UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period
ended:
or
For the transition period from ____________ to _____________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
| (Registrant’s telephone number, including area code) |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act: None
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.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for comply 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
As of November 11, 2022, there were
Manufactured Housing Properties Inc.
Quarterly Report on Form 10-Q
Period Ended September 30, 2022
TABLE OF CONTENTS
| PART I FINANCIAL INFORMATION |
||
| Item 1. | Financial Statements. | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 2 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | 17 |
| Item 4. | Controls and Procedures. | 17 |
| PART II FINANCIAL INFORMATION |
||
| Item 1. | Legal Proceedings | 18 |
| Item 1A. | Risk Factors | 18 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 18 |
| Item 3. | Defaults Upon Senior Securities | 18 |
| Item 4. | Mine Safety Disclosures | 18 |
| Item 5. | Other Information | 18 |
| Item 6. | Exhibits | 19 |
i
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
MANUFACTURED HOUSING PROPERTIES INC.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1
MANUFACTURED HOUSING PROPERTIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021
| September 30, 2022 | December 31, 2021 | |||||||
| Assets | (unaudited) | |||||||
| Investment Property | ||||||||
| Land | $ | $ | ||||||
| Site and Land Improvements | ||||||||
| Buildings and Improvements | ||||||||
| Construction in Process | ||||||||
| Total Investment Property | ||||||||
| Accumulated Depreciation | ( | ) | ( | ) | ||||
| Net Investment Property | ||||||||
| Cash and Cash Equivalents | ||||||||
| Restricted Cash | ||||||||
| Accounts Receivable | ||||||||
| Other Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| Liabilities | ||||||||
| Accounts Payable | $ | $ | ||||||
| Notes Payable, net of $ | ||||||||
| Lines of Credit – Variable Interest Entities, net of $ | ||||||||
| Lines of Credit – Related Party | ||||||||
| Note Payable – Related Party | - | |||||||
| Accrued Liabilities including amounts due to related parties of $ | ||||||||
| Tenant Security Deposits | ||||||||
| Series C Redeemable Preferred Stock, par value $ | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (See note 6) | ||||||||
| Redeemable Preferred Stock – subject to redemption | ||||||||
| Series A Cumulative Redeemable Convertible Preferred Stock, par value $ | ||||||||
| Series B Cumulative Redeemable Preferred Stock, par value $ | ||||||||
| Deficit | ||||||||
| Common Stock, par value $ | ||||||||
| Additional Paid in Capital | ( | ) | ( | ) | ||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Total Manufactured Housing Properties Inc. Deficit | ( | ) | ( | ) | ||||
| Non-controlling interest in Variable Interest Entities | ( | ) | ( | ) | ||||
| Total Deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND DEFICIT | $ | $ | ||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
F-1
MANUFACTURED HOUSING PROPERTIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | ||||||||||||||||
| Rental and related income | $ | $ | $ | $ | ||||||||||||
| Gross revenues from home sales | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Community operating expenses | ||||||||||||||||
| Repair and maintenance | ||||||||||||||||
| Real estate taxes | ||||||||||||||||
| Utilities | ||||||||||||||||
| Insurance | ||||||||||||||||
| General and administrative expense | ||||||||||||||||
| Total community operating expenses | ||||||||||||||||
| Corporate payroll and overhead | ||||||||||||||||
| Depreciation expense | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Refinancing costs | ||||||||||||||||
| Cost of home sales | ||||||||||||||||
| Total expenses | ||||||||||||||||
| Other income | - | |||||||||||||||
| Net loss before provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss attributable to non-controlling interest variable interest entities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) attributable to Manufactured Housing Properties, Inc. | ( | ) | ( | ) | ( | ) | ||||||||||
| Preferred stock dividends and put option value accretion | ||||||||||||||||
| Series A preferred dividends | ||||||||||||||||
| Series A preferred put option value accretion | ||||||||||||||||
| Series B preferred dividends | ||||||||||||||||
| Series B preferred put option value accretion | ||||||||||||||||
| Total preferred stock dividends and put option value accretion | ||||||||||||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
F-2
MANUFACTURED HOUSING PROPERTIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
| COMMON STOCK | ADDITIONAL PAID IN | ACCUMULATED | TOTAL MANUFACTURED HOUSING PROPERTIES | NON CONTROLLING | ||||||||||||||||||||||||
| SHARES | PAR VALUE | CAPITAL | DEFICIT | INC. | INTEREST | DEFICIT | ||||||||||||||||||||||
| Balance at January 1, 2021 | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| Stock option expense | - | |||||||||||||||||||||||||||
| Preferred shares Series A dividends | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series A put option value accretion | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series B dividends | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series B put option value accretion | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Common Stock issuance to preferred share holders | ||||||||||||||||||||||||||||
| Contributions to VIE | - | |||||||||||||||||||||||||||
| Distributions from VIE | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Balance at March 31, 2021 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||
| Stock option expense | - | |||||||||||||||||||||||||||
| Preferred shares Series A dividends | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series A put option value accretion | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series B dividends | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series B put option value accretion | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Distributions from VIE | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Net Income (Loss) | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||
| Stock option expense | - | |||||||||||||||||||||||||||
| Preferred shares Series A put option value accretion | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series A dividends | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series B put option value accretion | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series B dividends | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Distributions | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Net Income (Loss) | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at September 30, 2021 | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Balance at January 1, 2022 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $( | $ | ( | ) | ||||||||||||||
| Stock option expense | - | |||||||||||||||||||||||||||
| Preferred shares Series A dividends | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series A put option value accretion | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series B dividends | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series B put option value accretion | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Distributions from VIE | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Net Loss | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||
| Stock option expense | - | |||||||||||||||||||||||||||
| Common Stock issued through stock options | ||||||||||||||||||||||||||||
| Preferred shares Series A dividends | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series A put option value accretion | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series B dividends | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series B put option value accretion | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Distributions from VIE | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Net Income (Loss) | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||
| Stock option expense | - | |||||||||||||||||||||||||||
| Common Stock issued through stock options | ||||||||||||||||||||||||||||
| Preferred shares Series A dividends | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series A put option value accretion | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series B dividends | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series B put option value accretion | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Distributions from VIE | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Intercompany Transfer of Homes– Deemed Dividend | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Joint Ventures Adjustment | - | ( | ) | ( | ||||||||||||||||||||||||
| Net Income (Loss) | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
F-3
MANUFACTURED HOUSING PROPERTIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
| September 30, 2022 | September 30, 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Stock option expense | ||||||||
| Amortization of debt discount | ||||||||
| Write off debt issuance costs recorded as debt discount | ||||||||
| Write off acquisition and development pursuit costs | ||||||||
| Prepayment penalty upon debt extinguishment | - | |||||||
| Gain on debt extinguishment | ( | ) | ||||||
| Loss on sales of homes | ||||||||
| Depreciation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Other assets | ||||||||
| Accounts payable | ||||||||
| Tenant security deposits | ||||||||
| Accrued liabilities | ( | ) | ||||||
| Net Cash Provided by (Used in) Operating Activities | ( | ) | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Capital improvements | ( | ) | ( | ) | ||||
| Proceeds from sales of homes | ||||||||
| Purchases of investment properties | ( | ) | ( | ) | ||||
| Payment of pursuit costs | ( | ) | ||||||
| Payment of acquisition costs | ( | ) | ( | ) | ||||
| Net Cash Used in Investing Activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from related party debt | ||||||||
| Repayment of related party debt | ( | ) | ||||||
| Proceeds from refinanced notes payable and lines of credit | ||||||||
| Repayment of notes payable upon refinance | ( | ) | ||||||
| Repayment of lines of credit upon refinance - VIEs | ( | ) | ||||||
| Repayment of notes payable | ( | ) | ( | ) | ||||
| Repayment of lines of credit - VIEs | ( | ) | ||||||
| Proceeds from exercise of options | ||||||||
| Proceeds from issuance of preferred stock | ||||||||
| Payment of debt costs and Series C Preferred Stock costs recorded as debt discount | ( | ) | ( | ) | ||||
| Prepayment penalty upon debt extinguishment | ( | ) | - | |||||
| Redemption of Preferred Stock | ( | ) | ( | ) | ||||
| Fees paid in advance for debt | ( | ) | ||||||
| Series A and Series B Preferred share dividends | ( | ) | ( | ) | ||||
| Contribution to VIE | ||||||||
| Distributions from VIE | ( | ) | ( | ) | ||||
| Net Cash Provided by Financing Activities | ||||||||
| Net change in cash, cash equivalents and restricted cash | ||||||||
| Cash, cash equivalents and restricted cash at beginning of the period | ||||||||
| Cash, cash equivalents and restricted cash at end of the period | $ | $ | ||||||
| Cash, cash equivalents and restricted cash consist of the following: | ||||||||
| End of period | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total | $ | $ | ||||||
| Cash, cash equivalents and restricted cash consist of the following: | ||||||||
| Beginning of period | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total | $ | $ | ||||||
| Cash paid for: | ||||||||
| Income Taxes | $ | $ | ||||||
| Interest | $ | $ | ||||||
| Series C Preferred share dividends included in interest expense | $ | $ | ||||||
| Non-Cash Investing and Financing Activities | ||||||||
| Notes and lines of credit related to acquisitions and capital improvements | $ | $ | ||||||
| Non-cash Series A and B Preferred Stock accretion | $ | $ | ||||||
| Debt issuance costs included in accounts payable and accrued liabilities | $ | $ | ||||||
| Stock issued in connection with Series B Preferred Stock issuance | $ | $ | ||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
F-4
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
Organization
Manufactured Housing Properties Inc. (the “Company”) is a Nevada corporation whose principal activities are to acquire, own, and operate manufactured housing communities.
Basis of Presentation
The Company prepares its consolidated financial statements under the accrual basis of accounting, in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q of Regulation S-X. They do not include all information and footnotes required by GAAP for complete financial statements. The December 31, 2021 consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 31, 2022. The interim unaudited condensed consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for a fair statement of the financial statements, consisting solely of normal recurring adjustments, have been made. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company, entities controlled by the Company through its direct or indirect ownership of a majority interest, and any other entities in which the Company has a controlling financial interest. The Company consolidates variable interest entities (“VIEs”) where the Company is the primary beneficiary. The primary beneficiary of a VIE is the party that has both the power to direct the activities that most significantly impact the VIE’s economic performance, and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.
F-5
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
The Company’s formation of all subsidiaries and VIEs’ date of consolidation are as follows:
| Name of Subsidiary | State of Formation | Date of Formation | Ownership | |||
| * |
All intercompany transactions and balances have been eliminated in consolidation. The Company does not have a majority or minority interest in any other company, either consolidated or unconsolidated.
F-6
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
Revenue Recognition
Mobile home rental and related income is generated from lease agreements for our sites and homes. The lease component of these agreements is accounted for under Topic 842 of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, for leases.
Under ASC 842, the Company must assess on an individual lease basis whether it is probable that we will collect the future lease payments. The Company considers the tenant’s payment history and current credit status when assessing collectability. When collectability is not deemed probable, the Company will write-off the tenant’s receivables, including straight-line rent receivable, and limit lease income to cash received.
The Company’s revenues primarily consist of rental revenues and other rental related fee income. The Company has the following revenue sources and revenue recognition policies:
| ● | Rental revenues include revenues from the leasing of land lot or a combination of both, the mobile home and land at our properties to tenants. |
| ● | Revenues from the leasing of land lot or a combination of both, the mobile home and land at the Company’s properties to tenants include (i) lease components, including land lot or a combination of both, the mobile home and land, and (ii) reimbursement of utilities and account for the components as a single lease component in accordance with ASC 842. |
| ● | Revenues derived from fixed lease payments are recognized on a straight-line basis over the non-cancelable period of the lease. The Company commences rental revenue recognition when the underlying asset is available for use by the lessee. Revenue derived from the reimbursement of utilities are generally recognized in the same period as the related expenses are incurred. The majority of the Company’s leases are month-to-month. |
Revenue from sales of manufactured homes is recognized in accordance with the core principle of ASC 606, at the time of closing when control of the home transfers to the customer. After closing of the sale transaction, the Company generally has no remaining performance obligation.
Accounts Receivable
Accounts receivable consist primarily of amounts currently due from residents. Accounts receivable are reported in the balance sheet at outstanding principal adjusted for any charge-offs and allowance for losses. The Company records an allowance for bad debt when receivables are over 90 days old.
Acquisitions
The Company accounts for acquisitions as asset acquisitions in accordance with ASC 805, “Business Combinations,” and allocates the purchase price of the property based upon the fair value of the assets acquired, which generally consist of land, site and land improvements, buildings and improvements and rental homes. The Company allocates the purchase price of an acquired property generally determined by internal evaluation as well as third-party appraisal of the property obtained in conjunction with the purchase.
F-7
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
Variable Interest Entities
In December 2020, the Company entered into a
property management agreement with Gvest Finance LLC, a company owned and controlled by the Company’s parent company, Gvest Real
Estate Capital LLC, an entity whose sole owner is Raymond M. Gee, the Company’s chairman and chief executive officer, and has subsequently
entered into property management agreements with Gvest Homes I LLC, Gvest Anderson Homes LLC, Gvest Capital View Homes LLC, Gvest Hidden
Oaks Homes LLC, Gvest Springlake Homes LLC, Gvest Carolinas 4 Homes LLC, Gvest Sunnyland Homes LLC and Gvest Warrenville Homes LLC, which
are all wholly owned subsidiaries of Gvest Finance LLC. Under the property management agreements, the Company manages the homes owned
by the VIEs and the VIEs remit to the Company all income, less any sums paid out for operational expenses and debt service but retain
Additionally, during 2021, the Company formed
two entities, Brainerd Place LLC and Bull Creek LLC, for the purpose of exploring opportunities to develop mobile home communities. The
Company owns
A company with interests in a VIE must consolidate the entity if the company is deemed to be the primary beneficiary of the VIE; that is, if it has both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. Such a determination requires management to evaluate circumstances and relationships that may be difficult to understand and to make a significant judgment, and to repeat the evaluation at each subsequent reporting date. Primarily due to the Company’s common ownership by Mr. Gee, its power to direct the activities of these entities that most significantly impact their economic performance, and the fact that the Company has the obligation to absorb losses or the right to receive benefits from these entities that could potentially be significant to these entities, the entities listed above are considered to be VIEs in accordance with applicable GAAP.
F-8
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
Net Income (Loss) Per Share
Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding, including vested penny stock options during the period. Diluted net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding plus the weighted average number of net shares that would be issued upon exercise of stock options pursuant to the treasury stock method.
For the nine months ended September 30, 2022,
the potentially dilutive penny options for the purchase of
For the nine months ended September 30, 2021,
the potentially dilutive penny options for the purchase of
Use of Estimates
The presentation of financial statements in conformity with GAAP requires management to make estimates and assumptions that effect 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 reported period. Actual results could differ from those estimates.
Investment Property and Depreciation
Investment real property and equipment are carried
at cost. Depreciation of buildings, improvements to sites and buildings, rental homes, equipment, and vehicles is computed principally
on the straight-line method over the estimated useful lives of the assets (ranging from
Impairment Policy
The Company applies FASB ASC 360-10, “Property, Plant & Equipment,” to measure impairment in real estate investments. Rental properties are individually evaluated for impairment when conditions exist which may indicate that it is probable that the sum of expected future cash flows (on an undiscounted basis without interest) from a rental property is less than the carrying value under its historical net cost basis. These expected future cash flows consider factors such as future operating income, trends and prospects as well as the effects of leasing demand, competition and other factors. Upon determination that a permanent impairment has occurred, rental properties are reduced to their fair value. For properties to be disposed of, an impairment loss is recognized when the fair value of the property, less the estimated cost to sell, is less than the carrying amount of the property measured at the time there is a commitment to sell the property and/or it is actively being marketed for sale. A property to be disposed of is reported at the lower of its carrying amount or its estimated fair value, less its cost to sell. Subsequent to the date that a property is held for disposition, depreciation expense is not recorded. There was no impairment during the three and nine months ended September 30, 2022 and 2021.
F-9
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
Cash, Cash Equivalents, and Restricted Cash
The Company considers all highly liquid financial instruments purchased with an original maturity of three months or less to be cash equivalents.
As of September 30, 2022, restricted cash consisted of $
The Company maintains cash balances at banks and
deposits at times may exceed federally insured limits. Management believes that the financial institutions that hold the Company’s
cash are financially secure and, accordingly, minimal credit risk exists. At September 30, 2022 and December 31, 2021, the Company had
approximately $
Liquidity
The consolidated
financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. The
Company has incurred net losses each year since inception and has experienced nearly breakeven cash flows from operations during the nine
months ended September 30, 2022. The portfolio refinance with KeyBank discussed in Note 5 drove the large net loss for the quarter ended
September 30, 2022, which is a non-recurring cost going forward. Additionally, the Company is in an acquisitive, growth stage whereby
it has doubled the number of home sites in its portfolio of manufactured housing communities over the past two years. The Company
acquires communities and invests in physical improvements, implements operational efficiencies to cut costs, works to improve occupancy
and collections, and increases rents based on each respective market all to stabilize the acquired communities to their full potential.
The Company increased the number of home sites in its portfolio by
The Company believes its current available cash and anticipated revenues is sufficient to fund its operations for at least the next twelve months following the filing of these consolidated financial statements and through December 2023. The Company also has two revolving promissory notes available to it from its officers as detailed in Note 5, if needed for working capital or other cash flow needs. Proceeds from the KeyBank portfolio refinance were used to pay off debt attached to a significant percentage of the Company owned manufactured homes which are now unencumbered and can be sold for additional cash flow, if needed.
The Company’s continued growth depends on the availability of suitable properties which meet its investment criteria and appropriate financing, which includes its ability to raise capital. There is no guarantee that any of these additional opportunities will materialize or that the Company will be able to take advantage of such opportunities. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. To the extent that funds or appropriate communities are not available, fewer acquisitions and capital improvements will be made.
Stock Based Compensation
All stock based payments to employees, nonemployee
consultants, and to nonemployee directors for their services as directors, including any grants of restricted stock and stock options,
are measured at fair value on the grant date and recognized in the statements of operations as compensation or other expense over the
relevant service period in accordance with FASB ASC Topic 718. Stock based payments to nonemployees are recognized as an expense over
the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is reached, or
the date performance is completed. In addition, for awards that vest immediately and are nonforfeitable, the measurement date is the date
the award is issued. The Company recorded stock option expense of $
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10 of the FASB ASC for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB ASC to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. Most of the Company’s financial assets do not have a quoted market value. Therefore, estimates of fair value are necessarily based on a number of significant assumptions (many of which involve events outside the control of management). Such assumptions include assessments of current economic conditions, perceived risks associated with these financial instruments and their counterparties, future expected loss experience and other factors. Given the uncertainties surrounding these assumptions, the reported fair values represent estimates only and, therefore, cannot be compared to the historical accounting model. Use of different assumptions or methodologies is likely to result in significantly different fair value estimates.
The fair value of cash and cash equivalents, accounts receivables, and accounts payable approximates their current carrying amounts since all such items are short-term in nature. The fair value of variable and fixed rate mortgages payable and lines of credit approximate their current carrying amounts on the balance sheet since such amounts payable are at approximately a weighted average current market rate of interest.
F-10
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
The Company records uncertain tax positions in
accordance with ASC 740 on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that
the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the
more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than
The Company recognizes interest and penalties, if any, with income tax expense in the accompanying unaudited condensed consolidated statement of operations. As of September 30, 2022, and December 31, 2021, there were no such accrued interest or penalties.
Reclassifications
Certain amounts in the prior period presentation have been reclassified to conform with the current presentation.
For the year ended December 31, 2021, the Company
reclassed $
For the nine months ended September 30, 2021,
the Company reclassed $
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires that entities use a new forward looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU No. 2016-13 is effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2022. The Company is currently evaluating the potential impact this standard may have on the consolidated financial statements.
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying unaudited condensed consolidated financial statements.
Impact of Coronavirus Pandemic
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. On March 11, 2020, the World Health Organization declared the outbreak a pandemic, and on March 13, 2020, the United States declared a national emergency.
Some states and cities, including some where the Company’s properties are located, reacted by instituting quarantines, restrictions on travel, “stay at home” rules and restrictions on the types of businesses that may continue to operate, as well as guidance in response to the pandemic and the need to contain it.
The rules and restrictions put in place had a negative impact on the economy and business activity and may adversely impact the ability of the Company’s tenants, many of whom may be restricted in their ability to work, to pay their rent as and when due. Enforcing the Company’s rights as landlord against tenants who fail to pay rent or otherwise do not comply with the terms of their leases may not be possible as many jurisdictions, including those where are properties are located, have established rules and/or regulations preventing us from evicting tenants for certain periods in response to the pandemic. If the Company is unable to enforce its rights as landlords, our business would be materially affected.
F-11
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
The extent to which the pandemic may impact the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this report, including new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. Nevertheless, the pandemic and the current financial, economic, and capital markets environment present material uncertainty and risk with respect to the Company’s performance, financial condition, results of operations and cash flows.
NOTE 2 – VARIABLE INTEREST ENTITIES
During the nine months ended September 30, 2022, Gvest Finance LLC formed two wholly owned subsidiaries, Gvest Sunnyland Homes LLC and Gvest Warrenville Homes LLC, both of which are considered VIEs. The Company consolidates the accounts of Gvest Finance LLC, Gvest Homes I LLC, Gvest Anderson Homes LLC, Gvest Capital View Homes LLC, Gvest Hidden Oaks Homes LLC, Gvest Springlake Homes LLC, Gvest Carolinas 4 Homes LLC, Gvest Sunnyland Homes LLC, Gvest Warrenville Homes LLC, Brainerd Place LLC, and Bull Creek LLC and will continue to do so until they are no longer considered VIEs.
During the quarter ended September 30, 2022,
the Company refinanced most of its debt and used the refinance proceeds to pay off loans totaling $
Included in the unaudited condensed consolidated
results of operations for the three months ended September 30, 2022 and 2021 were net loss of $
Included in the unaudited condensed consolidated
results of operations for the nine months ended September 30, 2022 and 2021 were net loss of $
The consolidated balance sheets as of September 30, 2022 and December 31, 2021 included the following amounts related to the consolidated VIEs.
| September 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Investment Property | $ | $ | ||||||
| Accumulated Depreciation | ( | ) | ( | ) | ||||
| Net Investment Property | ||||||||
| Cash and Cash Equivalents | ||||||||
| Accounts Receivable | ||||||||
| Other Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Deficit | ||||||||
| Accounts Payable | $ | $ | ||||||
| Notes Payable, net of $ | ||||||||
| Line of Credit, net of $ | ||||||||
| Accrued Liabilities* | ||||||||
| Total Liabilities | ||||||||
| Non-controlling Interest | ( | ) | ( | ) | ||||
| Total Non-controlling Interest in Variable Interest Entities | ( | ) | ( | ) | ||||
| * |
F-12
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
NOTE 3 – INVESTMENT PROPERTY
The following table summarizes the Company’s property and equipment balances are generally used to depreciate the assets on a straight-line basis:
| September 30, 2022 |
December 31, 2021 |
|||||||
| (Unaudited) | ||||||||
| Investment Property | ||||||||
| Land | $ | $ | ||||||
| Site and Land Improvements | ||||||||
| Buildings and Improvements | ||||||||
| Construction in Process | ||||||||
| Total Investment Property | ||||||||
| Accumulated Depreciation | ( |
) | ( |
) | ||||
| Net Investment Property | $ | $ | ||||||
Depreciation expense totaled $
During the nine months ended September 30, 2022,
Gvest Finance LLC, the Company’s VIE, purchased twenty-five new manufactured homes for approximately $
During the year ended December 31, 2021, Gvest
Finance LLC, acquired thirty-four new manufactured homes for approximately $
F-13
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
NOTE 4 – ACQUISITIONS AND DISPOSITIONS
During the nine months ended September 30, 2022, the Company acquired nine communities and two large parcels of undeveloped land. These were acquisitions from third parties and have been accounted for as asset acquisitions.
On March 31, 2022, the Company purchased two
manufactured housing communities located in Warrenville, South Carolina consisting of 85 sites on approximately
On June 17, 2022, the Company purchased a manufactured
housing community located in Brunswick, Georgia consisting of 72 sites on approximately
On June 28, 2022, the Company, through its wholly
owned subsidiary Raeford MHP Development LLC, purchased
On July 7, 2022, the Company purchased a manufactured
housing community located in Leesville, North Carolina consisting of 39 sites on approximately
On July 29, 2022, the Company purchased a manufactured
housing community located in Clyde, North Carolina consisting of 51 sites on approximately
On September 14, 2022, the Company purchased
three manufactured housing communities located in Statesville, Thomasville, and Trinity, North Carolina consisting of 122 sites on approximately
During the nine months ended September 30, 2021, the Company acquired four manufactured housing communities; one in Brunswick, Georgia, one in Anderson, South Carolina and two in Columbia, South Carolina, and accounted for all as asset acquisitions.
F-14
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
The Company entered into various purchase agreements
during and after the nine months ended September 30, 2022 totaling an aggregate purchase price commitment of $
| Acquisition Date | Name (number of communities, if multiple) | Land | Improvements | Building | Total Purchase Price | |||||||||||||
| Golden Isles MHP | $ | $ | $ | $ | ||||||||||||||
| Golden Isles Gvest | ||||||||||||||||||
| Anderson MHP (10) | ||||||||||||||||||
| Anderson Gvest (10) | ||||||||||||||||||
| Capital View MHP | ||||||||||||||||||
| Capital View Gvest | ||||||||||||||||||
| Hidden Oaks MHP | ||||||||||||||||||
| Hidden Oaks Gvest | ||||||||||||||||||
| Total Purchase Price | $ | $ | $ | $ | ||||||||||||||
| Acquisition Costs | ||||||||||||||||||
| Total Investment Property | $ | $ | $ | $ | ||||||||||||||
| Sunnyland MHP | $ | $ | $ | $ | ||||||||||||||
| Sunnyland Gvest | ||||||||||||||||||
| Warrenville MHP (2) | ||||||||||||||||||
| Warrenville Gvest (2) | ||||||||||||||||||
| Spaulding MHP | ||||||||||||||||||
| Raeford MHP Parcel | ||||||||||||||||||
| Solid Rock MHP | ||||||||||||||||||
| Red Fox MHP | ||||||||||||||||||
| Statesville MHP | ||||||||||||||||||
| Northview MHP | ||||||||||||||||||
| Timberview MHP | ||||||||||||||||||
| Total Purchase Price | $ | $ | $ | $ | ||||||||||||||
| Acquisition Costs | ||||||||||||||||||
| Total Investment Property | $ | $ | $ | $ | ||||||||||||||
F-15
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
Pro-forma Financial Information
The following unaudited pro-forma information presents the combined results of operations for the three and nine months ended September 30, 2022 as if all acquisitions of manufactured housing communities during the three and nine months ended September 30, 2022, as well as several probable future acquisitions, had all occurred on January 1, 2022.
The below also presents the combined results of operations for the three and nine months ended September 30, 2021 as if all acquisitions of manufactured housing communities during the year ended December 31, 2021 and during the three and nine months ended September 30, 2022, as well as several probable future acquisitions, had all occurred on January 1, 2021.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 Pro Forma | 2021 Pro Forma | 2022 Pro Forma | 2021 Pro Forma | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Community operating expenses | ||||||||||||||||
| Corporate payroll and overhead expenses | ||||||||||||||||
| Depreciation expense | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Refinance costs | ||||||||||||||||
| Cost of home sales | ||||||||||||||||
| Other income | - | |||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to non-controlling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) attributable to Manufactured Housing Properties, Inc | ( | ) | ( | ) | ||||||||||||
| Preferred stock dividends / accretion | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
NOTE 5 – PROMISSORY NOTES
Promissory Notes
The Company has issued promissory notes payable
to lenders related to the acquisition of its manufactured housing communities and mobile homes. The interest rates on outstanding promissory
notes range from
On September 1, 2022, the Company, through its
wholly owned subsidiaries, entered into twenty-three loan agreements with KeyBank National Association (“KeyBank”) and Fannie
Mae for a total principal balance of $
F-16
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
As of September 30, 2022, the outstanding principal
balance on all third-party promissory notes was $
| Maturity Date |
Interest Rate |
Interest Only Period (Months) |
Balance September 30, 2022 |
Balance December 31, 2021 |
||||||||||||||
| Pecan Grove MHP LLC | |
% | - | $ | - | $ | ||||||||||||
| Pecan Grove MHP LLC - KeyBank* | |
% | ||||||||||||||||
| Azalea MHP LLC | |
% | - | - | ||||||||||||||
| Azalea MHP LLC - KeyBank* | |
% | ||||||||||||||||
| Holly Faye MHP LLC | |
% | - | - | ||||||||||||||
| Holly Faye MHP LLC - KeyBank* | |
% | ||||||||||||||||
| Chatham MHP LLC | |
% | - | - | ||||||||||||||
| Chatham MHP LLC - KeyBank* | |
% | ||||||||||||||||
| Lakeview MHP LLC | |
% | - | - | ||||||||||||||
| Lakeview MHP LLC - KeyBank* | |
% | ||||||||||||||||
| B&D MHP LLC | |
% | - | - | ||||||||||||||
| B&D MHP LLC - KeyBank* | |
% | ||||||||||||||||
| Hunt Club MHP LLC | |
% | - | - | ||||||||||||||
| Hunt Club MHP LLC - KeyBank* | |
% | ||||||||||||||||
| Crestview MHP LLC | |
% | - | - | ||||||||||||||
| Crestview MHP LLC - KeyBank* | |
% | ||||||||||||||||
| Maple Hills MHP LLC | |
% | - | - | ||||||||||||||
| Maple Hills MHP LLC - KeyBank* | |
% | ||||||||||||||||
| Springlake MHP LLC* | |
% | ||||||||||||||||
| Springlake MHP LLC - KeyBank* | |
% | ||||||||||||||||
| ARC MHP LLC | |
% | - | - | ||||||||||||||
| ARC MHP LLC - KeyBank* | |
% | ||||||||||||||||
| Countryside MHP LLC | |
% | - | |||||||||||||||
| Countryside MHP LLC - KeyBank* | |
% | ||||||||||||||||
| Evergreen MHP LLC | |
% | - | - | ||||||||||||||
| Evergreen MHP LLC - KeyBank* | |
% | ||||||||||||||||
| Golden Isles MHP LLC | |
% | - | |||||||||||||||
| Golden Isles MHP LLC - KeyBank* | |
% | ||||||||||||||||
| Anderson MHP LLC* | |
% | ||||||||||||||||
| Anderson MHP LLC - KeyBank* | |
% | ||||||||||||||||
| Capital View MHP LLC* | |
% | ||||||||||||||||
| Capital View MHP LLC - KeyBank* | |
% | - | |||||||||||||||
| Hidden Oaks MHP LLC* | |
% | ||||||||||||||||
| Hidden Oaks MHP LLC - KeyBank* | |
% | ||||||||||||||||
| North Raleigh MHP LLC | |
% | - | - | ||||||||||||||
| North Raleigh MHP LLC - KeyBank* | |
% | ||||||||||||||||
| Charlotte 3 Park MHP LLC (Dixie, Driftwood, Meadowbrook)(1) | |
% | ||||||||||||||||
| Charlotte 3 Park MHP LLC (Dixie, Driftwood, Meadowbrook)(2)* | |
% | ||||||||||||||||
| Charlotte 3 Park MHP LLC (Dixie) - KeyBank | |
% | - | |||||||||||||||
| Charlotte 3 Park MHP LLC (Driftwood) - KeyBank* | |
% | ||||||||||||||||
| Carolinas 4 MHP LLC (Asheboro, Morganton)* | |
% | ||||||||||||||||
| Carolinas 4 MHP LLC (Asheboro) - KeyBank* | |
% | ||||||||||||||||
| Carolinas 4 MHP LLC (Morganton) - KeyBank* | |
% | ||||||||||||||||
| Sunnyland MHP LLC(2)* | |
% | ||||||||||||||||
| Sunnyland MHP LLC - KeyBank* | |
% | ||||||||||||||||
| Warrenville MHP LLC* | |
% | ||||||||||||||||
| Spaulding MHP LLC | |
WSJ Prime +1 | % | - | ||||||||||||||
| Solid Rock MHP LLC | |
% | - | |||||||||||||||
| Red Fox MHP LLC | |
% | - | |||||||||||||||
| Statesville MHP LLC* | |
% | ||||||||||||||||
| Timberview MHP LLC* | |
% | ||||||||||||||||
| Northview MHP LLC - land (Seller Finance) | |
% | - | |||||||||||||||
| Statesville, Northview, and Timberview MHP LLC - homes (Seller Finance) | |
% | - | |||||||||||||||
| Gvest Finance LLC (B&D homes) | |
% | - | |||||||||||||||
| Gvest Finance LLC (Countryside homes) | |
% | - | - | ||||||||||||||
| Gvest Finance LLC (Golden Isles homes) | |
% | ||||||||||||||||
| Gvest Anderson Homes LLC* | |
% | ||||||||||||||||
| Gvest Capital View Homes LLC* | |
% | ||||||||||||||||
| Gvest Hidden Oaks Homes LLC* | % | |||||||||||||||||
| Gvest Carolinas 4 Homes LLC (Asheboro, Morganton)* | % | |||||||||||||||||
| Gvest Sunnyland Homes LLC(2)* | |
% | ||||||||||||||||
| Gvest Warrenville Homes LLC* | |
% | ||||||||||||||||
| Total Notes Payable | $ | $ | ||||||||||||||||
| Discount Direct Lender Fees | ( |
) | ( |
) | ||||||||||||||
| Total Net of Discount | $ | $ | ||||||||||||||||
| (1) | |
| (2) |
| * |
F-17
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
Lines of Credit – Variable Interest Entities
| Facility | Borrower | Community | Maturity Date | Interest Rate | Maximum Credit Limit | Balance September 30, 2022 | Balance December 31, 2021 | |||||||||||||
| Occupied Home Facility(1) | $ | $ | $ | |||||||||||||||||
| Multi-Community Rental Home Facility | $ | $ | $ | |||||||||||||||||
| Multi-Community Floorplan Home Facility(1)(2) | $ | $ | $ | |||||||||||||||||
| Springlake Home Facility(2) | $ | $ | $ | |||||||||||||||||
| Total Lines of Credit - VIEs | $ | $ | ||||||||||||||||||
| Discount Direct Lender Fees | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Total Net of Discount | $ | $ | ||||||||||||||||||
| (1) | During the nine months ended September 30, 2022, the Company drew down $ |
| (2) | Payments on the Multi-Community Floorplan Home Facility advances are interest only until each advance is paid off or transferred to the Multi-Community Rental Home Facility and payments on the Springlake Home Facility are interest only for the first six months. During the first quarter of 2022, the Company drew down $ |
| (3) | The maturity date of the of the Multi-Community Floorplan Line of Credit will vary based on each statement of financial transaction, a report identifying the funded homes and the applicable financial terms. |
The agreements for each of the above line of credit facilities require the maintenance of certain financial ratios or other affirmative and negative covenants. All the above line of credit facilities are guaranteed by Raymond M. Gee.
F-18
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
Metrolina Promissory Note
On October 22, 2021, the Company issued a
promissory note to Metrolina Loan Holdings, LLC (“Metrolina”), a significant stockholder, in the principal amount of
$
Raymond M. Gee Promissory Note
On October 1, 2017, the Company issued a revolving
promissory note to Raymond M. Gee, pursuant to which the Company could borrow up to $
Gvest Revolving Promissory Note
On December 27, 2021, the Company issued a revolving
promissory note to Gvest Real Estate Capital, LLC, an entity whose sole owner is Raymond M. Gee, the Company’s chairman and chief
executive officer, pursuant to which the Company may borrow up to $
NAV Real Estate LLC Promissory Note
On June 29, 2022, the Company issued a revolving
promissory note to NAV RE, LLC, an entity whose owners are Adam Martin, the Company’s chief investment officer, and his spouse,
pursuant to which the Company may borrow up to $
Maturities of Long-Term Obligations for Five Years and Beyond
The minimum annual principal payments of notes payable at September 30, 2022 by fiscal year were:
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total minimum principal payments | $ |
NOTE 6 – COMMITMENTS AND CONTINGENCIES
From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise that may harm its business. The Company is currently not aware of any such legal proceedings or claims that they believe will have, individually or in the aggregate, a material adverse effect on its business, financial condition, or operating results.
F-19
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
NOTE 7 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is authorized to issue up to
Series A Cumulative Convertible Preferred Stock
On May 8, 2019, the Company filed a certificate
of designation with the Nevada Secretary of State pursuant to which the Company designated
Ranking. The Series A Preferred Stock ranks, as to dividend rights and rights upon our liquidation, dissolution, or winding up, senior to the Common Stock and pari passu with the Series B Preferred Stock and Series C Preferred Stock (as defined below). The terms of the Series A Preferred Stock will not limit the Company’s ability to (i) incur indebtedness or (ii) issue additional equity securities that are equal or junior in rank to the shares of Series A Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up.
Dividend Rate and Payment Dates.
Dividends on the Series A Preferred Stock are cumulative and payable monthly in arrears to all holders of record on the applicable record
date. Holders of Series A Preferred Stock will be entitled to receive cumulative dividends in the amount of $
Liquidation Preference. The liquidation
preference for each share of Series A Preferred Stock is $
Stockholder Optional Conversion.
Each share of Series A Preferred Stock is convertible, at any time and from time to time, at the option of the holder thereof and without
the payment of additional consideration, into that number of shares of Common Stock determined by dividing the liquidation preference
of such share by the conversion price then in effect. The conversion price is initially equal $
Company Call and Stockholder Put Options. Commencing
on the fifth anniversary of the initial issuance of shares of Series A Preferred Stock and continuing indefinitely thereafter, the Company
will have a right to call for redemption the outstanding shares of Series A Preferred Stock at a call price equal to $3.75, or 150% of
the original issue price of the Series A Preferred Stock, and correspondingly, each holder of shares of Series A Preferred Stock shall
have a right to put the shares of Series A Preferred Stock held by such holder back to the Company at a put price equal to $3.75, or
150% of the original issue purchase price of such shares. During the nine months ended September 30, 2022 and 2021, the Company
recorded a put option value accretion of $
Voting Rights. The Company may not authorize or issue any class or series of equity securities ranking senior to the Series A Preferred Stock as to dividends or distributions upon liquidation (including securities convertible into or exchangeable for any such senior securities) or amend the Company’s articles of incorporation (whether by merger, consolidation, or otherwise) to materially and adversely change the terms of the Series A Preferred Stock without the affirmative vote of at least two-thirds of the votes entitled to be cast on such matter by holders of the outstanding shares of Series A Preferred Stock, voting together as a class. Otherwise, holders of the shares of Series A Preferred Stock do not have any voting rights.
As of September 30, 2022 and December 31, 2021,
there were
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MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
Series B Cumulative Redeemable Preferred Stock
On December
2, 2019, the Company filed a certificate of designation with the Nevada Secretary of State pursuant to which the Company designated
Ranking. The Series B Preferred Stock rank, as to dividend rights and rights upon liquidation, dissolution, or winding up, senior to the Common Stock and pari passu with the Series A Preferred Stock and Series C Preferred Stock. The terms of the Series B Preferred Stock will not limit the Company’s ability to (i) incur indebtedness or (ii) issue additional equity securities that are equal or junior in rank to the shares of Series B Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up.
Dividend
Rate and Payment Dates. Dividends on the Series B Preferred Stock are cumulative and payable monthly in arrears to all holders
of record on the applicable record date.
Liquidation
Preference. The liquidation preference for each share of Series B Preferred Stock is $
Company
Call and Stockholder Put Options. Commencing on the fifth anniversary of the initial issuance of shares of Series B Preferred
Stock and continuing indefinitely thereafter, the Company will have a right to call for redemption the outstanding shares of Series B
Preferred Stock at a call price equal to $15.00, or 150% of the original issue price of the Series B Preferred Stock, and correspondingly,
each holder of shares of Series B Preferred Stock shall have a right to put the shares of Series B Preferred Stock held by such holder
back to the Company at a put price equal to $15.00, or 150% of the original issue purchase price of such shares. During the nine months
ended September 30, 2022 and 2021, the Company recorded a put option value accretion of $
Voting Rights. The Company may not authorize or issue any class or series of equity securities ranking senior to the Series B Preferred Stock as to dividends or distributions upon liquidation (including securities convertible into or exchangeable for any such senior securities) or amend the Company’s articles of incorporation (whether by merger, consolidation, or otherwise) to materially and adversely change the terms of the Series B Preferred Stock without the affirmative vote of at least two-thirds of the votes entitled to be cast on such matter by holders of outstanding shares of Series B Preferred Stock, voting together as a class. Otherwise, holders of the shares of Series B Preferred Stock do not have any voting rights.
No Conversion Right. The Series B Preferred Stock is not convertible into shares of Common Stock.
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MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
On November
1, 2019,
This offering
terminated on March 30, 2021 thus, the Company sold no shares of Series B Preferred Stock during the nine months ended September 30, 2022.
During the nine months ended September 30, 2021, the Company sold an aggregate of
As of September
30, 2022, there were
Series C Cumulative Redeemable Preferred Stock
On May 24,
2021, the Company filed an amended and restated certificate of designation with the Nevada Secretary of State pursuant to which the Company
designated
Ranking. The Series C Preferred Stock ranks, as to dividend rights and rights upon liquidation, dissolution, or winding up, senior to Common Stock and pari passu with Series A Preferred Stock and Series B Preferred Stock. The terms of the Series C Preferred Stock do not limit the Company’s ability to (i) incur indebtedness or (ii) issue additional equity securities that are equal or junior in rank to the shares of Series C Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up.
Stated
Value. Each share of Series C Preferred Stock has an initial stated value of $
Dividend
Rate and Payment Dates. Dividends on the Series C Preferred Stock are cumulative and payable monthly in arrears to all holders
of record on the applicable record date.
Liquidation Preference. Upon a liquidation, dissolution or winding up of the Company, holders of shares of Series C Preferred Stock are entitled to receive, before any payment or distribution is made to the holders of Common Stock and on a pari passu basis with holders of Series A Preferred Stock and Series B Preferred Stock, a liquidation preference equal to the stated value per share, plus accrued but unpaid dividends thereon.
F-22
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
Redemption
Request at the Option of a Holder. Once per calendar quarter, a holder will have the opportunity to request that the Company redeem
that holder’s Series C Preferred Stock. The board of directors may, however, suspend cash redemptions at any time in its discretion
if it determines that it would not be in the best interests of the Company to effectuate cash redemptions at a given time because the
Company does not have sufficient cash, including because the board believes that the Company’s cash on hand should be utilized for
other business purposes. Redemptions will be limited to four percent (
| ● | 8% if the redemption is requested after the first anniversary and on or before the second anniversary of the original issuance of such shares; |
| ● | 5% if the redemption is requested after the second anniversary and on or before the third anniversary of the original issuance of such shares; and |
| ● | after the third anniversary of the date of original issuance of shares to be redeemed, no redemption fee shall be subtracted from the redemption price. |
Optional
Redemption by the Company. The Company has the right (but not the obligation) to redeem shares of Series C Preferred Stock at
a redemption price equal to the stated value of such redeemed shares, plus any accrued but unpaid dividends thereon; provided, however,
that if the Company redeems any shares of Series C Preferred Stock prior to the fourth (4th) anniversary of their issuance,
then the redemption price shall include a premium equal to ten percent (
Mandatory Redemption by the Company. The Company must redeem the outstanding shares of Series C Preferred Stock on the fourth (4th) anniversary of their issuance at a redemption price equal to the stated value of such redeemed shares, plus any accrued but unpaid dividends thereon.
Voting Rights. The Series C Preferred Stock has no voting rights.
No Conversion Right. The Series C Preferred Stock is not convertible into shares of Common Stock.
In accordance with ASC 480-10, the Series C Preferred Stock is treated as a liability and is presented net of unamortized debt issuance costs on the balance sheet because the Company has an unconditional obligation to redeem the Series C Preferred Stock and dividends on the Preferred C Stock are included in interest expense.
On June
11, 2021, the Company launched a new offering under Regulation A of Section 3(6) of the Securities Act for Tier 2 offerings, pursuant
to which the Company is offering up to
During the
nine months ended September 30, 2022, the Company sold an aggregate of
As of September
30, 2022 there were
As of December
31, 2021, there were
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MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
Common Stock
The Company
is authorized to issue up to
Stock Issued for Cash
During the
nine months ended September 30, 2022, the Company issued
During the
nine months ended September 30, 2021, the Company issued
Equity Incentive Plan
In December
2017, the Board of Directors, with the approval of a majority of the stockholders of the Company, adopted the Manufactured Housing Properties
Inc. Stock Compensation Plan (the “Plan”) which is administered by the Compensation Committee. As of September 30, 2022, there
were
During the
nine months ended September 30, 2022 and 2021, the Company issued
The following table summarizes the stock options outstanding as of September 30, 2022:
| Number of options | Weighted average exercise price (per share) | Weighted average remaining contractual term (in years) | ||||||||||
| Outstanding at December 31, 2021 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ( | ) | ( | ) | ( | ) | ||||||
| Forfeited / cancelled / expired | ( | ) | ( | ) | ( | ) | ||||||
| Outstanding at September 30, 2022 | ||||||||||||
| Exercisable at September 30, 2022 | ||||||||||||
As of September 30, 2022, there were
F-24
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
The following table summarizes information concerning options outstanding as of September 30, 2022.
| Strike Price Range ($) | Outstanding stock options | Weighted average remaining contractual term (in years) | Weighted average outstanding strike price | Vested stock options | Weighted average vested strike price | |||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
The table below presents the weighted average expected life in years of options granted under the Plan as described above. The risk-free rate of the stock options is based on the U.S. Treasury yield curve in effect at the time of grant, which corresponds with the expected term of the option granted.
The fair value of stock options was estimated using the Black Scholes option pricing model with the following assumptions for grants made during the periods indicated.
| Stock option assumptions | September 30, 2022 |
September 30, 2021 | ||
| Risk-free interest rate | ||||
| Expected dividend yield | ||||
| Expected volatility | ||||
| Expected life of options (in years) |
NOTE 8 – RELATED PARTY TRANSACTIONS
See Note 5 for information regarding the promissory notes issued to Metrolina, a significant stockholder, the revolving promissory note issued to Gvest Real Estate Capital, LLC, an entity whose sole owner is Raymond M. Gee, the Company’s chairman and chief executive officer, and the revolving promissory note issued to NAV Real Estate, LLC, an entity whose owners are Adam Martin, the Company’s chief investment officer, and his spouse.
In August
2019, the Company entered into an office lease agreement with 136 Main Street LLC, an entity whose sole owner is Gvest Real Estate LLC,
whose sole owner is Mr. Gee, for the lease of the Company’s offices. The lease is $
During the
nine months ended September 30, 2022, Raymond M. Gee received fees totaling $
During the
nine months ended September 30, 2022, the Company entered into a consulting agreement with Gvest Real Estate Capital, LLC for development
consulting and management services related to several upcoming mobile home community development projects at the Sunnyland and Raeford
properties and assistance with major capital improvement projects at existing communities. The consulting agreement is $
During the nine months ended September 30, 2022,
the Company entered into a consulting agreement with Two Oaks Capital LLC, and entity whose sole owner is John Gee, a director of the
Company and son of Raymond M. Gee, for consulting services related to the KeyBank Refinance totaling $
During the nine months ended September 30, 2022,
the Company entered into an agreement with Gvest Capital LLC, an entity whose sole owner is Raymond M. Gee, and its employee Michael P.
Kelly, a significant beneficial stockholder, whereby the Company pays a fee per completed acquisition and a monthly retainer fee to Mr.
Kelly for legal services in connection with acquisitions and other operating matters. During the three and nine months ended September
30, 2022, the company paid Mr. Kelly $
See Note 2 for information regarding related party VIEs.
F-25
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
NOTE 9 – SUBSEQUENT EVENTS
Additional Closings of Regulation A Offering
Subsequent
to September 30, 2022, the Company sold an aggregate of
Glynn Acres Acquisition
On July
12, 2022, MHP Pursuits LLC entered into a purchase and sale agreement with an individual for the purchase of a manufactured housing
community located in Brunswick, Georgia, consisting of
In connection
with the closing of the property, on October 7, 2022, Glynn Acres MHP LLC entered into a loan agreement with the sellers, a third-party,
for a loan in the principal amount of $
Interest on the disbursed and unpaid principal balance accrues from the date funds are first disbursed at a rate of 6.00% per annum, interest only until maturity on November 1, 2042. Payments of $6,448 will begin on December 1, 2022 and continue the 1st of every month until maturity. Glynn Acres MHP LLC may prepay the note in part or in full during the first 60 months of the loan term subject to a penalty of 3% of the outstanding loan balance or afterwards without penalty.
The note is secured by a first priority security interest in the property. The loan agreement and note contain customary financial and other covenants and events of default for a loan of its type.
Stock Options Exercise