8,015 | ||||||||||||||||||
| 1267 West 38th Street | 420,210 | 180,090 | 7,191 | 8,497 | 595,000 | 4,395 | ||||||||||||||||||
| 1618 West 38th | 508,298 | 127,074 | 14,732 | 3,711 | 650,141 | 10,510 | ||||||||||||||||||
| 4016 Dalton Avenue | 424,005 | 106,001 | 33,004 | 3,424 | 572,297 | 10,500 | ||||||||||||||||||
| 1981 West Estrella Avenue | 651,659 | 162,915 | 65,593 | 5,536 | 875,000 | 8,570 | ||||||||||||||||||
| 2115 Portland Avenue | 753,840 | 188,460 | - | 5,140 | 930,830 | 14,395 | ||||||||||||||||||
| 717 West 42nd Place | 376,800 | 94,200 | 43,649 | 3,297 | 472,135 | 1,350 | ||||||||||||||||||
| 3906 Denker Street | 428,000 | 107,000 | 1,253 | 2,108 | 598,484 | 12,500 | ||||||||||||||||||
| 3408 S. Budlong Street | 499,200 | 124,800 | - | 2,653 | 645,000 | 4,780 | ||||||||||||||||||
| 3912 S. Hill Street | - | - | - | - | 152,000 | - | ||||||||||||||||||
| $ | 6,288,629 | $ | 2,307,905 | $ | 294,871 | $ | 207,549 | $ | 8,212,156 | $ | 124,319 | |||||||||||||
| 8 |
NOTE 6- PROPERTY INDEBTEDNESS- Related Party
| Stated interest | ||||||||||||||
| Principal balance | rate as at | |||||||||||||
| September 30, 2020 | December 31, 2019 | September 30, 2020 | Maturity date | |||||||||||
| Akebia Property | $ | 566,115 | $ | 574,566 | 3.95 | % | August 1, 2021 | |||||||
| Zinnia Property | 466,362 | 832,744 | 3.50 | % | July 25, 2021 | |||||||||
| 3910 Walton Ave | ||||||||||||||
| -First Note | 560,871 | 518,800 | 6.00 | % | April 30, 2020 | |||||||||
| - 3910 Wisconsin Street | ||||||||||||||
| - First Note | 244,421 | 247,571 | 4.375 | % | October 1, 2036 | |||||||||
| - Second Note | 150,000 | 150,000 | 9.00 | % | September 27, 2020 | |||||||||
| - Third Note | 90,000 | 235,423 | 9.00 | % | April 30, 2022 | |||||||||
| 1557 West 29th Street | ||||||||||||||
| -First Note | 443,500 | 443,500 | 6.85 | % | November 1, 2025 | |||||||||
| -Second Note | 200,000 | 200,000 | 6.85 | % | October 30, 2022 | |||||||||
| 1267 West 38th Street | ||||||||||||||
| -First Note | 415,000 | 415,000 | 5.50 | % | March 19, 2023 | |||||||||
| -Second Note | 180,000 | 185,000 | 6.00 | % | March 19, 2023 | |||||||||
| 4016 Dalton Ave | ||||||||||||||
| -First Note | 417,297 | 420,000 | 7.2 | % | January 1, 2025 | |||||||||
| -Second Note | 155,000 | - | 6.00 | % | December 10,2023 | |||||||||
| 1618 West 38th Street | ||||||||||||||
| -First Note | 500,141 | 493,920 | 6.3 | % | January 1, 2050 | |||||||||
| -Second Note | 150,000 | - | 6.00 | % | December 10, 2023 | |||||||||
| 1981 Estrella Avenue -First Note | 610,000 | 600,000 | 5.00 | % | November 30, 2023 | |||||||||
| -Second Note | 265,000 | 265,000 | 5.00 | % | November 30, 2023 | |||||||||
| 717 West 42nd Place | ||||||||||||||
| -First Note | 337,167 | 337,167 | 6.85 | % | October 31, 2025 | |||||||||
| -Second Note | 134,968 | 134,986 | 6.85 | % | April 30, 2022 | |||||||||
| 2115 Portland Avenue | ||||||||||||||
| -First Note | 611,054 | 616,899 | 6.00 | % | May 31, 2024 | |||||||||
| -Second Note | 319,776 | 330,234 | 5.00 | % | April 30, 2024 | |||||||||
| 3906 Denker | ||||||||||||||
| - First Note | 413,484 | - | 6.00 | % | March 1, 2050 | |||||||||
| - Second Note | 185,000 | - | 6.85 | % | February 14, 2025 | |||||||||
| 3408 Budlong Avenue | ||||||||||||||
| -First Note | 470,000 | - | 5 | % | July 24, 2021 | |||||||||
| -Second Note | 175,000 | - | 5 | % | July 22, 2025 | |||||||||
| 3912 S. Hill Street | 152,000 | - | 6.425 | % | November 1, 2026 | |||||||||
| $ | 8,212,156 | $ | 7,000,810 | |||||||||||
| 9 |
NOTE 7 – PROMISSORY NOTES PAYABLE- Related Party
| September 30, 2020 | December 31, 2019 | |||||
| $ | 182,056 | $ | 182,055 | |||
As of September 30, 2020, the Company has two promissory notes payable to Esteban Coaloa, outstanding, the total amount owing of $182,055. The first is payable through its wholly owned subsidiary, Akebia Investments, LLC, in the amount of $92,463, bearing an interest rate of 3.95%, maturing on August 1, 2021, and the second with a balance of $89,592 is payable through its wholly owned subsidiary, Zinnia Investments, LLC, bearing an interest rate of 3.50%, maturing on July 25, 2021. The total balance is due on the maturity date of each note. Under the terms of the acquisition of the Akebia property at 3711 South Western Avenue, the Company’s consideration for the acquisition included a promissory note (“Akebia Note”)
NOTE 8 – RELATED PARTY TRANSACTIONS
As of September 30, 2020, the Company’s majority shareholder, has provided advances totaling $492,500 (December 31, 2019: $492,500). These advances are unsecured and do not carry a contractual interest rate or repayment terms. In connection with these advances, the Company has recorded an imputed interest charge of $25,880 and which was credited to additional paid-in capital for the 9 months ended September 30, 2020. See additional related party transactions in Note 4, 5, 6 and 7.
As of September 30, 2020, the Company was advanced funds from an investor for operating expenses in the amount of $30,000, which is secured by the Lantana property and does not carry a contractual interest or repayment terms. The second advance of $119,612 is secured by the Wisconsin property bearing an interest of 6%.
NOTE 9 – ECONOMIC INJURY DISASTER GRANT
On April 21, 2020, the Company received from the SBA an economic injury disaster grant in the amount of $4,000. The amount of the grant was determined by the number of employees indicated on the EIDL application. Per the SBA, the advance does not have to be repaid if we meet the SBA loan conditions.
NOTE 10 – SERIES 1 CONVERTIBLE PREFERRED SHARES
On September 8, 2016, the Company authorized and designated 2,000,000 shares of Series 1 convertible preferred stock (the “Preferred Stock”).
Effective September 30, 2019, the 5% Voting, Cumulative Convertible Series 1 Preferred Stock date of conversion has been extended to the September 30, 2029.
The Preferred Stock has the following rights and privileges:
Voting – The holders of the Preferred Stock shall be entitled to the number of votes equal to the number of shares of common stock into which such shares of Preferred Stock could be converted.
Conversion – Each share of Preferred Stock, is convertible at the option of the holder, into shares of common stock, at the lesser of $0.50 per share or a ten percent (10%) discount to the average closing bid price of the common stock 5 days prior to the notice of conversion. The Preferred Stock is also subject to certain adjustments for dilution, if any, resulting from future stock issuances, including for any subsequent issuance of common stock at a price per share less than that paid by the holders of the Preferred Stock.
Dividends – The holders of the Preferred Stock in preference to the holders of common stock, are entitled to receive, if and when declared by the Board of Directors, dividends at the rate of 5% per annum, in kind, which shall accrue quarterly. Such dividends are cumulative. No such dividends have been declared to date.
Liquidation – In the event of any liquidation, dissolution, winding-up or sale or merger of the Company, whether voluntarily or involuntarily, each holder of Preferred Stock is entitled to receive, in preference to the holders of common stock, a per-share amount equal to the original issue price of $1.00 (as adjusted, as defined), plus all declared but unpaid dividends.
| # of Shares | Amount | Dividend in Arrears | Total | |||||||||||||
| Balance, December 31, 2019 | 500,400 | $ | 500,400 | $ | 67,167 | $ | 567,567 | |||||||||
| Dividends for prior year shares | - | - | 12,442 | 12,442 | ||||||||||||
| Balance, December 31, 2020 | 500,400 | 500,400 | 67,167 | 567,567 | ||||||||||||
| Dividends accrued | 18,697 | 18,697 | ||||||||||||||
| Balance, September 30, 2020 | 500,400 | $ | 500,400 | $ | 85,864 | $ | 586,264 | |||||||||
NOTE 11 – SUBSEQUENT EVENTS
On October 30, 2020, the Company acquired, through its wholly owned subsidiary Investments, LLC, its real property asset located at 3912 Hill Street, Los Angeles.
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Forward Looking Statements
This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this report include forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 (collectively, the “Reform Act”). The Reform Act provides a safe harbor for forward-looking statements to encourage companies to provide prospective information about themselves so long as they identify these statements as forward-looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. All statements, other than statements of historical fact that we make in this Quarterly Report on Form 10-Q are forward-looking. The words “anticipates,” “believes,” “expects,” “intends,” “will continue,” “estimates,” “plans,” “projects,” the negative of these terms and similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean the statement is not forward-looking.
Forward-looking statements involve risks, uncertainties or other factors which may cause actual results to differ materially from the future results, performance or achievements expressed or implied by the forward-looking statements. These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. Certain risks, uncertainties or other important factors are detailed in this Quarterly Report on Form 10-Q and may be detailed from time to time in other reports we file with the Securities and Exchange Commission, including on Forms 8-K and 10-K.
Examples of forward looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, our expectations regarding our ability to generate operating cash flows and to fund our working capital and capital expenditure requirements. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our future products, the timing and cost of capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Although we believe that the estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be incorrect. Important factors that could cause actual results to differ materially from the results and events anticipated or implied by such forward-looking statements include:
| ● | the risks of a start-up company; | |
| ● | management’s plans, objectives and budgets for its future operations and future economic performance; | |
| ● | capital budget and future capital requirements; | |
| ● | meeting future capital needs; | |
| ● | our dependence on management and the need to recruit additional personnel; | |
| ● | limited trading for our common stock, if listed or quoted | |
| ● | the level of future expenditures; | |
| ● | impact of recent accounting pronouncements; | |
| ● | the outcome of regulatory and litigation matters; and | |
| ● | the assumptions described in this report underlying such forward-looking statements. Actual results and developments may materially differ from those expressed in or implied by such statements due to a number of factors, including: | |
| ● | those described in the context of such forward-looking statements; | |
| ● | the political, social and economic climate in which we conduct operations; and | |
| ● | the risk factors described in other documents and reports filed with the Securities and Exchange Commission |
We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statement. We believe these forward-looking statements are reasonable. However, you should not place undue reliance on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to update publicly any of them in light of new information or future events.
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Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations
The following is management’s discussion and analysis of financial condition and results of operations and is provided as a supplement to the accompanying unaudited financial statements and notes to help provide an understanding of our financial condition, results of operations and cash flows during the periods included in the accompanying unaudited financial statements.
In this Quarterly Report on Form 10-Q, “Company,” “the Company,” “us,” and “our” refer to Hubilu Venture Corporation, a Delaware corporation, unless the context requires otherwise.
We intend the following discussion to assist in the understanding of our financial position and our results of operations for the three and nine months ended September 30, 2020 and 2019, respectively. You should refer to the Financial Statements and related Notes in conjunction with this discussion.
Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited financial statements for the three and nine months ended September 30, 2020 and 2019, respectively, together with notes thereto, which are included in this Quarterly Report on Form 10-Q.
Three months ended September 30, 2020 compared to the three months ended September 30, 2019
Revenues. Our revenues increased $137,295 to $257,588 for the three months ended September 30, 2020 compared to $120,293 for the comparable period in 2019. The increase is due to the acquisition of 9 new properties.
Operating expenses. In total, operating expenses increased $29,083 to $130,696 for the three months ended September 30, 2020 compared to $101,613 for the comparable period in 2019. The increase is primarily due to the Company adding additional properties.
General and administrative expenses increased $36,293 to $40,494 for the three months ended September 30, 2020 compared to $4,201 for the comparable period in 2019.
Consulting expenses decreased $7,633 to $0 for the three months ended September 30, 2020 compared to $7,633 for the comparable period in 2019.
Depreciation expense increased $10,273 to $24,179 for the three months ended September 30, 2020 compared to $13,906 for the comparable period in 2019.
Professional fees decreased $1,360 to $0 for the three months ended September 30, 2020 compared to $1,360 for the comparable period in 2019. The decrease is attributable to the timing of the invoices received by the Company’s professional service providers.
Property tax expense decreased $1,048 to $19,158 for the three months ended September 30, 2020 compared to $20,206 for the comparable period in 2019. The decrease is due to paying our taxes earlier in the first quarter.
Repairs and maintenance expense decreased $7,202 to $0 for the three months ended September 30, 2020 compared to $7,202 for the comparable period in 2019. The increase is due to an additional acquisition last quarter.
Transfer Agent and Filing Fees decreased $4,235 to $300 for the three months ended September 30, 2020 compared to $4,535 for the comparable period in 2019.
Utilities expense increased $9,719 to $15,539 for the three months ended September 30, 2019 compared to $5,820 for the comparable period in 2019. The increase is due to 7 additional property acquisitions.
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Promissory Note Interest expense increased $21,258 to $36,776 for the three months ended September 30, 2020 compared to $15,518 for the comparable period in 2019.
Mortgage Interest increased $38,656 to $77,771 for the three months ended September 30, 2020 compared to $39,115 for the comparable period in 2019. The increase is due to the acquisition of 9 new properties.
Net loss. Our net loss decreased $39,655 to $2,553 for the three months ended September 30, 2020 compared to $42,208 for the comparable period in 2019. The decrease is attributable to the revenue and expenses discussed above.
Nine months ended September 30, 2020 compared to the nine months ended September 30, 2019
Revenues. Our revenues increased to $629,889 for the nine months ended September 30, 2020 compared to $311,792 for the comparable period in 2019. The increase is due to the acquisition of 7 new properties.
Operating expenses. Operating expenses include general and administrative expenses, consulting expense, depreciation, professional fees, property taxes, rent, repairs and maintenance, transfer agent and filing fees, and utilities. In total, operating expenses decreased $70,091 to $412,473 for the nine months ended September 30, 2020 compared to $489,564 for the comparable period in 2019. The decrease is due to less consulting services and maintenance and repairs.
General and administrative expenses increased $104,264 to $140,809 for the nine months ended September 30, 2020 compared to $36,545 for the comparable period in 2019.
Consulting expenses decreased $254,500 to $0 for the nine months ended September 30, 2020 compared to $254,500 for the comparable period in 2019. The decrease is attributable to a lesser fair value attributable to common shares issued to consultants during the nine months ended September 30, 2019 compared to the same period in the prior fiscal year.
Depreciation expense increased $32,899 to $69,850 for the nine months ended September 30, 2020 compared to $36,951 for the comparable period in 2019.
Professional fees decreased $17,206 to $447 for the nine months ended September 30, 2020 compared to $17,653 for the comparable period in 2019.
Property tax expense increased $20,807 to $51,120 for the nine months ended September 30, 2020 compared to $30,313 for the comparable period in 2019. The increase is due to paying our taxes earlier in the first quarter.
Rent expense decreased $10,200 to $11,250 for the nine months ended September 30, 2020 compared to $21,450 for the comparable period in 2019. The decrease is due to downsizing our office space.
Repairs and maintenance expense decreased $9,742 to $2,122 for the nine months ended September 30, 2020 compared to $11,864 for the comparable period in 2019. The increase is due to a new acquisition last quarter.
Transfer Agent and Filing Fees decreased $3,814 to $1,401 for the nine months ended September 30, 2020 compared to $5,215 for the comparable period in 2019. The decrease is due to additional less monthly fees paid.
Utilities expense increased $22,598 to $36,071 for the nine months ended September 30, 2020 compared to $13,473 for the comparable period in 2019. The increase is due to additional property acquisitions.
Promissory Note Interest expense increased $50,072 to $89,285 for the nine months ended September 30, 2020 compared to $39,213 for the comparable period in 2019.
Mortgage Interest increased $100,194 to $215,474 for the nine months ended September 30, 2020 compared to $115,280 for the comparable period in 2019. The increase is due to the acquisition of 7 new properties.
Net loss. Our net loss decreased $224,110 to $131,920 for the nine months ended September 30, 2020 compared to $356,030 for the comparable period in 2019. The decrease is attributable to the revenue and expenses discussed above.
Liquidity and Capital Resources. For the nine months ended September 30, 2020, we did not borrow any money from our majority shareholder. We intend to seek additional financing for our working capital, in the form of equity or debt, to provide us with the necessary capital to accomplish our plan of operation. There can be no assurance that we will be successful in our efforts to raise additional capital.
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Our total assets are $8,892,385 as of September 30, 2020, consisting of $8,683,856 in net property assets, $182,579 in cash and $25,950 in other current assets.
Our total liabilities are $9,754,772 as of September 30, 2020.
We used $39,035 in operating activities for the nine months ended September 30, 2020 including $131,920 in net loss which was offset by non-cash charges of $69,850 and depreciation, $18,697 in dividends accrued in preferred shares, a net increase of $107 in accounts payable, imputed interest of $25,880, $64,034 received for security deposits, and $16,145 for other current assets.
We used $205,958 in investing activities for the nine months ended September 30, 2020, which was used for building additions and improvements.
We had $186,608 provided by financing activities for the nine months ended September 30, 2020.
The Company had no formal long-term lines or credit or other bank financing arrangements as of September 30, 2020.
The Company has no current plans for the purchase or sale of any plant or equipment.
The Company has no current plans to make any changes in the number of employees.
Impact of Inflation
The Company believes that inflation has had a negligible effect on operations over the past quarter.
Capital Expenditures
The Company spent $208,007 on building improvements during the nine months ended September 30, 2020.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
For information on the impact of recent accounting pronouncements on our business, see note 3 of the Notes to the Consolidated Financial Statements.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
We conducted an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934 as amended (the “Exchange Act”)). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the fiscal quarter covered by this quarterly report on Form 10-Q were not effective at a reasonable assurance level 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 Securities and Exchange Commission rules and forms.
(b) Changes in Internal Controls over Financial Reporting
During the three and nine month period ended September 30, 2020, there has been no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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None.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
None.
| (a) | The following exhibits are filed with this quarterly report on Form 10-Q or are incorporated herein by reference: |
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Pursuant to the requirements 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.
| HUBILU VENTURE CORPORATION | |
| April 21, 2021 | /s/ David Behrend |
| David Behrend | |
| Chairman and Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Accounting and Financial Officer) |
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