UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 Junequarterly period ended September 30, 2015
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 No. Number: 000-51229
MANUFACTURED HOUSING PROPERTIES INC.
(Exact Name of Registrant as specifiedSpecified in its charter)
Nevada | 51-0482104 | |
(State or other jurisdiction of incorporation or organization) | ( |
136 Main Street Pineville, NC | 28134 | |
(Address of principal executive offices) | ( |
Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the Registrantregistrant (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 Registrantregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes: x No: o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes: x No: o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “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, x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No x
As of November 10, 2023, there were 12,493,012 common shares outstanding of Common Stock, par value $.01 per share, as of August 11, 2015 was 15,598,015 shares.
Manufactured Housing Properties Inc.)
Quarterly Report on Form 10-Q
Period Ended September 30, 2015
TABLE OF CONTENTS
Item 1. | 1 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of | 24 |
Item 3. | Quantitative and Qualitative Disclosures About Market | 32 |
Item 4. | 32 | |
Item 1. | 34 | |
Item | 34 | |
Item 2. | 34 | |
Item 3. | 34 | |
Item 4. | 34 | |
Item 5. | 34 | |
Item | 35 |
i
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
MANUFACTURED HOUSING PROPERTIES INC.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page | ||
Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 | 2 | |
3 | ||
4 | ||
6 | ||
Notes to Unaudited Condensed Consolidated Financial Statements | 8 |
1
MANUFACTURED HOUSING PROPERTIES INC.
June 30, | December 31, | |||||||
2015 | 2014 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 394,487 | $ | 80,025 | ||||
Accounts receivable (net of allowance for doubtful accounts of $228,574) | 122,429 | 270,132 | ||||||
Prepaid expenses and other | 20,266 | 49,586 | ||||||
Total current assets | 537,182 | 399,743 | ||||||
Property and equipment: | ||||||||
Oil and gas properties, evaluated (full cost method) | 7,501,897 | 16,046,178 | ||||||
Oil and gas properties, unevaluated (full cost method) | 214,018 | 1,005,603 | ||||||
Other property and equipment | 40,978 | 40,978 | ||||||
Total property and equipment | 7,756,893 | 17,092,759 | ||||||
Less: Accumulated depreciation, depletion, amortization and impairment | (7,188,953 | ) | (10,536,660 | ) | ||||
Net property and equipment | 567,940 | 6,556,099 | ||||||
Other assets: | ||||||||
Other noncurrent assets | 5,238 | 5,238 | ||||||
Total other assets | 5,238 | 5,238 | ||||||
Total assets | $ | 1,110,360 | $ | 6,961,080 | ||||
Liabilities and Stockholders’ Equity (Deficit) | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt - related party | $ | 125,000 | $ | - | ||||
Current portion of long-term debt - other | 12,295 | 2,052,040 | ||||||
Accounts payable - related party | - | 217,724 | ||||||
Accounts payable - other | 349,675 | 931,088 | ||||||
Accrued liabilities | 654,909 | 1,575,144 | ||||||
Total current liabilities | 1,141,879 | 4,775,996 | ||||||
Deferred income taxes | 155,000 | 803,800 | ||||||
Asset retirement obligations | 105,580 | 479,165 | ||||||
Total liabilities | 1,402,459 | 6,058,961 | ||||||
Stockholders’ equity (deficit): | ||||||||
Preferred stock, $.01 par value per share, 1,000,000 shares authorized, | ||||||||
None issued | - | - | ||||||
Common stock, $.01 par value per share, 200,000,000 shares authorized, | ||||||||
5,181,348 shares and 5,180,828 shares, issued and outstanding | 51,813 | 51,808 | ||||||
Additional paid in capital | 15,788,467 | 15,484,703 | ||||||
Accumulated deficit | (16,132,379 | ) | (14,634,392 | ) | ||||
Total stockholders’ equity (deficit) | (292,099 | ) | 902,119 | |||||
Total liabilities and stockholders’ equity (deficit) | $ | 1,110,360 | $ | 6,961,080 |
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2023 AND DECEMBER 31, 2022
| September 30, |
|
| December 31, |
| |||
Assets |
| (unaudited) |
|
|
|
| ||
Investment Property |
|
|
|
|
|
| ||
Land |
| $ | 37,403,653 |
|
| $ | 30,263,687 |
|
Site and Land Improvements |
|
| 49,470,418 |
|
|
| 44,035,649 |
|
Buildings and Improvements |
|
| 31,546,780 |
|
|
| 23,229,657 |
|
Construction in Process |
|
| 2,395,765 |
|
|
| 2,541,376 |
|
Total Investment Property |
|
| 120,816,616 |
|
|
| 100,070,369 |
|
Accumulated Depreciation |
|
| (11,564,934 | ) |
|
| (8,225,976 | ) |
Net Investment Property |
|
| 109,251,682 |
|
|
| 91,844,393 |
|
Cash and Cash Equivalents |
|
| 1,966,633 |
|
|
| 5,090,369 |
|
Restricted Cash |
|
| 5,238,797 |
|
|
| 5,315,246 |
|
Accounts Receivable |
|
| 342,573 |
|
|
| 368,081 |
|
Other Assets (Net of Amortization) |
|
| 1,333,796 |
|
|
| 975,064 |
|
TOTAL ASSETS |
| $ | 118,133,481 |
|
| $ | 103,593,153 |
|
|
|
|
|
|
|
| ||
Liabilities |
|
|
|
|
|
| ||
Accounts Payable |
| $ | 990,981 |
|
| $ | 755,124 |
|
Notes Payable, net of $3,656,874 and $3,666,214 debt discount, respectively |
|
| 86,947,646 |
|
|
| 75,883,866 |
|
Lines of Credit – Variable Interest Entities, net of $201,844 and $160,372 debt discount, respectively |
|
| 7,344,733 |
|
|
| 6,208,947 |
|
Lines of Credit – Related Party |
|
| 2,000,000 |
|
|
| 2,000,000 |
|
Accrued Liabilities including amounts due to related parties of $1,382,500 and $1,154,166, respectively |
|
| 3,189,993 |
|
|
| 2,054,438 |
|
Tenant Security and Home Sale Deposits |
|
| 1,059,403 |
|
|
| 879,676 |
|
Series C Redeemable Preferred Stock, par value $0.01 per share; 47,000 shares authorized; 26,929 and 21,584 shares issued and outstanding and redemption value $26,928,919 and $21,584,002 as of September 30, 2023 and December 31, 2022, respectively |
|
| 25,443,409 |
|
|
| 20,177,187 |
|
Total Liabilities |
|
| 126,976,165 |
|
|
| 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; 1,826,000 shares issued and outstanding and redemption value $6,847,500 as of September 30, 2023 and December 31, 2022 |
|
| 6,450,197 |
|
|
| 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 and redemption value $11,219,265 as of September 30, 2023 and December 31, 2022 |
|
| 9,667,030 |
|
|
| 9,122,218 |
|
Series D Cumulative Redeemable Preferred Stock, par value $0.01 per share; 75,000 shares authorized; 3,143 and 0 shares issued and outstanding and redemption value $3,146,831 and $0 as of September 30, 2023 and December 31, 2022, respectively |
|
| 2,846,060 |
|
|
| — |
|
|
|
|
|
|
|
| ||
Deficit |
|
|
|
|
|
| ||
Common Stock, par value $0.01 per share; 200,000,000 shares authorized; 12,493,012 shares are issued and outstanding as of September 30, 2023 and December 31, 2022 |
|
| 124,930 |
|
|
| 124,930 |
|
Additional Paid in Capital |
|
| (6,848,712 | ) |
|
| (5,428,984 | ) |
Accumulated Deficit |
|
| (18,555,748 | ) |
|
| (12,521,376 | ) |
Total Manufactured Housing Properties Inc. Deficit |
|
| (25,279,530 | ) |
|
| (17,825,430 | ) |
Non-controlling interest in Variable Interest Entities |
|
| (2,526,441 | ) |
|
| (1,770,789 | ) |
Total Deficit |
|
| (27,805,971 | ) |
|
| (19,596,219 | ) |
TOTAL LIABILITIES AND DEFICIT |
| $ | 118,133,481 |
|
| $ | 103,593,153 |
|
See accompanying notes to unaudited consolidated financial statements.
Three Months Ended June 30, | ||||||||
2015 | 2014 | |||||||
Revenues: | ||||||||
Oil and gas sales | $ | 110,424 | $ | 644,568 | ||||
Total revenues | 110,424 | 644,568 | ||||||
Operating expenses: | ||||||||
Lease operating expense | 173,912 | 381,115 | ||||||
Depreciation, depletion and amortization | 51,237 | 103,409 | ||||||
Impairment expense | 397,300 | - | ||||||
Accretion expense | 2,325 | 10,030 | ||||||
Workover expense | - | 388,878 | ||||||
Selling, general and administrative | 379,788 | 370,811 | ||||||
Gain on creditor settlements | (523,815 | ) | - | |||||
Total operating expenses | 480,747 | 1,254,243 | ||||||
Operating loss | (370,323 | ) | (609,675 | ) | ||||
Other income (expense): | ||||||||
Interest income | 73 | 89 | ||||||
Interest expense | (100,167 | ) | (22,148 | ) | ||||
Loss before income taxes | (470,417 | ) | (631,734 | ) | ||||
Benefit for income taxes: | ||||||||
Current | 61,492 | - | ||||||
Deferred | 108,900 | 140,100 | ||||||
Net loss | $ | (300,025 | ) | $ | (491,634 | ) | ||
Net loss per share, basic and diluted | $ | (0.06 | ) | $ | (0.10 | ) | ||
Weighted average shares outstanding, basic and diluted | 5,181,348 | 5,109,377 |
Six Months Ended June 30, | ||||||||
2015 | 2014 | |||||||
Revenues: | ||||||||
Oil and gas sales | $ | 272,624 | $ | 1,149,193 | ||||
Total revenues | 272,624 | 1,149,193 | ||||||
Operating expenses: | ||||||||
Lease operating expense | 431,575 | 755,047 | ||||||
Depreciation, depletion and amortization | 147,798 | 178,231 | ||||||
Impairment expense | 1,395,224 | - | ||||||
Accretion expense | 13,045 | 19,840 | ||||||
Workover expense | 68,185 | 771,318 | ||||||
Selling, general and administrative | 781,224 | 763,928 | ||||||
Gain on creditor settlements | (523,815 | ) | - | |||||
Total operating expenses | 2,313,236 | 2,488,364 | ||||||
Operating loss | (2,040,612 | ) | (1,339,171 | ) | ||||
Other income (expense): | ||||||||
Interest income | 87 | 315 | ||||||
Interest expense | (167,754 | ) | (43,306 | ) | ||||
Loss before income taxes | (2,208,279 | ) | (1,382,162 | ) | ||||
Benefit for income taxes: | ||||||||
Current | 61,492 | - | ||||||
Deferred | 648,800 | 343,900 | ||||||
Net loss | $ | (1,497,987 | ) | $ | (1,038,262 | ) | ||
Net loss per share, basic and diluted | $ | (0.29 | ) | $ | (0.21 | ) | ||
Weighted average shares outstanding, basic and diluted | 5,181,264 | 5,046,540 |
Six Months Ended June 30, | ||||||||
2015 | 2014 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (1,497,987 | ) | $ | (1,038,262 | ) | ||
Adjustments to reconcile net loss to net | ||||||||
cash provided by (used in) operations | ||||||||
Depreciation, depletion and amortization | 147,798 | 178,231 | ||||||
Impairment expense | 1,395,224 | - | ||||||
Benefit for income taxes (deferred) | (648,800 | ) | (343,900 | ) | ||||
Accretion expense | 13,045 | 19,840 | ||||||
Stock based compensation | 300,284 | 370,688 | ||||||
Gain on creditor settlements | (523,815 | ) | - | |||||
Changes in current assets and liabilities | (126,141 | ) | 557,526 | |||||
Other changes, net | 3,485 | - | ||||||
Net cash flows from operating activities | (936,907 | ) | (255,877 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment | (146,188 | ) | (163,940 | ) | ||||
Sale of property and equipment | 2,026,302 | - | ||||||
Net cash flows from investing activities | 1,880,114 | (163,940 | ) | |||||
Cash flows from financing activities: | ||||||||
Proceeds of long term debt - related parties | 345,000 | - | ||||||
Proceeds of private equity offering | - | 500,000 | ||||||
Payments of long term debt - related parties | (220,000 | ) | - | |||||
Payments of long term debt - others | (753,745 | ) | (360,749 | ) | ||||
Net cash flows from financing activities | (628,745 | ) | 139,251 | |||||
Net increase (decrease) in cash and cash equivalents | 314,462 | (280,566 | ) | |||||
Cash and cash equivalents at beginning of period | 80,025 | 877,525 | ||||||
Cash and cash equivalents at end of period | $ | 394,487 | $ | 596,959 | ||||
Supplemental cash flow data: | ||||||||
Cash paid for interest | $ | 165,481 | $ | 43,227 | ||||
Supplemental non-cash financing/investing activity: | ||||||||
Notes payable paid upon sale of property | 1,286,000 | - | ||||||
Accounts payable paid upon sale of property | 239,063 | - | ||||||
Asset retirement obligations reduced upon sale of property | 383,895 | - | ||||||
Accrued liabilities reduced upon sale of property | 653,330 | - | ||||||
Accounts payable incurred for oil and gas properties | - | 193,072 |
2
MANUFACTURED HOUSING PROPERTIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| |||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Rental and related income |
| $ | 4,564,273 |
|
| $ | 3,697,558 |
|
| $ | 12,934,176 |
|
| $ | 10,021,357 |
|
Gross Revenues from Home Sales |
|
| 137,900 |
|
|
| 18,570 |
|
|
| 449,000 |
|
|
| 121,164 |
|
Total revenues |
|
| 4,702,173 |
|
|
| 3,716,128 |
|
|
| 13,383,176 |
|
|
| 10,142,521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Community operating expenses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Repair and maintenance |
|
| 531,158 |
|
|
| 287,686 |
|
|
| 1,154,804 |
|
|
| 803,505 |
|
Real estate taxes |
|
| 212,353 |
|
|
| 186,358 |
|
|
| 624,848 |
|
|
| 584,280 |
|
Utilities |
|
| 334,817 |
|
|
| 259,758 |
|
|
| 920,183 |
|
|
| 735,638 |
|
Insurance |
|
| 121,608 |
|
|
| 87,044 |
|
|
| 345,034 |
|
|
| 226,341 |
|
General and administrative expense |
|
| 661,822 |
|
|
| 510,036 |
|
|
| 2,056,537 |
|
|
| 1,291,276 |
|
Total community operating expenses |
|
| 1,861,758 |
|
|
| 1,330,882 |
|
|
| 5,101,406 |
|
|
| 3,641,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Corporate payroll and overhead |
|
| 1,487,110 |
|
|
| 1,519,271 |
|
|
| 4,542,780 |
|
|
| 3,683,267 |
|
Depreciation and amortization expense |
|
| 1,174,457 |
|
|
| 898,963 |
|
|
| 3,375,561 |
|
|
| 2,477,642 |
|
Interest expense |
|
| 2,366,051 |
|
|
| 1,506,290 |
|
|
| 6,712,375 |
|
|
| 3,843,031 |
|
Refinancing costs |
|
| — |
|
|
| 3,604,671 |
|
|
| — |
|
|
| 3,620,422 |
|
Cost of home sales |
|
| 88,777 |
|
|
| 22,676 |
|
|
| 351,078 |
|
|
| 177,410 |
|
Total expenses |
|
| 6,978,153 |
|
|
| 8,882,753 |
|
|
| 20,083,200 |
|
|
| 17,442,812 |
|
Other income |
|
| — |
|
|
| 500 |
|
|
| — |
|
|
| 500 |
|
Net loss before provision for income taxes |
|
| (2,275,980 | ) |
|
| (5,166,125 | ) |
|
| (6,700,024 | ) |
|
| (7,299,791 | ) |
Provision for income taxes |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Net loss |
| $ | (2,275,980 | ) |
| $ | (5,166,125 | ) |
| $ | (6,700,024 | ) |
| $ | (7,299,791 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss attributable to non-controlling interest variable interest entities |
|
| (220,015 | ) |
|
| (376,105 | ) |
|
| (666,264 | ) |
|
| (786,590 | ) |
Net loss attributable to Manufactured Housing Properties, Inc. |
|
| (2,055,965 | ) |
|
| (4,790,020 | ) |
|
| (6,033,760 | ) |
|
| (6,513,201 | ) |
Preferred stock dividends and put option value accretion |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Series A preferred dividends |
|
| 86,700 |
|
|
| 94,178 |
|
|
| 269,633 |
|
|
| 282,778 |
|
Series A preferred put option value accretion |
|
| 114,031 |
|
|
| 117,726 |
|
|
| 342,281 |
|
|
| 353,472 |
|
Series B preferred dividends |
|
| 149,665 |
|
|
| 151,785 |
|
|
| 448,995 |
|
|
| 455,355 |
|
Series B preferred put option value accretion |
|
| 181,604 |
|
|
| 159,472 |
|
|
| 544,812 |
|
|
| 527,980 |
|
Series D preferred dividends |
|
| 26,924 |
|
|
| — |
|
|
| 28,057 |
|
|
| — |
|
Series D preferred put option value accretion |
|
| 3,749 |
|
|
| — |
|
|
| 4,056 |
|
|
| — |
|
Total preferred stock dividends and put option value accretion |
|
| 562,673 |
|
|
| 523,161 |
|
|
| 1,637,834 |
|
|
| 1,619,585 |
|
Net loss attributable to common stockholders |
| $ | (2,618,638 | ) |
| $ | (5,313,181 | ) |
| $ | (7,671,594 | ) |
| $ | (8,132,786 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average shares - basic and fully diluted |
|
| 12,916,854 |
|
|
| 12,812,232 |
|
|
| 12,916,854 |
|
|
| 12,779,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss per share – basic and fully diluted |
| $ | (0.20 | ) |
| $ | (0.41 | ) |
| $ | (0.59 | ) |
| $ | (0.64 | ) |
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
3
MANUFACTURED HOUSING PROPERTIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
| COMMON STOCK |
|
| ADDITIONAL |
|
| ACCUMULATED |
|
| TOTAL |
|
| NON |
|
|
|
| |||||||||||
| 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 | ) |
Stock option expense |
|
| — |
|
|
| — |
|
|
| 49,760 |
|
|
| — |
|
|
| 49,760 |
|
|
| — |
|
|
| 49,760 |
|
Preferred shares Series A dividends |
|
| — |
|
|
| — |
|
|
| (94,300 | ) |
|
| — |
|
|
| (94,300 | ) |
|
| — |
|
|
| (94,300 | ) |
Preferred shares Series A put option value accretion |
|
| — |
|
|
| — |
|
|
| (117,871 | ) |
|
| — |
|
|
| (117,871 | ) |
|
| — |
|
|
| (117,871 | ) |
Preferred shares Series B dividends |
|
| — |
|
|
| — |
|
|
| (151,785 | ) |
|
| — |
|
|
| (151,875 | ) |
|
| — |
|
|
| (151,875 | ) |
Preferred shares Series B put option value accretion |
|
| — |
|
|
| — |
|
|
| (184,254 | ) |
|
| — |
|
|
| (184,254 | ) |
|
| — |
|
|
| (184,254 | ) |
Distributions from VIE |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (30,000 | ) |
|
| (30,000 | ) |
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 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Stock option expense |
|
| — |
|
|
| — |
|
|
| 28,062 |
|
|
| — |
|
|
| 28,062 |
|
|
| — |
|
|
| 28,062 |
|
Common Stock issuance exercise stock options |
|
| 8,333 |
|
|
| 83 |
|
|
| — |
|
|
| — |
|
|
| 83 |
|
|
| — |
|
|
| 83 |
|
Preferred shares Series A dividends |
|
| — |
|
|
| — |
|
|
| (94,300 | ) |
|
| — |
|
|
| (94,300 | ) |
|
| — |
|
|
| (94,300 | ) |
Preferred shares Series A put option value accretion |
|
| — |
|
|
| — |
|
|
| (117,875 | ) |
|
| — |
|
|
| (117,875 | ) |
|
| — |
|
|
| (117,875 | ) |
Preferred shares Series B dividends |
|
| — |
|
|
| — |
|
|
| (151,785 | ) |
|
| — |
|
|
| (151,785 | ) |
|
| — |
|
|
| (151,785 | ) |
Preferred shares Series B put option value accretion |
|
| — |
|
|
| — |
|
|
| (184,254 | ) |
|
| — |
|
|
| (184,254 | ) |
|
| — |
|
|
| (184,254 | ) |
Distributions from VIE |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (30,000 | ) |
|
| (30,000 | ) |
Net Loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,093,061 | ) |
|
| (1,093,061 | ) |
|
| (250,915 | ) |
|
| (1,343,976 | ) |
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 issuance exercise 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 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 January 1, 2023 |
|
| 12,493,012 |
|
| $ | 124,930 |
|
| $ | (5,428,985 | ) |
| $ | (12,521,376 | ) |
| $ | (17,825,430 | ) |
| $ | (1,770,789 | ) |
| $ | (19,596,219 | ) |
Stock option expense |
|
| — |
|
|
| — |
|
|
| 109,975 |
|
|
| — |
|
|
| 109,974 |
|
|
| — |
|
|
| 109,974 |
|
Preferred shares Series A dividends |
|
| — |
|
|
| — |
|
|
| (91,633 | ) |
|
| — |
|
|
| (91,633 | ) |
|
| — |
|
|
| (91,633 | ) |
Preferred shares Series A put option value accretion |
|
| — |
|
|
| — |
|
|
| (114,125 | ) |
|
| — |
|
|
| (114,125 | ) |
|
| — |
|
|
| (114,125 | ) |
Preferred shares Series B dividends |
|
| — |
|
|
| — |
|
|
| (149,665 | ) |
|
| — |
|
|
| (149,665 | ) |
|
| — |
|
|
| (149,665 | ) |
Preferred shares Series B put option value accretion |
|
| — |
|
|
| — |
|
|
| (181,604 | ) |
|
| — |
|
|
| (181,604 | ) |
|
| — |
|
|
| (181,604 | ) |
Distributions from VIE |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (612 | ) |
|
| (612 | ) |
|
| (29,388 | ) |
|
| (30,000 | ) |
Net Loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,934,576 | ) |
|
| (1,934,576 | ) |
|
| (182,466 | ) |
|
| (2,117,042 | ) |
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 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
Stock option expense |
|
| — |
|
|
| — |
|
|
| 116,358 |
|
|
| — |
|
|
| 116,358 |
|
|
| — |
|
|
| 116,358 |
|
Preferred shares Series A dividends |
|
| — |
|
|
| — |
|
|
| (91,300 | ) |
|
| — |
|
|
| (91,300 | ) |
|
| — |
|
|
| (91,300 | ) |
Preferred shares Series A put option value accretion |
|
| — |
|
|
| — |
|
|
| (114,125 | ) |
|
| — |
|
|
| (114,125 | ) |
|
| — |
|
|
| (114,125 | ) |
Preferred shares Series B dividends |
|
| — |
|
|
| — |
|
|
| (149,665 | ) |
|
| — |
|
|
| (149,665 | ) |
|
| — |
|
|
| (149,665 | ) |
Preferred shares Series B put option value accretion |
|
| — |
|
|
| — |
|
|
| (181,604 | ) |
|
| — |
|
|
| (181,604 | ) |
|
| — |
|
|
| (181,604 | ) |
Preferred shares Series D dividends |
|
| — |
|
|
| — |
|
|
| (1,132 | ) |
|
| — |
|
|
| (1,132 | ) |
|
| — |
|
|
| (1,132 | ) |
Preferred shares Series D put option value accretion |
|
| — |
|
|
| — |
|
|
| (307 | ) |
|
| — |
|
|
| (307 | ) |
|
| — |
|
|
| (307 | ) |
Distributions from VIE |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (30,000 | ) |
|
| (30,000 | ) |
Net Loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,043,219 | ) |
|
| (2,043,219 | ) |
|
| (263,783 | ) |
|
| (2,307,002 | ) |
Balance at June 30, 2023 |
|
| 12,493,012 |
|
| $ | 124,930 |
|
| $ | (6,277,812 | ) |
| $ | (16,499,783 | ) |
| $ | (22,652,665 | ) |
| $ | (2,276,426 | ) |
| $ | (24,929,091 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Stock option expense |
|
| — |
|
|
| — |
|
|
| (8,227 | ) |
|
| — |
|
|
| (8,227 | ) |
|
| — |
|
|
| (8,227 | ) |
Preferred shares Series A dividends |
|
| — |
|
|
| — |
|
|
| (86,700 | ) |
|
| — |
|
|
| (86,700 | ) |
|
| — |
|
|
| (86,700 | ) |
Preferred shares Series A put option value accretion |
|
| — |
|
|
| — |
|
|
| (114,031 | ) |
|
| — |
|
|
| (114,031 | ) |
|
| — |
|
|
| (114,031 | ) |
Preferred shares Series B dividends |
|
| — |
|
|
| — |
|
|
| (149,665 | ) |
|
| — |
|
|
| (149,665 | ) |
|
| — |
|
|
| (149,665 | ) |
Preferred shares Series B put option value accretion |
|
| — |
|
|
| — |
|
|
| (181,604 | ) |
|
| — |
|
|
| (181,604 | ) |
|
| — |
|
|
| (181,604 | ) |
Preferred shares Series D dividends |
|
| — |
|
|
| — |
|
|
| (26,924 | ) |
|
| — |
|
|
| (26,924 | ) |
|
| — |
|
|
| (26,924 | ) |
Preferred shares Series D put option value accretion |
|
| — |
|
|
| — |
|
|
| (3,749 | ) |
|
| — |
|
|
| (3,749 | ) |
|
| — |
|
|
| (3,749 | ) |
Distributions from VIE |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (30,000 | ) |
|
| (30,000 | ) |
Net Loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,055,965 | ) |
|
| (2,055,965 | ) |
|
| (220,015 | ) |
|
| (2,275,980 | ) |
Balance at September 30, 2023 |
|
| 12,493,012 |
|
| $ | 124,930 |
|
| $ | (6,848,712 | ) |
| $ | (18,555,748 | ) |
| $ | (25,279,530 | ) |
| $ | (2,526,441 | ) |
| $ | (27,805,971 | ) |
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
5
MANUFACTURED HOUSING PROPERTIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
| September 30, |
|
| September 30, |
| |||
Cash Flows from Operating Activities: |
|
|
|
|
|
| ||
Net Loss |
| $ | (6,700,024 | ) |
| $ | (7,299,791 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
| ||
Stock option expense |
|
| 218,106 |
|
|
| 105,884 |
|
Amortization of debt discount |
|
| 1,016,116 |
|
|
| 481,545 |
|
Write off debt issuance costs recorded as debt discount |
|
| — |
|
|
| 2,219,591 |
|
Write off acquisition and development pursuit costs |
|
| — |
|
|
| 49,326 |
|
Prepayment penalty upon debt extinguishment |
|
| — |
|
|
| 1,400,831 |
|
(Gain) Loss on Home Sales |
|
| (97,922 | ) |
|
| 56,246 |
|
Depreciation and amortization |
|
| 3,375,561 |
|
|
| 2,477,642 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
| ||
Accounts receivable |
|
| 25,508 |
|
|
| (168,648 | ) |
Other assets |
|
| 154,202 |
|
|
| 413,731 |
|
Accounts payable |
|
| 235,857 |
|
|
| 451,425 |
|
Tenant security deposits |
|
| 94,001 |
|
|
| 158,766 |
|
Accrued liabilities |
|
| 1,135,555 |
|
|
| (348,401 | ) |
Net Used in Operating Activities |
|
| (543,040 | ) |
|
| (1,853 | ) |
Cash Flows from Investing Activities: |
|
|
|
|
|
| ||
Capital improvements |
|
| (3,046,274 | ) |
|
| (1,872,803 | ) |
Proceeds from sales of homes |
|
| 449,000 |
|
|
| 121,164 |
|
Proceeds from home sale deposits |
|
| 85,726 |
|
|
| — |
|
Purchases of investment properties |
|
| (6,528,479 | ) |
|
| (6,444,135 | ) |
Purchase of intangible assets |
|
| (613,783 | ) |
|
| — |
|
Net payment/reimbursement of pursuit costs |
|
| 81,888 |
|
|
| (291,742 | ) |
Payment of acquisition costs |
|
| (161,716 | ) |
|
| (471,096 | ) |
Net Cash Used in Investing Activities |
|
| (9,733,638 | ) |
|
| (8,958,612 | ) |
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 | ) |
Repayment of notes payable |
|
| (55,561 | ) |
|
| (506,656 | ) |
Proceeds from lines of credit - VIEs |
|
| 1,353,000 |
|
|
| — |
|
Repayment of lines of credit - VIEs |
|
| (444,242 | ) |
|
| (147,144 | ) |
Proceeds from exercise of options |
|
| — |
|
|
| 743 |
|
Proceeds from issuance of preferred stock |
|
| 8,513,170 |
|
|
| 10,253,917 |
|
Payment of debt costs and Series C Preferred Stock costs recorded as debt discount |
|
| (1,126,939 | ) |
|
| (3,956,743 | ) |
Prepayment penalty upon debt extinguishment |
|
| — |
|
|
| (1,400,831 | ) |
Redemption of Preferred Stock |
|
| (326,250 | ) |
|
| (172,062 | ) |
Fees paid in advance for debt |
|
| — |
|
|
| (45,000 | ) |
Series A, Series B and Series D Preferred share dividends |
|
| (746,685 | ) |
|
| (728,355 | ) |
Distributions from VIE |
|
| (90,000 | ) |
|
| (90,000 | ) |
Net Cash Provided by Financing Activities |
|
| 7,076,493 |
|
|
| 13,769,054 |
|
Net change in cash, cash equivalents and restricted cash |
|
| (3,200,185 | ) |
|
| 4,808,589 |
|
Cash, cash equivalents and restricted cash at beginning of the period |
|
| 10,405,615 |
|
|
| 2,106,329 |
|
Cash, cash equivalents and restricted cash at end of the period |
| $ | 7,205,430 |
|
| $ | 6,914,918 |
|
Cash, cash equivalents and restricted cash consist of the following: |
|
|
|
|
|
|
6
End of period |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 1,966,633 |
|
| $ | 1,896,839 |
|
Restricted cash |
|
| 5,238,797 |
|
|
| 5,018,079 |
|
Total |
| $ | 7,205,430 |
|
| $ | 6,914,918 |
|
Cash, cash equivalents and restricted cash consist of the following: |
|
|
|
|
|
| ||
Beginning of period |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 5,090,369 |
|
| $ | 1,401,134 |
|
Restricted cash |
|
| 5,315,246 |
|
|
| 705,195 |
|
Total |
| $ | 10,405,615 |
|
| $ | 2,106,329 |
|
Cash paid for: |
|
|
|
|
|
| ||
Income Taxes |
|
| — |
|
|
| — |
|
Interest |
| $ | 3,826,823 |
|
| $ | 2,395,384 |
|
Series C Preferred share dividends included in interest expense |
| $ | 1,288,166 |
|
| $ | 484,521 |
|
|
|
|
|
|
|
| ||
Non-Cash Investing and Financing Activities |
|
|
|
|
|
| ||
Notes and lines of credit related to acquisitions and capital improvements |
| $ | 11,378,498 |
|
| $ | 13,188,735 |
|
Non-cash Series A, B and D Preferred Stock accretion |
| $ | 891,149 |
|
| $ | 881,452 |
|
Debt issuance costs included in accounts payable and accrued liabilities |
| $ | — |
|
| $ | 1,061,000 |
|
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
7
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(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 accompanying consolidatedCompany prepares its unaudited condensed financial statements have been prepared by Stack-it Storage, Inc., formerly, Caprock Oil, Inc. (“we”, “our” orunder the “Company”), without audit,accrual basis of accounting, in accordanceconformity with accounting principles generally accepted in the UnitesUnited 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 pursuantwith 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, 2022 condensed 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 rules and regulations ofconsolidated financial statements for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission. In the opinion of management, theseCommission on March 29, 2023. The interim unaudited condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position of the Company as of June 30, 2015, the results of its operations for the three month and six month periods ended June 30, 2015 and 2014, and cash flows for the three month and six month periods ended June 30, 2015 and 2014. Certain prior year amounts have been reclassified to conform with the current year presentation. These financial statements should be read in conjunction with our Annual Report onthose consolidated financial statements included in the Form 10-K10-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 nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year endedending December 31, 2014.
Principles of its Common Stock. Accordingly, all Common Stock share and per share amounts in theConsolidation
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.
The Company’s formation of all subsidiaries and VIEs’ date of consolidation are as follows:
8
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
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 LLC(1) | 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 LLC(1) | Georgia | August 8, 2022 | 100% | |||
MHP Home Holdings LLC | North Carolina | August 17, 2022 | 100% | |||
Glynn Acres MHP LLC | Georgia | September 9, 2022 | 100% | |||
Wake Forest 2 MHP LLC | 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 LLC | North Carolina | October 27, 2022 | VIE |
(1) During the nine months ended September 30, 2023, there was no activity in Country Estates MHP LLC and Dalton 3 MHP LLC.
All intercompany transactions and balances have been retroactively adjusted to reflect the reverse stock split. Following the saleeliminated in consolidation. The Company does not have a majority or minority interest in any other company, either consolidated or unconsolidated.
Revenue Recognition
Rental and related income is generated from lease agreements for our manufactured housing sites and homes. The lease component of a substantial portionthese agreements is accounted for under Topic 842 of the Company’s oil and gas properties to another company in May 2015 (see Note 2), the Company expects to continue to maintain ownership of its remaining oil and gas properties for the foreseeable future while it also plans to seek new business opportunities as an owner and operator of self-storage facilities.
Under ASC 842, the Company believesmust assess on an individual lease basis whether it is probable that we will have little or no applicability tocollect the Company.
9
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
The Company’s revenues primarily consist of its working interests in three operated oil and gas fields in Texas to another oil and gas company. The cash sales price received at closing was $3,100,000, which is subject to a post-closing adjustment for the netrental revenues and expenditures attributable to the properties in the period from the effective date, January 1, 2015, to the closing date. In July, 2015, the amount of the post-closing adjustment was determined by mutual agreement of both parties to be less than $5,000. The net proceeds of this sale were largely used to pay off the Company’s long term debt (see Note 7). Asset retirement obligations of $383,895 were assumed by the buyer and other liabilities in the amount of $653,330 were reduced in this sale. No gain or loss was recognized on this sale.
Revenue from sales of Common Stock outstandingmanufactured homes is recognized in accordance with the core principle of ASC 606, at the date of the acquisition. In conjunction with this transaction, the Company also issued 125,000 shares of its Common Stock to an officer of the Company (see Note 10). Cinco was formed in April 2013 to acquire working interests in specific oil and gas properties in the States of Texas and Alabama. At the time of the acquisition, Cinco had a small working interest in a producing oil field in Texas and working interests in several exploratory prospects in Alabama. Cinco is now a wholly-owned subsidiaryclosing when control of the Company.
June 30, | December 31, | |||||||
2015 | 2014 | |||||||
$25,000,000 line of credit with a bank, maturing on January 1, 2015, default interest rate at 5.0% above prime, payable monthly, secured by first lien on CYMRI, LLC’s oil and gas properties | $ | - | $ | 1,286,000 | ||||
Bridge loans from individuals, due in October 2015, interest at 15% per annum, with second position security interest on oil and gas properties pledged to bank and first position on other oil and gas properties | 125,000 | 700,000 | ||||||
Unsecured notes payable assumed in acquisition of Cinco NRG, LLC | - | 25,000 | ||||||
Other short term notes for equipment and insurance financing, interest rates at 6% to 8% | 12,295 | 41,040 | ||||||
137,295 | 2,052,040 | |||||||
Current portion of long term debt | (137,295 | ) | (2,052,040 | ) | ||||
Long term debt, net of current portion | $ | - | $ | - |
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.
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, Gvest Warrenville Homes LLC and Gvest Wake Forest 2 Homes LLC, which are all outstanding borrowings underwholly owned subsidiaries of Gvest Finance LLC. Under the credit agreementproperty management agreements, the Company manages the homes owned by the VIEs and the credit agreement was terminated.
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 group of individual lenders. By May 2015, such borrowings had reached $820,000, of which $220,000 was from related parties (see Note 11). Amounts advanced under the bridge loan program accrued interest at the rate of 15% per annum,company owned and controlled by Gvest Real Estate Capital LLC, as manager with the principalauthority, 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.
Pursuant 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 in one year and a prepayment penalty due in the event of early payment (payable in cash or stock). The bridge lenders were granted a subordinated security interest into the Company’s assets. Upon closingcommon ownership by Mr. Gee, its power to direct the activities of these entities that most significantly impact their economic performance, and the sale of a small producing property in January 2015 (see Note 2),fact that the Company made a partial paymenthas the obligation to the bridge lenders in the principal amount of $100,000 and also paid prepayment penalties consisting of cash of $9,273 and 520 shares of Common Stock. Upon closing of the sale of CYMRI’s producing oil and gas properties on May 20, 2015 (see Note 2), the Company fully repaid all then outstanding bridge loans in the principal amount of $820,000 and paid cash prepayment penalties in the amount of $88,061.
Net Income Tax Refund
Basic net income taxes on its 2008 consolidated federal income tax return in the amount of $61,492. This refund resulted from the settlement of an IRS audit of the Company’s 2008 consolidated federal income tax return. The Company had not previously recorded a tax benefit for such a refund. Accordingly, the Company recognized a current income tax benefit for the amount of this income tax refund in the six months ended June 30, 2015.
For the nine months ended September 30, 2023, the potentially dilutive penny options for the purchase of 423,842 shares of Common Stock Method. The effectswere included in basic loss per share. Other securities outstanding as of potential common stock equivalents areSeptember 30, 2023 not included in computations when their effect is anti-dilutive. In the three month and six month periods ended June 30, 2015 and 2014, there were no dilutive common stock equivalents reflected in the determination of net loss per share, as the effect would have been anti-dilutive.
For the nine months ended September 30, 2014,2022, the Company closed a private equity offering with three accredited investorspotentially dilutive penny options for the salepurchase of 25,000 Units with each Unit comprised of two357,176 shares of Common Stock were included in basic loss per share. Other securities outstanding as of September 30, 2022 not included in dilutive loss per share, as the effect would be anti-dilutive, were 146,666 unvested stock options and 1,886,000 shares of Series A Cumulative Redeemable Convertible Preferred Stock, which are convertible into Common Stock for a Warranttotal of 1,886,000 shares.
10
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 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. Significant estimates include assumptions used in accounting and disclosures associated with acquisitions, depreciation of investment property, and recoverability and useful lives of long-lived assets.
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 one sharethe 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, 30-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 Common Stock, at an offeringthe 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 $20.00 per Unit, resulting in gross proceedsthe property based upon the fair value of $500,000.
Intangibles
The Company's intangible assets include trademarks and trade names. These intangible assets are recorded in Other Assets on the Consolidated Balance Sheet. The valuation of intangibles is generally determined by a third-party purchase price allocation report obtained in conjunction with an acquisition of Cinco, the Company issued 125,000 shares of restricted Common Stockpurchase based on appraisals. Acquisition costs allocated to an officer of the Company in March 2014 (see Note 4).intangible assets are capitalized. The restricted shares will vestCompany's intangibles and associated acquisition costs are amortized over a three year period. Based15-year estimated useful life on quoted prices for the Company’s stock, the Company calculated the value of such issued shares at $687,500 and will amortize that total amount of expense over a three year period. During the six months ended June 30, 2015 and 2014, the Company recorded amortized expense in the amounts of $114,584 and $76,388, respectively, for this grant.
Debt Issuance Costs
Costs incurred in connection with obtaining financing are deferred and amortized on a straight-line basis over the grant. Of these options, 20,000 shares vested immediatelyterm 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 remaining 180,000 shares will vest ratablystraight-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 three year period. The estimatedrental 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 option was calculated using a Black Scholes option pricing model based onproperty, less the following assumptions: (a) Computed volatility – 187%; (b) Expected risk free interest rate – 1.6%; (c) Expected dividend yield – zero; (d) Expected option term – 4.4 years, calculated pursuantestimated cost to ASC 718-10; and (e) Forfeitures – 0%, subject to adjustment for actual experience. Onsell, is less than the basis of these assumptions, the Company calculated the value of such options at $1,238,000 and will amortize that totalcarrying 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 over ais not recorded. There was no impairment during the three year period. During the sixand nine months ended JuneSeptember 30, 20152023 and 2014, the2022, respectively.
11
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
Cash, Cash Equivalents, and Restricted Cash
The Company recorded amortized expense in the amountsconsiders all highly liquid financial instruments purchased with an original maturity of $185,700 and $162,300, respectively, for this grant. The intrinsic value of such non-registered options is zero and there are no other options currently outstanding.
As of JuneSeptember 30, 2015,2023, the Company has total future unrecognized compensation expenserestricted cash balance of $5,238,797 was comprised of $1,059,403 of cash reserved for tenant security deposits and lender escrows for capital improvements, insurance, and real estate taxes in the amount of $1,062,847.
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, 2023 and December 31, 2014, was repaid in conjunction with the sale transaction in January 2015 (see Note 2).
Liquidity and Going Concern
The unaudited 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 quarter since inception and has experienced slightly negative cash flows from entities affiliated withoperations during the nine months ended September 30, 2023. 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 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.
As of September 30, 2023, the Company had unrestricted cash of $1,966,633. Based on current operating plans, the Company has sufficient cash and lines of credit available to fund operations, debt service, and preferred equity dividends for at least the next 12 months from the date of filing this Quarterly Report. Starting in March 2024, holders of shares of Series A Cumulative Convertible Preferred Stock have the right to put the shares to the Company. The Company will require additional capital to redeem such shares when and if shares are put to the Company. The Company expects to continue to raise capital, explore debt financing and will also continue to opportunistically sell homes and other assets to meet cash needs. The Company may not be able to raise capital when needed or on attractive terms, which could force the Company to explore other strategies to fund the redemptions. These factors potentially raise doubt about the Company's ability to continue as a major shareholder ingoing concern. The Company's future capital requirements will depend on many factors, including but not limited to:
The Company’s continued growth depends on the availability of suitable properties which meet the 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 Cumulative Redeemable Preferred Stock and Series D Cumulative Redeemable 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-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 non-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 $218,106 and $105,884 during the nine months ended September 30, 2023 and 2022, 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
12
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
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 receivable, 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.
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, 2023 and December 31, 2022, there wereno such accrued interest or penalties.
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 adopted the new guidance on January 1, 2023 and determined it did not have a material impact on its 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.
13
NOTE 2 – VARIABLE INTEREST ENTITIES
Included in the unaudited condensed consolidated results of operations for the three months ended September 30, 2023 and 2022 were net losses of $220,015 and $376,105, respectively, after deducting an additional management fee equal to cash flow after debt service pursuant to the management agreement of $1,576 and $11,045, respectively.
Included in the unaudited condensed consolidated results of operations for the nine months ended September 30, 2023 and 2022 were net losses of $666,264 and $786,590, respectively, after deducting an additional management fee equal to cash flow after debt service pursuant to the management agreement of $144,017 and $316,624, respectively.
The consolidated balance sheets as of September 30, 2023 and December 31, 2022 included the following amounts related to the consolidated VIEs.
| September 30, |
|
| December 31, |
| |||
| (Unaudited) |
|
|
|
| |||
Assets |
|
|
|
|
|
| ||
Investment Property |
| $ | 15,940,552 |
|
| $ | 14,688,424 |
|
Accumulated Depreciation |
|
| (1,473,539 | ) |
|
| (997,240 | ) |
Net Investment Property |
|
| 14,467,013 |
|
|
| 13,691,184 |
|
Cash and Cash Equivalents |
|
| 49,086 |
|
|
| 40,080 |
|
Accounts Receivable |
|
| 85,468 |
|
|
| 60,538 |
|
Other Assets |
|
| 209,852 |
|
|
| 194,871 |
|
Total Assets |
| $ | 14,811,419 |
|
| $ | 13,986,673 |
|
|
|
|
|
|
|
| ||
Liabilities and Deficit |
|
|
|
|
|
| ||
Accounts Payable |
| $ | 146,831 |
|
| $ | 206,882 |
|
Notes Payable, net of $35,777 and $45,790 debt discount, respectively |
|
| 3,018,581 |
|
|
| 3,035,455 |
|
Line of Credit, net of $201,844 and $160,372 debt discount, respectively |
|
| 7,344,733 |
|
|
| 6,208,947 |
|
Accrued Liabilities(1) |
|
| 6,827,715 |
|
|
| 6,306,178 |
|
Total Liabilities |
|
| 17,337,860 |
|
|
| 15,757,462 |
|
|
|
|
|
|
|
| ||
Non-controlling Interest |
|
| (2,526,441 | ) |
|
| (1,770,789 | ) |
Total Non-controlling Interest in Variable Interest Entities |
|
| (2,526,441 | ) |
|
| (1,770,789 | ) |
(1) Included in accrued liabilities is an intercompany balance of $6,667,116 and $6,232,561 as of September 30, 2023 and December 31, 2022, respectively. The intercompany balances have been eliminated on the condensed consolidated balance sheet.
NOTE 3 – INVESTMENT PROPERTY
The following table summarizes the Company’s property and equipment balances. These assets are generally depreciated on a straight-line basis.
| September 30, |
|
| December 31, |
| |||
| (Unaudited) |
|
|
|
| |||
Investment Property |
|
|
|
|
|
| ||
Land |
| $ | 37,403,653 |
|
| $ | 30,263,687 |
|
Site and Land Improvements |
|
| 49,470,418 |
|
|
| 44,035,649 |
|
Buildings and Improvements |
|
| 31,546,780 |
|
|
| 23,229,657 |
|
Construction in Process |
|
| 2,395,765 |
|
|
| 2,541,376 |
|
Total Investment Property |
|
| 120,816,616 |
|
|
| 100,070,369 |
|
Accumulated Depreciation |
|
| (11,564,934 | ) |
|
| (8,225,976 | ) |
Net Investment Property |
| $ | 109,251,682 |
|
| $ | 91,844,393 |
|
Depreciation and amortization expense totaled $1,174,457 and $898,963 for the three months ended September 30, 2023 and 2022, respectively, and $3,375,561 and $2,477,642 for the nine months ended September 30, 2023 and 2022, respectively.
During the nine months ended September 30, 2023, Gvest Finance LLC, the Company’s VIE, purchased four new manufactured homes for approximately $212,141 for use in the Meadowbrook community that 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 September 30, 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 25 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 December 31, 2022 and are included in Construction in Process on the balance sheet as of that date.
14
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
NOTE 4 – ACQUISITIONS AND DISPOSITIONS
During the nine months ended September 30, 2023, the Company acquired three 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.
On April 14, 2023, the Company purchased a manufactured housing community located in Donna, Texas consisting of 402 developed sites on approximately 27 acres for a total purchase price of $10,500,000. Palm Shadows MHP LLC purchased the land, land improvements, homes, intangibles and furniture, fixtures and equipment.
During the nine months ended September 30, 2022, the Company acquired nine communities and two large parcels of undeveloped land. These were acquisitions from third parties and have been accounted for as asset acquisitions.
On 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.
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 nine 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.
Nine Months Ended September 30, 2022
Acquisition Date |
| Name (number of communities, if multiple) |
| Land |
|
| Improvements |
|
| Building |
|
| Intangibles |
|
| Total |
| |||||
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 |
|
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 |
|
Nine Months Ended September 30, 2023
Acquisition Date |
| Name (number of communities, if multiple) |
| Land |
|
| Improvements |
|
| Building |
|
| Intangibles |
|
| 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 |
|
April 2023 |
| Palm Shadows MHP |
|
| 984,166 |
|
|
| 3,822,004 |
|
|
| 5,082,309 |
|
|
| 611,521 |
|
|
| 10,500,000 |
|
| Total Purchase Price |
| $ | 7,056,694 |
|
| $ | 5,062,174 |
|
| $ | 5,519,611 |
|
| $ | 611,521 |
|
| $ | 18,250,000 |
| |
| Acquisition Costs |
|
| 76,621 |
|
|
| 48,325 |
|
|
| 28,862 |
|
|
| 2,262 |
|
|
| 156,070 |
| |
| Total Investment Property |
| $ | 7,133,315 |
|
| $ | 5,110,499 |
|
| $ | 5,548,473 |
|
| $ | 613,783 |
|
| $ | 18,406,070 |
|
15
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
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 8% with five to 30 years principal amortization. The promissory notes are secured by the real estate assets and 34 loans totaling $86,655,293 are guaranteed by Raymond M. Gee.
As of September 30, 2023 and December 31, 2022, the outstanding principal balance on all third-party promissory notes was $90,604,520 and $79,550,080, respectively. The following are the terms of these notes:
| Maturity |
| Interest |
|
| Interest Only |
|
| Balance |
|
| Balance |
| |||||
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 |
|
|
| 914,151 |
|
|
| 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 | % |
|
| — |
|
|
| 880,228 |
|
|
| 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 | % |
|
| — |
|
|
| 587,922 |
|
|
| 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 |
|
|
| — |
| |
Palm Shadows MHP LLC(4) |
| 4/12/2033 |
|
| 7.030 | % |
|
| 12 |
|
|
| 5,930,000 |
|
|
| — |
|
Total Notes Payable |
|
|
|
|
|
|
|
|
| $ | 90,604,520 |
|
| $ | 79,550,080 |
| ||
Discount Direct Lender Fees |
|
|
|
|
|
|
|
|
|
| (3,656,874 | ) |
|
| (3,666,214 | ) | ||
Total Net of Discount |
|
|
|
|
|
|
|
|
| $ | 86,947,646 |
|
| $ | 75,883,866 |
|
(1) The notes indicated above are subject to certain financial covenants.
(2) On September 1, 2022, the Company, through its wholly owned subsidiaries, entered into 23 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 (see Note 7). In June 2015,date. The loans are secured by the real estate, which predominately excludes mobile homes, and are guaranteed by the Company re-borrowed $125,000 from oneand Raymond M. Gee. The Company capitalized $2,842,213 of these entitiesdebt issuance costs in anticipationconnection 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 near$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.
(4) The Palm Shadows MHP LLC note contains a future earn out funding option, which allows the Company to draw down on an additional $1,420,000 non-revolving straight line of credit within the first 24 months of the term capital needsassuming certain debt coverage ratios are achieved. As of September 30, 2023, the Company has not exercised this option.
16
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
Lines of Credit – Variable Interest Entities
Facility |
| Borrower |
| Community |
| Maturity |
| Interest |
| Maximum |
|
| Balance |
|
| Balance |
| |||
Occupied Home Facility(1) |
| Gvest Homes I LLC |
| ARC, Crestview, Maple, Countryside |
| 01/01/30 |
| 8.375% |
| $ | 20,000,000 |
|
| $ | 3,653,669 |
|
| $ | 2,424,896 |
|
Multi-Community Rental Home Facility |
| Gvest Finance LLC |
| ARC, Golden Isles, Springlake, |
| Various (2) |
| Greater of 3.25% or Prime, + 375 bps |
| $ | 5,000,000 |
|
| $ | 2,470,655 |
|
| $ | 2,561,380 |
|
Multi-Community Floorplan Home Facility |
| Gvest Finance LLC |
| Golden Isles, Springlake, Sunnyland, Crestview, Meadowbrook |
| Various (2) |
| LIBOR + 6 – 8% based on days outstanding |
| $ | 4,000,000 |
|
| $ | 1,422,253 |
|
| $ | 1,383,043 |
|
Total Lines of Credit - VIEs |
|
|
|
|
|
|
|
|
|
|
|
| $ | 7,546,577 |
|
| $ | 6,369,319 |
| |
Discount Direct Lender Fees |
|
|
|
|
|
|
|
|
|
|
|
| $ | (201,844 | ) |
| $ | (160,372 | ) | |
Total Net of Discount |
|
|
|
|
|
|
|
|
|
|
|
| $ | 7,344,733 |
|
| $ | 6,208,947 |
|
(1) During the nine months ended September 30, 2023, Gvest Homes I LLC drew down $1,353,000 related to the Occupied Home Facility.
(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, a significant stockholder, in the self-storage business (see Notesprincipal amount of $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. As of September 30, 2023 and 13)December 31, 2022, there was no outstanding balance on this note. During the three and nine months ended September 30, 2022, interest expense recognized was $47,342 and $181,233, respectively.
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 $2,000,000 on a revolving basis for working capital or acquisition purposes. On September 9, 2022, the Company paid off the full balance with proceeds from the KeyBank portfolio refinance. This note had a five-year term and was interest-only based on a 15% annual rate through the maturity date and was unsecured. As of September 30, 2023 and December 31, 2022, there was no outstanding balance on this note. During the three and nine months ended September 30, 2022, interest expense recognized was $59,167 and $87,542, respectively.
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, 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 a 15% annual rate through the maturity date and is unsecured. During the three and nine months ended September 30, 2023, interest expense recognized was $76,667 and $228,333, respectively. During the three and nine months ended September 30, 2022, interest expense totaled $76,667 and $77,500, respectively.
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, 2023 by fiscal year were:
2023 (remainder) |
| $ | 497,639 |
|
2024 |
| $ | 3,107,433 |
|
2025 |
| $ | 7,328,654 |
|
2026 |
| $ | 755,661 |
|
2027 |
| $ | 10,498,794 |
|
Thereafter |
| $ | 77,962,915 |
|
Total minimum principal payments |
| $ | 100,151,096 |
|
NOTE 6 – COMMITMENTS AND CONTINGENCIES
From time to time, the Company may become involved in litigationvarious lawsuits and legal proceedings, which arise in the ordinary course of business. At the present time,However, litigation is subject to inherent uncertainties, and an adverse result in these or other than the Company’s disclosures below, the Company’s managementmatters may arise that may harm its business. The Company is currently not aware of any such litigation or other legal proceedings or claims that couldthey believe will have, individually or in the aggregate, a material adverse effect on its resultsbusiness, financial condition, or operating results.
17
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
NOTE 7 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is authorized to issue up to 10,000,000 shares of operations, cash flows or financial condition.
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 recorded no loss provisionthe 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, Series C Preferred Stock and Series D Preferred Stock (as defined below). The terms of June 30, 2015.
Dividend Rate and Payment Dates. Dividends on a premium finance obligationthe 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 approximately $200,000,$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 nine months ended September 30, 2023 and 2022, the Company paid dividends of $269,633 and $282,778, 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 interestan 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 attorney’s fees.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 to $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 nine months ended September 30, 2023 and 2022, the Company recorded a put option value accretion of $342,281 and $353,472, respectively.
Voting Rights. The Company believes that its inactive Construction Staffing subsidiary has a meritorious position in this mattermay 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 has not engaged legal counsel to defend this case. A default judgment was rendered in favoradversely change the terms of the plaintiff in January 2011Series 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, 2023 and December 31, 2022, there were 1,826,000 shares of Series A Preferred Stock issued and outstanding. As of September 30, 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 $1,885,197. As of December 31, 2022, the Series A Preferred Stock balance was made up of Series A Preferred Stock totaling $4,565,000 and accretion of put options totaling $1,542,916.
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 recorded an accrual for the subsidiary’s estimated loss exposure of approximately $100,000following voting powers, designations, preferences and relative rights, qualifications, limitations, or restrictions:
Ranking. The Series B Preferred Stock rank, as of June 30, 2015.
Dividend Rate and Payment Dates. Dividends on the lessee under an oilSeries B Preferred Stock are cumulative and gas lease for the costpayable monthly in arrears to all holders of pollution clean-up resulting from operations and subject the lessee to liability for pollution damages. The Company maintains insurance coverage, which it believes is customary in the industry, although the Company is not fully insured against all environmental risks. The Company is not aware of any environmental claims existing as of June 30, 2015, which have not been provided for, covered by insurance or otherwise have a material impact on its financial position or results of operations. There can be no assurance, however, that current regulatory requirements will not change, or past noncompliance with environmental laws will not be discoveredrecord on the Company’s properties.
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. The Company recorded a put option value accretion of $544,812 and $527,980 during the nine months ended September 30, 2023 and 2022.
18
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
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.
As of September 30, 2023, there were 747,951 shares of Series B Preferred Stock issued and outstanding and the Series B Preferred Stock balance was converted into 10,416,667made up of Series B Preferred Stock, net of commissions, totaling $7,079,716 and accretion of put options totaling $2,587,314. As of 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 $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, Series B Preferred Stock and Series D 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 restrictedagreements prohibit the current payment of dividends or the Company does not have earnings. During the nine months ended September 30, 2023 and 2022, the Company paid dividends of $1,288,445 and $484,521, respectively. Due to timing of payments, accrued dividends of $203,195 and $112,695 are presented in accrued liabilities on the balance sheet as of September 30, 2023 and 2022, respectively.
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 (see Notes 7 and 11)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.
Redemption Request at the Option of a Holder.
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 $47,000,000.
During the nine months ended September 30, 2023, the Company sold an aggregate of 5,345 shares of Series C Preferred Stock for total proceeds of $5,344,917, net of aggregate redemptions of $326,250. After deducting a placement fee and broker dealer commissions, the Company received net proceeds of $4,983,279. In addition to the placement fee and broker dealer commissions, the Company capitalized an additional $43,785 of other issuance costs associated with the offering which, net of amortization expense, offset with the net proceeds on the balance sheet.
19
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
During the nine months ended September 30, 2022, the Company sold an aggregate of 10,260 shares of Series C Preferred Stock for total gross proceeds of $10,253,917. After deducting a placement fee and other expenses, the Company received net proceeds of $9,573,085. In addition to the placement fee and broker dealer commissions, the Company capitalized an additional $18,383 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, 2023 there were 26,929 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 $26,928,919 net of total unamortized debt issuance costs of $1,485,510.
As of December 31, 2022 there were 21,584 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 $21,584,002 net of total unamortized debt issuance costs of $1,406,815.
Series D Cumulative Redeemable Preferred Stock
On 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 “Series D Preferred Stock”). The Series D Preferred Stock has the following voting powers, designations, preferences and relative rights, qualifications, limitations, or restrictions:
Ranking. The Series D Preferred Stock ranks, 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, Series B Preferred Stock and Series C Preferred Stock. The terms of the Series D 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 D Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up.
Stated Value. Each share of Series D 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 D Preferred Stock.
Dividend Rate and Payment Dates. Dividends on the Series D Preferred Stock are cumulative and payable monthly in arrears to all holders of record on the applicable record date. Holders of Series D Preferred Stock are entitled to receive cumulative monthly cash dividends at a per annum rate of 9.5% of the stated value (or $7.81 per share each month based on the initial stated value); 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 10.5% of the stated value (or $8.63 per month based on the initial stated value). During the nine months ended September 30, 2023, the Company paid dividends of $28,057.
Exit Premium. Holders of Series D Preferred Stock are entitled to receive upon redemption or repurchase, or upon a liquidation, dissolution or winding up of the Company, a premium equal to 1% of the stated value per share, accruing upon each anniversary of issuance for the first five years from issuance and shall be payable to the recordholder of such stock at the time of redemption, repurchase, liquidation, dissolution or winding up of the Company (the “Exit Premium”).
Liquidation Preference. Upon a liquidation, dissolution or winding up of the Company, holders of shares of Series D 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, Series B Stock and Series C Preferred Stock, a liquidation preference equal to the stated value per share, plus any accrued but unpaid dividends and the Exit Premium.
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 D 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 occurring prior to the fifth (5th) anniversary from the date of issuance will be limited to five percent (5%) of the total outstanding Series D 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 and the Exit Premium, less the applicable redemption fee (if any) specified below:
Optional Redemption by the Company. The Company has the right (but not the obligation) to redeem shares of Series D Preferred Stock at a redemption price equal to the stated value of such redeemed shares, plus any accrued but unpaid dividends thereon and the Exit Premium.
Optional Repurchase Upon Death or Total Disability of a Holder. Within sixty (60) days of the death or Total Permanent Disability (as defined in the certificate of designation) of a holder, the holder or the estate of such holder (in the event of death) may request that the Company repurchase, in whole but not in part, without penalty, the Series D Preferred Stock held by such holder at a redemption price equal to the stated value of such redeemed shares, plus any accrued but unpaid dividends thereon.
Voting Rights. The Series D Preferred Stock has no voting rights relative to matters submitted to a vote of stockholders (other than as required by law). However, the Company may not, without the affirmative vote or written consent of the holders of a majority of the then issued and outstanding Series D Preferred Stock: (i) amend or waive any provision of the certificate of designation or otherwise take any action that modifies any powers, rights, preferences, privileges or restrictions of the Series D Preferred Stock (other than an amendment solely for the purpose of changing the number of shares of Series D Preferred Stock designated for issuance as provided in the certificate of designation); (ii) authorize, create or issue shares of any class of stock having rights, preferences or privileges as to dividends or distributions upon a liquidation that are superior to the Series D Preferred Stock; or (iii) amend the Company’s articles of incorporation in a manner that adversely and materially affects the rights of the Series D Preferred Stock.
No Conversion Right. The Series D Preferred Stock is not convertible into shares of Common Stock.
20
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
As of September 30, 2023, there were 3,143 shares of Series D Preferred Stock issued and outstanding and the Series D Preferred Stock balance was made up of Series D Preferred Stock, net of commissions, totaling $2,842,004 and accretion of put options totaling $4,056.
During the nine months ended September 30, 2023, the Company sold an aggregate of 3,143 shares of Series D Preferred Stock for total gross proceeds of $3,142,774. After deducting a placement fee and other expenses, the Company received net proceeds of $2,842,004.
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, 2023 and December 31, 2022, there were 12,493,012 shares of Common Stock issued and outstanding.
No shares of Common Stock were issued during the nine months ended September 30, 2023.
During the nine months ended September 30, 2022, the Company issued 74,332 shares of Common Stock upon employee exercise of stock options for total exercise price of $743.
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, 2023, there were 538,842 shares granted and 461,158 shares remaining available under the Plan. The Company has issued options to directors, officers, and employees under the Plan.
During the nine months ended September 30, 2023 and 2022, the Company issued 50,000 and 145,000 options and recorded stock option expense of $218,106 and $105,884, respectively. With the exception of 50,000 options issued in January 2023 and an additional 50,000 options issued in December 2022, 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 50,000 options issued in January 2023 were forfeited in July 2023.
The following table summarizes the stock options outstanding as of September 30, 2023:
| Number of |
|
| Weighted |
|
| Weighted |
| ||||
Outstanding at December 31, 2022 |
|
| 538,842 |
|
| $ | 0.01 |
|
|
| 6.6 |
|
Granted |
|
| 50,000 |
|
|
| 1.32 |
|
|
| — |
|
Exercised |
|
| — |
|
|
| — |
|
|
| — |
|
Forfeited / cancelled / expired |
|
| (50,000 | ) |
|
| 1.32 |
|
|
| — |
|
Outstanding at September 30, 2023 |
|
| 538,842 |
|
| $ | 0.06 |
|
|
| 6.1 |
|
Exercisable at September 30, 2023 |
|
| 423,842 |
|
|
| 0.03 |
|
|
| 5.4 |
|
As of September 30, 2023, there were 538,842 “in-the-money” options with an aggregate intrinsic value of $535,896. 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, 2023.
The following table summarizes information concerning options outstanding as of September 30, 2023.
Strike Price |
| Outstanding |
| Weighted |
| Weighted |
| Vested stock |
| Weighted |
| |||||||
$ |
| 0.01 |
|
| 288,675 |
|
| 4.9 |
| $ | 0.01 |
|
| 288,675 |
| $ | 0.01 |
|
$ |
| 0.01 |
|
| 13,500 |
|
| 7.0 |
| $ | 0.01 |
|
| 13,500 |
| $ | 0.01 |
|
$ |
| 0.01 |
|
| 50,000 |
|
| 8.0 |
| $ | 0.01 |
|
| 50,000 |
| $ | 0.01 |
|
$ | 0.01 – 0.50 |
|
| 186,667 |
|
| 8.3 |
| $ | 0.14 |
|
| 71,667 |
| $ | 0.12 |
|
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, |
|
| September 30, |
| ||
Risk-free interest rate | 1.40-2.84% |
|
| 1.40-2.84% |
| ||
Expected dividend yield |
| 0.00 | % |
|
| 0.00 | % |
Expected volatility | 237.85-249.77% |
|
| 237.85-249.77% |
| ||
Expected life of options (in years) | 6.5-7 |
|
| 6.5-7 |
|
21
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
NOTE 8 – RELATED PARTY TRANSACTIONS
See Note 5 for information regarding 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, 2023 and 2022, the Company paid $108,000 of rent expense to 136 Main Street LLC. During the three months ended September 30, 2023 and 2022, the Company paid $36,000 of rent expense to 136 Main Street LLC.
On September 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 nine months ended September 30, 2023 and 2022, the Company paid $72,000 and $8,000, respectively, for development consulting services to Gvest Real Estate Capital LLC. During the three months ended September 30, 2023 and 2022, the Company paid $24,000 and $8,000, respectively, for development consulting services to Gvest Real Estate Capital LLC.
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 nine months ended September 30, 2023, the company paid Mr. Kelly $15,000 and $60,000, respectively. During the three and nine months ended September 30, 2022, the company paid Mr. Kelly $35,000 and $55,000, respectively.
During the nine months ended September 30, 2023, Raymond M. Gee received fees totaling $245,000 for his personal guaranty on certain promissory notes relating to the acquisition and refinancing of mobile home communities owned by the Company, in relation to the Merritt Place MHP and County Aire MHP acquisitions paid at closing. The Company also accrued a $245,000 guaranty fee owed to Raymond M. Gee, in relation to the Palm Shadows MHP acquisition to be paid at a later date which is still outstanding and unpaid as of September 30, 2023. During the nine months ended September 30, 2022, Raymond M. Gee received fees totaling $1,080,000 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 September 30, 2023.
See Note 2 for information regarding related party VIEs.
22
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
NOTE 9 – SUBSEQUENT EVENTS
Additional Closings of Regulation D Offering
Subsequent to September 30, 2023, the Company sold an aggregate of 571 shares of Series D Preferred Stock in additional closings of the Company's Regulation D offering for total gross proceeds of $570,785. After deducting a placement fee, the Company received net proceeds of approximately $535,946.
23
ITEM 2. 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 ("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, Forward-looking statements should not be read 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 as to whether 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 Overview We are a As of September 30, 2023, we owned and operated 58 manufactured housing communities containing approximately 3,125 developed sites and 1,383 company-owned, manufactured homes. Our communities are located in Georgia, North Carolina, South Carolina, Tennessee and Texas. As of September 30, 2023, our 24 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 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. 25 Recent Developments Additional Closings of Regulation D Offering Subsequent to September 30, 2023, we sold an aggregate of 571 shares of Series D Cumulative Redeemable Preferred Stock (the “Series D Preferred Stock”) in additional closings of the offering described below for total gross proceeds of $570,785. After deducting a placement fee, we received net proceeds of approximately $535,946. 26 Results of Operations Comparison of Three Months Ended September 30, 2023 and 2022 The following table sets forth key components of our Three Months Ended Three Months Ended Amount Percent of Amount Percent of Revenue Rental and related income $ 4,564,273 97.07 % $ 3,697,558 99.50 % Gross revenues from home sales 137,900 2.93 % 18,570 0.50 % Total revenues 4,702,173 100.00 % 3,716,128 100.00 % Community operating expenses Repair and maintenance 531,158 11.30 % 287,686 7.74 % Real estate taxes 212,353 4.52 % 186,358 5.01 % Utilities 334,817 7.12 % 259,758 6.99 % Insurance 121,608 2.59 % 87,044 2.34 % General and administrative expense 661,822 14.07 % 510,036 13.72 % Total community operating expenses 1,861,758 39.59 % 1,330,882 35.81 % Corporate payroll and overhead 1,487,110 31.63 % 1,519,271 40.88 % Depreciation and amortization expense 1,174,457 24.98 % 898,963 24.19 % Interest expense 2,366,051 50.32 % 1,506,290 40.53 % Refinancing costs — — 3,604,671 97.00 % Cost of home sales 88,777 1.89 % 22,676 0.61 % Total expenses 6,978,153 148.40 % 8,882,753 239.03 % Other income — — 500 0.01 % Net loss $ (2,275,980 ) (48.40 )% $ (5,166,125 ) (139.02 )% Revenue. For the three months ended September 30, 2023, we earned total revenues Community Operating Expenses. For the three months ended September 30, 2023, we incurred total community operating expenses of $1,861,758, as compared to $1,330,882 for the three months ended Corporate Payroll and Overhead Expenses. For the three months ended September 30, 2023, we incurred corporate payroll and overhead expenses of $1,487,110, as compared to Depreciation and Amortization Expense. For the three months ended September 30, 2023, we recorded depreciation and amortization of our assets totaling $1,174,457, as compared to $898,963 for the three months ended Interest Expense. For the three months ended September 30, 2023, we incurred interest expense of $2,366,051, as compared to $1,506,290 for the three months ended Refinancing Costs. For the three months ended September 30, 2023, we incurred refinancing costs of $0, as compared to $3,604,671 for the three months ended Net Loss. 27 Comparison of Nine Months Ended September 30, 2023 and 2022 The following table sets forth key components of our results of operations during the nine months ended September 30, 2023 and 2022, both in dollars and as a percentage of our revenues. Nine Months Ended Nine Months Ended Amount Percent of Amount Percent of Revenue Rental and related income $ 12,934,176 96.65 % $ 10,021,357 98.81 % Gross revenues from home sales 449,000 3.35 % 121,164 1.19 % Total revenues 13,383,176 100.00 % 10,142,521 100.00 % Community operating expenses Repair and maintenance 1,154,804 8.63 % 803,505 7.92 % Real estate taxes 624,848 4.67 % 584,280 5.76 % Utilities 920,183 6.88 % 735,638 7.25 % Insurance 345,034 2.58 % 226,341 2.23 % General and administrative expense 2,056,537 15.37 % 1,291,276 12.73 % Total community operating expenses 5,101,406 38.12 % 3,641,040 35.90 % Corporate payroll and overhead 4,542,780 33.94 % 3,683,267 36.32 % Depreciation and amortization expense 3,375,561 25.22 % 2,477,642 24.43 % Interest expense 6,712,375 50.16 % 3,843,031 37.89 % Refinancing costs — — 3,620,422 35.70 % Cost of home sales 351,078 2.62 % 177,410 1.75 % Total expenses 20,083,200 150.06 % 17,442,812 171.98 % Other income — — 500 — Net loss $ (6,700,024 ) (50.06 )% $ (7,299,791 ) (71.97 )% Revenues. For the nine months ended September 30, 2023, we earned total revenues of $13,383,176, which included rental and related income of $12,934,176 and gross revenues from home sales of $449,000, as compared to $10,142,521, which included rental and related income of $10,021,357 and gross revenues from home sales of $121,164, for the nine months ended September 30, 2022, an increase of $3,240,655, or 31.95%. The increase in revenues compared to the prior period was primarily due to $1,420,563 of rental income from the Community Operating Expenses. For the Corporate Payroll and Overhead Expenses. For the nine months ended September 30, 2023, we incurred corporate payroll and overhead expenses of $4,542,780, as compared to $3,683,267 for the nine months ended September 30, 2022, an increase of $859,513, or 23.34%. This increase was primarily due to increased payroll including corporate salaries and benefits expense due to hiring additional personnel to support our future growth and an increase in stock compensation expense due to the issuance of stock options to officers hired to support our growth. Corporate payroll and overhead expenses as a percentage of revenues were 33.94% and 36.32% for the nine months ended September 30, 2023 and 2022, respectively. Depreciation and Amortization Expense. For the nine months ended September 30, 2023, we recorded depreciation and amortization of our Interest Expense. For the nine months ended September 30, 2023, we incurred interest expense of $6,712,375, as compared to $3,843,031 for the nine months ended September 30, 2022, an increase of $2,869,344, or 74.66%. The increase was primarily due to $903,955 of interest on additional debt incurred to acquire new properties and new homes subsequent to September 30, 2022 and $1,355,344 of dividends to series C preferred stockholders, which are included in interest expense given the liability treatment of the mandatorily redeemable Series C Preferred Stock. Interest expense as a percentage of revenues were 50.16% and 37.89% for the nine months ended September 30, 2023 and 2022, respectively. Refinancing Costs. For the nine months ended September 30, 2023, we incurred refinancing costs of $0, as compared to $3,620,422 for the nine months ended September 30, 2022, 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 Net Loss. The factors described above resulted in 28 Liquidity, Capital Resources and Going Concern As of September 30, 2023, we had unrestricted cash of $1,966,633. Based on our current operating plans, we have sufficient cash and lines of credit available to fund operations, debt service, and preferred equity dividends for at least the next 12 months from the date of filing this report. Starting in March 2024, the holders of shares of Series A Cumulative Convertible Preferred Stock have the right to put the shares to us. We will require additional capital to redeem the shares when and if shares are put to us. We expect to continue to raise capital, explore debt financing and will also continue to opportunistically sell homes and other assets to meet cash needs. We may not be able to raise capital when needed or on attractive terms, which could force us to explore other strategies to fund the redemptions. These Proceeds from issuance of Series C Preferred Stock and We have incurred net losses each year since inception and have experienced slightly negative cash flows from operations during the nine months ended Summary of Cash Flow The following table provides detailed information about our net cash flow for the Cash Flow Nine Months Ended 2023 2022 Net cash used in operating activities $ (543,040 ) $ (1,853 ) Net cash used in investing activities (9,733,638 ) (8,958,612 ) Net cash provided by financing activities 7,076,493 13,769,054 Net increase (decrease) in cash, cash equivalent and restricted cash (3,200,185 ) 4,808,589 Cash, cash equivalents and restricted cash at beginning of period 10,405,615 2,106,329 Cash, cash equivalents and restricted cash at end of period $ 7,205,430 $ 6,914,918 Net cash used in operating activities was $543,040 for the Net cash used in investing activities Net cash provided by financing activities was 29 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 $47,000,000. During the nine months ended September 30, Regulation D Offering On April 10, 2023, we launched a new offering under Regulation D of the Securities Act, pursuant to which we are offering up to 75,000 shares of Series D Preferred Stock at an offering price of $1,000 per share for a maximum offering amount of $75,000,000. During the nine months ended September 30, 2023, we sold an aggregate of 3,143 shares of Series D Preferred Stock for total gross proceeds of $3,142,774. After deducting a placement fee and broker dealer commissions, we received net proceeds of $2,842,004. 30 Promissory Notes We have issued promissory notes payable to lenders related to the acquisition of our manufactured housing communities and mobile homes. The interest rates on outstanding promissory notes range from 4% to 8% with five to 30 years principal amortization. The promissory notes are secured by the real estate assets and 34 loans totaling $86,655,293 are guaranteed by Raymond M. Gee. As of September 30, 2023 and December 31, 2022, the outstanding principal balance on all third-party promissory notes was $90,604,520 and $79,550,080, respectively. The following are the terms of these notes: Maturity Interest Interest Only Balance Balance 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 % 12 914,151 925,000 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 % 0 880,228 898,052 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 % — 587,922 614,809 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 — Palm Shadows MHP LLC(4) 4/12/2033 7.030 % 12 5,930,000 — Total Notes Payable $ 90,604,520 $ 79,550,080 Discount Direct Lender Fees (3,656,874 ) (3,666,214 ) Total Net of Discount $ 86,947,646 $ 75,883,866 (1) The notes indicated above are subject to certain financial covenants. (2) On September 1, 2022, we, through our wholly owned subsidiaries, entered into 23 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 (4) The Palm Shadows MHP LLC note contains a future earn out funding option, which allows the Company to draw down on an additional $1,420,000 non-revolving straight line of credit within the first 24 months of the term assuming certain debt 31 Lines of Credit – Variable Interest Entities Facility Borrower Community Maturity Interest Maximum Balance Balance Occupied Home Facility(1) Gvest Homes I LLC ARC, Crestview, Maple, Countryside 01/01/30 8.375% $ 20,000,000 $ 3,653,669 $ 2,424,896 Multi-Community Rental Gvest Finance LLC ARC, Golden Isles, Springlake, Various (2) Greater of 3.25% or Prime, + 375 bps $ 5,000,000 $ 2,470,655 $ 2,561,380 Multi-Community Gvest Finance LLC Golden Isles, Springlake, Sunnyland, Crestview, Meadowbrook Various (2) LIBOR + 6 – 8% based on days outstanding $ 4,000,000 $ 1,422,253 $ 1,383,043 Total Lines of Credit - $ 7,546,577 $ 6,369,319 Discount Direct Lender $ (201,844 ) $ (160,372 ) Total Net of Discount $ 7,344,733 $ 6,208,947 (1) During the nine months ended September 30, 2023, Gvest Homes I LLC drew down $1,353,000 related to the Occupied Home Facility. (2) The 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. Gvest Revolving Promissory Note On December 27, 2021, we issued a revolving promissory note to Gvest Real Estate Capital, LLC, an entity whose sole owner is Raymond M. Gee, our chairman and chief executive officer, pursuant to which we may borrow up to $2,000,000 on a revolving basis for working capital or acquisition purposes. On September 9, 2022, we paid off the full balance with proceeds from the KeyBank portfolio refinance. This note had a five-year term and was interest-only based on a 15% annual rate through the maturity date and was unsecured. As of September 30, 2023 and December 31, 2022, there was no outstanding balance on this note. During the three and nine months ended September 30, 2022, interest expense recognized was $59,167 and $87,542, respectively. NAV Real Estate LLC Promissory Note On June 29, 2022, we issued a revolving promissory note to NAV RE, LLC, an entity whose owners are Adam Martin, our chief investment officer, and his spouse, pursuant to which we may borrow up to $2,000,000 on a revolving basis for working capital or acquisition purposes. On the same date, we borrowed $2,000,000. As of September 30, 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 a 15% annual rate through the maturity date and is unsecured. During the three and nine months ended September 30, 2023, interest expense recognized was $76,667 and $228,333, respectively. During the three and nine months ended September 30, 2022, interest expense totaled $76,667 and $77,500, respectively. Off-Balance Sheet Arrangements As of September 30, 2023, we had no off-balance sheet arrangements. Critical Accounting Policies The preparation of the unaudited condensed consolidated financial statements For a description of the accounting policies that, in management’s opinion, involve the most significant application of judgment or involve complex estimation and which could, if different judgment or estimates were made, materially affect our ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET Not applicable. ITEM 4. CONTROLS AND 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 As required by Rule 13a-15(e) of 32 Annual Report on Form 10-K for the fiscal year ended December 31, MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussionOPERATIONS.and 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.in conjunctionas 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 is qualified in its entirety by, the consolidated financial statements and notes thereto included in Item 1 in this Quarterly Report on Form 10-Q. This item contains forward-looking statements that involveare subject to risks and uncertainties. Actualuncertainties that could cause actual performance or results mayto differ materially from those indicatedexpressed in suchor suggested by the forward-looking statements.OverviewCompany has historically operatedspecific 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 Exploration & Production (“E&P”)projections and estimates are based exclusively on our management’s own assessment of our business, but is currently undertakingthe 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.transformation into anself-administered, self-managed, vertically integrated owner and operator of self-storage facilities. Inmanufactured housing communities. We earn income from leasing manufactured home sites to tenants who own their own manufactured home and the E&P business,rental of company-owned manufactured homes to residents of the communities.two “legacy” subsidiaries, CYMRI, LLCportfolio of manufactured housing properties consisted of the following:Triumph Energy, Inc., held ownership interestslocated in Charlotte, North Carolina.generally static group39 lot, all-age community situated on 7.46 acres and located in Gastonia, North Carolina, a suburb of oilCharlotte, North Carolina.gas propertieslocated in TexasGastonia, North Carolina, a suburb of Charlotte North Carolina.Louisiana through May 2015. As indicatedlocated in Note 2, we entered into two separate transactionsChapel Hill, North Carolina.first half of 2015 which resultedColumbia, South Carolina metro area.divestmentAsheville, North Carolina, Metropolitan Statistical Area.substantial portionmanufactured 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.oil and gas properties (allresults of which were in Texas) andoperations during the payment of nearly all of our property related debt. For the foreseeable future, we expect to continue to maintain ownership of our remaining oil and gas properties (most of which are in Louisiana) while seeking new opportunities in the self-storage business.On March 17, 2014, we completed the acquisition of Cinco NRG, LLC (“Cinco”), a private oil and gas company, which was under common control by our majority shareholder. We acquired Cinco through the issuance of a total of 4,694,254 shares of our Common Stock. At the time of the acquisition, Cinco had a small working interest in a producing field in Texas as well as working interests in several exploratory prospects in Alabama. Under the accounting rules for entities under common control, we have reflected Cinco’s operations on a retroactive basis in our consolidated financial statements from the inception of Cinco in April 2013.Results of OperationsThe following discussion reflects the revenues and expenses for the three month and six month periods ended June 30, 2015 and 2014, as reported in our consolidated financial statements and notes thereto included in Item 1.Three months ended June 30, 2015 versus three months ended JuneSeptember 30, 2014 — Total2023 and 2022, both in dollars and as a percentage of our revenues.
September 30, 2023
September 30, 2022
Revenues
Revenuesnot including interestof $4,702,173, which included rental and related income of $4,564,273 and gross revenues from home sales of $137,900, as compared to $3,716,128, which included rental and related income of $3,697,558 and gross revenues from home sales of $18,570, for the three months ended JuneSeptember 30, 2015 were $110,0002022, an increase of $986,045, or 26.53%. The increase in revenues compared to $645,000the prior period was primarily due to $611,690 of rental income from the acquisition of seven manufactured housing communities on or subsequent to September 30, 2022, as well as an increase in revenues from home sales. The Company sold seven park-owned homes during the three months ended September 30, 2023, as compared to only three home sales during the three months ended September 30, 2022. The remaining increase was due to rental rate increases.JuneSeptember 30, 2014. Oil2022, an increase of $530,876, or 39.89%. The increase in community operating expenses was primarily due to $226,532 of additional expenses associated with the seven properties acquired on or subsequent to September 30, 2022. Community operating expenses as a percentage of revenues were 39.59% and gas revenues35.81% for the three months ended JuneSeptember 30, 2015 were $110,0002023 and 2022, respectively.$645,000$1,519,271 for the three months ended JuneSeptember 30, 2014. In the three months ended June 30, 2015, revenues from oil production were $92,000, reflecting net volumes2022, a decrease of 1,857 barrels at an average price of $49.54 per barrel, while gas revenues were $18,000, reflecting net volumes of 9,112 Mcf at an average price of $1.98 per Mcf. On an overall basis, these amounts reflect$32,161, or 2.12%. This decrease was primarily due to decreased payroll including corporate salaries and benefits expense and a decrease in production volumesstock compensation expense as a result of approximately 61%, duean adjustment to reflect the saleactual stock options issued. Corporate payroll and overhead expenses as a percentage of our producing oilrevenues were 31.63% and gas properties in Texas, compounded by a dramatic decrease in average oil and gas prices of approximately 56%.Lease operating expenses (“LOE”), including production taxes, were $174,00040.88% for the three months ended JuneSeptember 30, 2015 versus $381,0002023 and 2022, respectively.JuneSeptember 30, 2014. This decrease2022, an increase of $275,494, or 30.65%. The increase in depreciation and amortization was largelydriven by $215,005 related to the assets in seven manufactured housing communities that were acquired on or subsequent to September 30, 2022. The remaining increase was due to lower production volumes. depletion and amortization expense as a percentage of revenues were 24.98% and 24.19% for the three months ended JuneSeptember 30, 2015 was $51,000 versus $103,0002023 and 2022, respectively.JuneSeptember 30, 2014. This decrease2022, an increase of $859,761, or 57.08%. The increase was mostlyprimarily due to lower production volumes.13Impairment$373,292 of interest on additional debt incurred to acquire new properties and new homes subsequent to September 30, 2022 and $480,477 of 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 (the “Series C Preferred Stock”). Interest expense as a percentage of revenues were 50.32% and 40.53% for the three months ended JuneSeptember 30, 2015 was $397,000 versus zero2023 and 2022, respectively.JuneSeptember 30, 2014. This increase was due to2022, caused by a non-recurring major portfolio refinance on September 1, 2022 through KeyBank National Association and Fannie Mae, which refinanced most of the full cost ceiling test adjustment recordedoutstanding debt in our portfolio for a total principal balance of $62,000,000. We incurred refinancing expense of $3,604,671 in connection with the three months ended June 30, 2015 (see Note 5)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.Accretion expense on asset abandonment obligations The factors described above resulted in a net loss of $2,275,980 for the three months ended JuneSeptember 30, 2015 was $2,000 versus $10,0002023, as compared to $5,166,125 for the three months ended JuneSeptember 30, 2014. This2022, a decrease of $2,890,145, or 55.94%, predominately driven by a 26.53% increase in total revenues, offset by a 21.44% decrease in total expenses.
September 30, 2023
September 30, 2022
Revenues
Revenuessaleacquisition of our producing oil and gas propertiesseven manufactured housing communities on or subsequent to September 30, 2022, as well as an increase in Texas.Workover expenses forrevenues from home sales. The Company sold 22 park-owned homes during the threenine months ended JuneSeptember 30, 2015 were zero versus $389,000 for2023, as compared to only 12 home sales during the threenine months ended JuneSeptember 30, 2014. This decrease was due to the unexpectedly high workover costs of CYMRI’s largest water injection well in the second quarter of 2014.Selling, general and administrative (“SG&A”) expenses for the three months ended June 30, 2015 were $380,000 compared to $371,000 for the three months ended June 30, 2014. This increase was not considered to be significant.Gain from creditor settlements for the three months ended June 30, 2015 were $524,000 compared to zero for the three months ended June 30, 2014. This2022. The remaining increase was due to rental rate increases.settlements reachednine months ended September 30, 2023, we incurred total community operating expenses of $5,101,406, as compared to $3,641,040 for the nine months ended September 30, 2022, an increase of $1,460,366, or 40.11%. The increase in community operating expenses was primarily due to $448,073 of additional expenses associated with various creditorsthe seven properties acquired on or subsequent to September 30, 2022. Community operating expenses as a percentage of revenues were 38.12% and 35.90% for the nine months ended September 30, 2023 and 2022, respectively.subsidiary, CYMRI, LLC, in June 2015 (see Note 6).Interest expenseassets totaling $3,375,561, as compared to $2,477,642 for the threenine months ended JuneSeptember 30, 20152022, an increase of $897,919, or 36.24%. The increase in depreciation and amortization was $100,000 versus $22,000 fordriven by $465,181 related to the three months ended Juneassets in seven manufactured housing communities that were acquired on or subsequent to September 30, 2014. This2022. The remaining increase was due to depreciation of capital improvement projects completed subsequent to September 30, 2022, such as home renovations and new home installations. Depreciation expense as a percentage of revenues were 25.22% and 24.43% for the nine months ended September 30, 2023 and 2022, respectively.on bridge loansof $1,385,596, and other fees of $15,235.the current period.Income taxes were a benefitnet loss of $170,000$6,700,024 for the threenine months ended JuneSeptember 30, 20152023, as compared to $140,000$7,299,791 for the threenine months ended JuneSeptember 30, 2014.2022, a decrease of $599,767, or 8.22%, predominately driven by a 31.95% increase in total revenues, offset by a 15.14% increase in total expenses.benefit amounts reflected consolidated income tax ratesfactors potentially raise doubt about our ability to continue as a going concern. Our future capital requirements will depend on many factors, including but not limited to:approximately 36% (due to current tax refund)share redemptions.22%, respectively.SixSeries D 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.JuneSeptember 30, 2015 versus six months ended June 30, 2014 — Total revenues, not including2023. We are in an acquisitive, growth stage whereby we have doubled the number of home sites in our portfolio of manufactured housing communities over the past two years. We have incurred additional corporate payroll and overhead and interest income,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 cut costs, work to improve occupancy and collections, and increase rents based on each respective market all to stabilize the acquired communities to their full potential.six months ended June 30, 2015 were $273,000 compared to $1,149,000 for the six months ended June 30, 2014. Oil and gas revenues for the six months ended June 30, 2015 were $273,000 compared to $1,149,000 for the six months ended June 30, 2014. In the six months ended June 30, 2015, revenues from oil production were $226,000, reflecting volumes of 5,491 barrels at an average price of $41.15 per barrel, while gas revenues were $47,000, reflecting volumes of 20,799 Mcf at an average price of $2.25 per Mcf. On an overall basis, these amounts reflect a decrease in production volumes of approximately 43%, due to the sale of our producing oil and gas properties in Texas, compounded by a dramatic decrease in average oil and gas prices of approximately 58%.Lease operating expenses (“LOE”), including production taxes, were $432,000 for the six months ended June 30, 2015 versus $755,000 for the six months ended June 30, 2014. This decrease was largely due to lower production volumes.Depreciation, depletion and amortization expense for the six months ended June 30, 2015 was $148,000 versus $178,000 for the six months ended June 30, 2014. This decrease was mostly due to lower production volumes.Impairment expense for the six months ended June 30, 2015 was $1,395,000 versus zero for the six months ended June 30, 2014. This increase was due to the full cost ceiling test adjustment recorded in the six months ended June 30, 2015 (see Note 5).Accretion expense on asset abandonment obligations for the six months ended June 30, 2015 was $13,000 versus $20,000 for the six months ended June 30, 2014. This decrease was due to the sale of our producing oil and gas properties in Texas.Workover expenses for the six months ended June 30, 2015 were $68,000 versus $771,000 for the six months ended June 30, 2014. This decrease was due to the major workover of CYMRI’s largest producing oil and gas well in the first quarter of 2014 as well as the unexpectedly high workover costs of CYMRI’s largest water injection well in the second quarter of 2014.14Selling, general and administrative (“SG&A”) expenses for the six months ended June 30, 2015 were $781,000 compared to $764,000 for the six months ended June 30, 2014. This increase was not considered to be significant.Gain from creditor settlements for the six months ended June 30, 2015 were $524,000 compared to zero for the six months ended June 30, 2014. This increase was due to the settlements reached with various creditors of our subsidiary, CYMRI, LLC, in June 2015 (see Note 6).Interest expense for the six months ended June 30, 2015 was $168,000 versus $43,000 for the six months ended June 30, 2014. This increase was due to interest expense and prepayment penalties on bridge loans in the current period.Income taxes were a benefit of $710,000 for the six months ended June 30, 2015 compared to $344,000 for the six months ended June 30, 2014. These benefit amounts reflected consolidated income tax rates of approximately 32% (due to current tax refund) and 25%, respectively.Liquidity and Capital ResourcesOperating activities.period indicated:
September 30,sixnine months ended JuneSeptember 30, 2015 was $937,0002023, as compared to $256,000$1,853 for the sixnine months ended JuneSeptember 30, 2014. This difference was primarily due2022. For the nine months ended September 30, 2023, the net loss of $6,700,024, offset in part by non-cash depreciation and amortization expense of $3,375,561, an increase in accrued liabilities of $1,135,555 related to the relative changespayment of accrued 2022 employee bonuses, guarantee fees and accounting fees, and $1,016,116 related to the amortization of debt discount were the primary drivers of the net cash used in current assets and current liabilities.Investingoperating activities. Net cash provided by investing activities was $1,880,000 forFor the sixnine months ended JuneSeptember 30, 2015 compared2022, the net loss of $7,299,791, offset in part by non-cash depreciation expense of $2,477,642 and write-off of net unamortized debt issuance costs totaling $2,219,591 upon refinance, were 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.of $164,000was $9,733,638 for the sixnine months ended JuneSeptember 30, 2014. This increase was largely due2023, as compared to $8,958,612 for the proceeds from the divestment of a substantial portion of our oil and gas properties in two separate transactions in the first half of 2015 (see Note 2).Financing activities.nine months ended September 30, 2022. Net cash used in investing activities for the nine months ended September 30, 2023 consisted of purchases of investment properties and related intangibles in the amount of $6,528,479 and $613,783, respectively, capital improvements of $3,046,274, and payment of related acquisition costs of $161,716, offset by proceeds received from sale of homes of $449,000, proceeds from home sale deposits of $85,726 and advanced pursuit costs and deposits for potential deals of $81,888. Net cash used in investing activities for the nine months ended September 30, 2022 consisted of purchases of investment properties in the amount of $6,444,135, capital improvements of $1,872,803, payment of related acquisition costs of $471,096 and advanced pursuit costs and deposits for potential deals of $291,742, offset by proceeds received from sale of homes of $121,164.$629,000$7,076,493 for the sixnine months ended JuneSeptember 30, 20152023, as compared to $13,769,054 for the nine months ended September 30, 2022. For the nine months ended September 30, 2023, net cash provided by financing activities consisted primarily of $139,000 forproceeds from issuance of preferred stock of $8,513,170 and proceeds received from the sixrelated party lines of credit of $1,353,000, offset by the payment of debt costs and Series C Preferred Stock costs of $1,126,939. For the nine months ended September 30, 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, proceeds from related party debt of $4,700,000, 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, 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 dividends of $728,355.2014.2023, we sold an aggregate of 5,345 shares of Series C Preferred Stock for total proceeds of $5,344,917, net of aggregate redemptions of $326,250. After deducting a placement fee and broker dealer commissions, we received net proceeds of $4,983,279. In addition to the placement fee and broker dealer commissions, we capitalized an additional $43,785 of other issuance costs associated with the offering which, net of amortization expense, offset with the net proceeds on the balance sheet.
Date
Rate
Period
(Months)
September 30,
2023
December 31,
2022relative differencecommunity was chiefly duerefinanced on April 14, 2022, with a different lender and the Company capitalized $258,023 of debt issuance costs related to current period netthe new note.repayments.Going Concern
Date
Rate
Credit
Limit
September 30,
2023
December 31,
2022
Home Facility
Floorplan Home Facility
VIEs
Feesaccompanyingmaturity 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.have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has reported net losses from operations in the last two years and presently has a working capital deficit in the amount of $605,000. These factors, among others, indicate that the Company may be unable to continue as a going concern for a reasonable period of time. The consolidated financial statements do not contain any adjustments to reflect the possible future effects on the classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.Critical Accounting Policies and EstimatesOur discussion and analysis ofrequires our financial condition and results of operations are based on consolidated financial statements which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires usmanagement to make estimates and judgmentsassumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We believeexpenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these estimates. These estimates are based on management’s historical industry experience and on various other assumptions that certainare believed to be reasonable under the circumstances. Actual results may differ from these estimates.more significant judgmentsreported financial position, results of operations, or cash flows, see “Management’s Discussion and estimates usedAnalysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in the preparation of our consolidated financial statements. See our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 for a further description of our critical accounting policies2022 filed with the Securities and estimates.15RISKInformation for this Item is not required as the Registrant is a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act.PROCEDURES(a)PROCEDURES.June 30, 2015,the Exchange Act, our Chief Executive Officermanagement has carried out an evaluation, with the participation and Chief Financial Officer evaluatedunder the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our internal controls over financial reporting which encompasses our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures, as of the endSeptember 30, 2023. Based upon, and as of the period covered bydate of this Quarterly Report were not effectiveevaluation, our chief executive officer and chief financial officer determined that, because of a lack of segregation of duties, asthe material weaknesses described in Item 9A. (b)9A “Controls and Procedures” of our2014,2022 and further referenced below, which, due to employee turnover, we vieware still in the process of remediating as an integral part of September 30, 2023, our disclosure controls and procedures.
During its evaluation of the effectiveness of our internal control over financial reporting as of September 30, 2023, our management identified the following material weaknesses:
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.
To cure the foregoing material weakness, we have taken or plan to take the following remediation measures:
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 Changes in Internal Controls Over Financial Reporting We regularly review our system of internal Other than in connection with the implementation of the remedial measures described above, there were no 33 PART OTHER INFORMATION ITEM 1. LEGAL From time to ITEM 1A. RISK Not applicable. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF We have not sold any equity securities during the three months ended September 30, 2023 that were not previously disclosed in a current report on Form 8-K that was filed during the quarter, except as follows: On August 21, 2023, the Company completed an additional closing of the Regulation D offering, pursuant to which the Company sold an aggregate of 360 shares of Series D Preferred Stock for total gross proceeds of $360,000. After deducting the placement fee and broker dealer commissions, the Company received net proceeds of approximately $327,600. On September 5, 2023, the Company completed an additional closing of the Regulation D offering, pursuant to which the Company sold an aggregate of 360 shares of Series D Preferred Stock for total gross proceeds of $360,000. After deducting the placement fee and broker dealer commissions, the Company received net proceeds of approximately $327,600. On September 19, 2023, the Company completed an additional closing of the Regulation D offering, pursuant to which the Company sold an aggregate of 109 shares of Series D Preferred Stock for total gross proceeds of $109,140. After deducting the placement fee and broker dealer commissions, the Company received net proceeds of approximately $103,540. On October 3, 2023, the Company completed an additional closing of the Regulation D offering, pursuant to which the Company sold an aggregate of 140 shares of Series D Preferred Stock for total gross proceeds of $140,000. After deducting the placement fee and broker dealer commissions, the Company received net proceeds of approximately $127,400. On October 17, 2023, the Company completed an additional closing of the Regulation D offering, pursuant to which the Company sold an aggregate of 140 shares of Series D Preferred Stock for total gross proceeds of $139,785. After deducting the placement fee and broker dealer commissions, the Company received net proceeds of approximately $137,185. On October 31, 2023, the Company completed an additional closing of the Regulation D offering, pursuant to which the Company sold an aggregate of 70 shares of Series D Preferred Stock for total gross proceeds of $70,000. After deducting the placement fee and broker dealer commissions, the Company received net proceeds of approximately $63,700. On November 7, 2023, the Company completed an additional closing of the Regulation D offering, pursuant to which the Company sold an aggregate of 221 shares of Series D Preferred Stock for total gross proceeds of $221,000. After deducting the placement fee and broker dealer commissions, the Company received net proceeds of approximately $207,661. During the three months ended September 30, 2023, we did not repurchase any shares of our common stock. ITEM 3. DEFAULTS UPON SENIOR None. ITEM 4. MINE SAFETY Not applicable. ITEM 5. OTHER None. 34 ITEM 6. Exhibit No. Description 3.1 3.2 3.3 3.4 3.5 3.6 3.7 31.1* 31.2* 32.1* 32.2* 101.INS* Inline XBRL Instance Document 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104* Cover Page Interactive Data File (formatted as Inline XBRL * Filed herewith 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: November 13, 2023 MANUFACTURED HOUSING PROPERTIES INC. /s/ Raymond M. Gee Name: Raymond M. Gee Title: Chief Executive Officer (Principal Executive Officer and Principal Financial and Accounting Officer) 35results of operationsimplementing 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 of andsoon as practicable. We are committed to taking appropriate steps for the quarter ended June 30, 2015.(b) remediation, as needed.controlscontrol over financial reportingThere was 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.changechanges in our internal controls over financial reporting that occurred during the third quarter ended June 30, 2015,of the 2023 fiscal year that hashave materially affected, or isare reasonably likely to materially affect, our internal controlscontrol over financial reporting.16II. IIPROCEEDINGSSee Note 12PROCEEDINGS.Consolidated Financial Statements.FACTORSInformation for this Item is not required as the Registrant is a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act.PROCEEDSNone.SECURITIESDISCLOSURESNone.INFORMATIONEXHIBITS31.1Certification31.2Certification32.132.2101.INS101.SCH101.CAL101.LAB101.PRE101.DEFTaxonomy Extension Definition Linkbase Documentand contained in Exhibit 101)17SIGNATURESTACK-IT STORAGE, INC.August 11, 2015By:/s/ D. Hughes Watler, Jr.D. Hughes Watler, Jr.Chief Financial Officer