UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2022March 31, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission File Number: 000-51229
MANUFACTURED HOUSING PROPERTIES INC.
(Exact name of registrant as specified in its charter)
| Nevada | 51-0482104 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 136 Main Street, Pineville, North Carolina | 28134 | |
| (Address of principal executive offices) | (Zip Code) |
| (980) 273-1702 |
| (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. Yes ☒ No ☐
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). Yes ☒ No ☐
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 | ☐ |
| Non-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 NovemberMay 11, 2022,2023, there were 12,493,012 common shares of the registrant issued and outstanding.
Manufactured Housing Properties Inc.
Quarterly Report on Form 10-Q
Period Ended September 30, 2022March 31, 2023
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. | |
| Item 4. | Controls and Procedures. | |
| PART II | ||
| Item 1. | Legal Proceedings | |
| Item 1A. | Risk Factors | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
| Item 3. | Defaults Upon Senior Securities | |
| Item 4. | Mine Safety Disclosures | |
| Item 5. | Other Information | |
| Item 6. | Exhibits |
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, 2022MARCH 31, 2023 AND DECEMBER 31, 20212022
| September 30, 2022 | December 31, 2021 | March 31, 2023 | December 31, 2022 | |||||||||||||
| Assets | (unaudited) | (unaudited) | ||||||||||||||
| Investment Property | ||||||||||||||||
| Land | $ | 27,845,291 | $ | 18,854,760 | $ | 36,399,696 | $ | 30,263,687 | ||||||||
| Site and Land Improvements | 41,233,111 | 35,133,079 | 45,346,146 | 44,035,649 | ||||||||||||
| Buildings and Improvements | 21,806,023 | 14,666,296 | 25,321,424 | 23,229,657 | ||||||||||||
| Construction in Process | 2,575,086 | 3,030,456 | 1,692,050 | 2,541,376 | ||||||||||||
| Total Investment Property | 93,459,511 | 71,684,591 | 108,759,316 | 100,070,369 | ||||||||||||
| Accumulated Depreciation | (7,285,503 | ) | (4,832,300 | ) | (9,245,738 | ) | (8,225,976 | ) | ||||||||
| Net Investment Property | 86,174,008 | 66,852,291 | 99,513,578 | 91,844,393 | ||||||||||||
| Cash and Cash Equivalents | 1,896,839 | 1,401,134 | 5,710,926 | 5,090,369 | ||||||||||||
| Restricted Cash | 5,018,079 | 705,195 | 5,222,057 | 5,315,246 | ||||||||||||
| Accounts Receivable | 344,603 | 175,955 | 225,894 | 368,081 | ||||||||||||
| Other Assets | 806,034 | 913,205 | 788,927 | 975,064 | ||||||||||||
| TOTAL ASSETS | $ | 94,239,563 | $ | 70,047,780 | $ | 111,461,382 | $ | 103,593,153 | ||||||||
| Liabilities | ||||||||||||||||
| Accounts Payable | $ | 989,909 | $ | 477,484 | $ | 780,511 | $ | 755,124 | ||||||||
| Notes Payable, net of $3,561,671 and $2,064,294 debt discount, respectively | 71,100,381 | 48,891,483 | ||||||||||||||
| Lines of Credit – Variable Interest Entities, net of $141,061 and $151,749 debt discount, respectively | 5,270,283 | 6,200,607 | ||||||||||||||
| Notes Payable, net of $3,772,073 and $3,666,214 debt discount, respectively | 80,942,053 | 75,883,866 | ||||||||||||||
| Lines of Credit – Variable Interest Entities, net of $205,877 and $160,372 debt discount, respectively | 7,624,918 | 6,208,947 | ||||||||||||||
| Lines of Credit – Related Party | 2,000,000 | 150,000 | 2,000,000 | 2,000,000 | ||||||||||||
| Note Payable – Related Party | - | 1,500,000 | ||||||||||||||
| Accrued Liabilities including amounts due to related parties of $1,109,500 and $250,000, respectively | 1,646,378 | 1,235,001 | ||||||||||||||
| Accrued Liabilities including amounts due to related parties of $1,229,166 and $1,154,166, respectively | 2,053,265 | 2,054,438 | ||||||||||||||
| Tenant Security Deposits | 863,961 | 705,195 | 892,726 | 879,676 | ||||||||||||
| Series C Redeemable Preferred Stock, par value $0.01 per share; 47,000 shares authorized; 15,994 and 5,734 shares issued and outstanding; redemption value $15,994,000 and $5,734,400 as of September 30, 2022 and December 31, 2021, respectively | 14,888,366 | 5,214,370 | ||||||||||||||
| Series C Redeemable Preferred Stock, par value $0.01 per share; 47,000 shares authorized; 25,394 and 21,584 shares issued and outstanding; redemption value $25,393,919 and $21,584,002 as of March 31, 2023 and December 31, 2022, respectively | 23,812,360 | 20,177,187 | ||||||||||||||
| Total Liabilities | 96,759,278 | 64,374,140 | 118,105,833 | 107,959,238 | ||||||||||||
| Commitments and Contingencies (See note 6) | ||||||||||||||||
| Redeemable Preferred Stock – subject to redemption | ||||||||||||||||
| Series A Cumulative Redeemable Convertible Preferred Stock, par value $0.01 per share; 4,000,000 shares authorized; 1,866,000 and 1,886,000 shares issued and outstanding; redemption value $6,997,500 and $7,072,500 as of September 30, 2022 and December 31, 2021, respectively | 6,129,145 | 5,841,771 | ||||||||||||||
| Series B Cumulative Redeemable Preferred Stock, par value $0.01 per share; 1,000,000 shares authorized; 747,951 and 758,551 shares issued and outstanding; redemption value $11,219,265 and $11,378,265 as of September 30, 2022 and December 31, 2021, respectively | 8,940,614 | 8,518,594 | ||||||||||||||
| Series A Cumulative Redeemable Convertible Preferred Stock, par value $0.01 per share; 4,000,000 shares authorized; 1,826,000 shares issued and outstanding; redemption value $6,847,500 as of March 31, 2023 and December 31, 2022 | 6,222,041 | 6,107,916 | ||||||||||||||
| Series B Cumulative Redeemable Preferred Stock, par value $0.01 per share; 1,000,000 shares authorized; 747,951 shares issued and outstanding; redemption value $11,219,265 as of March 31, 2023 and December 31, 2022 | 9,303,822 | 9,122,218 | ||||||||||||||
| Series D Cumulative Redeemable Preferred Stock, par value $0.01 per share; 75,000 shares authorized; no shares issued and outstanding; no redemption value as of March 31, 2023 and December 31, 2022 | - | - | ||||||||||||||
| Deficit | ||||||||||||||||
| Common Stock, par value $0.01 per share; 200,000,000 shares authorized; 12,478,012 and 12,403,680 shares are issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | 124,780 | 124,037 | ||||||||||||||
| Common Stock, par value $0.01 per share; 200,000,000 shares authorized; 12,493,012 shares are issued and outstanding as of March 31, 2023 and December 31, 2022 | 124,930 | 124,930 | ||||||||||||||
| Additional Paid in Capital | (4,952,551 | ) | (3,160,712 | ) | (5,856,037 | ) | (5,428,984 | ) | ||||||||
| Accumulated Deficit | (11,186,912 | ) | (4,672,537 | ) | (14,456,564 | ) | (12,521,376 | ) | ||||||||
| Total Manufactured Housing Properties Inc. Deficit | (16,014,683 | ) | (7,709,212 | ) | (20,187,671 | ) | (17,825,430 | ) | ||||||||
| Non-controlling interest in Variable Interest Entities | (1,574,791 | ) | (977,513 | ) | (1,982,643 | ) | (1,770,789 | ) | ||||||||
| Total Deficit | (17,589,474 | ) | (8,686,725 | ) | (22,170,314 | ) | (19,596,219 | ) | ||||||||
| TOTAL LIABILITIES AND DEFICIT | $ | 94,239,563 | $ | 70,047,780 | $ | 111,461,382 | $ | 103,593,153 | ||||||||
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,MARCH 31, 2023 and 2022 AND 2021
(UNAUDITED)
| Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2023 | 2022 | |||||||||||||||||||
| Revenue | ||||||||||||||||||||||||
| Rental and related income | $ | 3,697,558 | $ | 2,250,169 | $ | 10,021,357 | $ | 5,690,227 | $ | 4,145,189 | $ | 3,040,022 | ||||||||||||
| Gross revenues from home sales | 18,570 | 9,000 | 121,164 | 74,244 | ||||||||||||||||||||
| Gross Revenues from Home Sales | 112,300 | 15,000 | ||||||||||||||||||||||
| Total revenues | 3,716,128 | 2,259,169 | 10,142,521 | 5,764,471 | 4,257,489 | 3,055,022 | ||||||||||||||||||
| Community operating expenses | ||||||||||||||||||||||||
| Repair and maintenance | 287,686 | 177,878 | 803,505 | 401,068 | 275,529 | 221,019 | ||||||||||||||||||
| Real estate taxes | 186,358 | 97,328 | 584,280 | 296,568 | 201,633 | 180,829 | ||||||||||||||||||
| Utilities | 259,758 | 189,022 | 735,638 | 488,334 | 306,412 | 235,895 | ||||||||||||||||||
| Insurance | 87,044 | 35,315 | 226,341 | 103,712 | 104,059 | 60,298 | ||||||||||||||||||
| General and administrative expense | 510,036 | 218,830 | 1,291,276 | 522,952 | 708,168 | 376,196 | ||||||||||||||||||
| Total community operating expenses | 1,330,882 | 718,373 | 3,641,040 | 1,812,634 | 1,595,801 | 1,074,237 | ||||||||||||||||||
| Corporate payroll and overhead | 1,519,271 | 580,109 | 3,683,267 | 1,744,576 | 1,571,454 | 909,078 | ||||||||||||||||||
| Depreciation expense | 898,963 | 507,493 | 2,477,642 | 1,411,158 | 1,023,015 | 759,704 | ||||||||||||||||||
| Interest expense | 1,506,290 | 546,065 | 3,843,031 | 1,439,419 | 2,053,455 | 1,101,693 | ||||||||||||||||||
| Refinancing costs | 3,604,671 | - | 3,620,422 | 16,675 | ||||||||||||||||||||
| Cost of home sales | 22,676 | - | 177,410 | - | 130,806 | - | ||||||||||||||||||
| Total expenses | 8,882,753 | 2,352,040 | 17,442,812 | 6,424,462 | 6,374,531 | 3,844,712 | ||||||||||||||||||
| Other income | 500 | - | 500 | 139,300 | ||||||||||||||||||||
| Net loss before provision for income taxes | (5,166,125 | ) | (92,871 | ) | (7,299,791 | ) | (520,691 | ) | (2,117,042 | ) | (789,690 | ) | ||||||||||||
| Provision for income taxes | - | - | - | - | - | - | ||||||||||||||||||
| Net loss | $ | (5,166,125 | ) | $ | (92,871 | ) | $ | (7,299,791 | ) | $ | (520,691 | ) | $ | (2,117,042 | ) | $ | (789,690 | ) | ||||||
| Net loss attributable to non-controlling interest variable interest entities | (376,105 | ) | (516,506 | ) | (786,590 | ) | (343,073 | ) | (182,466 | ) | (159,570 | ) | ||||||||||||
| Net income (loss) attributable to Manufactured Housing Properties, Inc. | (4,790,020 | ) | 423,635 | (6,513,201 | ) | (177,618 | ) | (1,934,576 | ) | (630,120 | ) | |||||||||||||
| Preferred stock dividends and put option value accretion | ||||||||||||||||||||||||
| Series A preferred dividends | 94,178 | 103,394 | 282,778 | 290,561 | 91,633 | 94,300 | ||||||||||||||||||
| Series A preferred put option value accretion | 117,726 | 118,146 | 353,472 | 354,396 | 114,125 | 117,871 | ||||||||||||||||||
| Series B preferred dividends | 151,785 | 151,786 | 455,355 | 427,517 | 149,665 | 151,785 | ||||||||||||||||||
| Series B preferred put option value accretion | 159,472 | 184,254 | 527,980 | 554,780 | 181,604 | 184,254 | ||||||||||||||||||
| Total preferred stock dividends and put option value accretion | 523,161 | 557,580 | 1,619,585 | 1,627,254 | 537,027 | 548,210 | ||||||||||||||||||
| Net loss attributable to common stockholders | $ | (5,313,181 | ) | $ | (133,945 | ) | $ | (8,132,786 | ) | $ | (1,804,872 | ) | $ | (2,471,603 | ) | $ | (1,178,330 | ) | ||||||
| Weighted average shares - basic and fully diluted | 12,812,232 | 12,923,355 | 12,779,543 | 12,921,485 | 12,883,521 | 13,108,188 | ||||||||||||||||||
| Net loss per share – basic and fully diluted | $ | (0.41 | ) | $ | (0.01 | ) | $ | (0.64 | ) | $ | (0.14 | ) | $ | (0.19 | ) | $ | (0.09 | ) | ||||||
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,MARCH 31, 2023 AND 2022 AND 2021
(UNAUDITED)
| COMMON STOCK | ADDITIONAL PAID IN | ACCUMULATED | TOTAL MANUFACTURED HOUSING PROPERTIES | NON CONTROLLING | 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 | 12,398,580 | $ | 124,016 | $ | (1,052,611 | ) | (3,574,194 | ) | $ | (4,502,789 | ) | $ | (419,275 | ) | $ | (4,922,064 | ) | |||||||||||||||||||||||||||||||||||||||
| Stock option expense | - | - | 646 | - | 646 | - | 646 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred shares Series A dividends | - | - | (96,167 | ) | - | (96,167 | ) | - | (96,167 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Preferred shares Series A put option value accretion | - | - | (118,125 | ) | - | (118,125 | ) | - | (118,125 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Preferred shares Series B dividends | - | - | (129,409 | ) | - | (129,409 | ) | - | (129,409 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Preferred shares Series B put option value accretion | - | - | (185,839 | ) | - | (185,839 | ) | - | (185,839 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock issuance to preferred share holders | 5,100 | 51 | 1,326 | - | 1,377 | - | 1,377 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Contributions to VIE | - | - | - | - | - | 12,371 | 12,371 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions from VIE | - | - | - | - | - | (20,000 | ) | (20,000 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | (414,276 | ) | (414,276 | ) | 55,085 | (359,191 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2021 | 12,403,680 | $ | 124,067 | $ | (1,580,179 | ) | $ | (3,988,470 | ) | $ | (5,444,582 | ) | $ | (371,819 | ) | $ | (5,816,401 | ) | ||||||||||||||||||||||||||||||||||||||
| Stock option expense | - | - | 37,171 | - | 37,171 | - | 37,171 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred shares Series A dividends | - | - | (91,000 | ) | - | (91,000 | ) | - | (91,000 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Preferred shares Series A put option value accretion | - | - | (118,125 | ) | - | (118,125 | ) | - | (118,125 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Preferred shares Series B dividends | - | - | (146,322 | ) | - | (146,322 | ) | - | (146,322 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Preferred shares Series B put option value accretion | - | - | (184,687 | ) | - | (184,687 | ) | - | (184,687 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Distributions from VIE | - | - | - | - | - | (30,000 | ) | (30,000 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Net Income (Loss) | - | - | - | (186,977 | ) | (186,977 | ) | 118,348 | (68,629 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | 12,403,680 | $ | 124,067 | $ | (2,083,142 | ) | $ | (4,175,447 | ) | $ | (6,134,522 | ) | $ | (283,471 | ) | $ | (6,417,993 | ) | ||||||||||||||||||||||||||||||||||||||
| Stock option expense | - | - | 216 | - | 216 | - | 216 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred shares Series A put option value accretion | - | - | (118,146 | ) | - | (118,146 | ) | - | (118,146 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Preferred shares Series A dividends | - | - | (103,394 | ) | - | (103,394 | ) | - | (103,394 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Preferred shares Series B put option value accretion | - | - | (184,254 | ) | - | (184,254 | ) | - | (184,254 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Preferred shares Series B dividends | - | - | (151,786 | ) | - | (151,786 | ) | - | (151,786 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Distributions | - | - | - | - | - | (30,000 | ) | (30,000 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Net Income (Loss) | - | - | - | 423,635 | 423,635 | (516,506 | ) | (92,871 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2021 | 12,403,680 | 124,067 | (2,640,506 | ) | (3,751,812 | ) | (6,268,251 | ) | (829,977 | ) | (7,098,228 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| SHARES | PAR VALUE | CAPITAL | DEFICIT | INC. | INTEREST | DEFICIT | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2022 | 12,403,680 | $ | 124,037 | $ | (3,160,712 | ) | $ | (4,672,537 | ) | $ | (7,709,212 | ) | $(977,513) | $ | (8,686,725 | ) | 12,403,680 | $ | 124,037 | $ | (3,160,712 | ) | (4,672,537 | ) | $ | (7,709,212 | ) | $ | (977,513 | ) | $ | (8,686,725 | ) | |||||||||||||||||||||||
| Stock option expense | - | - | 49,760 | - | 49,760 | - | 49,760 | - | - | 49,760 | - | 49,760 | - | 49,760 | ||||||||||||||||||||||||||||||||||||||||||
| Preferred shares Series A dividends | - | - | (94,300 | ) | - | (94,300 | ) | - | (94,300 | ) | - | - | (94,300 | ) | - | (94,300 | ) | - | (94,300 | ) | ||||||||||||||||||||||||||||||||||||
| Preferred shares Series A put option value accretion | - | - | (117,871 | ) | - | (117,871 | ) | - | (117,871 | ) | - | - | (117,871 | ) | - | (117,871 | ) | - | (117,871 | ) | ||||||||||||||||||||||||||||||||||||
| Preferred shares Series B dividends | - | - | (151,785 | ) | - | (151,785 | ) | - | (151,785 | ) | - | - | (151,785 | ) | - | (151,875 | ) | - | (151,875 | ) | ||||||||||||||||||||||||||||||||||||
| Preferred shares Series B put option value accretion | - | - | (184,254 | ) | - | (184,254 | ) | - | (184,254 | ) | - | - | (184,254 | ) | - | (184,254 | ) | - | (184,254 | ) | ||||||||||||||||||||||||||||||||||||
| Distributions from VIE | - | - | - | - | - | (30,000 | ) | (30,000 | ) | - | - | - | - | - | (30,000 | ) | (30,000 | ) | ||||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | (630,120 | ) | (630,120 | ) | (159,570 | ) | (789,690 | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | (630,120 | ) | (630,120 | ) | (159,570 | ) | (789,690 | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | 12,403,680 | $ | 124,037 | $ | (3,659,162 | ) | $ | (5,302,657 | ) | $ | (8,837,782 | ) | $ | (1,167,083 | ) | $ | (10,004,865 | ) | 12,403,680 | $ | 124,037 | $ | (3,659,162 | ) | $ | (5,302,657 | ) | $ | (8,837,782 | ) | $ | (1,167,083 | ) | $ | (10,004,865 | ) | ||||||||||||||||||||
| Balance at January 1, 2023 | 12,493,012 | $ | 124,930 | $ | (5,428,984 | ) | $ | (12,521,376 | ) | $ | (17,825,430 | ) | $ | (1,770,789 | ) | $ | (19,596,219 | ) | ||||||||||||||||||||||||||||||||||||||
| Stock option expense | - | - | 28,062 | - | 28,062 | - | 28,062 | - | - | 109,974 | - | 109,974 | - | 109,974 | ||||||||||||||||||||||||||||||||||||||||||
| Common Stock issued through stock options | 8,333 | 83 | - | - | 83 | - | 83 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred shares Series A dividends | - | - | (94,300 | ) | - | (94,300 | ) | - | (94,300 | ) | - | - | (91,633 | ) | - | (91,633 | ) | - | (91,633 | ) | ||||||||||||||||||||||||||||||||||||
| Preferred shares Series A put option value accretion | - | - | (117,875 | ) | - | (117,875 | ) | - | (117,875 | ) | - | - | (114,125 | ) | - | (114,125 | ) | - | (114,125 | ) | ||||||||||||||||||||||||||||||||||||
| Preferred shares Series B dividends | - | - | (151,785 | ) | - | (151,785 | ) | - | (151,785 | ) | - | - | (149,665 | ) | - | (149,665 | ) | - | (149,665 | ) | ||||||||||||||||||||||||||||||||||||
| Preferred shares Series B put option value accretion | - | - | (184,254 | ) | - | (184,254 | ) | - | (184,254 | ) | - | - | (181,604 | ) | - | (181,604 | ) | - | (181,604 | ) | ||||||||||||||||||||||||||||||||||||
| Distributions from VIE | - | - | - | - | - | (30,000 | ) | (30,000 | ) | - | - | - | (612 | ) | (612 | ) | (29,388 | ) | (30,000 | ) | ||||||||||||||||||||||||||||||||||||
| Net Income (Loss) | - | - | - | (1,093,061 | ) | (1,093,061 | ) | (250,915 | ) | (1,343,976 | ) | - | - | - | (1,934,576 | ) | (1,934,576 | ) | (182,466 | ) | (2,117,042 | ) | ||||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | 12,412,013 | $ | 124,120 | $ | (4,179,314 | ) | $ | (6,395,718 | ) | $ | (10,450,912 | ) | $ | (1,447,998 | ) | $ | (11,898,910 | ) | ||||||||||||||||||||||||||||||||||||||
| Stock option expense | - | - | 28,062 | - | 28,062 | - | 28,062 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock issued through stock options | 65,999 | 660 | - | - | 660 | - | 660 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred shares Series A dividends | - | - | (94,178 | ) | - | (94,178 | ) | - | (94,178 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Preferred shares Series A put option value accretion | - | - | (117,726 | ) | - | (117,726 | ) | - | (117,726 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Preferred shares Series B dividends | - | - | (151,785 | ) | - | (151,785 | ) | - | (151,785 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Preferred shares Series B put option value accretion | - | - | (159,472 | ) | - | (159,472 | ) | - | (159,472 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Distributions from VIE | - | - | - | - | - | (30,000 | ) | (30,000 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Intercompany Transfer of Homes– Deemed Dividend | - | - | (278,138 | ) | - | (278,138 | ) | 278,138 | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Joint Ventures Adjustment | - | - | - | (1,174 | ) | (1,174) | 1,174 | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net Income (Loss) | - | - | - | (4,790,020 | ) | (4,790,020 | ) | (376,105 | ) | (5,166,125 | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | 12,478,012 | $ | 124,780 | $ | (4,952,551 | ) | $ | (11,186,912 | ) | $ | (16,014,683 | ) | $ | (1,574,791 | ) | $ | (17,589,474 | ) | ||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | 12,493,012 | $ | 124,930 | $ | (5,856,037 | ) | $ | (14,456,564 | ) | $ | (20,187,671 | ) | $ | (1,982,643 | ) | $ | (22,170,314 | ) | ||||||||||||||||||||||||||||||||||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
F-3
MANUFACTURED HOUSING PROPERTIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30,MARCH 31, 2023 AND 2022 AND 2021
(UNAUDITED)
| September 30, 2022 | September 30, 2021 | March 31, 2023 | March 31, 2022 | |||||||||||||
| Cash Flows from Operating Activities: | ||||||||||||||||
| Net Loss | $ | (7,299,791 | ) | $ | (520,691 | ) | $ | (2,117,042 | ) | $ | (789,690 | ) | ||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||||||
| Stock option expense | 105,884 | 38,033 | 109,974 | 49,760 | ||||||||||||
| Amortization of debt discount | 481,545 | 140,423 | 310,512 | 162,328 | ||||||||||||
| Write off debt issuance costs recorded as debt discount | 2,219,591 | 56,691 | ||||||||||||||
| Write off acquisition and development pursuit costs | 49,326 | - | 19,806 | 59,486 | ||||||||||||
| Prepayment penalty upon debt extinguishment | 1,400,831 | - | ||||||||||||||
| Gain on debt extinguishment | - | (139,300 | ) | |||||||||||||
| Loss on sales of homes | 56,246 | 74,494 | 18,505 | 17,465 | ||||||||||||
| Depreciation | 2,477,642 | 1,411,158 | 1,023,015 | 759,704 | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||
| Accounts receivable | (168,648 | ) | (57,283 | ) | 142,187 | 15,182 | ||||||||||
| Other assets | 413,731 | 1,259,065 | 257,376 | 269,602 | ||||||||||||
| Accounts payable | 451,425 | 95,250 | 25,386 | 33,547 | ||||||||||||
| Tenant security deposits | 158,766 | 202,468 | 13,050 | 48,884 | ||||||||||||
| Accrued liabilities | (348,401 | ) | 108,900 | (303,477 | ) | (728,086 | ) | |||||||||
| Net Cash Provided by (Used in) Operating Activities | (1,853 | ) | 2,669,208 | |||||||||||||
| Net Cash Used in Operating Activities | (500,708 | ) | (101,818 | ) | ||||||||||||
| Cash Flows from Investing Activities: | ||||||||||||||||
| Capital improvements | (1,872,803 | ) | (1,317,405 | ) | (446,055 | ) | (764,907 | ) | ||||||||
| Proceeds from sales of homes | 121,164 | 74,244 | 112,300 | 15,000 | ||||||||||||
| Proceeds from sale of community | 242,356 | - | ||||||||||||||
| Purchases of investment properties | (6,444,135 | ) | (2,390,000 | ) | (2,570,000 | ) | (1,050,000 | ) | ||||||||
| Payment of pursuit costs | (291,742 | ) | - | (231,141 | ) | (66,071 | ) | |||||||||
| Payment of acquisition costs | (471,096 | ) | (160,384 | ) | (107,832 | ) | (163,578 | ) | ||||||||
| Net Cash Used in Investing Activities | (8,958,612 | ) | (3,793,545 | ) | (3,000,372 | ) | (2,029,556 | ) | ||||||||
| Cash Flows from Financing Activities: | ||||||||||||||||
| Proceeds from related party debt | 4,700,000 | - | ||||||||||||||
| Repayment of related party debt | (4,350,000 | ) | - | |||||||||||||
| Proceeds from refinanced notes payable and lines of credit | 66,071,563 | - | ||||||||||||||
| Repayment of notes payable upon refinance | (52,774,771 | ) | - | |||||||||||||
| Repayment of lines of credit upon refinance - VIEs | (3,085,607 | ) | ||||||||||||||
| Proceeds from line of credit – related party | - | 700,000 | ||||||||||||||
| Repayment of lines of credit - VIEs | (110,644 | ) | (47,952 | ) | ||||||||||||
| Repayment of notes payable | (506,656 | ) | (458,844 | ) | (15,955 | ) | (1,699,464 | ) | ||||||||
| Repayment of lines of credit - VIEs | (147,144 | ) | - | |||||||||||||
| Proceeds from exercise of options | 743 | - | ||||||||||||||
| Proceeds from lines of credit - VIEs | 1,329,417 | - | ||||||||||||||
| Proceeds from issuance of preferred stock | 10,253,917 | 3,519,484 | 3,874,917 | 4,289,444 | ||||||||||||
| Payment of debt costs and Series C Preferred Stock costs recorded as debt discount | (3,956,743 | ) | (927,191 | ) | (636,614 | ) | (847,499 | ) | ||||||||
| Prepayment penalty upon debt extinguishment | (1,400,831 | ) | - | |||||||||||||
| Redemption of Preferred Stock | (172,062 | ) | (10,000 | ) | (65,000 | ) | - | |||||||||
| Fees paid in advance for debt | (45,000 | ) | - | (78,675 | ) | - | ||||||||||
| Series A and Series B Preferred share dividends | (728,355 | ) | (718,078 | ) | (238,998 | ) | (242,785 | ) | ||||||||
| Contribution to VIE | - | 12,371 | ||||||||||||||
| Distributions from VIE | (90,000 | ) | (80,000 | ) | (30,000 | ) | (30,000 | ) | ||||||||
| Net Cash Provided by Financing Activities | 13,769,054 | 1,337,742 | 4,028,448 | 2,121,744 | ||||||||||||
| Net change in cash, cash equivalents and restricted cash | 4,808,589 | 213,405 | 527,368 | (9,630 | ) | |||||||||||
| Cash, cash equivalents and restricted cash at beginning of the period | 2,106,329 | 1,988,857 | 10,405,615 | 2,106,329 | ||||||||||||
| Cash, cash equivalents and restricted cash at end of the period | $ | 6,914,918 | $ | 2,202,262 | $ | 10,932,983 | $ | 2,096,699 | ||||||||
| Cash, cash equivalents and restricted cash consist of the following: | ||||||||||||||||
| End of period | ||||||||||||||||
| Cash and cash equivalents | $ | 1,896,839 | $ | 1,660,242 | $ | 5,710,926 | $ | 1,342,620 | ||||||||
| Restricted cash | 5,018,079 | 541,620 | 5,222,057 | 754,079 | ||||||||||||
| Total | $ | 6,914,918 | $ | 2,202,262 | $ | 10,932,983 | $ | 2,096,699 | ||||||||
| Cash, cash equivalents and restricted cash consist of the following: | ||||||||||||||||
| Beginning of period | ||||||||||||||||
| Cash and cash equivalents | $ | 1,401,134 | $ | 1,649,705 | $ | 5,090,369 | $ | 1,401,134 | ||||||||
| Restricted cash | 705,195 | 339,152 | 5,315,246 | 705,195 | ||||||||||||
| Total | $ | 2,106,329 | $ | 1,988,857 | $ | 10,405,615 | $ | 2,106,329 | ||||||||
| Cash paid for: | ||||||||||||||||
| Income Taxes | $ | - | $ | - | - | - | ||||||||||
| Interest | $ | 2,395,384 | $ | 1,249,612 | $ | 1,195,172 | $ | 784,735 | ||||||||
| Series C Preferred share dividends included in interest expense | $ | 484,521 | $ | - | $ | 373,773 | $ | 96,126 | ||||||||
| Non-Cash Investing and Financing Activities | ||||||||||||||||
| Notes and lines of credit related to acquisitions and capital improvements | $ | 13,188,735 | $ | 10,072,286 | $ | 5,399,120 | $ | 4,624,414 | ||||||||
| Non-cash Series A and B Preferred Stock accretion | $ | 881,452 | $ | 909,175 | $ | 295,729 | $ | 302,125 | ||||||||
| Debt issuance costs included in accounts payable and accrued liabilities | $ | 1,061,000 | $ | - | ||||||||||||
| Stock issued in connection with Series B Preferred Stock issuance | $ | - | $ | 1,377 | ||||||||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
F-4
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,MARCH 31, 2023 AND 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 consolidatedunaudited condensed 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, 20212022 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, 20212022 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 31, 2022.29, 2023. 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, 2022March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.2023.
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,MARCH 31, 2023 AND 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 | |||
| Pecan Grove MHP LLC | North Carolina | October 12, 2016 | 100% | |||
| Azalea MHP LLC | North Carolina | October 25, 2017 | 100% | |||
| Holly Faye MHP LLC | North Carolina | October 25, 2017 | 100% | |||
| Chatham Pines MHP LLC | North Carolina | October 31, 2017 | 100% | |||
| Maple Hills MHP LLC | North Carolina | October 31, 2017 | 100% | |||
| Lakeview MHP LLC | South Carolina | November 1, 2017 | 100% | |||
| MHP Pursuits LLC | North Carolina | January 31, 2019 | 100% | |||
| Mobile Home Rentals LLC | North Carolina | September 30, 2016 | 100% | |||
| Hunt Club MHP LLC | South Carolina | March 8, 2019 | 100% | |||
| B&D MHP LLC | South Carolina | April 4, 2019 | 100% | |||
| Crestview MHP LLC | North Carolina | June 28, 2019 | 100% | |||
| Springlake MHP LLC | Georgia | October 10, 2019 | 100% | |||
| ARC MHP LLC | South Carolina | November 13, 2019 | 100% | |||
| Countryside MHP LLC | South Carolina | March 12, 2020 | 100% | |||
| Evergreen MHP LLC | Tennessee | March 17, 2020 | 100% | |||
| Golden Isles MHP LLC | Georgia | March 16, 2021 | 100% | |||
| Anderson MHP LLC | South Carolina | June 2, 2021 | 100% | |||
| Capital View MHP LLC | South Carolina | August 6, 2021 | 100% | |||
| Hidden Oaks MHP LLC | South Carolina | August 6, 2021 | 100% | |||
| North Raleigh MHP LLC | North Carolina | September 16, 2021 | 100% | |||
| Carolinas 4 MHP LLC | North Carolina | November 30, 2021 | 100% | |||
| Charlotte 3 Park MHP LLC | North Carolina | December 10, 2021 | 100% | |||
| Sunnyland MHP LLC | Georgia | January 7, 2022 | 100% | |||
| Warrenville MHP LLC | South Carolina | February 15, 2022 | 100% | |||
| Solid Rock MHP LLC | South Carolina | June 6, 2022 | 100% | |||
| Spaulding MHP LLC | Georgia | June 10, 2022 | 100% | |||
| Raeford MHP Development LLC | North Carolina | June 20, 2022 | 100% | |||
| Solid Rock MHP Homes LLC | South Carolina | June 22, 2022 | 100% | |||
| Country Estates MHP | North Carolina | July 6, 2022 | 100% | |||
| Statesville MHP LLC | North Carolina | July 6, 2022 | 100% | |||
| Timberview MHP LLC | North Carolina | July 7, 2022 | 100% | |||
| Red Fox MHP LLC | North Carolina | July 7, 2022 | 100% | |||
| Northview MHP LLC | North Carolina | July 8, 2022 | 100% | |||
| Meadowbrook MHP LLC | South Carolina | July 25, 2022 | 100% | |||
| Sunnyland 2 MHP LLC | Georgia | July 27, 2022 | 100% | |||
| Dalton 3 MHP | Georgia | August 8, 2022 | 100% | |||
| MHP Home Holdings LLC | North Carolina | August 17, 2022 | 100% | |||
| Glynn Acres MHP | Georgia | September 9, 2022 | 100% | |||
| Wake Forest 2 MHP | North Carolina | October 27, 2022 | 100% | |||
| Country Aire MHP LLC | South Carolina | December 1, 2022 | 100% | |||
| Mobile Cottage MHP LLC | North Carolina | December 7, 2022 | 100% | |||
| Merritt Place MHP LLC | Georgia | December 6, 2022 | 100% | |||
| MHR Home Development LLC | Delaware | January 19, 2023 | 100% | |||
| Palm Shadows LLC | Texas | April 12, 2023 | 100% | |||
| Gvest Finance LLC | North Carolina | December 11, 2018 | VIE | |||
| Gvest Homes I LLC | Delaware | November 9, 2020 | VIE | |||
| Brainerd Place LLC | Delaware | February 24, 2021 | VIE | |||
| Bull Creek LLC | Delaware | April 13, 2021 | VIE | |||
| Gvest Anderson Homes LLC | Delaware | June 22, 2021 | VIE | |||
| Gvest Capital View Homes LLC | Delaware | August 6, 2021 | VIE | |||
| Gvest Hidden Oaks Homes LLC | Delaware | August 6, 2021 | VIE | |||
| Gvest Springlake Homes LLC | Delaware | September 24, 2021 | VIE | |||
| Gvest Carolinas 4 Homes LLC | Delaware | November 13, 2021 | VIE | |||
| Gvest Sunnyland Homes LLC | Delaware | January 6, 2022 | VIE | |||
| Gvest Warrenville Homes LLC | Delaware | February 14, 2022 | VIE | |||
| Gvest Wake Forest 2 Homes | North Carolina | October 27, 2022 | VIE |
| During the three |
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,MARCH 31, 2023 AND 2022 AND 2021
(UNAUDITED)
Revenue Recognition
Mobile home rentalRental and related income is generated from lease agreements for our manufactured housing 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,MARCH 31, 2023 AND 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 5% of the debt service payment as a reserve.
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 49% of these entities and Gvest Real Estate LLC, an entity whose sole owner is Raymond M. Gee, owns 51%. The Company also executed operating agreements with these entities which designate Gvest Capital Management LLC, a company owned and controlled by Gvest Real Estate Capital LLC, as manager with the authority, power, and discretion to manage and control the entities’ business decisions. The operating agreements require the Company to make cash contributions to the entities to fund their activities, operations, and existence, if the Company approves the contribution requests from the manager, which ultimately provides the Company with power to direct the economically significant activities of these entities.
APursuant to U.S. generally accepted accounting principles, or GAAP, 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.
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 ninethree months ended September 30, 2022,March 31, 2023, the potentially dilutive penny options for the purchase of 357,176390,509 shares of Common Stock were included in basic loss per share. Other securities outstanding as of September 30, 2022March 31, 2023 not included in dilutive loss per share, as the effect would be anti-dilutive, were 146,666198,333 unvested stock options and 1,866,0001,826,000 shares of Series A Cumulative Redeemable Convertible Preferred Stock, which are convertible into Common Stock for a total of 1,866,0001,826,000 shares.
For the ninethree months ended September 30, 2021,March 31, 2022, the potentially dilutive penny options for the purchase of 519,675704,508 shares of Common Stock were included in basic loss per share. Other securities outstanding as of September 30, 2021March 31, 2022 not included in dilutive loss per share, as the effect would be anti-dilutive, were 186,50015,000 unvested stock options and 1,886,000 shares of Series A Cumulative Redeemable Convertible Preferred Stock, which wereare convertible into Common Stock for a total of 1,886,000 shares.
F-8
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023 AND 2022
(UNAUDITED)
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.
Leases
Rental revenue is generated from lease agreements with tenants for lease of the Company’s sites and manufactured homes where the Company is the lessor. The terms of these leases are generally annual or month-to-month and are renewable upon the consent of both parties and contain no option to purchase the underlying asset. Therefore, these leases are accounted for as operating leases in accordance with ASC 842.
The Company is the lessee in a lease agreement for its corporate office space with a related party entity owned and controlled by Raymond M. Gee, the Company’s CEO and chairman. The lease term for the office is month-to-month, the lease is terminable by either party if written, thirty-day notice is given, and the lease contains no option to purchase the facility. This lease is accounted for as an operating lease. Pursuant to ASC 842-20-25-2, the Company, as the lessee, has elected the short-term lease measurement exception whereby lease expense is recognized on a straight-line basis over the term of the lease with no right-of-use asset or lease liability recognized on the consolidated balance sheet.
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 a third-party purchase price allocation report obtained in conjunction with the purchase based on appraisals.
Debt Issuance Costs
Costs incurred in connection with obtaining financing are deferred and amortized on a straight-line basis over the term of the related obligation with the amortization included as a component of interest expense in the statement of operations. The unamortized balance of the debt issuance costs is presented in the consolidated balance sheet as direct reduction from the carrying amount of the debt. Upon prepayment, refinance, or substantial modification of a debt obligation, the related unamortized costs are written off to expense.
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 3 to 25 years). Land development costs are not depreciated until they are put in use, at which time they are capitalized as land improvements. Interest Expense pertaining to Land Development Costs are capitalized. Maintenance and Repairs are charged to expense as incurred and improvements are capitalized. The costs and related accumulated depreciation of property sold or otherwise disposed of are removed from the financial statement and any gain or loss is reflected in the current period’s results of operations.
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, 2022March 31, 2023 and 2021.2022.
F-9
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,MARCH 31, 2023 AND 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,March 31, 2023, restricted cash consisted of $5,018,079$5,222,057 related to cash reserved for tenant security deposits of $863,961$892,726 and lender escrows for capital improvements, insurance, and real estate taxes of $4,154,118.$4,329,331. As of December 31, 2021,2022, the restricted cash consistedbalance of $705,195 related to$5,315,246 was comprised of $879,676 of cash reserved for tenant security deposits.deposits and lender escrows for capital improvements, insurance, and real estate taxes in the amount of $4,435,570.
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, 2022March 31, 2023 and December 31, 2021,2022, the Company had approximately $642,000$4,318,000 and $763,000$4,006,000 above the FDIC-insured limit, respectively.
Liquidity
Liquidity
The consolidatedunaudited condensed 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 yearquarter since inception and has experienced nearly breakevenslightly negative cash flows from operations during the ninethree months ended September 30, 2022.March 31, 2023. 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 more than 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 55% over the twelve months ended September 30, 2022, which are still stabilizing. The Company has incurred additional corporate payroll and overhead and interest expense in order to accomplish such growth which has driven losses and used operating cash flow.
The Company’s principal demands for cash are operating and administrative expenses, dividends on preferred stock, debt service payments, capital expenditures to improve properties, and community acquisitions. The Company believes its current available cash and anticipated revenues is sufficientexpects to fund its operations for at leastoperating cash requirements over the next twelve months following the filingyear through a combination of these consolidated financial statementscash on hand, net cash provided by its property operations, and through December 2023. The Company also has two revolving promissory notesif necessary, borrowings from related party lines of credit 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 itsthe Company’s 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. Proceeds from issuance of Series C Preferred Stock and cash held in escrow with lenders will fund the Company’s capital improvement projects and acquisitions. To the extent that funds or appropriate communities are not available, fewer acquisitions and capital improvements will be made.
Stock Based Compensation
All stock basedstock-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 nonemployeesnon-employees 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 $105,884$109,975 and $38,033$49,760 during the ninethree months ended September 30,March 31, 2023 and 2022, and 2021, respectively.
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,MARCH 31, 2023 AND 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 50 percent likely to be realized upon ultimate settlement with the related tax authority.
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,March 31, 2023, and December 31, 2021,2022, 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 $705,195 cash reserved for tenant security deposits to separately present as restricted cash on the balance sheet.
For the nine months ended September 30, 2021, the Company reclassed $74,244 from cash used for capital improvements to proceeds from sale of homes within the net cash used in investing activities section of the unaudited condensed consolidated statement of cash flows and reclassed $160,384 from cash used for payment of acquisition costs within the financing activities section to the investing activities section.
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 evaluatingadopted the potentialnew guidance on January 1, 2023 and determined it did not have a material impact this standard may have on theits 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.
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.
F-11
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023 AND 2022
(UNAUDITED)
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 $4,664,384 for which homes owned by Gvest Anderson Homes LLC, Gvest Capital View Homes LLC, Gvest Hidden Oaks Homes LLC, Gvest Carolinas 4 Homes LLC and Gvest Sunnyland Homes LLC were collateral. Homes in these communities were transferred to the Company’s wholly owned subsidiary, MHP Home Holdings LLC, in exchange for the debt paid off on behalf of these VIE entities owned by Gvest Finance LLC and intercompany debt forgiven totaling $460,226. This change in ownership of the homes is reflected in the current period’s balance sheet and the difference between the debt paid off and forgiven and the cost basis of the assets exchanged is reflected as an adjustment to additional paid in capital of $278,138 on the statement of changes in deficit which is eliminated in consolidation. Furthermore, the Company used refinance proceeds to pay off loans held by Gvest Finance LLC and Gvest Springlake Homes LLC which financed homes in the Springlake and Countryside communities. These VIE entities are in the process of obtaining replacement debt which has not been finalized of the date of this filing. An intercompany short-term loan of $3,908,731 is included in accrued liabilities and eliminated in consolidation equal to the Countryside and Springlake debt and refinance costs paid by the Company on the VIEs’ behalf. See Note 5 for more information about the refinance.
Included in the unaudited condensed consolidated results of operations for the three months ended September 30,March 31, 2023 and 2022 and 2021 were net loss of $376,105$182,466 and $516,506,$159,570, respectively, after deducting an additional management fee equal to cash flow after debt service per the management agreement of $11,045$30,522 and $328,762,$88,013, respectively.
Included in the unaudited condensed consolidated results of operations for the nine months ended September 30, 2022 and 2021 were net loss of $786,590 and $343,073, respectively, after deducting an additional management fee equal to cash flow after debt service per the management agreement of $316,624 and $587,762, respectively.
The consolidated balance sheets as of September 30, 2022March 31, 2023 and December 31, 20212022 included the following amounts related to the consolidated VIEs.
| September 30, 2022 | December 31, 2021 | March 31, 2023 | December 31, 2022 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Assets | ||||||||||||||||
| Investment Property | $ | 13,809,989 | $ | 14,144,268 | $ | 15,239,329 | $ | 14,688,424 | ||||||||
| Accumulated Depreciation | (870,439 | ) | (597,650 | ) | (1,141,707 | ) | (997,240 | ) | ||||||||
| Net Investment Property | 12,939,550 | 13,546,618 | 14,097,622 | 13,691,184 | ||||||||||||
| Cash and Cash Equivalents | 43,729 | 98,900 | 40,381 | 40,080 | ||||||||||||
| Accounts Receivable | 71,694 | 60,506 | 25,319 | 60,538 | ||||||||||||
| Other Assets | 193,625 | 158,920 | 200,571 | 194,871 | ||||||||||||
| Total Assets | $ | 13,248,598 | $ | 13,864,944 | $ | 14,363,893 | $ | 13,986,673 | ||||||||
| Liabilities and Deficit | ||||||||||||||||
| Accounts Payable | $ | 163,181 | $ | 169,298 | $ | 132,818 | $ | 206,882 | ||||||||
| Notes Payable, net of $16,953 and $0 debt discount, respectively | 2,513,230 | 6,793,319 | ||||||||||||||
| Line of Credit, net of $141,061 and $151,749 debt discount, respectively | 5,270,284 | 6,200,607 | ||||||||||||||
| Accrued Liabilities* | 6,876,694 | 1,679,233 | ||||||||||||||
| Notes Payable, net of $44,531 and $45,790 debt discount, respectively | 3,026,842 | 3,035,455 | ||||||||||||||
| Line of Credit, net of $205,877 and $160,372 debt discount, respectively | 7,624,918 | 6,208,947 | ||||||||||||||
| Accrued Liabilities(1) | 5,561,958 | 6,306,178 | ||||||||||||||
| Total Liabilities | 14,823,389 | 14,842,457 | 16,346,536 | 15,757,462 | ||||||||||||
| Non-controlling Interest | (1,574,791 | ) | (977,513 | ) | (1,982,643 | ) | (1,770,789 | ) | ||||||||
| Total Non-controlling Interest in Variable Interest Entities | (1,574,791 | ) | (977,513 | ) | (1,982,643 | ) | (1,770,789 | ) | ||||||||
| Included in accrued liabilities is an intercompany balance of |
F-12
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,MARCH 31, 2023 AND 2022 AND 2021
(UNAUDITED)
NOTE 3 – INVESTMENT PROPERTY
The following table summarizes the Company’s property and equipment balancesbalances. These assets are generally used to depreciate the assetsdepreciated on a straight-line basis:basis.
| September 30, 2022 | December 31, 2021 | March 31, 2023 | December 31, 2022 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Investment Property | ||||||||||||||||
| Land | $ | 27,845,291 | $ | 18,854,760 | $ | 36,399,696 | $ | 30,263,687 | ||||||||
| Site and Land Improvements | 41,233,111 | 35,133,079 | 45,346,146 | 44,035,649 | ||||||||||||
| Buildings and Improvements | 21,806,023 | 14,666,296 | 25,321,424 | 23,229,657 | ||||||||||||
| Construction in Process | 2,575,086 | 3,030,456 | 1,692,050 | 2,541,376 | ||||||||||||
| Total Investment Property | 93,459,511 | 71,684,591 | 108,759,316 | 100,070,369 | ||||||||||||
| Accumulated Depreciation | (7,285,503 | ) | (4,832,300 | ) | (9,245,738 | ) | (8,225,976 | ) | ||||||||
| Net Investment Property | $ | 86,174,008 | $ | 66,852,291 | $ | 99,513,578 | $ | 91,844,393 | ||||||||
Depreciation expense totaled $898,963$1,023,015 and $507,493$759,704 for the three months ended September 30,March 31, 2023 and 2022, and 2021, respectively, and $2,477,642 and $1,411,158 for the nine months ended September 30, 2022 and 2021, respectively.
During the ninethree months ended September 30,March 31, 2023, Gvest Finance LLC, the Company’s VIE, purchased four new manufactured homes for approximately $219,120 for use in the Meadowbrook community. These four homes are included in Construction in Process on the balance sheet. These recently purchased homes along with several new homes purchased during 2022 are not yet occupiable and still in the set-up phase as of March 31, 2023 and are included in Construction in Process on the balance sheet as of that date.
During the year ended December 31, 2022, Gvest Finance LLC, the Company’s VIE, purchased twenty-five25 new manufactured homes for approximately $1,300,000 for use in the Golden Isles, Springlake, Sunnyland, and Crestview communities. The majority of these recently purchased homes along with several new homes purchased during 2021 are not yet occupiable and still in the set-up phase as of September 30,December 31, 2022 and are included in Construction in Process on the balance sheet as of that date.
During the year ended December 31, 2021, Gvest Finance LLC, acquired thirty-four new manufactured homes for approximately $1,900,000 including set up costs for use in the Springlake community and fourteen new manufactured homes for approximately $860,000 including set up costs for use in the Golden Isles community that were not yet occupiable and were still in the set-up phase as of December 31, 2021 and were included in Construction in Process on the balance sheet as of that date.F-13
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,MARCH 31, 2023 AND 2022 AND 2021
(UNAUDITED)
NOTE 4 – ACQUISITIONS AND DISPOSITIONS
During the ninethree months ended September 30, 2022,March 31, 2023, the Company acquired nine communities and two large parcels of undeveloped land.communities. These were acquisitions from third parties and have been accounted for as asset acquisitions.
On January 12, 2023, the Company purchased a manufactured housing community located in Simpsonville, South Carolina, consisting of 107 sites all occupied by tenant-owned manufactured homes on approximately 21 acres for a total purchase price of $5,350,000. Country Aire MHP LLC purchased the land, land improvements, and homes.
On January 27, 2023, the Company purchased a manufactured housing community located in Brunswick, Georgia consisting of 40 developed sites, 14 undeveloped sites, and 24 homes on approximately 18 acres for a total purchase price of $2,400,000. Merritt Place MHP LLC - Land purchased the land and land improvements, and Merritt Place MHP LLC – Homes purchased the homes.
During the three months ended March 31, 2022, the Company acquired two manufactured housing communities. These were acquisitions from third parties and have been accounted for as asset acquisitions.
On January 31, 2022, the Company purchased a manufactured housing community located in Byron, Georgia consisting of 73 sites on approximately 18.57 acres and an adjacent parcel of 15.09 acres of undeveloped land for a total purchase price of $2,200,000. Sunnyland MHP LLC purchased the land and land improvements and the Company’s VIE, Gvest Sunnyland Homes LLC, purchased the homes.
On March 31, 2022, the Company purchased two manufactured housing communities located in Warrenville, South Carolina consisting of 85 sites on approximately 45 acres for a total purchase price of $3,050,000. Warrenville MHP LLC purchased the land and land improvements and the Company’s VIE, Gvest Warrenville Homes LLC, purchased the homes.
On June 17, 2022, the Company purchased a manufactured housing community located in Brunswick, Georgia consisting of 72 sites on approximately 17 acres for a total purchase price of $2,000,000. Spaulding MHP LLC purchased the land, land improvements, and homes.
On June 28, 2022, the Company, through its wholly owned subsidiary Raeford MHP Development LLC, purchased 62 acres of undeveloped land zoned for approximately 200 mobile home lots in Raeford, North Carolina, a town in the Fayetteville Metropolitan Statistical Area for a total purchase price of $650,000.F-14
On July 7, 2022, the Company purchased a manufactured housing community located in Leesville, North Carolina consisting of 39 sites on approximately 11 acres for a total purchase price of $1,700,000. Solid Rock MHP LLC purchased the land and land improvements, and Solid Rock MHP Homes LLC purchased homes.
On July 29, 2022, the Company purchased a manufactured housing community located in Clyde, North Carolina consisting of 51 sites on approximately 9 acres for a total purchase price of $3,044,769. Red Fox MHP LLC purchased the land, land improvements, and homes.
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 75 acres for a total purchase price of $5,350,000. Statesville MHP LLC, Northview MHP LLC, and Timberview MHP LLC purchased the land and land improvements, and MHP Home Holdings LLC purchased homes.
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.
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,MARCH 31, 2023 AND 2022 AND 2021
(UNAUDITED)
The Company entered into various purchase agreements during and after the ninethree months ended September 30, 2022March 31, 2023 totaling an aggregate purchase price commitment of $10,400,000,$23,200,000 which are inclusive of probable and non-probable acquisitions that have the potential to close at a future date. See Note 9 for more information about acquisitions that occurred subsequent to September 30, 2022, including the Glynn Acres community and Wake Forest portfolio.March 31, 2023.
| Acquisition Date | Name (number of communities, if multiple) | Land | Improvements | Building | Total Purchase Price | |||||||||||||
| March 2021 | Golden Isles MHP | $ | 1,050,000 | $ | 487,500 | $ | - | $ | 1,537,500 | |||||||||
| March 2021 | Golden Isles Gvest | - | - | 787,500 | 787,500 | |||||||||||||
| July 2021 | Anderson MHP (10) | 2,310,000 | 763,417 | 120,390 | 3,193,807 | |||||||||||||
| July 2021 | Anderson Gvest (10) | - | - | 2,006,193 | 2,006,193 | |||||||||||||
| September 2021 | Capital View MHP | 350,000 | 757,064 | - | 1,107,064 | |||||||||||||
| September 2021 | Capital View Gvest | - | - | 342,936 | 342,936 | |||||||||||||
| September 2021 | Hidden Oaks MHP | 290,000 | 843,440 | - | 1,133,440 | |||||||||||||
| September 2021 | Hidden Oaks Gvest | - | - | 416,560 | 416,560 | |||||||||||||
| Total Purchase Price | $ | 4,000,000 | $ | 2,851,421 | $ | 3,673,579 | $ | 10,525,000 | ||||||||||
| Acquisition Costs | - | 277,991 | 5,963 | 283,954 | ||||||||||||||
| Total Investment Property | $ | 4,000,000 | $ | 3,129,412 | $ | 3,679,542 | $ | 10,808 ,954 | ||||||||||
| January 2022 | Sunnyland MHP | $ | 672,400 | $ | 891,580 | $ | - | $ | 1,563,980 | |||||||||
| January 2022 | Sunnyland Gvest | - | - | 636,020 | 636,020 | |||||||||||||
| March 2022 | Warrenville MHP (2) | 975,397 | 853,473 | - | 1,828,870 | |||||||||||||
| March 2022 | Warrenville Gvest (2) | - | - | 1,221,130 | 1,221,130 | |||||||||||||
| June 2022 | Spaulding MHP | 1,217,635 | 304,409 | 477,956 | 2,000,000 | |||||||||||||
| June 2022 | Raeford MHP Parcel | 650,000 | - | - | 650,000 | |||||||||||||
| July 2022 | Solid Rock MHP | 1,001,966 | 206,928 | 491,106 | 1,700,000 | |||||||||||||
| July 2022 | Red Fox MHP | 1,622,748 | 840,560 | 581,461 | 3,044,769 | |||||||||||||
| September 2022 | Statesville MHP | 1,078,015 | 1,100,473 | 120,729 | 2,299,217 | |||||||||||||
| September 2022 | Northview MHP | 505,319 | 247,045 | 116,979 | 869,343 | |||||||||||||
| September 2022 | Timberview MHP | 1,010,639 | 1,021,868 | 148,933 | 2,181,440 | |||||||||||||
| Total Purchase Price | $ | 8,734,119 | $ | 5,466,336 | $ | 3,794,314 | $ | 17,994,769 | ||||||||||
| Acquisition Costs | 254,130 | 116,840 | 75,435 | 446,405 | ||||||||||||||
| Total Investment Property | $ | 8,988,249 | $ | 5,583,176 | $ | 3,869,749 | $ | 18,441,174 | ||||||||||
Three Months Ended March 31, 2022
| Acquisition Date | Name (number of communities, if multiple) | Land | Improvements | Building | Total Purchase Price | |||||||||||||
| January 2022 | Sunnyland MHP | $ | 672,400 | $ | 891,580 | $ | - | $ | 1,563,980 | |||||||||
| January 2022 | Sunnyland Gvest | - | - | 636,020 | 636,020 | |||||||||||||
| March 2022 | Warrenville MHP | 975,397 | 853,473 | - | 1,828,870 | |||||||||||||
| March 2022 | Warrenville Gvest | - | - | 1,221,130 | 1,221,130 | |||||||||||||
| Total Purchase Price | $ | 1,647,797 | $ | 1,745,053 | $ | 1,857,150 | $ | 5,250,000 | ||||||||||
| Acquisition Costs | 51,760 | 62,097 | 38,367 | 152,224 | ||||||||||||||
| Total Investment Property | $ | 1,699,557 | $ | 1,807,150 | $ | 1,895,517 | $ | 5,402,224 | ||||||||||
Three Months Ended March 31, 2023
| Acquisition Date | Name (number of communities, if multiple) | Land | Improvements | Building | Total | |||||||||||||
| January 2023 | Country Aire MHP | $ | 4,661,722 | $ | 682,724 | $ | 5,554 | $ | 5,350,000 | |||||||||
| January 2023 | Merritt Place MHP | 1,410,806 | 557,446 | (1) | 431,748 | 2,400,000 | ||||||||||||
| Total Purchase Price | $ | 6,072,528 | $ | 1,240,170 | $ | 437,302 | $ | 7,750,000 | ||||||||||
| Acquisition Costs | 63,481 | 34,188 | 9,713 | 107,382 | ||||||||||||||
| Total Investment Property | $ | 6,136,009 | $ | 1,274,358 | $ | 447,015 | $ | 7,857,382 | ||||||||||
| (1) | Includes an allocation of $300,000 for 14 lots under development to be completed by seller and a respective note payable for the same amount has been included in accrued liabilities financial statement line item on the balance sheet as of March 31, 2023. |
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 | $ | 4,055,065 | $ | 3,716,227 | $ | 11,746,146 | $ | 10,821,958 | ||||||||
| Community operating expenses | 1,461,667 | 1,337,657 | 4,300,685 | 3,996,857 | ||||||||||||
| Corporate payroll and overhead expenses | 1,519,271 | 580,109 | 3,683,267 | 1,744,576 | ||||||||||||
| Depreciation expense | 987,005 | 941,692 | 2,854,646 | 2,809,597 | ||||||||||||
| Interest expense | 1,634,157 | 976,150 | 4,367,555 | 2,844,249 | ||||||||||||
| Refinance costs | 3,604,671 | - | 3,620,422 | 16,675 | ||||||||||||
| Cost of home sales | 22,676 | - | 177,410 | - | ||||||||||||
| Other income | 500 | - | 500 | 139,300 | ||||||||||||
| Net loss | (5,173,882 | ) | (119,381 | ) | (7,257,339 | ) | (450,696 | ) | ||||||||
| Net loss attributable to non-controlling interest | (376,105 | ) | (558,605 | ) | (801,212 | ) | (512,510 | ) | ||||||||
| Net income (loss) attributable to Manufactured Housing Properties, Inc | (4,797,777 | ) | 439,224 | (6,456,127 | ) | 61,814 | ||||||||||
| Preferred stock dividends / accretion | 523,161 | 557,580 | 1,619,585 | 1,627,254 | ||||||||||||
| Net loss | $ | (5,320,938 | ) | $ | (118,356 | ) | $ | (8,075,712 | ) | $ | (1,565,440 | ) | ||||
| Net loss per share | $ | (0.42 | ) | $ | (0.01 | ) | $ | (0.63 | ) | $ | (0.12 | ) | ||||
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 4% to 6%8% with 5 to 30 years principal amortization. The promissory notes are secured by the real estate assets and twenty-ninethirty-three loans totaling $70,393,053$80,752,977 are guaranteed by Raymond M. Gee.
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 $62,000,000. The loan proceeds were primarily used to pay off third party notes and line of credit with various other lenders totaling approximately $54,000,000, the promissory note issued to Metrolina discussed below for $1,500,000, and the revolving promissory note issued to Gvest Real Estate Capital LLC, discussed below for $2,000,000. KeyBank withheld approximately $4,000,000 in escrow for planned capital projects to improve the financed communities which is included in restricted cash on the unaudited condensed consolidated balance sheet. The Company recognized refinancing expense of $3,604,672 in connection with the debt extinguished including write-off of net unamortized debt issuance costs totaling $2,203,841, prepayment penalties of $1,385,596, and other fees of $15,234. The new loans with KeyBank are interest-only at 4.87% for the first 60 months of the term with principal and interest payments continuing thereafter until maturity on September 1, 2032. The Company may prepay the notes in part or in full subject to prepayment penalties if repaid before May 31, 2032, and without penalty if repaid on or subsequent to that date. The loans are secured by the real estate, which predominately excludes mobile homes, and are guaranteed by the Company and Raymond M. Gee. The Company capitalized $2,842,213 of debt issuance costs in connection with this refinancing including a $1,000,000 accrued guaranty fee owed to Raymond M. Gee to be paid at a later date.
F-15
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,MARCH 31, 2023 AND 2022 AND 2021
(UNAUDITED)
As of September 30,March 31, 2023 and December 31, 2022, the outstanding principal balance on all third-party promissory notes was $74,662,052.$84,714,126 and $79,550,080, respectively. The following are the terms of these notes:
| Maturity Date | Interest Rate | Interest Only Period (Months) | Balance September 30, 2022 | Balance December 31, 2021 | ||||||||||||||
| Pecan Grove MHP LLC | 02/22/29 | 5.250 | % | - | $ | - | $ | 2,969,250 | ||||||||||
| Pecan Grove MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 4,489,000 | - | ||||||||||||
| Azalea MHP LLC | 03/01/29 | 5.400 | % | - | - | 790,481 | ||||||||||||
| Azalea MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 1,830,000 | - | ||||||||||||
| Holly Faye MHP LLC | 03/01/29 | 5.400 | % | - | - | 579,825 | ||||||||||||
| Holly Faye MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 1,608,000 | - | ||||||||||||
| Chatham MHP LLC | 04/01/24 | 5.875 | % | - | - | 1,698,800 | ||||||||||||
| Chatham MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 2,263,000 | - | ||||||||||||
| Lakeview MHP LLC | 03/01/29 | 5.400 | % | - | - | 1,805,569 | ||||||||||||
| Lakeview MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 3,229,000 | - | ||||||||||||
| B&D MHP LLC | 05/02/29 | 5.500 | % | - | - | 1,779,439 | ||||||||||||
| B&D MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 2,887,000 | - | ||||||||||||
| Hunt Club MHP LLC | 01/01/33 | 3.430 | % | - | - | 2,398,689 | ||||||||||||
| Hunt Club MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 2,756,000 | - | ||||||||||||
| Crestview MHP LLC | 12/31/30 | 3.250 | % | - | - | 4,682,508 | ||||||||||||
| Crestview MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 4,625,000 | - | ||||||||||||
| Maple Hills MHP LLC | 12/01/30 | 3.250 | % | - | - | 2,341,254 | ||||||||||||
| Maple Hills MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 2,570,000 | - | ||||||||||||
| Springlake MHP LLC* | 12/10/26 | 4.750 | % | 12 | - | 4,016,250 | ||||||||||||
| Springlake MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 6,590,000 | - | ||||||||||||
| ARC MHP LLC | 01/01/30 | 5.500 | % | - | - | 3,809,742 | ||||||||||||
| ARC MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 3,687,000 | - | ||||||||||||
| Countryside MHP LLC | 03/20/50 | 5.500 | % | 12 | - | 1,684,100 | ||||||||||||
| Countryside MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 4,343,000 | - | ||||||||||||
| Evergreen MHP LLC | 04/01/32 | 3.990 | % | - | - | 1,115,261 | ||||||||||||
| Evergreen MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 2,604,000 | - | ||||||||||||
| Golden Isles MHP LLC | 03/31/26 | 4.000 | % | 60 | - | 787,500 | ||||||||||||
| Golden Isles MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 1,987,000 | - | ||||||||||||
| Anderson MHP LLC* | 07/10/26 | 5.210 | % | 24 | - | 2,153,807 | ||||||||||||
| Anderson MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 5,118,000 | - | ||||||||||||
| Capital View MHP LLC* | 09/10/26 | 5.390 | % | 24 | - | 817,064 | ||||||||||||
| Capital View MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 829,000 | - | ||||||||||||
| Hidden Oaks MHP LLC* | 09/10/26 | 5.330 | % | 24 | - | 823,440 | ||||||||||||
| Hidden Oaks MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 764,000 | - | ||||||||||||
| North Raleigh MHP LLC | 11/01/26 | 4.750 | % | - | - | 5,304,409 | ||||||||||||
| North Raleigh MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 5,279,000 | - | ||||||||||||
| Charlotte 3 Park MHP LLC (Dixie, Driftwood, Meadowbrook)(1) | 03/01/22 | 5.000 | % | 2 | - | 1,500,000 | ||||||||||||
| Charlotte 3 Park MHP LLC (Dixie, Driftwood, Meadowbrook)(2)* | 11/01/28 | 4.250 | % | - | - | |||||||||||||
| Charlotte 3 Park MHP LLC (Dixie) - KeyBank | 09/01/32 | 4.870 | % | 60 | 485,000 | - | ||||||||||||
| Charlotte 3 Park MHP LLC (Driftwood) - KeyBank* | 09/01/32 | 4.870 | % | 60 | 274,000 | - | ||||||||||||
| Carolinas 4 MHP LLC (Asheboro, Morganton)* | 01/10/27 | 5.300 | % | 36 | - | 3,105,070 | ||||||||||||
| Carolinas 4 MHP LLC (Asheboro) - KeyBank* | 09/01/32 | 4.870 | % | 60 | 1,374,000 | - | ||||||||||||
| Carolinas 4 MHP LLC (Morganton) - KeyBank* | 09/01/32 | 4.870 | % | 60 | 1,352,000 | - | ||||||||||||
| Sunnyland MHP LLC(2)* | 02/10/27 | 5.370 | % | 36 | - | - | ||||||||||||
| Sunnyland MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 1,057,000 | - | ||||||||||||
| Warrenville MHP LLC* | 03/10/27 | 5.590 | % | 36 | 1,218,870 | - | ||||||||||||
| Spaulding MHP LLC | 07/22/43 | WSJ Prime +1 | % | 12 | 1,600,000 | - | ||||||||||||
| Solid Rock MHP LLC | 07/07/32 | 5.000 | % | 12 | 925,000 | - | ||||||||||||
| Red Fox MHP LLC | 08/01/32 | 5.250 | % | 24 | 2,250,000 | - | ||||||||||||
| Statesville MHP LLC* | 09/13/25 | SOFR +2.35 | % | 36 | 1,519,925 | - | ||||||||||||
| Timberview MHP LLC* | 09/13/25 | SOFR +2.35 | % | 36 | 1,418,075 | - | ||||||||||||
| Northview MHP LLC - land (Seller Finance) | 09/15/27 | 6.000 | % | 60 | 792,654 | - | ||||||||||||
| Statesville, Northview, and Timberview MHP LLC - homes (Seller Finance) | 09/15/27 | 6.000 | % | 60 | 407,345 | - | ||||||||||||
| Gvest Finance LLC (B&D homes) | 05/01/24 | 5.000 | % | - | 624,833 | 657,357 | ||||||||||||
| Gvest Finance LLC (Countryside homes) | 03/20/50 | 5.500 | % | - | - | 1,287,843 | ||||||||||||
| Gvest Finance LLC (Golden Isles homes) | 03/31/36 | 4.000 | % | 180 | 684,220 | 787,500 | ||||||||||||
| Gvest Anderson Homes LLC* | 07/10/26 | 5.210 | % | 24 | - | 2,006,193 | ||||||||||||
| Gvest Capital View Homes LLC* | 09/10/26 | 5.390 | % | 24 | - | 342,936 | ||||||||||||
| Gvest Hidden Oaks Homes LLC* | 09/10/26 | 5.330 | % | 24 | - | 416,560 | ||||||||||||
| Gvest Carolinas 4 Homes LLC (Asheboro, Morganton)* | 01/10/27 | 5.300 | % | 36 | - | 1,294,930 | ||||||||||||
| Gvest Sunnyland Homes LLC(2)* | 02/10/27 | 5.370 | % | 36 | - | - | ||||||||||||
| Gvest Warrenville Homes LLC* | 03/10/27 | 5.590 | % | 36 | 1,221,130 | - | ||||||||||||
| Total Notes Payable | $ | 74,662,052 | $ | 50,955,777 | ||||||||||||||
| Discount Direct Lender Fees | (3,561,671 | ) | (2,064,294 | ) | ||||||||||||||
| Total Net of Discount | $ | 71,100,381 | $ | 48,891,483 | ||||||||||||||
| Maturity Date | Interest Rate | Interest Only Period (Months) | Balance March 31, 2023 | Balance December 31, 2022 | ||||||||||||||
| Pecan Grove MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | $ | 4,489,000 | $ | 4,489,000 | ||||||||||
| Azalea MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 1,830,000 | 1,830,000 | ||||||||||||
| Holly Faye MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 1,608,000 | 1,608,000 | ||||||||||||
| Chatham MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 2,263,000 | 2,263,000 | ||||||||||||
| Lakeview MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 3,229,000 | 3,229,000 | ||||||||||||
| B&D MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 2,887,000 | 2,887,000 | ||||||||||||
| Hunt Club MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 2,756,000 | 2,756,000 | ||||||||||||
| Crestview MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 4,625,000 | 4,625,000 | ||||||||||||
| Maple Hills MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 2,570,000 | 2,570,000 | ||||||||||||
| Springlake MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 6,590,000 | 6,590,000 | ||||||||||||
| ARC MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 3,687,000 | 3,687,000 | ||||||||||||
| Countryside MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 4,343,000 | 4,343,000 | ||||||||||||
| Evergreen MHP LLC (1)(2) | 9/1/2032 | 4.870 | % | 60 | 2,604,000 | 2,604,000 | ||||||||||||
| Golden Isles MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 1,987,000 | 1,987,000 | ||||||||||||
| Anderson MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 5,118,000 | 5,118,000 | ||||||||||||
| Capital View MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 829,000 | 829,000 | ||||||||||||
| Hidden Oaks MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 764,000 | 764,000 | ||||||||||||
| North Raleigh MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 5,279,000 | 5,279,000 | ||||||||||||
| Charlotte 3 Park MHP LLC (Dixie) (1)(2)(3) | 9/1/2032 | 4.870 | % | 60 | 485,000 | 485,000 | ||||||||||||
| Charlotte 3 Park MHP LLC (Driftwood) (1)(2) | 9/1/2032 | 4.870 | % | 60 | 274,000 | 274,000 | ||||||||||||
| Carolinas 4 MHP LLC (Asheboro) (1)(2) | 9/1/2032 | 4.870 | % | 60 | 1,374,000 | 1,374,000 | ||||||||||||
| Carolinas 4 MHP LLC (Morganton) (1)(2) | 9/1/2032 | 4.870 | % | 60 | 1,352,000 | 1,352,000 | ||||||||||||
| Sunnyland MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 1,057,000 | 1,057,000 | ||||||||||||
| Warrenville MHP LLC(1) | 3/10/2027 | 5.590 | % | 36 | 1,218,870 | 1,218,870 | ||||||||||||
| Spaulding MHP LLC | 7/22/2043 | WSJ Prime + 1 | % | 12 | 1,600,000 | 1,600,000 | ||||||||||||
| Solid Rock MHP LLC | 6/30/2032 | 5.000 | % | 12 | 925,000 | 925,000 | ||||||||||||
| Red Fox MHP LLC | 8/1/2032 | 5.250 | % | 24 | 2,250,000 | 2,250,000 | ||||||||||||
| Statesville MHP LLC – land(1) | 9/13/2025 | SOFR + 2.35 | % | 36 | 1,519,925 | 1,519,925 | ||||||||||||
| Timberview MHP LLC – land(1) | 9/13/2025 | SOFR + 2.35 | % | 36 | 1,418,075 | 1,418,075 | ||||||||||||
| Northview MHP LLC - land (Seller Finance) | 9/15/2027 | 6.000 | % | 60 | 792,654 | 792,654 | ||||||||||||
| Statesville, Northview, Timberview MHP LLC - homes (Seller Finance) | 9/15/2027 | 6.000 | % | 60 | 407,345 | 407,345 | ||||||||||||
| Glynn Acres MHP LLC | 11/1/2042 | 6.000 | % | 0 | 892,150 | 898,052 | ||||||||||||
| Wake Forest MHP LLC (Cooley’s Country road)(1) | 12/10/2027 | 7.390 | % | 36 | 3,038,914 | 3,038,914 | ||||||||||||
| Mobile Cottage MHP LLC | 12/20/2027 | 5.000 | % | 30 | 400,000 | 400,000 | ||||||||||||
| Gvest Finance LLC (B&D homes) | 5/1/2024 | 5.000 | % | - | 604,757 | 614,809 | ||||||||||||
| Gvest Finance LLC (Golden Isles homes) | 3/31/2031 | 4.000 | % | 120 | 684,220 | 684,220 | ||||||||||||
| Warrenville Gvest Homes LLC(1) | 3/10/2027 | 5.590 | % | 36 | 1,221,130 | 1,221,130 | ||||||||||||
| Gvest Wake Forest 2 Homes LLC (Cooley’s, Country Road home)(1) | 12/10/2027 | 7.390 | % | 36 | 561,086 | 561,086 | ||||||||||||
| Merritt Place MHP LLC | 1/27/2024 | WSJ Prime + 1 | % | 12 | 1,680,000 | - | ||||||||||||
| Country Aire MHP LLC(1) | 9/13/2025 | SOFR + 2.35 | % | 36 | 3,500,000 | - | ||||||||||||
| Total Notes Payable | $ | 84,714,126 | $ | 79,550,080 | ||||||||||||||
| Discount Direct Lender Fees | (3,772,073 | ) | (3,666,214 | ) | ||||||||||||||
| Total Net of Discount | $ | 80,942,053 | $ | 75,883,866 | ||||||||||||||
| (1) | The notes indicated above are subject to certain financial covenants. |
F-16
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023 AND 2022
(UNAUDITED)
| (2) | 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 $62,000,000. The loan proceeds were primarily used to pay off third party notes and line of credit with various other lenders totaling approximately $54,000,000, promissory note issued to Metrolina Loan Holdings, LLC for $1,500,000 and a revolving promissory Note issued to Gvest Real Estates Capital LLC for $2,000,000. KeyBank withheld approximately $4,000,000 in escrow for planned capital projects to improve the financed communities which is included in restricted cash. The Company may prepay the notes in part or in full subject to prepayment penalties if repaid before May 31, 2032, and without penalty if repaid on or subsequent to that date. The loans are secured by the real estate, which predominately excludes mobile homes, and are guaranteed by the Company and Raymond M. Gee. The Company capitalized $2,842,213 of debt issuance costs in connection with this refinancing including a $1,000,000 accrued guaranty fee owed to Raymond M. Gee to be paid at a later date. |
| (3) | The Company repaid the Charlotte 3 Park MHP LLC note payable of $1,500,000 on March 1, 2022 and recognized refinancing cost expense totaling $15,751. This community was refinanced on April 14, 2022 with a different lender and the Company capitalized $258,023 of debt issuance costs related to the new note. | |
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 | Borrower | Community | Maturity Date | Interest Rate | Maximum Credit Limit | Balance March 31, 2023 | Balance December 31, 2022 | ||||||||||||||||||||||||||
| Occupied Home Facility(1) | Gvest Homes I LLC | ARC, Crestview, Maple | 01/01/30 | 8.375% | $ | 20,000,000 | $ | 2,446,084 | $ | 2,517,620 | Gvest Homes I LLC | ARC, Crestview, Maple, Countryside | 01/01/30 | 8.375% | $ | 20,000,000 | $ | 3,755,107 | $ | 2,424,896 | ||||||||||||||||||||
| Multi-Community Rental Home Facility | Gvest Finance LLC | ARC, Golden Isles | Various (3) | Greater of 3.25% or Prime, + 375 bps | $ | 4,000,000 | $ | 1,475,714 | $ | 838,000 | Gvest Finance LLC | ARC, Golden Isles, Springlake, | Various (2) | Greater of 3.25% or Prime, + 375 bps | $ | 5,000,000 | $ | 2,490,623 | $ | 2,561,380 | ||||||||||||||||||||
| Multi-Community Floorplan Home Facility | Gvest Finance LLC | Golden Isles, Springlake, Sunnyland, Crestview | Various (3) | LIBOR + 6 – 8% based on days outstanding | $ | 2,000,000 | $ | 1,489,546 | $ | 1,104,255 | Gvest Finance LLC | Golden Isles, Springlake, Sunnyland, Crestview, Meadowbrook | Various (2) | LIBOR + 6 – 8% based on days outstanding | $ | 4,000,000 | $ | 1,585,065 | $ | 1,383,043 | ||||||||||||||||||||
| Springlake Home Facility(2) | Gvest Finance LLC | Springlake | 12/10/26 | 6.75% | $ | 3,300,000 | $ | - | $ | 1,892,481 | ||||||||||||||||||||||||||||||
| Total Lines of Credit - VIEs | $ | 5,411,344 | $ | 6,352,356 | $ | 7,830,795 | $ | 6,369,319 | ||||||||||||||||||||||||||||||||
| Discount Direct Lender Fees | $ | (141,061 | ) | $ | (151,749 | ) | $ | (205,877 | ) | $ | (160,372 | ) | ||||||||||||||||||||||||||||
| Total Net of Discount | $ | 5,270,283 | $ | 6,200,607 | $ | 7,624,918 | $ | 6,208,947 | ||||||||||||||||||||||||||||||||
| (1) | During the |
| The maturity date of the of the Multi-Community Floorplan and Rental 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-17
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,MARCH 31, 2023 AND 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 $1,500,000. As of December 31, 2021, the balance on this note was $1,500,000. On September 2, 2022, the Company repaid the full outstanding balance of the loan with proceeds from the KeyBank portfolio refinance. The note bore interest at a rate of 18% per annum and was set to mature on April 1, 2023. The note was guaranteed by Raymond M. Gee. During the nine months ended September 30, 2022 and 2021, interest expense totaled $181,233 and $0, respectively. During the three months ended September 30, 2022 and 2021, interest expense totaled $47,342 and $0, respectively.
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 $1,500,000 from Mr. Gee on a revolving basis for working capital purposes. In September 2020, the Company paid off the full balance; however, the line of credit remained available to the Company until it was cancelled in December 2021. As of September 30, 2022March 31, 2023 and December 31, 2021,2022, there was no outstanding balance on this note. During the note.three months ended March 31, 2022, interest expense recognized was $66,575.
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 $1,500,000 on a revolving basis for working capital or acquisition purposes. As of December 31, 2021, the outstanding balance on this note was $150,000. On September 9, 2022, the Company paid off the full balance with proceeds from the KeyBank portfolio refinance. During the period while the note was outstanding, the maximum credit limit on this note was increased to $2,000,000 and the Company borrowed an aggregate of $2,700,000. This note had a five-year term and was interest-only based on a 15% annual rate through the maturity date and was unsecured. During the nine months ended September 30,As of March 31, 2023 and December 31, 2022, and 2021, interest expense totaled $87,542 and $0, respectively.there was no outstanding balance on this note. During the three months ended September 30,March 31, 2022, and 2021, interest expense totaled $59,167 and $0, respectively. recognized was $14,718.
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 $2,000,000 on a revolving basis for working capital or acquisition purposes. On the same date, the Company borrowed $2,000,000. As of September 30,March 31, 2023 and December 31, 2022, the outstanding principal balance on this note was $2,000,000. This note has a five-year term and is interest-only based on ana 15% annual rate through the maturity date and is unsecured. During the three and nine months ended September 30,March 31, 2023 and 2022, interest expense totaled $76,667 and $77,500, respectively. $75,000.
Maturities of Long-Term Obligations for Five Years and Beyond
The minimum annual principal payments of notes payable, related party debt and lines of credit at September 30, 2022March 31, 2023 by fiscal year were:
| 2022 | 41,147 | |||||||
| 2023 | 367,130 | |||||||
| 2023 (remainder) | $ | 351,666 | ||||||
| 2024 | 1,751,244 | 3,877,634 | ||||||
| 2025 | 3,362,574 | 7,117,026 | ||||||
| 2026 | 454,742 | 523,354 | ||||||
| 2027 | 10,251,778 | |||||||
| Thereafter | 76,096,560 | 72,423,463 | ||||||
| Total minimum principal payments | $ | 82,073,396 | $ | 94,544,921 | ||||
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-18
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,MARCH 31, 2023 AND 2022 AND 2021
(UNAUDITED)
NOTE 7 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is authorized to issue up to 10,000,000 shares of preferred stock, $0.01 par value.
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 4,000,000 shares of its preferred stock as Series A Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”). The Series A Preferred Stock has the following voting powers, designations, preferences and relative rights, qualifications, limitations or restrictions:
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 $0.017 per share each month, which is equivalent to the rate of 8% of the $2.50 liquidation preference per share. Dividends on shares of Series A Preferred Stock will continue to accrue even if any of the Company’s agreements prohibit the current payment of dividends or the Company does not have earnings. During the ninethree months ended September 30,March 31, 2023 and 2022, and 2021, the Company paid dividends of $282,778$91,633 and $290,561,$94,300, respectively.
Liquidation Preference. The liquidation preference for each share of Series A Preferred Stock is $2.50. Upon a liquidation, dissolution or winding up of the Company, holders of shares of Series A Preferred Stock will be 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 B Preferred Stock and Series C Preferred Stock, the liquidation preference with respect to their shares plus an amount equal to any accrued but unpaid dividends (whether or not declared) to, but not including, the date of payment with respect to such shares.
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 $2.50, subject to adjustment as set forth in the certificate of designation. In addition, if at any time the trading price of the Common Stock is greater than the liquidation preference of $2.50, the Company may deliver a written notice to all holders to cause each holder to convert all or part of such holders’ Series A Preferred Stock.
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 ninethree months ended September 30,March 31, 2023 and 2022, and 2021, the Company recorded a put option value accretion of $353,472$114,125 and $354,396,$117,871, respectively.
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, 2022March 31, 2023 and December 31, 2021,2022, there were 1,866,000 and 1,886,0001,826,000 shares of Series A Preferred Stock issued and outstanding, respectively.outstanding. As of September 30,March 31, 2023, the Series A Preferred Stock balance was made up of Series A Preferred Stock totaling $4,565,000 and accretion of put options totaling $1,657,041. As of December 31, 2022, the Series A Preferred Stock balance was made up of Series A Preferred Stock totaling $4,665,000$4,565,000 and accretion of put options totaling $1,464,145. As of December 31, 2021, the Series A Preferred Stock balance was made up of Series A Preferred Stock totaling $4,715,000 and accretion of put options totaling $1,126,771.$1,542,916.
F-19
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,MARCH 31, 2023 AND 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 1,000,000 shares of its preferred stock as Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”). The Series B Preferred Stock has the following voting powers, designations, preferences and relative rights, qualifications, limitations, or restrictions:
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. Holders of Series B Preferred Stock will be entitled to receive cumulative dividends in the amount of $0.067 per share each month, which is equivalent to the annual rate of 8% of the $10.00 liquidation preference per share; provided that upon an event of default (generally defined as the Company’s failure to pay dividends when due or to redeem shares when requested by a holder), such amount shall be increased to $0.083 per month, which is equivalent to the annual rate of 10% of the $10.00 liquidation preference per share. During the ninethree months ended September 30,March 31, 2023 and 2022, and 2021, the Company paid dividends of $455,355$149,665 and $427,517,$151,785, respectively.
Liquidation Preference. The liquidation preference for each share of Series B Preferred Stock is $10.00. Upon a liquidation, dissolution or winding up of the Company, holders of shares of Series B Preferred Stock will be 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 C Preferred Stock, the liquidation preference with respect to their shares plus an amount equal to any accrued but unpaid dividends (whether or not declared) to, but not including, the date of payment with respect to such shares.
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, theThe Company recorded a put option value accretion of $527,980$181,604 and $554,780, respectively.$184,254 during the three months ended March 31, 2023 and 2022.
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.
F-20
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,MARCH 31, 2023 AND 2022 AND 2021
(UNAUDITED)
On November 1, 2019, the Company launched an offering under Regulation AAs of Section 3(6) of the Securities Act of 1933, as, amended, for Tier 2 offerings, pursuant to which the Company offered up to 1,000,000March 31, 2023, there were 747,951 shares of Series B Preferred Stock at an offering price of $10.00 per share, for a maximum offering amount of $10,000,000. In addition,issued and outstanding and the Company offered bonus shares to early investors in this offering, whereby the first 400 investors received, in addition to Series B Preferred Stock 100 shares of Common Stock, regardless of the amount invested, for a total of 40,000 shares of Common Stock.
This offering terminated on March 30, 2021 thus, the Company sold no sharesbalance was made up 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 aggregatenet of 117,297 sharescommissions, totaling $7,079,716 and accretion of Series B Preferred Stock for total gross proceeds of $1,172,970. After deducting a placement fee and other expenses, the Company received net proceeds of $1,087,485.
put options totaling $2,224,106. As of September 30,December 31, 2022, there were 747,951 shares of Series B Preferred Stock issued and outstanding and the Series B Preferred Stock balance was made up of Series B Preferred Stock, net of commissions, totaling $7,079,716 and accretion of put options totaling $1,860,898. As of December 31, 2021, there were 758,551 shares of Series B Preferred Stock issued and outstanding and the Series B Preferred Stock balance was made up of Series B Preferred Stock, net of commissions, totaling $7,185,716 and accretion of put options totaling $1,332,878.$2,042,502.
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 47,000 shares of its preferred stock as Series C Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”). The Series C Preferred Stock has the following voting powers, designations, preferences and relative rights, qualifications, limitations or restrictions:
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 $1,000, subject to appropriate adjustment in relation to certain events, such as recapitalizations, stock dividends, stock splits, stock combinations, reclassifications or similar events affecting the Series C Preferred Stock.
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. Holders of Series C Preferred Stock are entitled to receive cumulative monthly cash dividends at a per annum rate of 7% of the stated value (or $5.83 per share each month based on the initial stated value). Dividends on each share begin accruing on, and are cumulative from, the date of issuance and regardless of whether the board of directors declares and pays such dividends. Dividends on shares of Series C Preferred Stock will continue to accrue even if any of the Company’s agreements prohibit the current payment of dividends or the Company does not have earnings. During the ninethree months ended September 30, 2022,March 31, 2023, the Company paid dividends of $484,521.$373,773. Due to timing of payments, accrued dividends of $112,695 $157,974 is presented in accrued liabilities on the balance sheet as of September 30, 2022.March 31, 2023.
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-21
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,MARCH 31, 2023 AND 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 (4%) of the total outstanding Series C Preferred Stock per quarter and any redemptions in excess of such limit or to the extent suspended, shall be redeemed in subsequent quarters on a first come, first served, basis. The Company will redeem shares at a redemption price equal to the stated value of such redeemed shares, plus any accrued but unpaid dividends thereon, less the applicable redemption fee (if any). As a percentage of the aggregate redemption price of a holder’s shares to be redeemed, the redemption fee shall be:
| ● | 11% if the redemption is requested on or before the first anniversary of the original issuance of such shares; |
| ● | 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 (10%) of the stated value.
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 of 1933, as amended (the “Securities Act”) for Tier 2 offerings, pursuant to which the Company is offering up to 47,000 shares of Series C Preferred Stock at an offering price of $1,000 per share for a maximum offering amount of $47 million.$47,000,000.
During the ninethree months ended September 30, 2022,March 31, 2023, the Company sold an aggregate of 10,2603,875 shares of Series C Preferred Stock for total gross proceeds of $10,253,917.$3,874,917. After deducting a placement fee and broker dealer commissions, the Company received net proceeds of $3,613,371. In addition to the placement fee and broker dealer commissions, the Company capitalized an additional $29,326 of other issuance costs associated with the offering which, net of amortization expense, offset with the net proceeds on the balance sheet.
During the three months ended March 31, 2022, the Company sold an aggregate of 4,293 shares of Series C Preferred Stock for total gross proceeds of $4,289,444. After deducting a placement fee and other expenses, the Company received net proceeds of $9,573,085.$4,004,110. In addition to the placement fee and broker dealer commissions, the Company capitalized an additional $9,997 of other issuance costs associated with the offering which, net of amortization expense, offset with the net proceeds on the balance sheet.
As of September 30,December 31, 2022 there were 15,99421,584 shares of Series C Preferred Stock issued and outstanding and the Series C Preferred Stock balance was made up of Series C Preferred Stock gross proceeds totaling $15,988,317$21,584,002 net of total unamortized debt issuance costs of $1,099,951.
As of December 31, 2021, there were 5,734 shares of Series C Preferred Stock issued and outstanding and the Series C Preferred Stock balance was made up of Series C Preferred Stock gross proceeds totaling $5,734,400 net of total unamortized debt issuance costs of $520,030.$1,406,815.
F-22
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,MARCH 31, 2023 AND 2022 AND 2021
(UNAUDITED)
Common Stock
The Company is authorized to issue up to 200,000,000 shares of Common Stock, par value $0.01 per share. As of September 30, 2022March 31, 2023 and December 31, 2021,2022, there were 12,478,012 and 12,403,68012,493,012 shares of Common Stock issued and outstanding, respectively.
Stock Issued for Cashoutstanding.
During the nine months ended September 30, 2022, the Company issued 74,332No shares of Common Stock were issued upon employee exercise of stock options for total exercise price of $743.
Duringduring the ninethree months ended September 30, 2021, the Company issued 5,100 shares of Common Stock, valued at $1,377, to early investors in the prior Regulation A offering.March 31, 2023 and 2022.
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,March 31, 2023, there were 503,842588,842 shares granted and 496,158411,158 shares remaining available under the Plan. The Company has issued options to directors, officers, and employees under the Plan.
During the ninethree months ended September 30,March 31, 2023 and 2022, and 2021, the Company issued 145,00050,000 and 50,00045,000 options and recorded stock option expense of $105,884$109,975 and $38,033,$49,760, respectively. The aggregate fair value of the options issued during the ninethree months ended September 30, 2022March 31, 2023 was $570,221.$65,817. The vesting schedule for 100,00050,000 options issued to an officer in April 2022January 2023 is as follows: one third vestvests after one year,two years, and two thirds vest in equal installments over the succeeding two-year period. The vesting schedule forWith the other 45,000exception of 50,000 options issued during the nine months ended 2022 is as follows: one third vest immediately, and two thirds vest in equal annual installments over the succeeding two-year period. AllJanuary 2023, all options were granted at a price of $0.01 per share, which represents a price that may be deemed to be below the market value per share of the Company’s common stock as defined by the Plan.
The following table summarizes the stock options outstanding as of September 30, 2022:March 31, 2023:
| Number of options | Weighted average exercise price (per share) | Weighted average remaining contractual term (in years) | Number of options | Weighted average exercise price (per share) | Weighted average remaining contractual term (in years) | |||||||||||||||||||
| Outstanding at December 31, 2021 | 706,175 | $ | 0.01 | 6.6 | ||||||||||||||||||||
| Outstanding at December 31, 2022 | 538,842 | $ | 0.06 | 6.8 | ||||||||||||||||||||
| Granted | 145,000 | 0.01 | 9.5 | 50,000 | 1.32 | 9.9 | ||||||||||||||||||
| Exercised | (78,333 | ) | (0.01 | ) | (6.2 | ) | - | - | - | |||||||||||||||
| Forfeited / cancelled / expired | (269,000 | ) | (0.01 | ) | (5.9 | ) | - | - | - | |||||||||||||||
| Outstanding at September 30, 2022 | 503,842 | 0.01 | 6.8 | |||||||||||||||||||||
| Exercisable at September 30, 2022 | 357,175 | 0.01 | 5.7 | |||||||||||||||||||||
| Outstanding at March 31, 2023 | 588,842 | $ | 0.16 | 6.9 | ||||||||||||||||||||
| Exercisable at March 31, 2023 | 390,509 | $ | 0.03 | 5.6 | ||||||||||||||||||||
As of September 30, 2022,March 31, 2023, there were 503,842538,842 “in-the-money” options with an aggregate intrinsic value of $851,493.$508,954. The aggregate intrinsic value represents the total intrinsic value (the difference between the Company’s closing stock price at fiscal year-end and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holder had all options holders exercised their options on September 30, 2022.March 31, 2023.
F-23
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,MARCH 31, 2023 AND 2022 AND 2021
(UNAUDITED)
The following table summarizes information concerning options outstanding as of September 30, 2022.March 31, 2023.
| Strike Price Range ($) | Strike Price Range ($) | Outstanding stock options | Weighted average remaining contractual term (in years) | Weighted average outstanding strike price | Vested stock options | Weighted average vested strike price | Strike Price Range ($) | Outstanding stock options | Weighted average remaining contractual term (in years) | Weighted average outstanding strike price | Vested stock options | Weighted average vested strike price | ||||||||||||||||||||||||||||||||
| $ | 0.01 | 288,675 | 5.2 | $ | 0.01 | 288,675 | $ | 0.01 | 1.32 | 50,000 | 9.9 | $ | 1.32 | - | $ | - | ||||||||||||||||||||||||||||
| $ | 0.01 | 28,500 | 7.3 | $ | 0.01 | 28,500 | $ | 0.01 | 0.01 | 288,675 | 4.9 | $ | 0.01 | 288,675 | $ | 0.01 | ||||||||||||||||||||||||||||
| $ | 0.01 | 50,000 | 8.3 | $ | 0.01 | 33,333 | $ | 0.01 | 0.01 | 13,500 | 7.0 | $ | 0.01 | 13,500 | $ | 0.01 | ||||||||||||||||||||||||||||
| $ | 0.01 | 136,667 | 9.5 | $ | 0.01 | 6,667 | $ | 0.01 | 0.01 | 50,000 | 8.0 | $ | 0.01 | 50,000 | $ | 0.01 | ||||||||||||||||||||||||||||
| $ | 0.01 - 0.50 | 186,667 | 8.8 | $ | 0.14 | 38,334 | $ | 0.22 | ||||||||||||||||||||||||||||||||||||
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 | March 31, 2023 | March 31, 2022 | ||||||||
| Risk-free interest rate | 1.40-2.84% | 0.26-1.40% | 1.40-3.98 | % | 1.55-1.76 | % | ||||||
| Expected dividend yield | 0.00% | 0.00% | 0.00 | % | 0.00 | % | ||||||
| Expected volatility | 237.85-249.77% | 16.03-273.98% | 223.05-249.77 | % | 245.51 | % | ||||||
| Expected life of options (in years) | 6.5-7 | 6.5 | 6.5-7 | 6.5 | ||||||||
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 $12,000 per month and is on a month-to-month term. During the nine months ended September 30, 2022 and 2021, the Company paid $108,000 of rent expense to 136 Main Street LLC. During the three months ended September 30,March 31, 2023 and 2022, and 2021, the Company paid $36,000 of rent expense to 136 Main Street LLC.
During the nine months endedOn September 30, 2022, Raymond M. Gee received fees totaling $1,080,000 for his personal guaranty on certain promissory notes relating to the acquisition and refinancing of mobile home communities owned by the Company, including $250,000 in relation to the Asheboro and Morganton acquisitions which were accrued for at December 31, 2021 and paid in January 2022. The Company also accrued $1,000,000 guaranty fee owed to Raymond M. Gee during the nine months ended September 30, 2022 for his personal guaranty of the KeyBank $62 million portfolio refinance made up of several loans discussed in Note 5 to be paid at a later date. During the nine months ended September 30, 2021, Mr. Gee received $400,000 for his personal guaranties on four promissory notes relating to the acquisitions of the assets acquired by the Company at our Anderson, Capital View, and Hidden Oaks Communities.
During the nine months ended September 30,1, 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 $8,000 per month and is on a month-to-month term. During the ninethree months ended September 30, 2022,March 31, 2023, the Company paid $8,000 for development consulting services to Gvest Real Estate Capital LLC.
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 $32,000.
During the nine months ended September 30,On April 1, 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 ninethree months ended September 30, 2022,March 31, 2023, the company paid Mr. Kelly $35,000$25,000.
During the three months ended March 31, 2023, Raymond M. Gee received fees totaling $245,000 for his personal guaranty on certain promissory notes relating to the acquisition and $55,000, respectively.refinancing of mobile home communities owned by the Company, in relation to the Merritt Place MHP and County Aire MHP acquisitions paid at closing. During the three months ended March 31, 2022, Raymond M. Gee received fees totaling $450,000 for his personal guaranty on certain promissory notes relating to the acquisitions of mobile home communities owned by the Company, including $250,000 in relation to the Asheboro and Morganton acquisitions which were accrued for at December 31, 2021 and paid in January 2022. The Company also accrued a $1,000,000 guaranty fee owed to Raymond M. Gee, during the year ended December 31, 2022 for his personal guaranty of the KeyBank $62,000,000 portfolio refinance made up of several loans to be paid at a later date which is still outstanding and unpaid as of March 31, 2023.
See Note 2 for information regarding related party VIEs.
F-24
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,MARCH 31, 2023 AND 2022 AND 2021
(UNAUDITED)
NOTE 9 – SUBSEQUENT EVENTS
Additional Closings of Regulation A Offering
Subsequent to September 30, 2022,March 31, 2023, the Company sold an aggregate of 2,2941,434 shares of Series C Preferred Stock in additional closings of this offering for total gross proceeds of $2,291,580.$1,433,750. After deducting a placement fee, the Company received net proceeds of approximately $2,140,701.$1,336,972.
Glynn Acres AcquisitionNew Offering
On July 12, 2022,April 10, 2023, the Company filed a certificate of designation with the Nevada Secretary of State pursuant to which the Company designated 75,000 shares of its preferred stock as Series D Cumulative Redeemable Preferred Stock. The Company filed this designation in anticipation of the launching of a new offering under Regulation D of the Securities Act.
Palm Shadows Acquisition
On March 28, 2023, 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 21 sites and 21 homes on approximately 2.9 acres for a total purchase price of $1,125,000. On September 27, 2022, MHP Pursuits LLC assigned its rights and obligations in the purchase agreementPalm Shadows Purchase Agreement to Glynn Acresthe Company’s newly formed wholly owned subsidiary Palm Shadows MHP LLC, an entity wholly owned by the Company, pursuant to an assignment of purchase and sale agreement.a Texas limited liability company (“Palm Shadows MHP”) (the “Palm Shadows Assignment”). On October 7, 2022,April 14, 2023, closing of the purchase agreementPalm Shadows Purchase Agreement was completed and Glynn AcresPalm Shadows MHP LLC purchased the land, land improvements,improvement, and buildings further expanding the Company’s presence in the Brunswick market. Proforma financial information is included in the unaudited proforma combined resultsfor a total purchase price of operations in Note 4.$10,500,000. The Palm Shadows Purchase Agreement also contains additional covenants, representations, and warranties that are customary of real estate purchase and sale agreements.
In connection with the closing of the property,Palm Shadows Property, on October 7,April 12, 2022, Glynn AcresPalm Shadows MHP LLC entered into a loan agreement (the “Palm Shadows Loan Agreement”) with the sellers, a third-party,Five Star Bank for a loan in the principal amount of $900,000 and issued a promissory note to the lenders for the same amount.
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
On October 4, 2022, the Company issued 15,000 common shares to a former employee upon exercise of stock options pursuant to the Stock Compensation Plan administered by the Compensation Committee.
Wake Forest Portfolio Acquisition
On June 24, 2022, MHP Pursuits LLC entered into a purchase and sale agreement with two individuals for the purchase of 100% membership interests in MACRAL Properties LLC and Ron-Ran Enterprises LLC, two North Carolina limited liability companies that own two manufactured housing communities located in Wake Forest, North Carolina, a part of the Raleigh metropolitan area, for a total purchase price of $4,500,000. The two communities consist of 72 sites and 54 homes on approximately 43 acres.
On November 11, 2022, MHP Pursuits LLC assigned its rights and obligations in the purchase agreement to Wake Forest 2 MHP LLC and Gvest Wake Forest 2 Homes LLC pursuant to an assignment of purchase and sale agreement. On November 14, 2022, closing of the purchase agreement was completed and Wake Forest 2 MHP LLC purchased the membership interests. Proforma financial information is included in the unaudited proforma combined results of operations in Note 4.
In connection with the closing of the property, on November 14, 2022, MACRAL Properties LLC, Ron-Ran Enterprises LLC, and Gvest Wake Forest 2 Homes LLC, entered into a loan agreement with Vanderbilt Mortgage and Finance for a loan in the principal amount of $3,600,000$7,350,000 and issued a promissory note to the lender for the same amount.amount (the “Palm Shadows Note”).
The loan is interest only for the first twelve months. Interest on the disbursed and unpaid principal balance accrues from the date funds are first disbursed at a rate of 7.39%7.030% per annum.annum for the first sixty months, and for the remainder of the term, interest on the disbursed and unpaid principal balance accrues based on the Daily Treasury Yield Curve on United States Treasury Securities plus a margin of 3.00% per annum adjusted for minimum and maximum rate limitations on the loan, resulting in an initial rate of $7.03%. Interest onlyis calculated on the basis of a 360-day year and the actual number of calendar days elapsed. Interest-only payments will begin on January 10,May 12, 2023 and continue monthly until May 12, 2024, at which point the 10th of every month until December 10, 2025 and thereafter amortize over three hundred and sixty consecutive monthly installmentspayment consisting of principal and interest through November 10, 2027. The note matureswill be $39,982 per month until maturity on December 10, 2027 at which point all accrued but unpaid interest and outstanding principal balance is due. The noteMay 12, 2033. Palm Shadows MHP may be prepaidprepay the Palm Shadows Note in part or in full during the first 60 months of the loan term subject toat any time if they pay a penalty as specified in the loan agreement or thereafter, without penalty.prepayment fee.
The notePalm Shadows Note is secured by a first priority security interest in the property. Palm Shadows Property pursuant to a deed of trust (the “Palm Shadow Deed”), an assignment of rents (the “Palm Shadows Assignment of Rents”) and is guaranteed by the Company (the “Corporate Guaranty”) and Raymond M. Gee.
The loan agreementPalm Shadows Loan Agreement and notePalm Shadows Note contain customary financial and other covenants and events of default for a loan of its type.
F-25
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Use of Terms
Except as otherwise indicated by the context and for the purposes of this report only, references in this report to “we,” “our” and the “Company” refer to Manufactured Housing Properties Inc., a Nevada corporation, and its consolidated subsidiaries and variable interest entities, or VIEs.
Special Note Regarding Forward Looking Statements
This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation and availability of resources. These forward-looking statements include, without limitation: statements concerning projections, predictions, expectations, estimates or forecasts for our business, financial and operating results and future economic performance; statements of management’s goals and objectives; trends affecting our financial condition, results of operations or future prospects; statements regarding our financing plans or growth strategies; statements concerning litigation or other matters; and other similar expressions concerning matters that are not historical facts. Words such as “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes” and “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements.
Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times, or by which, that performance or those results will be achieved. Forward-looking statements are based on information available at the time they are made and/or management’s good faith beliefs as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.
Potential investors should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. Potential investors should not make an investment decision based solely on our projections, estimates or expectations.
The specific discussions herein about our company include financial projections and future estimates and expectations about our company’s business. The projections, estimates and expectations are presented in this report only as a guide about future possibilities and do not represent actual amounts or assured events. All the projections and estimates are based exclusively on our management’s own assessment of our business, the industry in which we operate and the economy at large and other operational factors, including capital resources and liquidity, financial condition, fulfillment of contracts and opportunities. The actual results may differ significantly from the projections.
Overview
We are a self-administered, self-managed, vertically integrated owner and operator of manufactured housing communities. We earn income from leasing manufactured home sites to tenants who own their own manufactured home and the rental of company-owned manufactured homes to residents of the communities.
2
We ownAs of March 31, 2023, we owned and operate fifty-twooperated 57 manufactured housing communities containing approximately 2,4722,723 developed sites and 1,3241,410 company-owned, manufactured homes. Our communities are located in Georgia, North Carolina, South Carolina and Tennessee.
As of September 30, 2022,March 31, 2023, our portfolio of manufactured housing properties consisted of the following:
| ● | Pecan Grove – |
| ● | Azalea Hills – a 39 lot, all-age community situated on 7.46 acres and located in Gastonia, North Carolina, a suburb of Charlotte, North Carolina. |
| ● | Holly Faye – a 35 lot all-age community situated on 8.01 acres and located in Gastonia, North Carolina, a suburb of Charlotte North Carolina. |
| ● | Lakeview – |
| ● | Chatham Pines – a 49 lot all-age community situated on 23.57 acres and located in Chapel Hill, North Carolina. |
| ● | Maple Hills – a 74 lot all-age community situated on 21.20 acres and located in Mills River, North Carolina, which is part of the Asheville, North Carolina, Metropolitan Statistical Area. |
| ● | Hunt Club Forest – a 78 lot all-age community situated on 13.02 acres and located in the Columbia, South Carolina metro area. | |
| ● | B&D – a 96 lot all-age community situated on 17.75 acres and located in Chester, South Carolina. | |
| ● | Crestview – a 113 lot all age community situated on 17.1 acres and located in the Asheville, North Carolina, Metropolitan Statistical Area. | |
| ● | Springlake – three all-age communities with | |
| ● | ARC – five all-age communities with 180 lots situated on 39.34 acres and located in Lexington, South Carolina. | |
| ● | Countryside – a 110 lot all-age community situated on 35 acres and located in Lancaster, North Carolina. |
| ● | Evergreen – a 65 lot all-age community situated on 28.4 acres and located in Dandridge, Tennessee. | |
| ● | Golden Isles – a 107 lots all-age community situated on 16.76 acres and located in Brunswick, Georgia. | |
| ● | Anderson – ten all-age communities with 178 lots situated on 50 acres and located in Anderson, South Carolina. | |
| ● | Capital View – a 32 lot all-age community situated on 9.84 acres and located in Gaston, South Carolina. | |
| ● | Hidden Oaks - a 44 lot all-age community situated on 8.96 acres and located in West Columbia, South Carolina. | |
| ● | North Raleigh – five all-age communities with 138 lots situated on 135 acres and located in Franklin and Granville Counties, North Carolina. |
3
| ● | Dixie – a 37 lot all-age community situated on 3.43 acres and located in Kings Mountain, North Carolina. | |
| ● | Driftwood – a 26 lot all-age community situated on 34.92 acres and located in Charlotte, North Carolina. | |
| ● | Meadowbrook – a 94 lot all-age community situated on 40.1 acres and located in York, South Carolina. | |
| ● | Morganton – a 61 lot all-age community situated on 31.29 acres and located in Morganton, North Carolina. | |
| ● | Asheboro – | |
| ● | Sunnyland – a | |
| ● | Warrenville – two all-age communities with 85 lots situated on 45 acres and located in Warrenville, South Carolina. | |
| ● | Lake Village (fka Spaulding) – a | |
| ● | Solid Rock – a 39 lot all-age community situated on 11 acres and located in Leesville, South Carolina. | |
| ● | Red Fox – a | |
| ● | Statesville – a 44 lot all age community situated on 12.86 acres and located in Statesville, North Carolina. | |
| ● | Timberview – a 55 lot all age community situated on 50 acres and located in Trinity, North Carolina. | |
| ● | ||
| ● | Cooley’s (aka Wake Forest 2) – a 44 lot all age community situated on 16 acres and located in Youngsville, North Carolina. | |
| ● | Country Road (aka Wake Forest 2) – a 72 lot all age community situated on 27 acres and located in Franklinton, North Carolina. | |
| ● | Mobile Cottage – a 23 lot all age community situated on | |
| ● | Merritt Place – a 39 lot all age community situated on 13 acres and located in Morganton, North Carolina. | |
| ● | Country Aire – a 105 lot all age community situated on 21 acres and located in Simpsonville, South Carolina. |
Manufactured housing communities are residential developments designed and improved for the placement of detached, single-family manufactured homes that are produced off-site and installed on residential sites within the community. The owner of a manufactured home leases the site on which it is located or the lessee of a manufactured home leases both the home and site on which the home is located.
We believe that manufactured housing is one of the only non-subsidized affordable housing options in the U.S. and that manufactured housing is an economically attractive alternative to traditional single-family and multi-family housing, as it provides a housing alternative that has characteristics of single-family housing (no shared walls, dedicated parking and a yard), yet is more attainable than single-family while being competitively priced to multi-family. Demand for housing affordability continues to increase, but supply of manufactured housing remains virtually static, as there are not many new manufactured housing communities being developed, and many are redeveloped to less affordable options. We are committed to providing this attainable housing option and an improved level of service to our residents, while producing an attractive and risk adjusted return to our investors.
4
Recent Developments
Additional Closings of Regulation A Offering
Subsequent to September 30, 2022, weMarch 31, 2023, the Company sold an aggregate of 2,2941,434 shares of Series C Preferred Stock in additional closings of this offering for total gross proceeds of $2,291,580.$1,433,750. After deducting a placement fee, wethe Company received net proceeds of approximately $2,140,701.$1,336,972.
Glynn AcresPalm Shadows Acquisition
On July 12, 2022,March 28, 2023, MHP Pursuits LLC, our wholly owned subsidiary, entered into a purchase and sale agreement with a third-party for the purchase of a manufactured housing community located in Brunswick, Georgia, consisting of 21 sites and 21 homes on approximately 2.9 acres for a total purchase price of $1,125,000. On September 27, 2022, MHP Pursuits LLC assigned its rights and obligations in the purchase agreementPalm Shadows Purchase Agreement to Glynn Acresthe Company’s newly formed wholly owned subsidiary Palm Shadows MHP LLC, an entity wholly owned by the Company, pursuant to an assignment of purchase and sale agreement.a Texas limited liability company (“Palm Shadows MHP”) (the “Palm Shadows Assignment”). On October 7, 2022,April 14, 2023, closing of the purchase agreementPalm Shadows Purchase Agreement was completed and Glynn AcresPalm Shadows MHP LLC purchased the land, land improvements,improvement, and buildings, further expanding the Company’s presence in the Brunswick market. Proforma financial information is included in the unaudited proforma combined resultsbuildings. The Palm Shadows Purchase Agreement also contains additional covenants, representations, and warranties that are customary of operations in Note 4 of the notes to condensed consolidated financial statements.
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 $900,000 and issued a promissory note to the lenders for the same amount.
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.
Wake Forest Portfolio Acquisition
On June 24, 2022, MHP Pursuits LLC entered into areal estate purchase and sale agreement with two individuals for the purchase of 100% membership interests in MACRAL Properties LLC and Ron-Ran Enterprises LLC, two North Carolina limited liability companies that own two manufactured housing communities located in Wake Forest, North Carolina, a part of the Raleigh metropolitan area, for a total purchase price of $4,500,000. The two communities consist of 72 sites and 54 homes on approximately 43 acres.
On November 11, 2022, MHP Pursuits LLC assigned its rights and obligations in the purchase agreement to Wake Forest 2 MHP LLC and Gvest Wake Forest 2 Homes LLC pursuant to an assignment of purchase and sale agreement. On November 14, 2022, closing of the purchase agreement was completed and Wake Forest 2 MHP LLC purchased the membership interests. Proforma financial information is included in the unaudited proforma combined results of operations in Note 4 of the notes to condensed consolidated financial statements.agreements.
In connection with the closing of the property,Palm Shadows Property, on November 14,April 12, 2022, MACRAL Properties LLC, Ron-Ran Enterprises LLC, and Gvest Wake Forest 2 Homes LLC,Palm Shadows MHP entered into a loan agreement (the “Palm Shadows Loan Agreement”) with Vanderbilt Mortgage and FinanceFive Star Bank for a loan in the principal amount of $3,600,000$7,350,000 and issued a promissory note to the lender for the same amount.amount (the “Palm Shadows Note”).
The loan is interest only for the first twelve months. Interest on the disbursed and unpaid principal balance accrues from the date funds are first disbursed at a rate of 7.39%7.030% per annum.annum for the first sixty months, and for the remainder of the term, interest on the disbursed and unpaid principal balance accrues based on the Daily Treasury Yield Curve on United States Treasury Securities plus a margin of 3.00% per annum adjusted for minimum and maximum rate limitations on the loan, resulting in an initial rate of $7.03%. Interest onlyis calculated on the basis of a 360-day year and the actual number of calendar days elapsed. Interest-only payments will begin on January 10,May 12, 2023, and continue monthly until May 12, 2024, at which point the 10th of every month until December 10, 2025 and thereafter amortize over three hundred and sixty consecutive monthly installmentspayment consisting of principal and interest through November 10, 2027. The note matureswill be $39,982 per month until maturity on December 10, 2027 at which point all accrued but unpaid interest and outstanding principal balance is due. The noteMay 12, 2033. Palm Shadows MHP may be prepaidprepay the Palm Shadows Note in part or in full during the first 60 months of the loan term subject toat any time if they pay a penalty as specified in the loan agreement or thereafter, without penalty.prepayment fee.
The notePalm Shadows Note is secured by a first priority security interest in the property. Palm Shadows Property pursuant to a deed of trust (the “Palm Shadow Deed”), an assignment of rents (the “Palm Shadows Assignment of Rents”) and is guaranteed by the Company (the “Corporate Guaranty”) and Raymond M. Gee.
The loan agreementPalm Shadows Loan Agreement and notePalm Shadows Note contain customary financial and other covenants and events of default for a loan of its type.
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 and is what capacity, as well as guidance in response to the pandemic and the need to contain it.
The rules and restrictions put in place have 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.
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.
5
Results of Operations
Comparison of Three Months Ended September 30,March 31, 2023 and 2022 and 2021
The following table sets forth key components of our results of operations during the three months ended September 30,March 31, 2023 and 2022, and 2021, both in dollars and as a percentage of our revenues.
| Three Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |||||||||||||||||||||||||||||
| Amount | Percent of Revenues | Amount | Percent of Revenues | Amount | Percent of Revenues | Amount | Percent of Revenues | |||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||
| Rental and related income | $ | 3,697,558 | 99.50 | % | 2,250,169 | 99.60 | % | $ | 4,145,189 | 97.36 | % | $ | 3,040,022 | 99.51 | % | |||||||||||||||||
| Gross revenues from home sales | 18,570 | 0.50 | % | 9,000 | 0.40 | % | 112,300 | 2.64 | % | 15,000 | 0.49 | % | ||||||||||||||||||||
| Total revenues | 3,716,128 | 100.00 | % | 2,259,169 | 100.00 | % | 4,257,489 | 100.00 | % | 3,055,022 | 100.00 | % | ||||||||||||||||||||
| Community operating expenses | ||||||||||||||||||||||||||||||||
| Repair and maintenance | 287,686 | 7.74 | % | 177,878 | 7.87 | % | 275,529 | 6.47 | % | 221,019 | 7.23 | % | ||||||||||||||||||||
| Real estate taxes | 186,358 | 5.01 | % | 97,328 | 4.31 | % | 201,633 | 4.74 | % | 180,829 | 5.92 | % | ||||||||||||||||||||
| Utilities | 259,758 | 6.99 | % | 189,022 | 8.37 | % | 306,412 | 7.20 | % | 235,895 | 7.72 | % | ||||||||||||||||||||
| Insurance | 87,044 | 2.34 | % | 35,315 | 1.56 | % | 104,059 | 2.44 | % | 60,928 | 1.97 | % | ||||||||||||||||||||
| General and administrative expense | 510,036 | 13.72 | % | 218,830 | 9.69 | % | 708,168 | 16.63 | % | 376,196 | 12.31 | % | ||||||||||||||||||||
| Total community operating expenses | 1,330,882 | 35.81 | % | 718,373 | 31.80 | % | 1,595,801 | 37.48 | % | 1,074,237 | 35.16 | % | ||||||||||||||||||||
| Corporate payroll and overhead | 1,519,271 | 40.88 | % | 580,109 | 25.68 | % | 1,571,454 | 36.91 | % | 909,078 | 29.76 | % | ||||||||||||||||||||
| Depreciation expense | 898,963 | 24.19 | % | 507,493 | 22.46 | % | 1,023,015 | 24.03 | % | 759,704 | 24.87 | % | ||||||||||||||||||||
| Interest expense | 1,506,290 | 40.53 | % | 546,065 | 24.17 | % | 2,053,455 | 48.23 | % | 1,101,693 | 36.06 | % | ||||||||||||||||||||
| Refinancing costs | 3,604,671 | 97.00 | % | - | - | |||||||||||||||||||||||||||
| Cost of home sales | 22,676 | 0.61 | % | - | - | 130,806 | 3.07 | % | - | 0.00 | % | |||||||||||||||||||||
| Total expenses | 8,882,753 | 239.03 | % | 2,352,040 | 104.11 | % | 6,374,531 | 149.73 | % | 3,844,712 | 125.85 | % | ||||||||||||||||||||
| Other income | 500 | 0.01 | % | - | - | % | ||||||||||||||||||||||||||
| Net loss | $ | (5,166,125 | ) | (139.02 | )% | (92,871 | ) | (4.11 | )% | $ | (2,117,042 | ) | (49.73 | )% | $ | (789,690 | ) | (25.84 | )% | |||||||||||||
| Variable interest entity share of net loss | (376,105 | ) | (10.12 | )% | (516,506 | ) | (22.86 | )% | (182,466 | ) | (4.29 | )% | (159,570 | ) | (5.22 | )% | ||||||||||||||||
| Net income (loss) attributable to our company | $ | (4,790,020 | ) | (128.90 | )% | 423,635 | 18.75 | % | $ | (1,934,576 | ) | (45.44 | )% | $ | (630,120 | ) | (20.63 | )% | ||||||||||||||
| Preferred stock dividends and put option value accretion | 523,161 | 14.08 | % | 557,580 | 24.68 | % | 537,027 | 12.61 | % | 548,210 | 17.94 | % | ||||||||||||||||||||
| Net loss attributable to common stockholders | $ | (5,313,181 | ) | (142.98 | )% | (133,945 | ) | (5.93 | )% | $ | (2,471,603 | ) | (58.05 | )% | $ | (1,178,330 | ) | (38.57 | )% | |||||||||||||
Revenues. For the three months ended September 30, 2022,March 31, 2023, we earned total revenues of $3,716,128,$4,257,489, as compared to $2,259,169$3,055,022 for the three months ended September 30, 2021,March 31, 2022, an increase of $1,456,959,$1,202,467, or 64.49%39.36%. The increase in revenues between the periods was primarily due to $1,060,338$714,255 of rental income from the acquisition of twenty-twothirteen manufactured housing communities during andon or subsequent to September 2021.March 31, 2022. The remaining increase was due to occupancy and rental rate increases.
Community Operating Expenses. For the three months ended September 30, 2022,March 31, 2023, we incurred total community operating expenses of $1,330,882,$1,595,801, as compared to $718,373$1,074,237 for the three months ended September 30, 2021,March 31, 2022, an increase of $612,509,$521,564, or 85.26%48.55%. The increase in community operating expenses was primarily due to $387,757$341,459 of additional expenses associated with the twenty-twothirteen properties acquired during and subsequent to September 2021, including additional repairs and maintenance, insurance, utilities, and real estate tax expenses and additionalMarch 31, 2022. This includes a $136,615 increase in payroll as we hired additional on-site maintenance staff at several of our new parks to increase efficiencies and decrease contract labor costs.costs, a $36,978 increase in recurring bank service charges related to the KeyBank portfolio refinance agreement the Company entered into on September 1, 2022, a $27,079 increase in repairs and maintenance, a $21,134 increase insurance and a $26,877 increase in utilities. Community operating expenses as a percentage of revenues were 37.48% and 35.16% for the three months ending March 31, 2023 and 2022, respectively.
6
Corporate Payroll and Overhead Expenses. For the three months ended September 30, 2022,March 31, 2023, we incurred corporate payroll and overhead expenses of $1,519,271,$1,571,454, as compared to $580,109$909,078 for the three months ended September 30, 2021,March 31, 2022, an increase of $939,162,$662,376, or 161.89%72.86%. This increase was primarily due to increased payroll including corporate salaries and benefits expense of $330,770$506,111 due to hiring additional personnel to support our future growth, $154,000 of additional legal and accounting expense accruals, and approximately $100,000 of pursuit costs written off during the quarterincurred related to a new offering of $36,000 and an acquisition that the Company abandoned based on late-stageincrease in stock compensation expense of $60,215 due diligence findings. Additionally, duringto issuance of stock options to officers hired to support our growth. Corporate payroll and overhead expenses as a percentage of revenues were 36.91% and 29.76% for the three months ended September 30,ending March 31, 2023, and 2022, we accrued $225,000 for employee year-end bonuses, as compared to no accrual during the three months ended September 30, 2021.respectively.
Depreciation Expense. For the three months ended September 30, 2022,March 31, 2023, we recorded depreciation of our assets totaling $898,963,$1,023,015, as compared to $507,493$759,704 for the three months ended September 30, 2021,March 31, 2022, an increase of $391,470,$263,311, or 77.14%34.66%. The increase in depreciation was driven by approximately $327,000$181,725 related to the assets in twenty-twothirteen manufactured housing communities that were acquired during and subsequent to September 2021.March 31, 2022. The remaining increase was due to depreciation of capital improvement projects completed subsequent to September 30, 2021,March 31, 2022, such as home renovations and new home installations.
Interest Expense. For the three months ended September 30, 2022,March 31, 2023, we incurred interest expense of $1,506,290,$2,053,455, as compared to $546,065$1,101,693 for the three months ended September 30, 2021,March 31, 2022, an increase of $960,225,$951,762, or 175.84%86.39%. The increase was primarily due to $379,079$347,437 of interest on additional debt incurred to acquire new properties and new homes during and $80,770 of nine months of interest related to 2022 acquisition debt subsequent to September 2021, $183,175 of interest on related party debt issued subsequent to September 30, 2021, and anMarch 31, 2022. In addition, there was a $269,706 increase of $217,291 in dividends paid to series C preferred stockholders, which are included in interest expense given the liability treatment of the mandatorily redeemable Series C Cumulative Redeemable Preferred Stock.
Refinancing Costs. For the three months ended September 30, 2022, we incurred refinancing costs Interest Expense as a percentage of $3,604,671, as compared to $0revenues were 48.23% and 36.06% for the three months ended September 30, 2021, an increase of 100% caused by a non-recurring major portfolio refinance through KeyBank National Associationending March 31, 2023, and Fannie Mae, which refinanced most of the outstanding debt in our portfolio for a total new principal balance of $62,000,000. We incurred refinancing expense of $3,604,672 in connection with the debt we extinguished including write-off of net unamortized debt issuance costs totaling $2,203,841, prepayment penalties of $1,385,596, and other fees of $15,234.2022, respectively.
Net Loss. The factors described above resulted in a net loss of $5,166,125$2,117,042, for the three months ended September 30, 2022,March 31, 2023, as compared to $92,871$789,690 for the three months ended September 30, 2021, an increaseMarch 31, 2022, a decrease of $5,073,254,$1,327,352, or 5,462.69%168.09%, predominately driven by non-recurring refinance costs.
Comparison of Nine Months Ended September 30, 2022 and 2021
The following table sets forth key components of our results of operations during the nine months ended September 30, 2022 and 2021, both in dollars and as a percentage of our revenues.
Nine Months Ended September 30, 2022 | Nine Months Ended September 30, 2021 | |||||||||||||||
| Amount | Percent of Revenues | Amount | Percent of Revenues | |||||||||||||
| Revenue | ||||||||||||||||
| Rental and related income | $ | 10,021,357 | 98.81 | % | 5,690,227 | 98.71 | % | |||||||||
| Gross revenues from home sales | 121,164 | 1.19 | % | 74,244 | 1.29 | % | ||||||||||
| Total revenues | 10,142,521 | 100.00 | % | 5,764,471 | 100.00 | % | ||||||||||
| Community operating expenses | ||||||||||||||||
| Repair and maintenance | 803,505 | 7.92 | % | 401,068 | 6.96 | % | ||||||||||
| Real estate taxes | 584,280 | 5.76 | % | 296,568 | 5.14 | % | ||||||||||
| Utilities | 735,638 | 7.25 | % | 488,334 | 8.47 | % | ||||||||||
| Insurance | 226,341 | 2.23 | % | 103,712 | 1.80 | % | ||||||||||
| General and administrative expense | 1,291,276 | 12.73 | % | 522,952 | 9.07 | % | ||||||||||
| Total community operating expenses | 3,641,040 | 35.90 | % | 1,812,634 | 31.44 | % | ||||||||||
| Corporate payroll and overhead | 3,683,267 | 36.32 | % | 1,744,576 | 30.26 | % | ||||||||||
| Depreciation expense | 2,477,642 | 24.43 | % | 1,411,158 | 24.48 | % | ||||||||||
| Interest expense | 3,843,031 | 37.89 | % | 1,439,419 | 24.97 | % | ||||||||||
| Refinancing costs | 3,620,422 | 35.70 | % | 16,675 | 0.29 | % | ||||||||||
| Cost of home sales | 177,410 | 1.75 | % | - | - | |||||||||||
| Total expenses | 17,442,812 | 171.98 | % | 6,424,462 | 111.45 | % | ||||||||||
| Other Income | 500 | - | 139,300 | 2.42 | % | |||||||||||
| Net loss | $ | (7,299,791 | ) | (71.97 | )% | (520,691 | ) | (9.03 | )% | |||||||
| Variable interest entity share of net loss | (786,590 | ) | (7.76 | )% | (343,073 | ) | (5.95 | )% | ||||||||
| Net loss attributable to our company | $ | (6,513,201 | ) | (64.22 | )% | (177,618 | ) | (3.08 | )% | |||||||
| Preferred stock dividends and put option value accretion | 1,619,585 | 15.97 | % | 1,627,254 | 28.23 | % | ||||||||||
| Net loss attributable to common stockholders | $ | (8,132,786 | ) | (80.19 | )% | (1,804,872 | ) | (31.31 | )% | |||||||
Revenues. For the nine months ended September 30, 2022, we earned total revenues of $10,142,521, as compared to $5,764,471 for the nine months ended September 30, 2021, an increase of $4,378,050, or 75.95%. The65.80% increase in revenues between the periodstotal expenses, which was primarily due to $2,411,928 of rental income from the acquisition of twenty manufactured housing communities subsequent to September 30, 2021, an increase of $1,451,175 from nine full months of rental income from thirteen communities acquired during the nine months ended September 30, 2021 and increased gross revenues from home sales of $46,920. The remaining increase was due to occupancy and rental rate increases.
Community Operating Expenses. For the nine months ended September 30, 2022, we incurred total community operating expenses of $3,641,040, as compared to $1,812,634 for the nine months ended September 30, 2021, an increase of $1,828,406, or 100.87%. Thepartially offset by a 39.36% increase in community operating expenses was primarily due to additional expenses of $1,417,792 associated with the thirty-three properties acquired during 2021 and 2022, including additional repairs and maintenance, insurance, utilities, and real estate tax expenses and we hired additional on-site maintenance staff at several of our new parks to increase efficiencies and decrease contract labor costs.
Corporate Payroll and Overhead Expenses. For the nine months ended September 30, 2022, we incurred corporate payroll and overhead expenses of $3,683,267, as compared to $1,744,576 for the nine months ended September 30, 2021, an increase of $1,938,691, or 111.13%. This increase was primarily due to increased payroll related expenses including corporate salaries and benefits expense of $766,730, one-time bonuses and recruiter service fees of $119,000 related to new hires and one-time separation payments of approximately $226,000, and an increase in stock compensation expense of $67,850 due to issuance of stock options to officers hired to support our growth. Additionally, during the nine months ended September 30, 2022, we accrued $225,000 for employee year-end bonuses, as compared to no accrual during the nine months ended September 30, 2021. The increase in corporate overhead expenses was also due to approximately $120,000 of additional marketing and travel expenses and $152,000 of pursuit costs written off during 2022 in relation to abandoned potential acquisitions and development deals.
Depreciation Expense. For the nine months ended September 30, 2022, we recorded depreciation expense of $2,477,642, as compared to $1,411,158 for the nine months ended September 30, 2021, an increase of $1,066,484, or 75.58%. The increase in depreciation was driven by approximately $970,000 of additional deprecation related to the assets acquired in thirty-three manufactured housing communities during 2021 and 2022. The remaining increase was due to depreciation of capital improvement projects completed subsequent to September 30, 2021, such as home renovations and new home installations.
Interest Expense. For the nine months ended September 30, 2022, we incurred interest expense of $3,843,031, as compared to $1,439,419 for the nine months ended September 30, 2021, an increase of $2,403,612, or 166.98%. The increase was primarily due to $813,059 of interest on additional debt incurred to acquire new properties and new homes during or subsequent to September 2021, $346,274 of interest on related party debt added subsequent to September 30, 2021, an increase in amortization of debt issuance costs of $335,824, and an increase of $548,213 in dividends to series C preferred stockholders, which are included in interest expense given the liability treatment of the mandatorily redeemable Series C Cumulative Redeemable Preferred Stock.
Refinancing Costs. For the nine months ended September 30, 2022, we incurred refinancing costs of $3,620,422, as compared to $16,675 for the three months ended September 30, 2021, an increase of $3,603,747 primarily driven by a non-recurring major portfolio refinance on September 1, 2022 through KeyBank National Association and Fannie Mae, which refinanced most of the outstanding debt in our portfolio for a total new principal balance of $62,000,000. We incurred refinancing expense of $3,604,672 in connection with the debt we extinguished including write-off of net unamortized debt issuance costs totaling $2,203,841, prepayment penalties of $1,385,596, and other fees of $15,235.
Other Income. For the nine months ended September 30, 2022, we earned other income of $500 miscellaneous non-operating fees compared to $139,300 other income recognized for the nine months ended September 30, 2021 upon the forgiveness of our Paycheck Protection Program loan by the Small Business Administration in June 2021.
Net Loss. The factors described above resulted in a net loss of $7,299,791 for the nine months ended September 30, 2022, as compared to $520,691 for the nine months ended September 30, 2021, an increase of $6,779,100, or 1,301.94%, predominately driven by non-recurring refinancing costs.revenues.
Liquidity and Capital Resources
The Company’s main liquidity demands have been and are expected to continue to include distributions to the Company’s preferred stockholders, acquisitions, capital improvements including renovations of company owned manufactured homes and development and expansion of communities, debt service, and expenses relating to rental real estate operations. Our business plan includes acquiring communities that yield more than our cost of funds and then investing in physical improvements, including adding rental homes onto otherwise vacant sites. We intend to continue to increase our real estate investments. The growth of our real estate portfolio depends on the availability of suitable properties which meet our investment criteria and appropriate financing, which includes our ability to raise capital. There is no guarantee that any of these additional opportunities will materialize or that we 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 us, if at all. To the extent that funds or appropriate communities are not available, fewer acquisitions will be made.
Our principal demands for cash are operating and administrative expenses, dividends on our preferred stock, debt service payments, capital expenditures to improve the properties within our portfolio, and community acquisitions.
As of September 30, 2022,March 31, 2023, we held cash and cash equivalents of $1,896,839$5,710,926 and restricted cash of $5,018,079.$5,222,057. We believe that our current available cash along with anticipated revenues is sufficient to meet our cash needs for the near future. We plan to meet our short-term liquidity requirements for the next twelve months, generally through available cash, cash provided by operating activities, and with funds available to us under the existing two $2 million$2,000,000 revolving promissory notes from our officers, described below. Proceeds from theAdditionally, we have a number of unencumbered homes which are available to be sold to generate liquidity which became available after KeyBank portfolio refinance completedin 2022.
Proceeds from issuance of Series C Preferred Stock and cash held in escrow with our lenders will fund our capital improvement projects and acquisitions. To the extent that funds or appropriate communities are not available, fewer acquisitions and capital improvements will be made.
We have incurred net losses each year since inception and have experienced slightly negative cash flows from operations during the thirdfirst quarter ended March 31, 2023. We are in an acquisitive, growth stage whereby we have doubled the number of 2022 werehome sites in our portfolio of manufactured housing communities over the past two years. We have incurred additional corporate payroll and overhead and interest expense in order to accomplish such growth which has driven losses and used operating cash flow. We acquire communities and invest in physical improvements, implement operational efficiencies to pay off debt attachedcut costs, work to a significant percentage of our company owned manufactured homes which are now unencumberedimprove occupancy and can be sold for additional cash flow, if needed.collections, and increase rents based on each respective market all to stabilize the acquired communities to their full potential.
7
Summary of Cash Flow
The following table provides detailed information about our net cash flow for the period indicated:
Cash Flow
| Nine Months Ended September 30, | Three Months Ended March 31, | |||||||||||||||
| 2022 | 2021 | 2023 | 2022 | |||||||||||||
| Net cash provided by (used in) operating activities | $ | (1,853 | ) | 2,669,208 | ||||||||||||
| Net cash used in operating activities | $ | (500,708 | ) | $ | (101,818 | ) | ||||||||||
| Net cash used in investing activities | (8,958,612 | ) | (3,793,545 | ) | (3,000,372 | ) | (2,029,556 | ) | ||||||||
| Net cash provided by financing activities | 13,769,054 | 1,337,742 | 4,028,448 | 2,121,744 | ||||||||||||
| Net increase in cash, cash equivalent and restricted cash | 4,808,589 | 213,405 | ||||||||||||||
| Net increase (decrease) in cash, cash equivalent and restricted cash | 527,368 | (9,630 | ) | |||||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 2,106,329 | 1,988,857 | 10,405,615 | 2,106,329 | ||||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 6,914,918 | 2,202,262 | $ | 10,932,983 | $ | 2,096,699 | |||||||||
Net cash used in operating activities was $1,853$500,708 for the ninethree months ended September 30, 2022,March 31, 2023, as compared to $2,669,208 net cash provided by operating activities$101,818 for the ninethree months ended September 30, 2021.March 31, 2022. For the ninethree months ended September 30, 2022,March 31, 2023, the net loss of $7,299,791$2,117,042 offset in part by non-cash depreciation expense of $2,477,642,$1,023,015 and write-offa decrease in accrued liabilities of net unamortized debt issuance costs totaling $2,219,591 upon refinance$303,477 related to the payment of accrued 2022 employee bonuses, guarantee fees, and accounting fees were the primary drivers of the net cash used in operating activities. Additionally, prepayment penalties and other fees of $1,400,831 paid to old lenders upon refinance of the majority of our loans that is included in net loss is added back to net loss to present as a financing activity. For the ninethree months ended September 30, 2021,March 31, 2022, the net loss of $520,691$789,690 and debt extinguishmentdecrease in accrued liabilities of $139,300,$728,086 related to the payment of accrued 2021 employee bonuses, guarantee fees, and real estate taxes in January 2022, offset by depreciation in the amount of $1,411,158,$759,704, amortization of debt issuance costs in the amount of $162,328, and a decrease in other assets of $1,259,065, and an increase in tenant security deposits of $202,468,$269,602 were the primary drivers of the net cash provided byused in operating activities.
Net cash used in investing activities was $8,958,612$3,000,372 for the ninethree months ended September 30, 2022,March 31, 2023, as compared to $3,793,545$2,029,556 for the ninethree months ended September 30, 2021.March 31, 2022. Net cash used in investing activities for the ninethree months ended September 30, 2022March 31, 2023, consisted of purchases of investment properties in the amount of $6,444,135, capital improvements of $1,872,803,$446,055, payment of related acquisition costs of $471,096$107,832 and advanced pursuit costs and deposits for potential deals of $291,742,$231,141, purchases of investment properties in the amount of $2,570,000 and offset by proceeds received from sale of homes of $121,164.$112,300. Net cash used in investing activities for the ninethree months ended September 30, 2021March 31, 2022, consisted of purchase of investment properties in the amount of $2,390,000, capital improvements of $1,317,405,$1,050,000 and payment of related acquisition costs totaling $160,384, offset by proceeds received from sale of homes$163,578, as well as cash paid for capital improvements in the amount of $74,244.$764,907 and cash paid for advanced pursuit costs and deposits of $66,071.
Net cash provided by financing activities was $13,769,054$4,028,448 for the ninethree months ended September 30, 2022,March 31, 2023, as compared to $1,337,742$2,121,744 for the ninethree months ended September 30, 2021.March 31, 2022. For the ninethree months ended September 30,March 31, 2023, net cash provided by financing activities consisted primarily of proceeds from issuance of preferred stock of $3,874,917 and proceeds received from the related payment of lines of credit of $1,329,417, offset by the payment of debt costs and Series C Preferred Stock costs of $636,614. For the three months ended March 31, 2022, net cash provided by financing activities consisted primarily of proceeds received from refinanced notes payable and lines of credit of $66,071,563, proceeds from issuance of preferred stock of $10,253,917, ,$4,289,444 and proceeds from related party debtline of $4,700,000,credit of $700,000, offset by repayment of notes payable upon refinance of $52,774,774, repayment of VIE lines of credit upon refinance of $3,085,607, repayment of related party debt of $4,350,000, repayment of notes payable of $506,656, repayment of VIE lines of credit of $147,144,$1,699,464, payment of mortgage costs and financing costs recorded as debt discount of $3,956,743, payment of prepayment penalties totaling $1,400,831 to old lenders upon refinance of the majority of loans in our portfolio, preferred stock$847,499, and Series A and Series B Preferred Stock dividends of $728,355. For$242,785. The Company repaid the nine months ended September 30, 2021, net cash provided by financing activities consisted primarilyCharlotte 3 Park MHP LLC note payable of proceeds from the issuance of preferred stock of $3,519,484, offset by preferred share dividends of $718,078, repayment of notes payable $458,844, and payment of mortgage costs recorded as debt discount of $927,191.$1,500,000 on March 1, 2022. This community was subsequently refinanced on April 14, 2022.
Regulation A Offering
On June 11, 2021, we launched a new offering under Regulation A of Section 3(6) of the Securities Act for Tier 2 offerings, pursuant to which we are offering up to 47,000 shares of Series C Preferred Stock at an offering price of $1,000 per share for a maximum offering amount of $47 million.$47,000,000 (the “Regulation A Offering”).
During the ninethree months ended September 30, 2022, the CompanyMarch 31, 2023, we sold an aggregate of 10,2603,875 shares of Series C Preferred Stock for total gross proceeds of $10,253,917.$3,874,917. After deducting a placement fee and other expenses, the Companybroker dealer commissions, we received net proceeds of $9,573,085. $3,613,371. In addition to the placement fee and broker dealer commissions, we capitalized an additional $29,326 of other issuance costs associated with the offering which, net of amortization expense, offset with the net proceeds on the balance sheet.
8
Promissory Notes
The Company hasWe have issued promissory notes payable to lenders related to the acquisition of itsour manufactured housing communities and mobile homes. The interest rates on outstanding promissory notes range from 4% to 6%8% with 5 to 30 years principal amortization. The promissory notes are secured by the real estate assets and twenty-ninethirty-three loans totaling $70,393,053$80,752,977 are guaranteed by Raymond M. Gee, our chairman and chief executive officer.Gee.
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 $62,000,000. The loan proceeds were primarily used to pay off third party notes and line of credit with various other lenders totaling approximately $54,000,000, promissory note issued to Metrolina Loan Holdings, LLC for $1,500,000 and a revolving promissory Note issued to Gvest Real Estates Capital LLC for $2,000,000. KeyBank withheld approximately $4,000,000 in escrow for planned capital projects to improve the financed communities which is included in restricted cash. The Company recognized refinancing expense of $3,604,672 in connection with the debt we extinguished including write-off of net unamortized debt issuance costs totaling $2,203,841, prepayment penalties of $1,385,596, and other fees of $15,234. The new loans with KeyBank are interest-only at 4.87% for the first 60 months of the term with principal and interest payments continuing thereafter until maturity on September 1, 2032. The Company may prepay the notes in part or in full subject to prepayment penalties if repaid before May 31, 2032, and without penalty if repaid on or subsequent to that date. The loans are secured by the real estate, which predominately excludes mobile homes, and are guaranteed by the Company and Raymond M. Gee. The Company capitalized $2,842,213 of debt issuance costs in connection with this refinancing including a $1,000,000 accrued guaranty fee owed to Raymond M. Gee to be paid at a later date.
As of September 30,March 31, 2023 and December 31, 2022, the outstanding principal balance on all third-party promissory notes was $74,662,052.$84,714,126 and $79,550,080, respectively. The following are the terms of these notes:
| Maturity Date | Interest Rate | Interest Only Period (Months) | Balance September 30, 2022 | Balance December 31, 2021 | ||||||||||||||
| Pecan Grove MHP LLC | 02/22/29 | 5.250 | % | - | $ | - | $ | 2,969,250 | ||||||||||
| Pecan Grove MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 4,489,000 | - | ||||||||||||
| Azalea MHP LLC | 03/01/29 | 5.400 | % | - | - | 790,481 | ||||||||||||
| Azalea MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 1,830,000 | - | ||||||||||||
| Holly Faye MHP LLC | 03/01/29 | 5.400 | % | - | - | 579,825 | ||||||||||||
| Holly Faye MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 1,608,000 | - | ||||||||||||
| Chatham MHP LLC | 04/01/24 | 5.875 | % | - | - | 1,698,800 | ||||||||||||
| Chatham MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 2,263,000 | - | ||||||||||||
| Lakeview MHP LLC | 03/01/29 | 5.400 | % | - | - | 1,805,569 | ||||||||||||
| Lakeview MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 3,229,000 | - | ||||||||||||
| B&D MHP LLC | 05/02/29 | 5.500 | % | - | - | 1,779,439 | ||||||||||||
| B&D MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 2,887,000 | - | ||||||||||||
| Hunt Club MHP LLC | 01/01/33 | 3.430 | % | - | - | 2,398,689 | ||||||||||||
| Hunt Club MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 2,756,000 | - | ||||||||||||
| Crestview MHP LLC | 12/31/30 | 3.250 | % | - | - | 4,682,508 | ||||||||||||
| Crestview MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 4,625,000 | - | ||||||||||||
| Maple Hills MHP LLC | 12/01/30 | 3.250 | % | - | - | 2,341,254 | ||||||||||||
| Maple Hills MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 2,570,000 | - | ||||||||||||
| Springlake MHP LLC* | 12/10/26 | 4.750 | % | 12 | - | 4,016,250 | ||||||||||||
| Springlake MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 6,590,000 | - | ||||||||||||
| ARC MHP LLC | 01/01/30 | 5.500 | % | - | - | 3,809,742 | ||||||||||||
| ARC MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 3,687,000 | - | ||||||||||||
| Countryside MHP LLC | 03/20/50 | 5.500 | % | 12 | - | 1,684,100 | ||||||||||||
| Countryside MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 4,343,000 | - | ||||||||||||
| Evergreen MHP LLC | 04/01/32 | 3.990 | % | - | - | 1,115,261 | ||||||||||||
| Evergreen MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 2,604,000 | - | ||||||||||||
| Golden Isles MHP LLC | 03/31/26 | 4.000 | % | 60 | - | 787,500 | ||||||||||||
| Golden Isles MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 1,987,000 | - | ||||||||||||
| Anderson MHP LLC* | 07/10/26 | 5.210 | % | 24 | - | 2,153,807 | ||||||||||||
| Anderson MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 5,118,000 | - | ||||||||||||
| Capital View MHP LLC* | 09/10/26 | 5.390 | % | 24 | - | 817,064 | ||||||||||||
| Capital View MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 829,000 | - | ||||||||||||
| Hidden Oaks MHP LLC* | 09/10/26 | 5.330 | % | 24 | - | 823,440 | ||||||||||||
| Hidden Oaks MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 764,000 | - | ||||||||||||
| North Raleigh MHP LLC | 11/01/26 | 4.750 | % | - | - | 5,304,409 | ||||||||||||
| North Raleigh MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 5,279,000 | - | ||||||||||||
| Charlotte 3 Park MHP LLC (Dixie, Driftwood, Meadowbrook)(1) | 03/01/22 | 5.000 | % | 2 | - | 1,500,000 | ||||||||||||
| Charlotte 3 Park MHP LLC (Dixie, Driftwood, Meadowbrook)(2)* | 11/01/28 | 4.250 | % | - | - | |||||||||||||
| Charlotte 3 Park MHP LLC (Dixie) - KeyBank | 09/01/32 | 4.870 | % | 60 | 485,000 | - | ||||||||||||
| Charlotte 3 Park MHP LLC (Driftwood) - KeyBank* | 09/01/32 | 4.870 | % | 60 | 274,000 | - | ||||||||||||
| Carolinas 4 MHP LLC (Asheboro, Morganton)* | 01/10/27 | 5.300 | % | 36 | - | 3,105,070 | ||||||||||||
| Carolinas 4 MHP LLC (Asheboro) - KeyBank* | 09/01/32 | 4.870 | % | 60 | 1,374,000 | - | ||||||||||||
| Carolinas 4 MHP LLC (Morganton) - KeyBank* | 09/01/32 | 4.870 | % | 60 | 1,352,000 | - | ||||||||||||
| Sunnyland MHP LLC(2)* | 02/10/27 | 5.370 | % | 36 | - | - | ||||||||||||
| Sunnyland MHP LLC - KeyBank* | 09/01/32 | 4.870 | % | 60 | 1,057,000 | - | ||||||||||||
| Warrenville MHP LLC* | 03/10/27 | 5.590 | % | 36 | 1,218,870 | - | ||||||||||||
| Spaulding MHP LLC | 07/22/43 | WSJ Prime + 1 | % | 12 | 1,600,000 | - | ||||||||||||
| Solid Rock MHP LLC | 07/07/32 | 5.000 | % | 12 | 925,000 | - | ||||||||||||
| Red Fox MHP LLC | 08/01/32 | 5.250 | % | 24 | 2,250,000 | - | ||||||||||||
| Statesville MHP LLC* | 09/13/25 | SOFR+2.35 | % | 36 | 1,519,925 | - | ||||||||||||
| Timberview MHP LLC* | 09/13/25 | SOFR+2.35 | % | 36 | 1,418,075 | - | ||||||||||||
| Northview MHP LLC - land (Seller Finance) | 09/15/27 | 6.000 | % | 60 | 792,654 | - | ||||||||||||
| Statesville, Northview, and Timberview MHP LLC - homes (Seller Finance) | 09/15/27 | 6.000 | % | 60 | 407,345 | - | ||||||||||||
| Gvest Finance LLC (B&D homes) | 05/01/24 | 5.000 | % | - | 624,833 | 657,357 | ||||||||||||
| Gvest Finance LLC (Countryside homes) | 03/20/50 | 5.500 | % | - | - | 1,287,843 | ||||||||||||
| Gvest Finance LLC (Golden Isles homes) | 03/31/36 | 4.000 | % | 180 | 684,220 | 787,500 | ||||||||||||
| Gvest Anderson Homes LLC* | 07/10/26 | 5.210 | % | 24 | - | 2,006,193 | ||||||||||||
| Gvest Capital View Homes LLC* | 09/10/26 | 5.390 | % | 24 | - | 342,936 | ||||||||||||
| Gvest Hidden Oaks Homes LLC* | 09/10/26 | 5.330 | % | 24 | - | 416,560 | ||||||||||||
| Gvest Carolinas 4 Homes LLC (Asheboro, Morganton)* | 01/10/27 | 5.300 | % | 36 | - | 1,294,930 | ||||||||||||
| Gvest Sunnyland Homes LLC(2)* | 02/10/27 | 5.370 | % | 36 | - | - | ||||||||||||
| Gvest Warrenville Homes LLC* | 03/10/27 | 5.590 | % | 36 | 1,221,130 | - | ||||||||||||
| Total Notes Payable | $ | 74,662,052 | $ | 50,955,777 | ||||||||||||||
| Discount Direct Lender Fees | (3,561,671 | ) | (2,064,294 | ) | ||||||||||||||
| Total Net of Discount | $ | 71,100,381 | $ | 48,891,483 | ||||||||||||||
| Maturity Date | Interest Rate | Interest Only Period (Months) | Balance March 31, 2023 | Balance December 31, 2022 | ||||||||||||||
| Pecan Grove MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | $ | 4,489,000.00 | $ | 4,489,000 | ||||||||||
| Azalea MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 1,830,000 | 1,830,000 | ||||||||||||
| Holly Faye MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 1,608,000 | 1,608,000 | ||||||||||||
| Chatham MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 2,263,000 | 2,263,000 | ||||||||||||
| Lakeview MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 3,229,000 | 3,229,000 | ||||||||||||
| B&D MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 2,887,000 | 2,887,000 | ||||||||||||
| Hunt Club MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 2,756,000 | 2,756,000 | ||||||||||||
| Crestview MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 4,625,000 | 4,625,000 | ||||||||||||
| Maple Hills MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 2,570,000 | 2,570,000 | ||||||||||||
| Springlake MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 6,590,000 | 6,590,000 | ||||||||||||
| ARC MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 3,687,000 | 3,687,000 | ||||||||||||
| Countryside MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 4,343,000 | 4,343,000 | ||||||||||||
| Evergreen MHP LLC (1)(2) | 9/1/2032 | 4.870 | % | 60 | 2,604,000 | 2,604,000 | ||||||||||||
| Golden Isles MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 1,987,000 | 1,987,000 | ||||||||||||
| Anderson MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 5,118,000 | 5,118,000 | ||||||||||||
| Capital View MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 829,000 | 829,000 | ||||||||||||
| Hidden Oaks MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 764,000 | 764,000 | ||||||||||||
| North Raleigh MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 5,279,000 | 5,279,000 | ||||||||||||
| Charlotte 3 Park MHP LLC (Dixie) (1)(2)(3) | 9/1/2032 | 4.870 | % | 60 | 485,000 | 485,000 | ||||||||||||
| Charlotte 3 Park MHP LLC (Driftwood) (1)(2) | 9/1/2032 | 4.870 | % | 60 | 274,000 | 274,000 | ||||||||||||
| Carolinas 4 MHP LLC (Asheboro) (1)(2) | 9/1/2032 | 4.870 | % | 60 | 1,374,000 | 1,374,000 | ||||||||||||
| Carolinas 4 MHP LLC (Morganton) (1)(2) | 9/1/2032 | 4.870 | % | 60 | 1,352,000 | 1,352,000 | ||||||||||||
| Sunnyland MHP LLC(1)(2) | 9/1/2032 | 4.870 | % | 60 | 1,057,000 | 1,057,000 | ||||||||||||
| Warrenville MHP LLC(1) | 3/10/2027 | 5.590 | % | 36 | 1,218,870 | 1,218,870 | ||||||||||||
| Spaulding MHP LLC | 7/22/2043 | WSJ Prime + 1 | % | 12 | 1,600,000 | 1,600,000 | ||||||||||||
| Solid Rock MHP LLC | 6/30/2032 | 5.000 | % | 12 | 925,000 | 925,000 | ||||||||||||
| Red Fox MHP LLC | 8/1/2032 | 5.250 | % | 24 | 2,250,000 | 2,250,000 | ||||||||||||
| Statesville MHP LLC – land(1) | 9/13/2025 | SOFR + 2.35 | % | 36 | 1,519,925 | 1,519,925 | ||||||||||||
| Timberview MHP LLC – land(1) | 9/13/2025 | SOFR + 2.35 | % | 36 | 1,418,075 | 1,418,075 | ||||||||||||
| Northview MHP LLC - land (Seller Finance) | 9/15/2027 | 6.000 | % | 60 | 792,654 | 792,654 | ||||||||||||
| Statesville, Northview, Timberview MHP LLC - homes (Seller Finance) | 9/15/2027 | 6.000 | % | 60 | 407,345 | 407,345 | ||||||||||||
| Glynn Acres MHP LLC | 11/1/2042 | 6.000 | % | 0 | 892,150 | 898,052 | ||||||||||||
| Wake Forest MHP LLC (Cooley’s Country road)(1) | 12/10/2027 | 7.390 | % | 36 | 3,038,914 | 3,038,914 | ||||||||||||
| Mobile Cottage MHP LLC | 12/20/2027 | 5.000 | % | 30 | 400,000 | 400,000 | ||||||||||||
| Gvest Finance LLC (B&D homes) | 5/1/2024 | 5.000 | % | - | 604,757 | 614,809 | ||||||||||||
| Gvest Finance LLC (Golden Isles homes) | 3/31/2031 | 4.000 | % | 120 | 684,220 | 684,220 | ||||||||||||
| Warrenville Gvest Homes LLC(1) | 3/10/2027 | 5.590 | % | 36 | 1,221,130 | 1,221,130 | ||||||||||||
| Gvest Wake Forest 2 Homes LLC (Cooley’s, Country Road home)(1) | 12/10/2027 | 7.390 | % | 36 | 561,086 | 561,086 | ||||||||||||
| Merritt Place MHP LLC | 1/25/2024 | WSJ Prime + 1 | % | 12 | 1,680,000 | - | ||||||||||||
| Country Aire MHP LLC(1) | 9/13/2025 | SOFR + 2.35 | % | 36 | 3,500,000 | - | ||||||||||||
| Total Notes Payable | $ | 84,714,126 | $ | 79,550,080 | ||||||||||||||
| Discount Direct Lender Fees | (3,772,073 | ) | (3,666,214 | ) | ||||||||||||||
| Total Net of Discount | $ | 80,942,053 | $ | 75,883,866 | ||||||||||||||
| (1) | The |
9
| (2) | On September 1, 2022, we, through our wholly owned subsidiaries, entered into twenty-three loan agreements with KeyBank National Association (“KeyBank”) and Fannie Mae for a total principal balance of $62,000,000. The loan proceeds were primarily used to pay off third party notes and line of credit with various other lenders totaling approximately $54,000,000, promissory note issued to Metrolina Loan Holdings, LLC for $1,500,000 and a revolving promissory Note issued to Gvest Real Estates Capital LLC for $2,000,000. KeyBank withheld approximately $4,000,000 in escrow for planned capital projects to improve the financed communities which is included in restricted cash. We may prepay the notes in part or in full subject to prepayment penalties if repaid before May 31, 2032, and without penalty if repaid on or subsequent to that date. The loans are secured by the real estate, which predominately excludes mobile homes, and are guaranteed by us and Raymond M. Gee. We capitalized $2,842,213 of debt issuance costs in connection with this refinancing including a $1,000,000 accrued guaranty fee owed to Raymond M. Gee to be paid at a later date. |
| (3) | We repaid the Charlotte 3 Park MHP LLC note payable of $1,500,000 on March 1, 2022, and recognized refinancing cost expense totaling $15,751. This community was refinanced on April 14, 2022, with a different lender and the Company capitalized $258,023 of debt issuance costs related to the new note. |
Lines of Credit – Variable Interest Entities
| Facility | Borrower | Community | Maturity Date | Interest Rate | Maximum Credit Limit | Balance September 30, 2022 | Balance December 31, 2021 | Borrower | Community | Maturity Date | Interest Rate | Maximum Credit Limit | Balance March 31, 2023 | Balance December 31, 2022 | ||||||||||||||||||||||||||
| Occupied Home Facility(1) | Gvest Homes I LLC | ARC, Crestview, Maple | 01/01/30 | 8.375% | $ | 20,000,000 | $ | 2,446,084 | $ | 2,517,620 | Gvest Homes I LLC | ARC, Crestview, Maple, Countryside | 01/01/30 | 8.375% | $ | 20,000,000 | $ | 3,755,107 | $ | 2,424,896 | ||||||||||||||||||||
| Multi-Community Rental Home Facility | Gvest Finance LLC | ARC, Golden Isles | Various (3) | Greater of 3.25% or Prime, + 375 bps | $ | 4,000,000 | $ | 1,475,714 | $ | 838,000 | Gvest Finance LLC | ARC, Golden Isles, Springlake, | Various (2) | Greater of 3.25% or Prime, + 375 bps | $ | 5,000,000 | $ | 2,490,623 | $ | 2,561,380 | ||||||||||||||||||||
| Multi-Community Floorplan Home Facility | Gvest Finance LLC | Golden Isles, Springlake, Sunnyland, Crestview | Various (3) | LIBOR + 6 – 8% based on days outstanding | $ | 2,000,000 | $ | 1,489,546 | $ | 1,104,255 | Gvest Finance LLC | Golden Isles, Springlake, Sunnyland, Crestview, Meadowbrook | Various (2) | LIBOR + 6 – 8% based on days outstanding | $ | 4,000,000 | $ | 1,585,065 | $ | 1,383,043 | ||||||||||||||||||||
| Springlake Home Facility(2) | Gvest Finance LLC | Springlake | 12/10/26 | 6.75% | $ | 3,300,000 | $ | - | $ | 1,892,481 | ||||||||||||||||||||||||||||||
| Total Lines of Credit - VIEs | $ | 5,411,344 | $ | 6,352,356 | $ | 7,830,795 | $ | 6,369,319 | ||||||||||||||||||||||||||||||||
| Discount Direct Lender Fees | $ | (141,061 | ) | $ | (151,749 | ) | $ | (205,877 | ) | $ | (160,372 | ) | ||||||||||||||||||||||||||||
| Total Net of Discount | $ | 5,270,283 | $ | 6,200,607 | $ | 7,624,918 | $ | 6,208,947 | ||||||||||||||||||||||||||||||||
| (1) | During the |
| (2) |
| The maturity date of the of the Multi-Community Floorplan and Rental 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.
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 $1,500,000. As of December 31, 2021, the balance on this note was $1,500,000. On September 2, 2022, the Company repaid the full outstanding balance of the loan with proceeds from the KeyBank portfolio refinance. The note bore interest at a rate of 18% per annum and was set to mature on April 1, 2023. The note was guaranteed by Raymond M. Gee. During the nine months ended September 30, 2022 and 2021, interest expense totaled $181,233 and $0, respectively. During the three months ended September 30, 2022 and 2021, interest expense totaled $47,342 and $0, respectively.
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 $1,500,000 from Mr. Gee on a revolving basis for working capital purposes. In September 2020, the Company paid off the full balance; however, the line of credit remained available to the Company until it was cancelled in December 2021. As of September 30, 2022March 31, 2023, and December 31, 2021,2022, there was no outstanding balance on this note. During the note.three months ended March 31, 2022, interest expense recognized was $66,575.
Gvest Revolving Promissory Note
On December 27, 2021, the Companywe issued a revolving promissory note to Gvest Real Estate Capital, LLC, an entity whose sole owner is Raymond M. Gee, the Company’sour chairman and chief executive officer, pursuant to which the Companywe may borrow up to $1,500,000 on a revolving basis for working capital or acquisition purposes. There was no balance outstanding on this note as of March 31, 2023. As of March 31, 2023 and December 31, 2021, the2022, there was no outstanding balance on this note was $150,000. On September 9, 2022, the Company paid off the full balance of the revolver with proceeds from the KeyBank portfolio refinance. During the period while the note was outstanding, the maximum credit limit on this note was increased to $2,000,000 and the Company borrowed an aggregate of $2,700,000.note. This note had a five-year term and was interest-only based on a 15% annual rate through the maturity date and was unsecured. During the nine months ended September 30, 2022 and 2021, interest expense totaled $87,542 and $0, respectively. During the three months ended September 30,March 31, 2022, and 2021, interest expense totaled $59,167 and $0, respectively. recognized was $14,718.
10
NAV Real Estate LLC Promissory Note
On June 29, 2022, the Companywe issued a revolving promissory note to NAV RE, LLC, an entity whose owners are Adam Martin, the Company’sour chief investment officer, and his spouse, pursuant to which the Companywe may borrow up to $2,000,000 on a revolving basis for working capital or acquisition purposes. On the same date, the Companywe borrowed $2,000,000. As of September 30,March 31, 2023, and December 31, 2022, the outstanding principal balance on this note was $2,000,000. This note has a five-year term and is interest-only based on ana 15% annual rate through the maturity date and is unsecured. During the three and nine months ended September 30, 2022,March 31, 2023, interest expense totaled $76,667 and $77,500, respectively.$75,000.
Off-Balance Sheet Arrangements
As of September 30, 2022,March 31, 2023, we had no off-balance sheet arrangements.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of thesethe unaudited condensed consolidated financial statements requires our management to make estimates and judgmentsassumptions that affect the reported amounts of assets, and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities atliabilities. On a regular basis, we evaluate these estimates. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the date of our unaudited condensed consolidated financial statements.circumstances. Actual results may differ from these estimates under different assumptions or conditions.estimates.
CriticalFor a description of the accounting policies are defined as those that, in management’s opinion, involve the most significant application of judgment or involve complex estimation and potentiallywhich could, resultif different judgment or estimates were made, materially affect our reported financial position, results of operations, or cash flows, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in materially different results under different assumptions and conditions. Management believesour Annual Report on Form 10-K for the following critical accounting policies are affected by our more significant judgments and estimates used in the preparation of our unaudited condensed consolidated financial statements.
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 (“FASB”) Accounting Standards Codification (“ASC”) for leases.
Under ASC 842, we must assess on an individual lease basis whether it is probable that we will collect the future lease payments. We consider the tenant’s payment history and current credit status when assessing collectability. When collectability is not deemed probable, we write-off the tenant’s receivables, including straight-line rent receivable, and limit lease income to cash received.
Our revenues primarily consist of rental revenues and other rental related fee income. We have the following revenue sources and revenue recognition policies:
Revenue from sales of manufactured homes is recognized in accordancefiscal year ended December 31, 2022 filed 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, we generally have no remaining performance obligation.
Acquisitions. We account for acquisitions as asset acquisitions in accordance with ASC 805, “Business Combinations,”Securities and allocate 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. We allocate 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.
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 5% of the debt service payment as a reserve.
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 49% of these entities and Gvest Real Estate LLC, an entity whose sole owner is Raymond M. Gee, owns 51%. The Company also executed operating agreements with these entities which designate Gvest Capital Management LLC, a company owned and controlled by Gvest Real Estate Capital LLC, as manager with the authority, power, and discretion to manage and control the entities’ business decisions. The operating agreements require the Company to make cash contributions to the entities to fund their activities, operations, and existence, if the Company approves the contribution requests from the manager, which ultimately provides the Company with power to direct the economically significant activities of these entities.
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 applicable GAAP.
During the quarter ended September 30, 2022, the Company refinanced most of its debt and used the refinance proceeds to pay off loans totaling $4,664,384 for which homes owned by Gvest Anderson Homes LLC, Gvest Capital View Homes LLC, Gvest Hidden Oaks Homes LLC, Gvest Carolinas 4 Homes LLC and Gvest Sunnyland Homes LLC were collateral. Homes in these communities were transferred to the Company’s wholly owned subsidiary, MHP Home Holdings LLC, in exchange for the debt paid offExchange Commission on behalf of these VIE entities owned by Gvest Finance LLC and intercompany debt forgiven totaling $460,226. This change in ownership of the homes is reflected in the current period’s balance sheet and the difference between the debt paid off and forgiven and the cost basis of the assets exchanged is reflected as an adjustment to additional paid in capital of $278,138 on the statement of changes in deficit which is eliminated in consolidation. Furthermore, the Company used refinance proceeds to pay off loans held by Gvest Finance LLC and Gvest Springlake Homes LLC which financed homes in the Springlake and Countryside communities. These VIE entities are in the process of obtaining replacement debt which has not been finalized of the date of this filing. An intercompany short-term loan of $3,908,731 is included in accrued liabilities and eliminated in consolidation equal to the Countryside and Springlake debt and refinance costs paid by the Company on the VIEs’ behalf.March 29, 2023.
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 3 to 25 years). Land development costs are not depreciated until they are put in use, at which time they are capitalized as land improvements. Interest Expense pertaining to Land Development Costs are capitalized. Maintenance and Repairs are charged to expense as incurred and improvements are capitalized. The costs and related accumulated depreciation of property sold or otherwise disposed of are removed from the financial statement and any gain or loss is reflected in the current period’s results of operations.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by Rule 13a-15(e) of the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of September 30, 2022.March 31, 2023. Based upon, and as of the date of this evaluation, our chief executive officer and chief financial officer determined that, because of the material weaknesses described in Item 9A “Controls and Procedures” of our Annual Report on Form 10-K for the fiscal year ended December 31, 20212022 and further referenced below, which, due to employee turnover, we are still in the process of remediating as of September 30, 2022,March 31, 2023, our disclosure controls and procedures were not effective.
During its evaluation of the effectiveness of our internal control over financial reporting as of September 30, 2022,March 31, 2023, our management identified the following material weaknesses:
| ● | We lack proper segregation of duties due to the limited number of employees within the accounting department. |
| ● | We lack effective closing procedures. |
To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of legal and accounting professionals. As we grow, we expect to increase our number of employees, which will enable us to implement adequate segregation of duties within the internal control framework.
11
To cure the foregoing material weakness, we have taken or plan to take the following remediation measures:
| ● |
| ● | We have added and plan to continue to add additional employees to assist in the financial closing procedures. |
| ● | As necessary, we will continue to engage consultants or outside accounting firms to ensure proper accounting for our consolidated financial statements. |
We intend to complete the remediation of the material weaknesses discussed above as soon as practicable, but we can give no assurance that we will be able to do so. Designing and implementing an effective disclosure controls and procedures is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to devote significant resources to maintain a financial reporting system that adequately satisfies our reporting obligations. The remedial measures that we have taken and intend to take may not fully address the material weaknesses that we have identified, and material weaknesses in our disclosure controls and procedures may be identified in the future. Should we discover such conditions, we intend to remediate them as soon as practicable. We are committed to taking appropriate steps for remediation, as needed.
Changes in Internal Controls Over Financial Reporting
We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.
Other than in connection with the implementation of the remedial measures described above, there were no changes in our internal controls over financial reporting during the thirdfirst quarter of fiscal year 20222023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, we 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 from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
ITEM 1A. RISK FACTORS.
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
We have notOn March 7, 2023, the Company completed an additional closing of the Regulation A Offering, pursuant to which the Company sold any equity securities duringan aggregate of 547 shares of Series C Preferred Stock for total gross proceeds of $547,000. After deducting the nine months ended September 30, 2022 that were not previously disclosed in a current report on Form 8-K that was filed duringDealer Manager’s fees, the quarter.Company received net proceeds of approximately $510,478.
On March 21, 2023, the Company completed an additional closing of the Regulation A Offering, pursuant to which the Company sold an aggregate of 747 shares of Series C Preferred Stock for total gross proceeds of $747,000. After deducting the Dealer Manager’s fees, the Company received net proceeds of approximately $696,578.
On April 4, 2023, the Company completed an additional closing of the Regulation A Offering, pursuant to which the Company sold an aggregate of 437 shares of Series C Preferred Stock for total gross proceeds of $437,000. After deducting the Dealer Manager’s fees, the Company received net proceeds of approximately $407,503.
On April 11, 2023, the Company completed an additional closing of the Regulation A Offering, pursuant to which the Company sold an aggregate of 295 shares of Series C Preferred Stock for total gross proceeds of $295,000. After deducting the Dealer Manager’s fees, the Company received net proceeds of approximately $275,088.
On April 18, 2023, the Company completed an additional closing of the Regulation A Offering, pursuant to which the Company sold an aggregate of 141 shares of Series C Preferred Stock for total gross proceeds of $140,750. After deducting the Dealer Manager’s fees, the Company received net proceeds of approximately $131,249.
During the ninethree months ended September 30, 2022,March 31, 2023, we did not repurchase any shares of our common stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
We have no information to disclose that was required to be in a report on Form 8-K during the third quarter of fiscal year 2022 but was not reported. There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.None.
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ITEM 6. EXHIBITS.
| * | Filed herewith |
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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.
| Date: | MANUFACTURED HOUSING PROPERTIES INC. | |
| /s/ Raymond M. Gee | ||
| Name: | Raymond M. Gee | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| /s/ | ||
| Name: | ||
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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