Hubilu Venture Corporation
11/19/2024 | Press release | Distributed by Public on 11/19/2024 16:26
Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2024
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 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 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☒ 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☒ | Smaller reporting company ☒ |
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 ☒
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 |
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of November 19, 2024 the number of shares outstanding of the issuer's sole class of common stock, $0.001par value per share, is 26,237,125.
TABLE OF CONTENTS
| PART I - FINANCIAL INFORMATION | 3 |
| Item 1. Financial Statements | 3 |
| Condensed Consolidated Balance Sheets as of September 30, 2024 (Unaudited) and December 31, 2023 | 3 |
| Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited) | 4 |
| Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited) | 5 |
| Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 (Unaudited) | 6 |
| Notes to Condensed Consolidated Financial Statements (Unaudited) | 7 |
| Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations | 19 |
| Item 3. Quantitative and Qualitative Disclosures about Market Risk | 25 |
| Item 4. Controls and Procedures | 25 |
| PART II - OTHER INFORMATION | 26 |
| Item 1. Legal Proceedings | 26 |
| Item 1A. Risk Factors | 26 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 26 |
| Item 3. Defaults Upon Senior Securities | 26 |
| Item 4. Mine Safety Disclosures | 26 |
| Item 5. Other Information | 26 |
| Item 6. Exhibits | 27 |
| SIGNATURES | 28 |
| 2 |
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
HUBILU VENTURE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| ASSETS | (Unaudited) | |||||||
| Current assets: | ||||||||
| Cash | $ | 58,437 | $ | 24,564 | ||||
| Accounts receivable | 2,773 | 2,100 | ||||||
| Prepaid expenses | - | 9,500 | ||||||
| Total current assets | 61,210 | 36,164 | ||||||
| Real estate: | ||||||||
| Land | 14,083,679 | 11,800,304 | ||||||
| Building and capital improvements | 7,020,885 | 5,458,695 | ||||||
| Property acquisition and financing | 401,171 | 296,463 | ||||||
| Less: accumulated depreciation | (921,507 | ) | (762,406 | ) | ||||
| Total real estate, net | 20,584,228 | 16,793,056 | ||||||
| Investments at cost | 64,940 | - | ||||||
| Security deposits | 25,470 | 6,600 | ||||||
| Total assets | $ | 20,735,848 | $ | 16,835,820 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 12,266 | $ | 21,250 | ||||
| Advanced rents received | 7,434 | 10,124 | ||||||
| Accrued interest | 88,539 | 39,402 | ||||||
| Security deposits payable | 321,350 | 300,383 | ||||||
| Due to related party, current maturities | 474,271 | 474,271 | ||||||
| Mortgages payable, current maturities | 2,125,765 | 768,961 | ||||||
| Dividends payable | 198,942 | 179,463 | ||||||
| Total current liabilities | 3,228,567 | 1,793,854 | ||||||
| Mortgages payable, related party | 599,594 | 599,594 | ||||||
| Mortgages payable | 17,500,502 | 15,104,744 | ||||||
| Convertible preferred stock payable | 520,400 | 520,400 | ||||||
| Total liabilities | 21,849,063 | 18,018,592 | ||||||
| Stockholders' equity (deficit): | ||||||||
| Common stock, $0.001par value, 100,000,000shares authorized, 26,237,125shares issued and outstanding | 26,237 |
26,237 |
||||||
| Additional paid-in capital | 977,666 | 911,894 | ||||||
| Accumulated deficit | (2,117,118 | ) | (2,120,903 | ) | ||||
| Total stockholders' equity (deficit) | (1,113,215 | ) | (1,182,772 | ) | ||||
| Total liabilities and stockholders' equity (deficit) | $ | 20,735,848 | $ | 16,835,820 |
See accompanying notes to financial statements.
| 3 |
HUBILU VENTURE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Rental revenue | $ | 616,393 | $ | 473,105 | $ | 1,666,452 | $ | 1,308,041 | ||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | 37,145 | 19,687 | 133,117 | 56,239 | ||||||||||||
| Salaries and benefits | 35,300 | 17,200 | 69,300 | 48,800 | ||||||||||||
| Utilities | 7,760 | 10,003 | 26,308 | 35,888 | ||||||||||||
| Professional fees | 35,867 | 13,476 | 110,167 | 68,032 | ||||||||||||
| Property taxes | 44,403 | 43,752 | 143,945 | 135,113 | ||||||||||||
| Repairs and maintenance | 8,822 | - | 114,610 | - | ||||||||||||
| Depreciation | 64,028 | 57,775 | 159,101 | 170,779 | ||||||||||||
| Total operating expenses | 233,325 | 161,893 | 756,548 | 514,851 | ||||||||||||
| Net operating income | 383,068 | 311,212 | 909,904 | 793,190 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Dividends expense | (6,541 | ) | (6,541 | ) | (19,479 | ) | (19,408 | ) | ||||||||
| Interest expense | (315,229 | ) | (242,631 | ) | (828,461 | ) | (713,830 | ) | ||||||||
| Gain (loss) on early extinguishment of debt | 5,224 | - | (58,179 | ) | - | |||||||||||
| Total other income (expense) | (316,546 | ) | (249,172 | ) | (906,119 | ) | (733,238 | ) | ||||||||
| Net income | $ | 66,522 | $ | 62,040 | $ | 3,785 | $ | 59,952 | ||||||||
| Weighted average common shares outstanding - basic | 26,237,125 | 26,237,125 | 26,237,125 | 26,237,125 | ||||||||||||
| Net income per common share - basic | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||
| Weighted average common shares outstanding - diluted | 35,874,162 | 35,874,162 | 35,874,162 | 35,874,162 | ||||||||||||
| Net income per common share - diluted | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 |
See accompanying notes to financial statements.
| 4 |
HUBILU VENTURE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)
| For the Three Months Ended September 30, 2024 | ||||||||||||||||||||
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid-In | Accumulated | Stockholders' | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance, June 30, 2024 | 26,237,125 | $ | 26,237 | $ | 956,726 | $ | (2,183,640 | ) | $ | (1,200,677 | ) | |||||||||
| Imputed interest | - | - | 20,940 | - | 20,940 | |||||||||||||||
| Net income | - | - | - | 66,522 | 66,522 | |||||||||||||||
| Balance, September 30, 2024 | 26,237,125 | $ | 26,237 | $ | 977,666 | $ | (2,117,118 | ) | $ | (1,113,215 | ) |
| For the Three Months Ended September 30, 2023 | ||||||||||||||||||||
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid-In | Accumulated | Stockholders' | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance, June 30, 2023 | 26,237,125 | $ | 26,237 | $ | 847,990 | $ | (1,847,659 | ) | $ | (973,432 | ) | |||||||||
| Imputed interest | - | - | 13,220 | - | 13,220 | |||||||||||||||
| Net income | - | - | - | 62,040 | 62,040 | |||||||||||||||
| Balance, September 30, 2023 | 26,237,125 | $ | 26,237 | $ | 861,210 | $ | (1,785,619 | ) | $ | (898,172 | ) |
| For the Nine Months Ended September 30, 2024 | ||||||||||||||||||||
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid-In | Accumulated | Stockholders' | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance, December 31, 2023 | 26,237,125 | $ | 26,237 | $ | 911,894 | $ | (2,120,903 | ) | $ | (1,182,772 | ) | |||||||||
| Imputed interest | - | - | 65,772 | - | 65,772 | |||||||||||||||
| Net income | - | - | - | 3,785 | 3,785 | |||||||||||||||
| Balance, September 30, 2024 | 26,237,125 | $ | 26,237 | $ | 977,666 | $ | (2,117,118 | ) | $ | (1,113,215 | ) |
| For the Nine Months Ended September 30, 2023 | ||||||||||||||||||||
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid-In | Accumulated | Stockholders' | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance, December 31, 2022 (Revised) | 26,237,125 | $ | 26,237 | $ | 821,981 | $ | (1,845,571 | ) | $ | (997,353 | ) | |||||||||
| Imputed interest | - | - | 39,229 | - | 39,229 | |||||||||||||||
| Net income | - | - | - | 59,952 | 59,952 | |||||||||||||||
| Balance, September 30, 2023 | 26,237,125 | $ | 26,237 | $ | 861,210 | $ | (1,785,619 | ) | $ | (898,172 | ) |
See accompanying notes to financial statements.
| 5 |
HUBILU VENTURE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | 3,785 | $ | 59,952 | ||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation | 159,101 | 170,779 | ||||||
| Imputed interest | 65,772 | 39,229 | ||||||
| Cumulative preferred stock dividends payable | 19,479 | 19,408 | ||||||
| Loss on early extinguishment of debt | 58,179 | - | ||||||
| Decrease (increase) in current assets: | ||||||||
| Accounts receivable | (673 | ) | - | |||||
| Prepaid expenses | 9,500 | - | ||||||
| Security deposits | (18,870 | ) | 183 | |||||
| Increase (decrease) in current liabilities: | ||||||||
| Accounts payable | (8,984 | ) | 10,987 | |||||
| Advanced rents received | (2,690 | ) | 5,087 | |||||
| Accrued expenses | 49,137 | 5,377 | ||||||
| Security deposits payable | 20,967 | 23,150 | ||||||
| Net cash provided by operating activities | 354,703 | 334,152 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of investments at cost | (64,940 | ) | - | |||||
| Purchase of property and equipment | (1,138,373 | ) | (328,553 | ) | ||||
| Net cash used in investing activities | (1,203,313 | ) | (328,553 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds received from mortgages payable | 1,007,185 | 102,100 | ||||||
| Repayments on mortgages payable | (124,702 | ) | (182,261 | ) | ||||
| Net cash provided by (used in) financing activities | 882,483 | (80,161 | ) | |||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | 33,873 | (74,562 | ) | |||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 24,564 | 92,068 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 58,437 | $ | 17,506 | ||||
| SUPPLEMENTAL INFORMATION: | ||||||||
| Interest paid | $ | 707,145 | $ | 669,224 | ||||
| Income taxes paid | $ | - | $ | - | ||||
| Non-cash investing and financing transactions: | ||||||||
| Acquisition of properties with debt financing | $ | 2,811,900 | $ | - |
See accompanying notes to financial statements.
| 6 |
HUBILU VENTURE CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Nature of Business and Significant Accounting Policies
Nature of Business
Hubilu Venture Corporation ("the Company," "we," "our" or "us") was incorporated under the laws of the state of Delawareon March 2, 2015and is a real estate consulting, asset management and business acquisition company, which specializes in acquiring student housing and corporate income properties and development/business opportunities located near the Los Angeles Metro/subway stations and within the Los Angeles area.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and the rules of the Securities and Exchange Commission (SEC). Intercompany accounts and transactions have been eliminated.
The unaudited condensed consolidated financial statements of the Company and the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the Condensed Consolidated Financial Statements have been included. Such adjustments are of a normal, recurring nature. The Condensed Consolidated Financial Statements, and the accompanying notes, are prepared in accordance with GAAP and do not contain certain information included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The interim Condensed Consolidated Financial Statements should be read in conjunction with that Annual Report on Form 10-K. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the following entities, all of which were under common control and ownership at September 30, 2024:
| State of | ||||
| Name of Entity | Incorporation | Relationship | ||
| Hubilu Venture Corporation(1) |
| Delaware | Parent | |||
| Akebia Investments, LLC(2) | Wyoming | Subsidiary | ||
| Boabab Investments, LLC(2) | Wyoming | Subsidiary | ||
| Elata Investments, LLC(2) | Wyoming | Subsidiary | ||
| Kapok Investments, LLC(2) | Wyoming | Subsidiary | ||
| Lantana Investments, LLC(2) | Wyoming | Subsidiary | ||
| Mopane Investments, LLC(2) | Wyoming | Subsidiary | ||
| Sunza Investments, LLC(2) | Wyoming | Subsidiary | ||
| Trilosa Investments, LLC(2) | Wyoming | Subsidiary | ||
| Zinnia Investments, LLC(2) | Wyoming | Subsidiary |
| (1) | Holding company in the form of a corporation. | |
| (2) | Wholly-owned subsidiary in the form of a limited liability corporation. |
Reclassifications
Certain reclassifications have been made to the prior years' financial statements to conform to current year presentation. These reclassifications had no effect on previously reported results of operations or retained earnings.
| 7 |
HUBILU VENTURE CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Segment Reporting
ASC Topic 280, "Segment Reporting," requires use of the "management approach" model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. The Company operates as a single segment and will evaluate additional segment disclosure requirements as it expands its operations.
Fair Value of Financial Instruments
The Company discloses the fair value of certain assets and liabilities in accordance with ASC 820 - Fair Value Measurement and Disclosures (ASC 820). Under ASC 820-10-05, the FASB establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company's financial statements as reflected herein. The carrying amounts of cash, accounts receivable, accounts payable and accrued expenses reported on the balance sheets are estimated by management to approximate fair value primarily due to the short-term nature of the instruments.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customer. Under ASC 606, the Company recognizes revenue from leases with its various tenants under operating leases in accordance with a five-step model in which the Company evaluates the performance obligations in an amount that reflects the consideration which the Company expects to be entitled to receive in exchange for those services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
The Company's sales are predominantly generated from leasing its properties to various tenants under operating leases. These sales contain a single performance obligation, and revenue is recognized on a straight-line basis using the effective interest method, based on the Company's borrowing rate, over the life of the leases. The Company records adjustments to revenue for incidentals and move out, or janitorial reimbursements in the same period that the related revenue is recorded.
| 8 |
Earnings Per Share
The following table shows the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2024 and 2023:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net income | $ | 66,522 | $ | 62,040 | $ | 3,785 | $ | 59,952 | ||||||||
| Denominator: | ||||||||||||||||
| Weighted-average basic shares outstanding | 26,237,125 | 26,237,125 | 26,237,125 | 26,237,125 | ||||||||||||
| Effect of dilutive securities | 9,637,037 | 9,637,037 | 9,637,037 | 9,637,037 | ||||||||||||
| Weighted-average diluted shares | 35,874,162 | 35,874,162 | 35,874,162 | 35,874,162 | ||||||||||||
| Basic earnings per share | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||
| Diluted earnings per share | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 |
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company's financial statements upon adoption.
| 9 |
HUBILU VENTURE CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 2 - Going Concern
As shown in the accompanying condensed consolidated financial statements as of September 30, 2024, our balance of cash on hand was $58,437, and we had negative working capital of $3,167,357and an accumulated deficit of $2,117,118. The Company expects to incur further losses in the development of its business, and may not be able to generate sufficient funds to sustain our operations for the next twelve months. Accordingly, we may need to raise additional cash to fund our operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. In the event revenues do not materialize at the expected rates, management would seek additional financing and would attempt to conserve cash by further reducing expenses. There can be no assurance that we will be successful in achieving these objectives.
The condensed consolidated financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company's ability to continue as a going concern. The condensed consolidated financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. Our ability to acquire new properties and increase revenues is largely dependent on our success in raising additional capital.
Note 3 - Significant Concentrations
The Company had certain customers whose revenue individually represented 10% or more of the Company's total net revenue, or whose accounts receivable balances individually represented 10% or more of the Company's total accounts receivable, as follows:
For the nine months ended September 30, 2024, one customer accounted for 64% and 65% of revenue for the nine months ended September 30, 2024 and 2023, respectively.
Note 4 - Fair Value of Financial Instruments
Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.
The Company has cash and debts that must be measured under the fair value standard. The Company's financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:
Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.
| 10 |
The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balances sheet as of September 30, 2024 and December 31, 2023:
| Fair Value Measurements at September 30, 2024 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Assets | ||||||||||||
| Cash | $ | 58,437 | $ | - | $ | - | ||||||
| Total assets | 58,437 | - | - | |||||||||
| Liabilities | ||||||||||||
| Due to related party | - | 474,271 | - | |||||||||
| Mortgages payable, related party | - | 599,594 | - | |||||||||
| Mortgages payable | - | 19,626,267 | - | |||||||||
| Dividends payable | - | 198,942 | - | |||||||||
| Convertible preferred stock payable | - | - | 520,400 | |||||||||
| Total liabilities | - | 20,899,074 | 520,400 | |||||||||
| Net asset (liabilities) | $ | 58,437 | $ | (20,899,074 | ) | $ | (520,400 | ) |
| Fair Value Measurements at December 31, 2023 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Assets | ||||||||||||
| Cash | $ | 24,564 | $ | - | $ | - | ||||||
| Total assets | 24,564 | - | - | |||||||||
| Liabilities | ||||||||||||
| Due to related party | - | 474,271 | - | |||||||||
| Mortgages payable, related party | - | 599,594 | - | |||||||||
| Mortgages payable | - | 15,873,705 | - | |||||||||
| Dividends payable | - | 179,463 | - | |||||||||
| Convertible preferred stock payable | - | - | 520,400 | |||||||||
| Total liabilities | - | 17,127,033 | 520,400 | |||||||||
| Net asset (liability) | $ | 24,564 | $ | (17,127,033 | ) | $ | (520,400 | ) |
There were no transfers of financial assets or liabilities between Level 1 and Level 2 inputs for the nine months ended September 30, 2024 or the year ended December 31, 2023.
| 11 |
HUBILU VENTURE CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 5 - Real Estate
Property Acquisitions
On August 30, 2024, the Company, through its subsidiary, Mopane Investments, LLC ("Mopane"), closed on the acquisition of the real property located at 1659 Roosevelt Avenue in Los Angeles, California for a purchase price of $760,000. The property was vacant at the time of purchase. The Mopane purchase is subject to two loans as follows: (1) $570,000first position note owing by Mopane to LendingOne, LLC ("LendingOne"), bearing interest at the rate of 6.90% per annum. Principal and interest payable in monthly installments of $3,278commenced on August 29, 2024 and continues until September 1, 2054, at which time the entire principal balance together with interest due thereon, shall become due and payable. (2) A $200,000second position note owed by Mopane to Belladonna Lily Investments, Inc. ("Belladonna"), bearing interest at the rate of 6.00% per annum. Interest only payable in monthly installments of $1,000are due the 1st day of each month beginning on September 1, 2024 and continuing until December 31, 2029, at which time the entire principal balance together with interest due thereon, shall become due and payable.
On August 20, 2024, the Company, through its subsidiary, Mopane, closed on the acquisition of the real property located at 802 E. 25th Street in Los Angeles, California, for a purchase price of $650,000. The property was vacant at the time of purchase. The Mopane purchase is subject to two loans, as follows: (1) $520,000first position note owing by Mopane to LendingOne, LLC ("LendingOne"), bearing interest on unpaid principal at the rate of 6.71% per annum. Principal and interest payable in monthly installments of $3,359, or more, commenced on August 15, 2024 and continues until July 1, 2054, at which time the entire principal balance together with interest due thereon, shall become due and payable, and a (2) $150,000second position note owed by Mopane to Belladonna Lily Investments, Inc. ("Belladonna"), bearing interest at the rate of 6.00% per annum. Interest only payable in monthly installments of $750are due on the 1st day of each month beginning on August 1, 2024 and continuing until December 31, 2029, at which time the entire principal balance together with interest due thereon, shall become due and payable.
On June 27, 2024, we completed an acquisition, through our subsidiary, Mopane, the real property located at 1457 W. 35th Street in Los Angeles, CA, for a purchase price of $710,000. The property was vacant at the time of purchase. Terms of the acquisition are as follows: (1) A first position note with payment on principal balance of $599,750issued by the Property Owner, Mopane, owing to lender, Churchill Funding I, LLC, bearing interest at 10% per annum, based on a 30/360 day year. The Company has an additional $25,000of credit available to them pursuant to a construction hold back. Monthly payments of interest only in the amount of $4,998commenced on August 1, 2024, and continue until July 1, 2025, at which time the entire principal balance together with interest due thereon, shall become due and payable. (2) A $130,000second position note owing by Mopane to Belladonna Lily Investments, Inc. ("Belladonna"), 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 $650or more on the 1st day of each month beginning on the 1st day of July 2024 and continuing until June 30, 2029, at which time the entire principal balance together with interest due thereon, shall become due and payable.
On June 27, 2024, we completed another acquisition, through our subsidiary Mopane, the real property located at 1460 North Eastern Avenue in Los Angeles, California, for a purchase price of $670,000. The property was partially vacant at time of purchase. Terms of the acquisition as follows: (1) A first position note with payment on principal balance of $578,000issued by the Property Owner, Mopane, owing to lender, LendingOne, LLC, bearing interest at 10% per annum, based on a 30/360 day year. The Company has an additional $25,000of credit available to them pursuant to a construction hold back. Interest only payments in monthly installments of $4,774, or more, commenced August 1, 2024, and continue until April 1, 2025, at which time the entire principal balance together with interest due thereon, shall become due and payable. (2) A $175,000second position note owing by Mopane to Belladonna, 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 $750or more on the 1st day of each month beginning on the 1st day of July 2024 and continuing until June 30, 2029, at which time the entire principal balance together with interest due thereon, shall become due and payable.
On May 8, 2024, we completed an acquisition, through our subsidiary, Mopane, the real property located at 4700 S. Budlong Avenue in Los Angeles, California for a purchase price of $649,000. The property was vacant at time of purchase. Terms of the acquisition as follows: (1) A first position note with payment on principal balance of $544,150issued by the Property Owner, Mopane, owing to lender, Center Street Lending VIII SPR, LLC, bearing interest at the rate of 10.99% per annum, based on a daily rate of 360 days per year. The Company has an additional $50,000of credit available to them pursuant to a construction hold back. The loan is payable in monthly interest only installments of $4,984or more starting on June 1, 2024, and continuing until April 15, 2025, at which time the entire principal balance together with interest due thereon, shall become due and payable. (2) A $175,000second position note owing by Mopane to Belladonna, 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 $875or more on the 1st day of each month beginning on the 1st day of May 2024 and continuing until March 31, 2029, at which time the entire principal balance together with interest due thereon, shall become due and payable.
| 12 |
HUBILU VENTURE CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Schedule of Real Estate
The Company's real estate investments consisted of the following at September 30, 2024 and December 31, 2023:
| September 30, 2024 | December 31, 2023 | |||||||
| Land | $ | 14,083,679 | $ | 11,800,304 | ||||
| Buildings and capital improvements | 7,020,885 | 5,458,695 | ||||||
| Property acquisition and financing | 401,171 | 296,463 | ||||||
| Real estate gross | 21,505,735 | 17,555,462 | ||||||
| Less: accumulated depreciation | (921,507 | ) | (762,406 | ) | ||||
| Total real estate, net | $ | 20,584,228 | $ | 16,793,056 |
Depreciation and amortization expense was $159,101and $170,779for the nine months ended September 30, 2024 and 2023, respectively.
Summary of Changes in Real Estate Investments
The change in the real estate investments is as follows for the nine months ended September 30, 2024 and the year ended December 31, 2023:
| Nine months ended | Year ended | |||||||
| September 30, 2024 | December 31, 2023 | |||||||
| Balance, prior period | $ | 17,555,462 | $ | 17,555,462 | ||||
| Acquisitions: | 3,439,000 | - | ||||||
| Real estate investment property, at cost | 20,994,462 | 17,555,462 | ||||||
| Current period capital improvements and property acquisition costs | 511,273 | - | ||||||
| Balance, end of period | $ | 21,505,735 | $ | 17,555,462 |
Note 6 - Investments at Cost
On July 2, 2024, the Company closed on a Short Form Equity Stake and Investment Agreement ("Investment Agreement") with Gula World, Gula Health Inc., and Gaya Ventures Inc, collectively referred to as (the "Gula Entities"), a conglomerate of spiritual and health-based product and services companies. The Investment Agreement required the Company to purchase Thirty-Two Thousand, Nine Hundred and Forty Dollars ($32,940) into the Gula Entities for a Four (4%) percent Non-Diluted Ownership Interest ("NDOI") in the Gula Entities. On August 27, 2024 and September 15, 2024, the Company also invested a total of $32,000, bringing the total investment to $64,940 at September 30, 2024. Also included in the purchase are any and all assets and axillary products and companies that are owned, planned or may arise from the Gula Entities' operations. In addition to the shares purchased, the Company received a total of 3,600,003 shares in the Gula Entities for services provided. Pursuant to the cumulative NDOI purchased, and shares received for services, the Company received the following interests in the Gula Entities (collectively referred to as, "Stock"), as of September 30, 2024:
Gaya Ventures Inc - 11,000,000 shares of Common Stock
Gula Heath Inc - 1,100,000 shares of Common Stock
Gula World - 1,100,000 shares of Common Stock
| 13 |
The Company did not receive voting rights for its NDOI. As amended on August 26, 2024 and November 19, 2024, the Company also has the right to purchase an additional NDOI in the Gula Entities over the following period as follows:
$16,000 invested October 1, 2024 = 2% NDOI
$16,000 invested November 1, 2024 = 2% NDOI
If any of the Gula Entities issue any Stock before December 1, 2024, to any party ("Third Party"), besides Hubilu, the Gula Entities will issue Stock to Hubilu of at least Hubilu's ownership interest at the time the Gula Entities issues the Stock to the Third Party. In the event Hubilu invests a total of $140,000in the Gula Entities by December 1, 2024, Hubilu will be issued Stock equal to 17% of the Stock issued to Third Party.
In addition, the Company will be entitled to 50% of all sales generated from a referral program called, "Gift a Friend" ("GAF"), or similar named link that generates customer contact information from the Gulaworld.com website to the Gula Entities as part of any membership sales and/or products sold by the Gula Entities to its customers, net of their shipping costs and/or cost of service ("Royalties").
Alternatively, the Company may elect to receive additional Stock on a Non-Dilutive basis as payment of Royalties in lieu of cash. This additional Stock received in the Gula Entities would include voting rights. Royalties are to be calculated on a quarterly basis.
Note 7 - Security Deposits
Security deposits included the following as of September 30, 2024 and December 31, 2023, respectively:
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Down payment on purchase of properties | $ | 18,870 | $ | - | ||||
| Security deposits on office lease | 6,600 | 6,600 | ||||||
| $ | 25,470 | $ | 6,600 |
Note 8 - Due to Related Party
As of September 30, 2024 and December 31, 2023, Jacaranda Investments, Inc., had provided total advances of $474,271. These advances are unsecured and do not carry a contractual interest rate or repayment terms. In connection with these advances, the Company has recorded imputed interest charges of $65,772and $39,229for the nine months ended September 30, 2024 and 2023, respectively, which was credited to additional paid-in capital.
Note 9 - Mortgages Payable, Related Party
The Company's mortgages payable to related parties are as follows:
| Principal balance | ||||||||||||||
| September 30, | December 31, | Stated | Maturity | |||||||||||
| 2024 | 2023 | Interest Rate | Date | |||||||||||
| 2909 South Catalina Street | $ | 599,594 | $ | 599,594 | 6.00 | % | April 20, 2029 |
On April 10, 2017, Esteban Coaloa loaned the Company $655,000via an All Inclusive Trust Deed ("AITD") as part of the purchase of 2909 S. Catalina Street, Los Angeles, California. This loan is considered a related party loan due to Esteban Coaloa's preferred stock holdings. If converted to common stock at the current share price, the conversion would result in Mr. Coaloa owning > 5% of the Company's outstanding common stock. This is an interest only promissory note with principal due on April 20, 2029. A total of $41,347of accrued interest was owed and outstanding on this loan at September 30, 2024.
The Company recognized $27,006and $26,908of interest expense on notes payable for the nine months ended September 30, 2024 and 2023, respectively.
| 14 |
HUBILU VENTURE CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 10 - Mortgages Payable
Mortgages payable consists of the following at September 30, 2024 and December 31, 2023, respectively:
| Principal Balance | ||||||||||||||
| September 30, | December 31, | Stated | Maturity | |||||||||||
| 2024 | 2023 | Interest Rate | Date | |||||||||||
| 3711 South Western Avenue | $ | 643,585 | $ | 643,585 | 5.00 | % | December 1, 2029 | |||||||
| 3910 Walton Avenue | 736,000 | 529,258 | 5.00 | % | August 1, 2049 | |||||||||
| 3910 Wisconsin Street | 670,712 | 679,788 | 5.225 | % | March 1, 2052 | |||||||||
| 1557 West 29 Street | 585,204 | 593,956 | 4.975 | % | June 1, 2051 | |||||||||
| 1267 West 38 Street | 588,236 | 596,195 | 4.95 | % | June 1, 2051 | |||||||||
| 4016 Dalton Avenue | 591,929 | 600,038 | 4.975 | % | June 1, 2051 | |||||||||
| 1618 West 38 Street | ||||||||||||||
| -First Note | 471,853 | 477,482 | 6.30 | % | January 1, 2050 | |||||||||
| -Second Note | 150,000 | 150,000 | 6.00 | % | December 10, 2025 | |||||||||
| 1981 Estrella Avenue | 871,843 | 883,908 | 5.225 | % | June 1, 2051 | |||||||||
| 717 West 42 Place | ||||||||||||||
| -First Note | 334,267 | 335,167 | 6.85 | % | November 1, 2048 | |||||||||
| -Second Note | 134,968 | 134,968 | 6.85 | % | April 30, 2029 | |||||||||
| 2115 Portland Street | 992,190 | 902,214 | 7.25 | % | July 1, 2054 | |||||||||
| 3906 Denker | ||||||||||||||
| -First Note | 390,400 | 395,159 | 6.00 | % | March 1, 2050 | |||||||||
| -Second Note | 185,000 | 185,000 | 6.85 | % | February 14, 2025 | |||||||||
| 3408 Budlong | ||||||||||||||
| -First Note | 589,840 | 598,527 | 4.875 | % | December 1, 2051 | |||||||||
| -Second Note | 120,000 | 120,000 | 5.00 | % | November 1, 2029 | |||||||||
| 3912 S. Hill Street | ||||||||||||||
| -First Note | 490,843 | 496,174 | 6.425 | % | December 1, 2050 | |||||||||
| -Second Note | 152,000 | 152,000 | 6.425 | % | November 1, 2026 | |||||||||
| 4009 Brighton Avenue | 698,951 | 708,367 | 4.875 | % | November 1, 2051 | |||||||||
| 3908 Denker Avenue | 612,431 | 620,547 | 4.975 | % | December 1, 2051 | |||||||||
| 4021 Halldale Avenue | 748,342 | 755,111 | 6.75 | % | October 1, 2052 | |||||||||
| 1284 W. 38th Street | ||||||||||||||
| -First Note | 628,227 | 637,267 | 4.625 | % | March 1, 2052 | |||||||||
| -Second Note | 188,000 | 188,000 | 5.25 | % | June 30, 2029 | |||||||||
| 4505 Orchard Avenue | 628,895 | 637,567 | 5.00 | % | March 1, 2052 | |||||||||
| 3777 Ruthelen Street | 689,569 | 699,061 | 4.625 | % | March 1, 2052 | |||||||||
| 3791 S. Normandie Avenue | ||||||||||||||
| -First Note | 599,413 | 606,567 | 5.225 | % | April 1, 2052 | |||||||||
| -Second Note | 150,000 | 150,000 | 5.00 | % | March 1, 2029 | |||||||||
| 2029 W. 41st Place | 820,000 | 820,000 | 6.00 | % | December 31, 2029 | |||||||||
| 4517 Orchard Avenue | ||||||||||||||
| -First Note | 466,030 | 471,632 | 5.225 | % | April 1, 2052 | |||||||||
| -Second Note | 158,000 | 158,000 | 5.00 | % | March 1, 2029 | |||||||||
| 1733 W. 37th Place | ||||||||||||||
| -First Note | 592,639 | 573,167 | 7.225 | % | April 1, 2054 | |||||||||
| -Second Note | 100,000 | 100,000 | 6.00 | % | May 1, 2029 | |||||||||
| 4700 S. Budlong Ave | ||||||||||||||
| -First Note | 544,150 | - | 10.99 | % | April 15, 2025 | |||||||||
| -Second Note | 175,000 | - | 6.00 | % | March 31, 2029 | |||||||||
| 1457 W. 35th Street | ||||||||||||||
| -First Note | 599,750 | - | 10 | % | July 1, 2025 | |||||||||
| -Second Note | 130,000 | - | 6.00 | % | June 30, 2029 | |||||||||
| 1460 N. Eastern Avenue | ||||||||||||||
| -First Note | 578,000 | - | 9.50 | % | April 1, 2025 | |||||||||
| -Second Note | 175,000 | - | 6.00 | % | June 30, 2029 | |||||||||
| 802 E. 25th Street | ||||||||||||||
| -First Note | 520,000 | - | 6.71 | % | July 1, 2029 | |||||||||
| -Second Note | 150,000 | - | 6.00 | % | December 31, 2029 | |||||||||
| 1659 Roosevelt Avenue | ||||||||||||||
| -First Note | 570,000 | - | 6.90 | % | September 1, 2054 | |||||||||
| -Second Note | 200,000 | - | 6.00 | % | December 31, 2029 | |||||||||
| Hubilu General Loan | 205,000 | 275,000 | 0.00 | % | On Demand | |||||||||
| Total mortgages payable | $ | 19,626,267 | $ | 15,873,705 | ||||||||||
| Less: current maturities | 2,125,765 | 768,961 | ||||||||||||
| Mortgages payable, long-term portion | $ | 17,500,502 | $ | 15,104,744 |
| 15 |
In addition to the mortgages incurred on current period property acquisitions disclosed in Note 5, the Company refinanced the following debt:
On August 20, 2024, the first note for 3910 Walton Avenue was refinanced for $736,000with Investor Mortgage Finance, LLC, bearing interest at the rate of 6.650% per annum. Principal and interest payable in monthly installments of $4,724.86commenced on October 1, 2024, and continue until September 1, 2054, at which time the entire principal balance together with interest due thereon, shall become due and payable.
On June 14, 2024, the first and second note for 2115 Portland Street was refinanced for $993,750with Ameritrust Mortgage, Corp., bearing interest on unpaid principal at the rate of 7.25% per annum. Principal and interest payable in monthly installments of $6,779or more commenced on August 1, 2024, and continue until July 1, 2054, at which time the entire principal balance together with interest due thereon, shall become due and payable.
On March 16, 2024, the first note for 1733 W. 37th Place was refinanced for $595,000with Investor Mortgage Finance, LLC, bearing interest at the rate of 7.225% per annum. Principal and interest payable in monthly installments of $4,049commenced on May 1, 2024, and continue until April 1, 2054, at which time the entire principal balance together with interest due thereon, shall become due and payable.
The Company realized a $58,179loss on early extinguishment of debt related to refinancing notes payable during the nine months ended September 30, 2024.
The Company recognized $735,683and $647,693of interest expense on notes payable for the nine months ended September 30, 2024 and 2023, respectively.
| 16 |
HUBILU VENTURE CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 11 - Convertible Preferred Stock Payable
The Company has authorized 10,000,000shares of preferred stock, and designated 100,000and 2,000,000shares of 5% voting, cumulative convertible Series A ("Series A") and Series 1 ("Series 1") preferred stock (collectively, "Preferred Stock"), respectively.
The Series A matures on September 30, 2030, and Series 1 matures on 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 Series A preferred stock, is convertible at the option of the holder, into shares of common stock, equal to three hundred thirty-three and 33/100 (333 1/3) shares of common stock, calculated by dividing the number of Series A preferred shares by $0.003.The Series A 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.
Each share of Series 1 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 Series 1 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 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.
The predominant settlement obligation of the convertible preferred stock was considered to be the issuance of a variable number of shares to settle a fixed monetary amount. Thus, these shares are scoped into the guidance of ASC 480-10 and are accounted for as a liability.
Noshares of Series A preferred stock have been issued to date. Outstanding Series 1 preferred stock is as follows:
| Shares | Amount | Dividend in Arrears | Total | |||||||||||||
| Balance, December 31, 2023 | 520,400 | $ | 520,400 | $ | 179,463 | $ | 699,863 | |||||||||
| Dividends accrued | - | - | 19,479 | 19,479 | ||||||||||||
| Balance, September 30, 2024 | 520,400 | $ | 520,400 | $ | 198,942 | $ | 719,342 |
| 17 |
HUBILU VENTURE CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 12 - Commitments and Contingencies
Legal Matters
From time to time, the Company may be a party to various legal matters, threatened claims, or proceedings in the normal course of business. Legal fees and other costs associated with such actions are expensed as incurred. The Company assesses, in conjunction with its legal counsel, the need to record a liability for litigation and contingencies. Legal accruals are recorded when and if it is determined that a loss related to a certain matter is both probable and reasonably estimable.
Note 13 - Changes in Stockholders' Equity (Deficit)
Common Stock
The Company has authorized 100,000,000shares of $0.001par value common stock. As of September 30, 2024, a total of 26,237,125shares of common stock had been issued. Each holder of common stock is entitled to one vote for each share of common stock held.
Noshares of common stock were issued during the nine months ended, September 30, 2024.
Note 14 - Income Taxes
The Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences.
For the nine months ended September 30, 2024, and the year ended December 31, 2023, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At September 30, 2024, the Company had approximately $1,442,000of federal net operating losses. The net operating loss carry forwards, if not utilized, will begin to expire in 2025.
Based on the available objective evidence, including the Company's history of its loss, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at September 30, 2024 and December 31, 2023, respectively.
In accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.
Note 15 - Subsequent Events
Property Acquisitions
On October 23, 2024, the Company, through its subsidiary, Mopane, closed on the purchase of real property located at 1100 W. 48th Street in Los Angeles, California for $650,000. The property was acquired with a $487,500mortgage, and cash payments of $162,500.
| 18 |
Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations
You should read the following discussion of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. In addition to historical condensed financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.
Overview
We were incorporated under the laws of the state of Delaware on March 2, 2015, and are a real estate consulting, asset management and business acquisition company, that specializes in acquiring student housing and corporate income properties and development/business opportunities located near the Los Angeles Metro/subway stations and within the Los Angeles area.
Due to high demand for houses from students, non- profit, and for-profit corporate tenants around the USC Campus and neighboring Metro/subway stations, we have focused on acquiring multiple houses, remodeling and renting out. Rents have increased dramatically for houses in our target areas, allowing us to target larger and higher priced houses, while factoring in current interest rates.
With multiple properties within a small radius, we're able to take advantage of economies of scale and benefit from property management efficiencies. Our focus is to continue acquiring houses and expand rental operations.
We purchased two new properties during the third quarter of 2024, and entered into agreements to acquire two additional properties during the fourth quarter of 2024. All properties have been purchased in conjunction with various debt financing arrangements.
Going Concern Uncertainty
As of September 30, 2024, our balance of cash on hand was $58,437, and we had negative working capital of $3,167,357 and an accumulated deficit of $2,117,118. We expect to incur further losses in the development of its business; therefore, we may not have sufficient funds to sustain our operations for the next twelve months and we may need to raise additional cash to fund our operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. In the event revenues do not materialize at the expected rates, management would seek additional financing and would attempt to conserve cash by further reducing expenses. There can be no assurance that we will be successful in achieving these objectives.
The condensed consolidated financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company's ability to continue as a going concern. The condensed consolidated financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. Our ability to acquire new properties and increase revenues is largely dependent on our success in raising additional capital.
| 19 |
Results of Operations for the Three Months Ended September 30, 2024 and 2023
The following table summarizes selected items from the statement of operations for the three months ended September 30, 2024 and 2023, respectively.
| Three Months Ended | ||||||||||||
| September 30, | Increase / | |||||||||||
| 2024 | 2023 | (Decrease) | ||||||||||
| Rental revenue | $ | 616,393 | $ | 473,105 | $ | 143,288 | ||||||
| Operating expenses: | ||||||||||||
| General and administrative | 37,145 | 19,687 | 17,458 | |||||||||
| Salaries and benefits | 35,300 | 17,200 | 18,100 | |||||||||
| Utilities | 7,760 | 10,003 | (2,243 | ) | ||||||||
| Professional fees | 35,867 | 13,476 | 22,391 | |||||||||
| Property taxes | 44,403 | 43,752 | 651 | |||||||||
| Repairs and maintenance | 8,822 | - | 8,822 | |||||||||
| Depreciation | 64,028 | 57,775 | 6,253 | |||||||||
| Total operating expenses | 233,325 | 161,893 | 71,432 | |||||||||
| Net operating income | 383,068 | 311,212 | 71,856 | |||||||||
| Other income (expense) | (316,546 | ) | (249,172 | ) | 67,374 | |||||||
| Net income | $ | 66,522 | $ | 62,040 | $ | 4,482 |
Revenues
Our total revenues increased to $616,393 for the three months ended September 30, 2024, compared to $473,105 for the three months ended September 30, 2023, an increase of $143,288, or 30%. The increase is due primarily to increased rental rates, occupancies and additional rental properties during the current period.
General and Administrative
General and administrative expenses for the three months ended September 30, 2024 was $37,145, compared to $19,687 for the three months ended September 30, 2023, an increase of $17,458, or 89%. General and administrative expenses increased primarily due to increased property management costs incurred during the current period.
Salaries and Benefits
Salaries and benefits expenses for the three months ended September 30, 2024 was $35,300, compared to $17,200 for the three months ended September 30, 2023, an increase of $18,100, or 105%. Salaries and benefits increased primarily due to increased compensation paid to our vice president during the current period.
Utilities
Utilities expense for the three months ended September 30, 2024 was $7,760, compared to $10,003 for the three months ended September 30, 2023, a decrease of $2,243, or 22%. Utilities expense decreased due to additional tenants that reimbursed the Company for their share of utilities during the current period.
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Professional Fees
Professional fees for the three months ended September 30, 2024 was $35,867, compared to $13,476 for the three months ended September 30, 2023, an increase of $22,391, or 166 %. Professional fees consisted of legal, audit and accounting fees, which increased primarily due to increased compliance costs related to our public filings with the SEC, and legal costs related to the acquisition of properties acquired during the current period.
Property Taxes
Property tax expense for the three months ended September 30, 2024 was $44,403, compared to $43,752 for the three months ended September 30, 2023, an increase of $651, or 1%.
Repairs and Maintenance
Repairs and maintenance expense for the three months ended September 30, 2024 was $8,822, compared to $-0- for the three months ended September 30, 2023, an increase of $8,822. Repairs and maintenance expense increased due to greater repairs on certain properties during the current period.
Depreciation
Depreciation expense for the three months ended September 30, 2024 was $64,028, compared to $57,775 for the three months ended September 30, 2023, an increase of $6,253, or 11%. Depreciation expense decreased during the current period due to recent property acquisitions now being depreciated.
Other Income (Expense)
Other expense for the three months ended September 30, 2024 was $316,546, compared to $249,172 for the three months ended September 30, 2023, an increase of $67,374, or 27%. During the three months ended September 30, 2024, other expense consisted of $6,541 of dividends expense, $315,229 of interest expense, and a $5,224 gain on early extinguishment of debt related to the refinancing of one of our mortgages. During the three months ended September 30, 2023, other expense consisted of $6,541 of dividends expense and $242,631 of interest expense.
Net Income
Net income for the three months ended September 30, 2024 was $66,522, compared to net income of $62,040 for the three months ended September 30, 2023, an increase of $4,482, or 7%. The increased net income was primarily due to increased rental revenues, as partially offset by increased operating expenses and interest expense during the current period.
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Results of Operations for the Nine Months Ended September 30, 2024 and 2023
The following table summarizes selected items from the statement of operations for the nine months ended September 30, 2024 and 2023, respectively.
| Nine Months Ended | ||||||||||||
| September 30, | Increase/ | |||||||||||
| 2024 | 2023 | (Decrease) | ||||||||||
| Rental revenue | $ | 1,666,452 | $ | 1,308,041 | $ | 358,411 | ||||||
| Operating expenses: | ||||||||||||
| General and administrative | 133,117 | 56,239 | 76,878 | |||||||||
| Salaries and benefits | 69,300 | 48,800 | 20,500 | |||||||||
| Utilities | 26,308 | 35,888 | (9,580 | ) | ||||||||
| Professional fees | 110,167 | 68,032 | 42,135 | |||||||||
| Property taxes | 143,945 | 135,113 | 8,832 | |||||||||
| Repairs and maintenance | 114,610 | - | 114,610 | |||||||||
| Depreciation | 159,101 | 170,779 | (11,678 | ) | ||||||||
| Total operating expenses | 756,548 | 514,851 | 241,697 | |||||||||
| Net operating income | 909,904 | 793,190 | 116,714 | |||||||||
| Other income (expense) | (906,119 | ) | (733,238 | ) | 172,881 | |||||||
| Net income | $ | 3,785 | $ | 59,952 | $ | (56,167 | ) |
Revenues
Our total revenues increased to $1,666,452 for the nine months ended September 30, 2024, compared to $1,308,041 for the nine months ended September 30, 2023, an increase of $358,411, or 27%. The increase is due primarily to increased rental rates, occupancies and additional rental properties during the current period.
General and Administrative
General and administrative expenses for the nine months ended September 30, 2024 was $133,117, compared to $56,239 for the nine months ended September 30, 2023, an increase of $76,938, or 137%. General and administrative expenses increased primarily due to increased property management costs incurred during the current period.
Salaries and Benefits
Salaries and benefits expenses for the nine months ended September 30, 2024 was $69,300, compared to $48,800 for the nine months ended September 30, 2023, an increase of $20,500, or 42%. Salaries and benefits increased primarily due to increased compensation paid to our vice president during the current period.
Utilities
Utilities expense for the nine months ended September 30, 2024 was $26,308, compared to $35,888 for the nine months ended September 30, 2023, a decrease of $9,580, or 27%. Utilities expense decreased due to additional tenants that reimbursed the Company for their share of utilities.
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Professional Fees
Professional fees for the nine months ended September 30, 2024 was $110,167, compared to $68,032 for the nine months ended September 30, 2023, an increase of $42,135 or 62%. Professional fees consisted of legal, audit and accounting fees, which increased primarily due to increased audit work, compliance costs related to our public filings with the SEC, and legal costs related to the acquisition of properties acquired during the current period.
Property Taxes
Property tax expense for the nine months ended September 30, 2024 was $143,945, compared to $135,113 for the nine months ended September 30, 2023, an increase of $8,832, or 7%. The increase is primarily due to the acquisition of additional properties during the current period.
Repairs and Maintenance
Repairs and maintenance expense for the nine months ended September 30, 2024 was $114,610, compared to $-0- for the nine months ended September 30, 2023, an increase of $114,610. Repairs and maintenance expense increased due to greater repairs on certain properties during the current period.
Depreciation
Depreciation expense for the nine months ended September 30, 2024 was $159,101, compared to $170,779 for the nine months ended September 30, 2023, a decrease of $11,678, or 7%. Depreciation expense decreased during the current period due to some assets reaching the end of their useful lives.
Other Income (Expense)
Other expense for the nine months ended September 30, 2024 was $906,119, compared to $733,238 for the nine months ended September 30, 2023, an increase of $172,881, or 24%. During the nine months ended September 30, 2024, other expense consisted of $19,479 of dividends expense, $828,461 of interest expense, and a $58,179 loss on early extinguishment of debt related to the refinancing of one of our mortgages. During the nine months ended September 30, 2023, other expense consisted of $19,408 of dividends expense and $713,830 of interest expense.
Net Income
Net income for the nine months ended September 30, 2024 was $3,785, compared to net income of $59,952 for the nine months ended September 30, 2023, a decrease of $56,167, or 94%. The decreased net income was primarily due to increased operating expenses and interest expense, as partially offset by increased revenues during the current period.
Liquidity and Capital Resources
The following table summarizes our total current assets, liabilities and working capital as of September 30, 2024 and December 31, 2023.
| September 30, 2024 | December 31, 2023 | |||||||
| Current Assets | $ | 61,210 | $ | 36,164 | ||||
| Current Liabilities | $ | 3,228,567 | $ | 1,793,854 | ||||
| Working Capital Deficit | $ | (3,167,357 | ) | $ | (1,757,690 | ) |
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As of September 30, 2024, we had negative working capital of $3,167,357. We have incurred net losses since our inception and we anticipate net losses and negative operating cash flows for the near future, and we may not be profitable or realize growth in the value of our assets. To date, our primary sources of capital have been cash generated from rental income and debt financing. As of September 30, 2024, we had cash of $58,437, total liabilities of $21,849,063, and an accumulated deficit of $2,117,118. As of December 31, 2023, we had cash of $24,564, total liabilities of $18,018,592, and an accumulated deficit of $2,120,903.
Cash Flow
Comparison of the Nine Months Ended September 30, 2024 and the Nine Months Ended September 30, 2023
The following table sets forth the primary sources and uses of cash for the periods presented below:
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash provided by operating activities | $ | 354,703 | $ | 334,152 | ||||
| Net cash used in investing activities | (1,203,313 | ) | (328,553 | ) | ||||
| Net cash provided by (used in) financing activities | 882,483 | (80,161 | ) | |||||
| Net change in cash | $ | 33,873 | $ | (74,562 | ) |
Net Cash Provided by Operating Activities
Net cash provided by operating activities was $354,703 for the nine months ended September 30, 2024, compared to $334,152 for the nine months ended September 30, 2023, an increase of $20,551, or 6%. The increase was primarily due to the loss on early extinguishment of debt, as partially offset by the decreased net income in the current period.
Net Cash Used in Investing Activities
Net cash used in investing activities was $1,203,313 for the nine months ended September 30, 2024, compared to $328,553 for the nine months ended September 30, 2023, an increase of $874,760, or 266%. This increase was primarily attributable to the purchase of two properties and investments in the current period.
Net Cash Provided by (Used in) Financing Activities
Net cash provided by financing activities was $882,483, for the nine months ended September 30, 2024, compared to net cash used in financing activities of $80,161 for the nine months ended September 30, 2023, an increase of $962,644, or 1,201%. Our increased cash provided by financing activities was primarily due to increased proceeds received and decreased repayments on debt financing received in the current period.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our financial results are affected by the selection and application of accounting policies and methods. In the nine-month period ended September 30, 2024 there were no changes to the application of critical accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
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CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements in this report, other than statements of historical fact, are "forward-looking statements" for purposes of these provisions, including any projections of earnings, revenues or other financial items, any statements of the plans and objectives of our management for future operations, any statements concerning proposed new products or services, any statements regarding the integration, development or commercialization of the business or any assets acquired from other parties, any statements regarding future economic conditions or performance, and any statements of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as "may," "will," "expects," "plans," "anticipates," "intends," "seeks," "believes," "estimates," "potential," "forecasts," "continue," or other forms of these words or similar words or expressions, or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct, and actual results will likely differ, and could differ materially, from those projected or assumed in the forward-looking statements. Investors are cautioned not to unduly rely on any such forward-looking statements.
All subsequent forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Our actual results will likely differ, and may differ materially, from anticipated results. Financial estimates are subject to change and are not intended to be relied upon as predictions of future operating results. All forward-looking statements included in this report are made as of the date hereof and are based on information available to us as of such date. We assume no obligation to update any forward-looking statement. If we do update or correct one or more forward-looking statements, investors and others should not conclude that we will make additional updates or corrections.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is not required to provide the information required by this Item as it is a "smaller reporting company," as defined in Rule 12b-2 of the Exchange Act.
Item 4. Controls and Procedures
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, who are one in the same, 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, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective.
Changes in Internal Control Over Financial Reporting
During the nine-month period ended September 30, 2024, 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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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We may become, from time to time, involved in routine litigation or subject to disputes or claims related to our business activities. We are not currently party to any pending legal proceedings that we believe would, individually or in the aggregate, have a material adverse effect on our financial condition, cash flows or results of operations.
Item 1A. Risk Factors
The Company is not required to provide the information required by this Item as it is a "smaller reporting company," as defined in Rule 12b-2 of the Exchange Act.
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.
Item 5. Other Information
None.
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Item 6. Exhibits
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SIGNATURES
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 | |
| November 19, 2024 | /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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