UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30,March 31, 20232024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________________________ to _____________________________________
Commission File Number: 000-25991
MANHATTAN BRIDGE CAPITAL, INC.
(Exact name of registrant as specified in its charter)
| New York | 11-3474831 | |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) |
60 Cutter Mill Road, Great Neck, New York 11021
(Address of principal executive offices)
(516) 444-3400
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common shares, par value $.001 | LOAN | Nasdaq Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒No
As of October 24, 2023,April 23, 2024, the Issuerregistrant had a total of common shares, $.001 par value per share, outstanding.
MANHATTAN BRIDGE CAPITAL, INC.
TABLE OF CONTENTS
| 2 |
Forward Looking Statements
This report contains forward-looking statements within the meaning of section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are typically identified by the words “believe,” “expect,” “intend,” “estimate” and similar expressions. Those statements appear in a number of places in this report and include statements regarding our intent, belief or current expectations or those of our directors or officers with respect to, among other things, trends affecting our financial condition and results of operations and our business and growth strategies. These forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those projected, expressed or implied in the forward-looking statements as a result of various factors (such factors are referred to herein as “Cautionary Statements”), including but not limited to the following: (i) our loan origination activities, revenues and profits are limited by available funds; (ii) we operate in a highly competitive market and competition may limit our ability to originate loans with favorable interest rates; (iii) our Chief Executive Officer is critical to our business and our future success may depend on our ability to retain him; (iv) if we overestimate the yields on our loans or incorrectly value the collateral securing the loan, we may experience losses; (v) we may be subject to “lender liability” claims; (vi) our due diligence may not uncover all of a borrower’s liabilities or other risks to its business; (vii) borrower concentration could lead to significant losses; (viii) we may choose to make distributions in our own stock, in which case you may be required to pay income taxes in excess of the cash dividends you receive; (ix) our ability to recover additional amounts relating to a single foreclosure action; and (x)(ix) an increase in interest rates may impact our profitability. The accompanying information contained in this report, including the information set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” identifies important factors that could cause such differences. Further information on potential factors that could affect our business is described under the heading “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.2023. These forward-looking statements speak only as of the date of this report, and we caution potential investors not to place undue reliance on such statements. We undertake no obligation to update or revise any forward-looking statements. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Cautionary Statements.
All references in this Form 10-Q to “Company,” “we,” “us,” or “our” refer to Manhattan Bridge Capital, Inc. and its wholly-owned subsidiary, MBC Funding II Corp., unless the context otherwise indicates.
| 3 |
PART I. FINANCIAL INFORMATION
Item 1.CONSOLIDATED FINANCIAL STATEMENTS
MANHATTAN BRIDGE CAPITAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
| September 30, 2023 | December 31, 2022 | |||||||
(unaudited) | (audited) | |||||||
| Assets | ||||||||
| Loans receivable | $ | 70,781,039 | $ | 74,483,463 | ||||
| Interest receivable on loans | 1,349,374 | 1,363,502 | ||||||
| Cash | 133,147 | 103,540 | ||||||
| Other assets | 100,030 | 59,566 | ||||||
| Operating lease right-of-use asset, net | 221,079 | 262,222 | ||||||
| Deferred financing costs, net | 30,765 | 7,708 | ||||||
| Total assets | $ | 72,615,434 | $ | 76,280,001 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Liabilities: | ||||||||
| Line of credit | $ | 21,433,094 | $ | 24,994,234 | ||||
| Senior secured notes (net of deferred financing costs of $190,842 and $247,155, respectively) | 5,809,158 | 5,752,845 | ||||||
| Deferred origination fees | 670,295 | 669,128 | ||||||
| Accounts payable and accrued expenses | 236,186 | 289,868 | ||||||
| Operating lease liability | 233,978 | 273,485 | ||||||
| Dividends payable | 1,288,753 | 1,436,868 | ||||||
| Total liabilities | 29,671,464 | 33,416,428 | ||||||
| Commitments and contingencies | - | - | ||||||
| Stockholders’ equity: | ||||||||
| Preferred shares - $ par value; shares authorized; issued | — | — | ||||||
| Common shares - $ par value; shares authorized; issued; and outstanding, respectively | 11,757 | 11,757 | ||||||
| Additional paid-in capital | 45,545,609 | 45,535,811 | ||||||
| Treasury stock, at cost – and shares, respectively | (984,630 | ) | (798,939 | ) | ||||
| Accumulated deficit | (1,628,766 | ) | (1,885,056 | ) | ||||
| Total stockholders’ equity | 42,943,970 | 42,863,573 | ||||||
| Total liabilities and stockholders’ equity | $ | 72,615,434 | $ | 76,280,001 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
MANHATTAN BRIDGE CAPITAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Interest income from loans | $ | 1,992,495 | $ | 1,677,670 | $ | 5,888,843 | $ | 4,933,767 | ||||||||
| Origination fees | 441,271 | 429,350 | 1,342,077 | 1,405,076 | ||||||||||||
| Total revenue | 2,433,766 | 2,107,020 | 7,230,920 | 6,338,843 | ||||||||||||
| Operating costs and expenses: | ||||||||||||||||
| Interest and amortization of deferred financing costs | 614,389 | 496,718 | 1,856,079 | 1,204,954 | ||||||||||||
| Referral fees | 361 | 625 | 1,652 | 3,945 | ||||||||||||
| General and administrative expenses | 377,192 | 377,436 | 1,274,267 | 1,125,162 | ||||||||||||
| Total operating costs and expenses | 991,942 | 874,779 | 3,131,998 | 2,334,061 | ||||||||||||
| Income from operations | 1,441,824 | 1,232,241 | 4,098,922 | 4,004,782 | ||||||||||||
| Other income | 4,500 | 4,500 | 29,380 | 13,500 | ||||||||||||
| Income before income tax expense | 1,446,324 | 1,236,741 | 4,128,302 | 4,018,282 | ||||||||||||
| Income tax expense | — | — | (650 | ) | (650 | ) | ||||||||||
| Net income | $ | 1,446,324 | $ | 1,236,741 | $ | 4,127,652 | $ | 4,017,632 | ||||||||
| Basic and diluted net income per common share outstanding: | ||||||||||||||||
| —Basic | $ | 0.13 | $ | 0.11 | $ | 0.36 | $ | 0.35 | ||||||||
| —Diluted | $ | 0.13 | $ | 0.11 | $ | 0.36 | $ | 0.35 | ||||||||
| Weighted average number of common shares outstanding | ||||||||||||||||
| —Basic | 11,461,052 | 11,494,945 | 11,477,133 | 11,494,945 | ||||||||||||
| —Diluted | 11,461,052 | 11,494,945 | 11,477,133 | 11,494,945 | ||||||||||||
March 31, 2024 | December 31, 2023 | |||||||
| (unaudited) | (audited) | |||||||
| Assets | ||||||||
| Loans receivable | $ | 72,596,149 | $ | 73,048,403 | ||||
| Interest receivable on loans | 1,514,836 | 1,395,905 | ||||||
| Cash | 87,097 | 104,222 | ||||||
| Cash - restricted | 311,545 | 1,587,773 | ||||||
| Other assets | 97,734 | 63,636 | ||||||
| Operating lease right-of-use asset, net | 193,650 | 207,364 | ||||||
| Deferred financing costs, net | 24,400 | 27,583 | ||||||
| Total assets | $ | 74,825,411 | $ | 76,434,886 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Liabilities: | ||||||||
| Line of credit | $ | 23,450,677 | $ | 25,152,338 | ||||
| Senior secured notes (net of deferred financing costs of $153,298 and $172,069, respectively) | 5,846,702 | 5,827,931 | ||||||
| Deferred origination fees | 655,023 | 719,019 | ||||||
| Accounts payable and accrued expenses | 263,692 | 295,292 | ||||||
| Operating lease liability | 206,934 | 220,527 | ||||||
| Dividends payable | 1,315,445 | 1,287,073 | ||||||
| Total liabilities | 31,738,473 | 33,502,180 | ||||||
| Commitments and contingencies | - | - | ||||||
| Stockholders’ equity: | ||||||||
| Preferred shares - $ par value; shares authorized; issued | — | — | ||||||
| Common shares - $ par value; shares authorized; issued; and outstanding, respectively | 11,757 | 11,757 | ||||||
| Additional paid-in capital | 45,552,142 | 45,548,876 | ||||||
| Less: Treasury stock, at cost – and shares | (1,070,406 | ) | (1,060,606 | ) | ||||
| Accumulated deficit | (1,406,555 | ) | (1,567,321 | ) | ||||
| Total stockholders’ equity | 43,086,938 | 42,932,706 | ||||||
| Total liabilities and stockholders’ equity | $ | 74,825,411 | $ | 76,434,886 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
MANHATTAN BRIDGE CAPITAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| 2024 | 2023 | |||||||
Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue: | ||||||||
| Interest income from loans | $ | 2,142,487 | $ | 1,953,821 | ||||
| Origination fees | 430,591 | 443,971 | ||||||
| Total revenue | 2,573,078 | 2,397,792 | ||||||
| Operating costs and expenses: | ||||||||
| Interest and amortization of deferred financing costs | 690,589 | 646,263 | ||||||
| Referral fees | 500 | 291 | ||||||
| General and administrative expenses | 410,278 | 496,096 | ||||||
| Total operating costs and expenses | 1,101,367 | 1,142,650 | ||||||
| Income from operations | 1,471,711 | 1,255,142 | ||||||
| Other income | 4,500 | 4,500 | ||||||
| Net income | $ | 1,476,211 | $ | 1,259,642 | ||||
| Basic and diluted net income per common share outstanding: | ||||||||
| —Basic | $ | 0.13 | $ | 0.11 | ||||
| —Diluted | $ | 0.13 | $ | 0.11 | ||||
| Weighted average number of common shares outstanding: | ||||||||
| —Basic | 11,438,673 | 11,494,945 | ||||||
| —Diluted | 11,438,673 | 11,494,945 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 5 |
MANHATTAN BRIDGE CAPITAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023MARCH 31, 2024
| Shares | Amount | in Capital | Shares | Cost | Deficit | Totals | Shares | Amount | Capital | Shares | Cost | Deficit | Totals | |||||||||||||||||||||||||||||||||||||||||||
| Common Shares | Additional Paid | Treasury Shares | Accumulated | Common Shares | Additional Paid-in | Treasury Stock | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | in Capital | Shares | Cost | Deficit | Totals | Shares | Amount | Capital | Shares | Cost | Deficit | Totals | |||||||||||||||||||||||||||||||||||||||||||
| Balance, July 1, 2023 | 11,757,058 | $ | 11,757 | $ | 45,542,343 | 295,473 | $ | (963,745 | ) | $ | (1,786,337 | ) | $ | 42,804,018 | ||||||||||||||||||||||||||||||||||||||||||
| Balance, January 1, 2024 | 11,757,058 | $ | 11,757 | $ | 45,548,876 | 316,407 | $ | (1,060,606 | ) | $ | (1,567,321 | ) | $ | 42,932,706 | ||||||||||||||||||||||||||||||||||||||||||
| Non-cash compensation | 3,266 | 3,266 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of treasury shares | 4,500 | (20,885 | ) | (20,885 | ) | 2,000 | (9,800 | ) | (9,800 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash compensation | 3,266 | 3,266 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends declared and payable | (1,288,753 | ) | (1,288,753 | ) | (1,315,445 | ) | (1,315,445 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | - | - | - | - | - | 1,446,324 | 1,446,324 | - | - | - | 1,476,211 | 1,476,211 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | 11,757,058 | $ | 11,757 | $ | 45,545,609 | 299,973 | $ | (984,630 | ) | $ | (1,628,766 | ) | $ | 42,943,970 | ||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | 11,757,058 | $ | 11,757 | $ | 45,552,142 | 318,407 | $ | (1,070,406 | ) | $ | (1,406,555 | ) | $ | 43,086,938 | ||||||||||||||||||||||||||||||||||||||||||
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022
| Common Shares | Additional Paid | Treasury Shares | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | in Capital | Shares | Cost | Deficit | Totals | ||||||||||||||||||||||
| Balance, July 1, 2022 | 11,757,058 | $ | 11,757 | $ | 45,529,278 | 262,113 | $ | (798,939 | ) | $ | (1,442,167 | ) | $ | 43,299,929 | ||||||||||||||
| Non-cash compensation | 3,266 | 3,266 | ||||||||||||||||||||||||||
| Dividends declared and payable | (1,436,868 | ) | (1,436,868 | ) | ||||||||||||||||||||||||
| Net income | - | - | - | - | - | 1,236,741 | 1,236,741 | |||||||||||||||||||||
| Balance, September 30, 2022 | 11,757,058 | $ | 11,757 | $ | 45,532,544 | 262,113 | $ | (798,939 | ) | $ | (1,642,294 | ) | $ | 43,103,068 | ||||||||||||||
FOR THE NINE MONTHS ENDED SEPTEMBER 30,MARCH 31, 2023
| Common Shares | Additional Paid | Treasury Shares | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | in Capital | Shares | Cost | Deficit | Totals | ||||||||||||||||||||||
| Balance, January 1, 2023 | 11,757,058 | $ | 11,757 | $ | 45,535,811 | 262,113 | $ | (798,939 | ) | $ | (1,885,056 | ) | $ | 42,863,573 | ||||||||||||||
| Purchase of treasury shares | 37,860 | (185,691 | ) | (185,691 | ) | |||||||||||||||||||||||
| Non-cash compensation | 9,798 | 9,798 | ||||||||||||||||||||||||||
| Dividends paid | (2,582,609 | ) | (2,582,609 | ) | ||||||||||||||||||||||||
| Dividends declared and payable | (1,288,753 | ) | (1,288,753 | ) | ||||||||||||||||||||||||
| Net income | - | - | - | - | - | 4,127,652 | 4,127,652 | |||||||||||||||||||||
| Balance, September 30, 2023 | 11,757,058 | $ | 11,757 | $ | 45,545,609 | 299,973 | $ | (984,630 | ) | $ | (1,628,766 | ) | $ | 42,943,970 | ||||||||||||||
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022
| Common Shares | Additional Paid | Treasury Shares | Accumulated | Common Shares | Additional Paid-in | Treasury Stock | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | in Capital | Shares | Cost | Deficit | Totals | Shares | Amount | Capital | Shares | Cost | Deficit | Totals | |||||||||||||||||||||||||||||||||||||||||||||
| Balance, January 1, 2022 | 11,757,058 | $ | 11,757 | $ | 45,522,746 | 262,113 | $ | (798,939 | ) | $ | (1,349,322 | ) | $ | 43,386,242 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, January 1, 2023 | 11,757,058 | $ | 11,757 | $ | 45,535,811 | 262,113 | $ | (798,939 | ) | $ | (1,885,056 | ) | $ | 42,863,573 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance | 11,757,058 | $ | 11,757 | $ | 45,522,746 | 262,113 | $ | (798,939 | ) | $ | (1,349,322 | ) | $ | 43,386,242 | 11,757,058 | $ | 11,757 | $ | 45,535,811 | 262,113 | $ | (798,939 | ) | $ | (1,885,056 | ) | $ | 42,863,573 | ||||||||||||||||||||||||||||||
| Non-cash compensation | 9,798 | 9,798 | 3,266 | 3,266 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends paid | (2,873,736 | ) | (2,873,736 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends declared and payable | (1,436,868 | ) | (1,436,868 | ) | (1,293,181 | ) | (1,293,181 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | - | - | - | - | - | 4,017,632 | 4,017,632 | - | - | - | 1,259,642 | 1,259,642 | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2022 | 11,757,058 | $ | 11,757 | $ | 45,532,544 | 262,113 | $ | (798,939 | ) | $ | (1,642,294 | ) | $ | 43,103,068 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | 11,757,058 | $ | 11,757 | $ | 45,539,077 | 262,113 | $ | (798,939 | ) | $ | (1,918,595 | ) | $ | 42,833,300 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance | 11,757,058 | $ | 11,757 | $ | 45,532,544 | 262,113 | $ | (798,939 | ) | $ | (1,642,294 | ) | $ | 43,103,068 | 11,757,058 | $ | 11,757 | $ | 45,539,077 | 262,113 | $ | (798,939 | ) | $ | (1,918,595 | ) | $ | 42,833,300 | ||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
MANHATTAN BRIDGE CAPITAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| 2023 | 2022 | |||||||
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 4,127,652 | $ | 4,017,632 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities - | ||||||||
| Amortization of deferred financing costs | 71,449 | 83,401 | ||||||
| Adjustment to operating lease right-of-use asset and liability | 1,636 | 3,274 | ||||||
| Depreciation | 3,001 | 1,598 | ||||||
| Non-cash compensation expense | 9,798 | 9,798 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Interest receivable on loans | 14,128 | (176,746 | ) | |||||
| Other assets | (38,381 | ) | (29,164 | ) | ||||
| Accounts payable and accrued expenses | (53,682 | ) | 47,890 | |||||
| Deferred origination fees | 1,167 | 61,645 | ||||||
| Net cash provided by operating activities | 4,136,768 | 4,019,328 | ||||||
| Cash flows from investing activities: | ||||||||
| Issuance of short term loans | (40,810,565 | ) | (49,241,679 | ) | ||||
| Collections received from loans | 44,512,989 | 42,255,461 | ||||||
| Purchase of fixed assets | (5,085 | ) | (1,893 | ) | ||||
| Net cash provided by (used in) investing activities | 3,697,339 | (6,988,111 | ) | |||||
| Cash flows from financing activities: | ||||||||
| (Repayment of) proceeds from line of credit, net | (3,561,140 | ) | 7,715,637 | |||||
| Dividends paid | (4,019,478 | ) | (4,310,604 | ) | ||||
| Purchase of treasury shares | (185,691 | ) | — | |||||
| Deferred financing costs incurred | (38,191 | ) | (35,819 | ) | ||||
| Net cash (used in) provided by financing activities | (7,804,500 | ) | 3,369,214 | |||||
| Net increase in cash and restricted cash* | 29,607 | 400,431 | ||||||
| Cash and restricted cash*, beginning of year* | 103,540 | 142,546 | ||||||
| Cash and restricted cash*, end of period* | $ | 133,147 | $ | 542,977 | ||||
| Supplemental Cash Flow Information: | ||||||||
| Taxes paid during the period | $ | 650 | $ | 650 | ||||
| Interest paid during the period | $ | 1,797,254 | $ | 1,036,338 | ||||
| Operating leases paid during the period | $ | 47,822 | $ | 47,703 | ||||
| Supplemental Information – Noncash Information: | ||||||||
| Dividend declared and payable | $ | 1,288,753 | $ | 1,436,868 | ||||
| 2024 | 2023 | |||||||
Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 1,476,211 | $ | 1,259,642 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities - | ||||||||
| Amortization of deferred financing costs | 21,954 | 27,540 | ||||||
| Adjustment to operating lease right-of-use asset and liability | 121 | 685 | ||||||
| Depreciation | 1,055 | 892 | ||||||
| Non-cash compensation expense | 3,266 | 3,266 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Interest receivable on loans | (118,931 | ) | 104,455 | |||||
| Other assets | (35,153 | ) | (35,189 | ) | ||||
| Accounts payable and accrued expenses | (31,600 | ) | (28,043 | ) | ||||
| Deferred origination fees | (63,996 | ) | (18,272 | ) | ||||
| Net cash provided by operating activities | 1,252,927 | 1,314,976 | ||||||
| Cash flows from investing activities: | ||||||||
| Issuance of short-term loans | (9,650,271 | ) | (13,734,803 | ) | ||||
| Collections received from loans | 10,102,525 | 16,285,581 | ||||||
| Purchase of fixed assets | — | (5,085 | ) | |||||
| Net cash provided by investing activities | 452,254 | 2,545,693 | ||||||
| Cash flows from financing activities: | ||||||||
| Repayment of line of credit, net | (1,701,661 | ) | (2,413,957 | ) | ||||
| Dividend paid | (1,287,073 | ) | (1,436,868 | ) | ||||
| Purchase of treasury shares | (9,800 | ) | — | |||||
| Deferred financing costs incurred | — | (38,192 | ) | |||||
| Net cash used in financing activities | (2,998,534 | ) | (3,889,017 | ) | ||||
| Net decrease in cash | (1,293,353 | ) | (28,348 | ) | ||||
| Cash and cash - restricted, beginning of period | 1,691,995 | 103,540 | ||||||
| Cash and cash - restricted, end of period | $ | 398,642 | $ | 75,192 | ||||
| Supplemental Disclosure of Cash Flow Information | ||||||||
| Cash paid during the period for interest | $ | 667,488 | $ | 636,990 | ||||
| Cash paid during the period for operating leases | $ | 16,370 | $ | 15,917 | ||||
| Supplemental Schedule of Noncash Financing Activities: | ||||||||
| Dividend declared and payable | $ | 1,315,445 | $ | 1,293,181 | ||||
| Loan holdback relating to mortgage receivable | $ | — | $ | 17,500 | ||||
| The components of cash and cash - restricted are as follows: | ||||||||
| Cash | $ | 87,097 | $ | 75,192 | ||||
| Cash - restricted | $ | 311,545 | $ | --- | ||||
The accompanying notes are an integral part of these consolidated financial statements.
MANHATTAN BRIDGE CAPITAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)MARCH 31, 2024
1.THE COMPANY
The accompanying unaudited consolidated financial statements of Manhattan Bridge Capital, Inc. (“MBC”), a New York corporation founded in 1989, and its consolidated subsidiary, MBC Funding II Corp. (“MBC Funding II”), a New York corporation formed in December 2015 (collectively referred to herein as the “Company”) have been prepared by the Company in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete annual financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The accompanying unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 20222023 and the notes thereto included in the Company’s Annual Report on Form 10-K. Results of consolidated operations for the interim period are not necessarily indicative of the operating results to be attained in the entire fiscal year.
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses during the reporting period. Actual amounts could differ from those estimates.
The consolidated financial statements include the accounts of MBC and MBC Funding II. All significant intercompany balances and transactions have been eliminated in consolidation.
The Company offers short-term, secured, non–banking loans to real estate investors (also known as hard money)money loans) to fund their acquisition, renovation, rehabilitation or development of residential or commercial properties located in the New York metropolitan area, including New Jersey and Connecticut, and in Florida.
Interest income from commercial loans is recognized, as earned, over the loan period.
Origination fee revenue on commercial loans is amortized over the term of the respective note.
2.RECENT TECHNICAL ACCOUNTING PRONOUNCEMENTS
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements.
3.CASH – RESTRICTED
Restricted cash mainly represents collections received, pending clearance, from the Company’s commercial loans and is primarily dedicated to the reduction of the Webster Credit Line (as defined below), established pursuant to the Amended and Restated Credit Agreement (as defined below, see Note 5).
4.COMMERCIAL LOANS
Loans Receivable
The Company offers short-term secured non–banking loans to real estate investors (also known as hard money)money loans) to fund their acquisition and construction of properties located in the New York metropolitan area, including New Jersey and Connecticut, and in Florida. The loans are principally secured by collateral consisting of real estate and accompanied by personal guarantees from the principals of the borrowers. The loans are generally for a term of one year. The short termshort-term loans are initially recorded, and carried thereafter, in the consolidated financial statements at cost. Most of the loans provide for receipt of interest only during the term of the loan and a balloon payment at the end of the term.
At September 30, 2023,March 31, 2024, the Company was committed to $9,663,9016,882,819 in construction loans that can be drawn by the borrowers when certain conditions are met.
At September 30, 2023,March 31, 2024, no entity had loans outstanding representing more than 10% of the total balance of the loans outstanding.
The Company generally grants loans for a term of one year. When a performing loan reaches its maturity and the borrower requests an extension, the Company may extend the term of the loan beyond one year. Prior to granting an extension of any loan, the Company reevaluates the underlying collateral.
Credit Risk
Credit risk profile based on loan activity as of September 30, 2023March 31, 2024 and December 31, 2022:2023:
SCHEDULE OF CREDIT RISK
| Performing loans | Developers- Residential | Developers- Commercial | Developers- Mixed Use | Total outstanding loans | ||||||||||||
| September 30, 2023 | $ | 60,397,039 | $ | 8,915,000 | $ | 1,469,000 | $ | 70,781,039 | ||||||||
| December 31, 2022 | $ | 62,264,463 | $ | 9,300,000 | $ | 2,919,000 | $ | 74,483,463 | ||||||||
| Performing loans | Developers-Residential | Developers-Commercial | Developers-Mixed Use | Total outstanding loans | ||||||||||||
| March 31, 2024 | $ | 59,996,149 | $ | 10,680,000 | $ | 1,920,000 | $ | 72,596,149 | ||||||||
| December 31, 2023 | $ | 64,729,403 | $ | 7,300,000 | $ | 1,019,000 | $ | 73,048,403 | ||||||||
At September 30, 2023,March 31, 2024, the Company’s loans receivable consisted of loans in the amount of $36,79029,818, $760,433, $2,660,2502,210,250, $2,204,0001,030,000, $6,300,000 and $10,965,00018,243,920, originally due or committed to lend to borrowers in 2016, 2019, 2020, 2021, 2022 and 2022,2023, respectively. The loans receivable also includes loans in the amount of $15,803,0006,115,000 originally due in the first nine monthsquarter of 2023.2024.
Generally, borrowers are paying their interest, and the Company receives a fee in connection with the extension of the loans. In all instances, except as described below, the borrower has either signed an extension agreement or areis in the process of signing the extension. Accordingly, at September 30, 2023,March 31, 2024, no loan impairments exist and there are no provisions for impairments of loans or recoveries thereof.
During February 2023, the Company determined to, and sold one of its loans receivable to a third-party investor at its face value of $485,000. Mr. Assaf Ran, the Company’s President and Chief Executive Officer, participated in such acquisition in the amount of $152,000. In addition, in June 2023, the Company filed a foreclosure lawsuit relating to one property, as a result of a deed transfer from thea borrower to a buyer without the Company’s consent. In that instance, the buyer of athe property on which the Company had a valid mortgage suffered a data breach which resulted in the failure of the buyer to remit the funds needed for the loan payoff. As a result, the Company filed the foreclosure lawsuit to assist the buyer in making a claim with its title insurer. OnIn October 18, 2023, the Company received the entire payoff amount for the property, originally owed as of March 24, 2023. The Company is workingloan receivable, including all unpaid fees, to recover additional amounts incurred subsequent torectify the original payoff date, which includes additional interest, costs and legal fees.situation.
Subsequent to the balance sheet date, $2,560,0002,000,000 of the loans receivable at September 30, 2023March 31, 2024 were paid off, including $2,150,000 originally due in or before 2022.off.
4. 5.LINE OF CREDIT
The Company executed an Amended and Restated Credit and Security Agreement (as amended, on January 31, 2023, the “Amended and Restated Credit Agreement”), with Webster Business Credit Corporation (“Webster”), Flushing Bank (“Flushing”) and Mizrahi Tefahot Bank Ltd (“Mizrahi” and together with Webster and Flushing, the “Lenders”), which established the Company’s credit line (the “Webster Credit Line”). Currently, the Webster Credit Line provides the Company with a credit line of $32.5 million in the aggregate until February 28, 2026, secured by assignments of mortgages and other collateral. The interest rates relating to the Webster Credit Line equal (i) the Secured Overnight Financing Rate (“SOFR”) plus a premium, which rate aggregated approximately 8.9%, including a 0.5% agency fee, as of September 30, 2023,March 31, 2024, or (ii) a Base Rate (as defined in the Amended and Restated Credit Agreement) plus 2.00% and a 0.5% agency fee, as chosen by the Company for each drawdowndrawdown..
The Webster Credit Line contains various covenants and restrictions including, among other covenants and restrictions, limiting the amount that the Company can borrow relative to the value of the underlying collateral, maintaining various financial ratios and limitations on the terms of loans the Company makes to its customers, limiting the Company’s ability to pay dividends under certain circumstances, and limiting the Company’s ability to repurchase its common shares, sell assets, engage in mergers or consolidations, grant liens, and enter into transactions with affiliates. In addition, the Webster Credit Line contains a cross default provision which will deem any default under any indebtedness owed by us or our subsidiary, MBC Funding II, as a default under the credit line. Under the Amended and Restated Credit Agreement, the Company may repurchase, redeem or otherwise retire its equity securities in an amount not to exceed ten percent of our annual net income from the prior fiscal year. Further, the Company may issue up to $20 million in bonds through its subsidiary, of which not more than $10 million of such bonds may be secured by mortgage notes receivable, and provided that the terms and conditions of such bonds are approved by Webster, subject to its reasonable discretiondiscretion..
On January 31, 2023, the Company entered into anotheran amendment, effective as of January 2, 2023, with respect to the Amended and Restated Credit Agreement with the Lenders and Mr. Ran, as guarantor, to (i) extend the maturity date of the credit line by three years to February 28, 2026; (ii) transition the applicable benchmark from LIBOR to SOFR and adjust the applicable margin with respect to Base Rate Loans and SOFR Loans; (iii) update the required calculation with respect to the fixed charge coverage ratio covenant; (iv) further increase the limit on individual loans and the concentration of any mortgagor (together with guarantors and other related entities and affiliates); and (v) eliminate the requirement to pledge additional mortgage loans as collateral for the credit line. In addition, the terms of the personal guaranty provided by Mr. Ran were amended such that the potential sums owed under such guaranty will not exceed the sum of $1,000,000 plus any costs relating to the enforcement of the personal guaranty.
The Company was in compliance with all covenants of the Webster Credit Line, as amended, as of September 30, 2023.March 31, 2024. At September 30, 2023,March 31, 2024, the outstanding amount under the Amended Credit Agreement was $21,433,09423,450,677. The interest rate on the amount outstanding fluctuates daily. The rate, including a 0.5% agency fee, was approximately 8.9% as of September 30, 2023.March 31, 2024.
5. 6.SENIOR SECURED NOTES
On April 25, 2016, in an initial public offering, MBC Funding II issued 6% senior secured notes, due April 22, 2026 (the “Notes”) in the aggregate principal amount of $6,000,000 under the Indenture, dated April 25, 2016, among MBC Funding II, as Issuer, the Company, as Guarantor, and Worldwide Stock Transfer LLC, as Indenture Trustee (the “Indenture”). The Notes, having a principal amount of $1,000 each, are listed on the NYSE American and trade under the symbol “LOAN/26”. Interest accrues on the Notes commencing on May 16, 2016. The accrued interest is payable monthly in cash, in arrears, on the 15th day of each calendar month commencing June 2016.
Under the terms of the Indenture, the aggregate outstanding principal balance of the mortgage loans held by MBC Funding II, together with MBC Funding II’s cash on hand, must always equal at least 120% of the aggregate outstanding principal amount of the Notes at all times. To the extent the aggregate principal amount of the mortgage loans owned by MBC Funding II plus MBC Funding II’s cash on hand is less than 120% of the aggregate outstanding principal balance of the Notes, MBC Funding II is required to repay, on a monthly basis, the principal amount of the Notes equal to the amount necessary such that, after giving effect to such repayment, the aggregate principal amount of all mortgage loans owned by MBC Funding II plus, MBC Funding II’s cash on hand at such time is equal to or greater than 120% of the outstanding principal amount of the Notes. For this purpose, each mortgage loan is deemed to have a value equal to its outstanding principal balance, unless the borrower is in default of its obligations.
MBC Funding II may redeem the Notes, in whole or in part, at any time after April 22, 2019, upon at least 30 days prior written notice to the Noteholders. The redemption price will be equal to the outstanding principal amount of the Notes redeemed plus the accrued but unpaid interest thereon up to, but not including, the date of redemption, without penalty or premium. No Notes were redeemed by MBC Funding II as of September 30, 2023.March 31, 2024.
MBC Funding II is obligated to offer to redeem the Notes if there occurs a “change of control” with respect to MBC Funding II or the Company or if MBC Funding II or the Company sell any assets unless, in the case of an asset sale, the proceeds are reinvested in the business of the seller. The redemption price in connection with a “change of control” will be 101% of the principal amount of the Notes redeemed plus accrued but unpaid interest thereon up to, but not including, the date of redemption. The redemption price in connection with an asset sale will be the outstanding principal amount of the Notes redeemed plus accrued but unpaid interest thereon up to, but not including, the date of redemption.
The Company guaranteed MBC Funding II’s obligations under the Notes, which are secured by its pledge of 100% of the outstanding common shares of MBC Funding II that it owns.
OurThe Company’s principal executive officers consist of Assaf Ran, who serves as ourits Chief Executive Officer and President, and Vanessa Kao, who serves as ourits Chief Financial Officer. As of September 30, 2023,March 31, 2024, each of Mr. Ran and Ms. Kao own an aggregate of $704,000 and $288,000, respectively, of our Notes.Notes, respectively.
The Company adopted a share buy back program on April 11, 2023, for the repurchase of up to of the Company’s common shares in the next twelve months. As of September 30, 2023, the Company has purchased an aggregate of common shares under this repurchase program, at an aggregate cost of approximately $.
Basic and diluted earnings per share are calculated in accordance with Accounting Standards Codification (“ASC”) Topic 260, “Earnings Per Share” (“ASC Topic 260”). Under ASC Topic 260, basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased to include the potential dilution from the exercise of stock options and warrants for common shares using the treasury stock method. The numerator in calculating both basic and diluted earnings per common share for each period is the reported net income.
Stock basedStock-based compensation expense recognized under ASC Topic 718, “Compensation – Stock“Compensation-Stock Compensation,” for each of the three-month periods ended September 30,March 31, 2024 and 2023 and 2022 of $, and for each of the nine month periods ended September 30, 2023 and 2022 of $ represent represents the amortization of the fair value of restricted shares granted to the Company’s Chief Executive Officer on September 9, 2011 of $195,968, after adjusting for the effect on the fair value of the stock options related to this transaction. The fair value is being amortized over years. At September 30, 2023,March 31, 2024, all shares remainremained restricted, and the remaining unrecognized stock basedstock-based compensation amounted to $. .
9. STOCKHOLDERS’ EQUITY
The Company adopted a share buyback program on April 11, 2023, for the repurchase of up to of the Company’s common shares in the next twelve months. Before this program expired on April 10, 2024, the Company had purchased an aggregate of common shares at an aggregate cost of $271,468, including common shares repurchased during the first quarter of 2024 at an aggregate cost of $9,800.
10.SUBSEQUENT EVENT
In accordance with the dividend declared by the Company’s Board of Directors on July 27, 2023,February 7, 2024, a cash dividend of $ per share in an aggregate amount of $1,288,7531,315,445 waswere paid on October 16, 2023April 15, 2024, to all shareholders of record on OctoberApril 10, 20232024.
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Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and notes thereto included in thethis Quarterly Report.Report on Form 10-Q. The discussion and analysis containscontain forward-looking statements based on current expectations that involve risks and uncertainties. Actual results and the timing of certain events may differ significantly from those projected in such forward-looking statements.
We are a New York-based real estate finance company that specializes in originating, servicing and managing a portfolio of first mortgage loans. We offer short-term, secured, non-banking loans (sometimes referred to as “hard money” loans), which we may renew or extend on, before or after their initial term expires, to real estate investors to fund their acquisition, renovation, rehabilitation or development of residential or commercial properties located in the New York metropolitan area, including New Jersey and Connecticut, and in Florida.
The properties securing the loans are generally classified as residential or commercial real estate and, typically, are not income producing. Each loan is secured by a first mortgage lien on real estate. In addition, each loan is personally guaranteed by the principal(s) of the borrower, which guarantee may be collaterally secured by a pledge of the guarantor’s interest in the borrower. The face amount of the loans we originated in the past seven years ranged from $40,000 to a maximum of $3.3 million. Our lending policy limits the maximum amount of any loan to the lower of (i) 9.9% of the aggregate amount of our loan portfolio (not including the loan under consideration) and (ii) $3.5 million. Our loans typically have a maximum initial term of 12 months and bear interest at a fixed rate of 9% to 13%13.5% per year. In addition, we usually receive origination fees or “points” ranging from 0% to 2% of the original principal amount of the loan as well as other fees relating to underwriting and funding the loan. Interest is always payable monthly, in arrears. In the case of acquisition financing, the principal amount of the loan usually does not exceed 75% of the value of the property (as determined by an independent appraiser) and in the case of construction financing, it is typically up to 80% of construction costs.
Since commencing our business in 2007, except as set forth below, we have never foreclosed on a property, although sometimes we have renewed or extended the term of a loan to enable the borrower to avoid premature sale or refinancing of the property. When we renew or extend a loan, we generally receive additional “points” and other fees. In June 2023, we filed a foreclosure lawsuit relating to one property, as a result of a deed transfer from the borrower to a buyer without our consent. In that instance, the buyer of athe property on which we had a valid mortgage suffered a data breach which resulted in the failure of the buyer to remit the funds needed for the loan payoff. As a result, we filed the foreclosure lawsuit to assist the buyer in making a claim with its title insurer. OnIn October 18, 2023, we received the entire payoff amount for the property, originally owed as of March 24, 2023. We are workingloan receivable, including all unpaid fees, to recover additional amounts incurred subsequent torectify the original payoff date, which includes additional interest, costs and legal fees.situation.
Our primary business objective is to grow our loan portfolio while protecting and preserving capital in a manner that provides for attractive risk-adjusted returns to our shareholders over the long term through dividends. We intend to achieve this objective by continuing to selectively originate, and fund loans secured by first mortgages on residential and commercial real estate held for investment located in the New York metropolitan area, including New Jersey and Connecticut, and in Florida, and to carefully manage and service our portfolio in a manner designed to generate attractive risk-adjusted returns across a variety of market conditions and economic cycles. We believe that current market dynamics specifically the demand/supply imbalance for relatively small real estate loans, presents opportunities for us to selectively originate high-quality first mortgage loans and we believe that these market conditions should persist for a number of years. We have built our business on a foundation of intimate knowledge of the New York metropolitan area real estate market combined with a disciplined credit and due diligence culture that is designed to protect and preserve capital. We believe that our flexibility and ability to structure loans that address the needs of our borrowers without compromising our standards on credit risk, our expertise, our intimate knowledge of the New York metropolitan area real estate market and our focus on newly originated first mortgage loans, has defined our success until now and should enable us to continue to achieve our objectives.
A principal source of new transactions has been repeat business from prior customers and their referral of new business. We also receive leads for new business from banks, brokers and a limited amount of advertising. Finally, our Chief Executive Officer also spends a significant portion of his time on new business development. We rely on our own employees, independent legal counsel, and other independent professionals to verify titles and ownership, to file liens and to consummate the transactions. Outside appraisers are used to assist us in evaluating the worth of collateral, when deemed necessary by management. We also use construction inspectors.
For the ninethree month periodperiods ended September 30,March 31, 2024 and 2023, and 2022, the total amounts of $40,810,565$9,650,271 and $49,241,679,$13,734,803, respectively, have been lent, offset by collections received from borrowers under our commercial loans in the amounts of $44,512,989$10,102,525 and $42,255,461,$16,285,581, respectively.
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At September 30, 2023,March 31, 2024, we were committed to $9,663,901$6,882,819 in construction loans that can be drawn by theour borrowers when certain conditions are met.
To date, except as discussed above, none of the loans previously made have been non-collectable, although no assurances can be given that existing or future loans may not prove to be non-collectible or foreclosed in the future.
We satisfied all of the requirements to be taxed as a real estate investment trust (“REIT”) and elected to be taxed as a REIT commencing with our taxable year ended December 31, 2014. In order to maintain our qualification for taxation as a REIT and avoid any excise tax on our net taxable income, we are required to distribute each year at least 90% of our REIT taxable income. If we distribute less than 100% of our taxable income (but more than 90%), the undistributed portion will be taxed at the regular corporate income tax rates. As a REIT, we may also be subject to federal excise taxes and minimum state taxes.
Results of Operations
Three months ended September 30, 2023March 31, 2024 compared to three months ended September 30, 2022March 31, 2023
RevenueTotal revenue
Total revenues for the three months ended September 30, 2023March 31, 2024 were approximately $2,434,000$2,573,000 compared to approximately $2,107,000$2,398,000 for the three months ended September 30, 2022,March 31, 2023, an increase of $327,000$175,000, or 15.5%7.3%. The increase in revenue was due to higher interest rates charged on our commercial loans. For the three months ended September 30, 2023 and 2022,March 31, 2024, approximately $1,992,000 and $1,678,000, respectively,$2,142,000 of our revenues were attributable torevenue represents interest income on secured commercial loans that we offer to real estate investors, compared to approximately $1,954,000 for the same period in 2023, and approximately $441,000$431,000 and $429,000,$444,000, respectively, of our revenues were attributable torepresent origination fees on such loans. The loans are principally secured by collateral consisting of real estate and accompanied by personal guarantees from the principals of the borrowers.
Interest and amortization of deferred financing costs
Interest and amortization of deferred financing costs for the three months ended September 30, 2023March 31, 2024 were approximately $614,000$691,000 compared to approximately $497,000$646,000 for the three months ended September 30, 2022,March 31, 2023, an increase of $117,000,$45,000, or 23.5%7.0%. The increase is primarily attributable to the increase in interest expense due to higher interest rates and increases in amounts borrowed relating to the use of the Webster Credit Line.Line (See Note 4 to the consolidated financial statements included elsewhere in this quarterly report on Form 10-Q).
General and administrative expenses
General and administrative expenses for each of the three months ended September 30, 2023 and 2022 were approximately $377,000.
Net income
Net income for the three months ended September 30, 2023 was approximately $1,446,000 compared to approximately $1,237,000 for the three months September 30, 2022, an increase of $209,000, or 16.9%. This increase is primarily attributable to the increase in interest income from loans, partially offset by the increase in interest expense.
Nine months ended September 30, 2023 compared to nine months ended September 30, 2022
Revenue
Total revenues for the nine months ended September 30, 2023 were approximately $7,231,000 compared to approximately $6,339,000 for the nine months ended September 30, 2022, an increase of $892,000, or 14.1%. The increase in revenue was due to higher interest rates charged on our commercial loans. For the nine months ended September 30, 2023 and 2022, revenues of approximately $5,889,000 and $4,934,000, respectively, were attributable to interest income on the secured commercial loans that we offer to real estate investors, and approximately $1,342,000 and $1,405,000, respectively, of our revenues were attributable to origination fees on such loans. The loans are principally secured by collateral consisting of real estate and accompanied by personal guarantees from the principals of the borrowers.
Interest and amortization of deferred financing costs
Interest and amortization of deferred financing costs for the nine months ended September 30, 2023 were approximately $1,856,000 compared to approximately $1,205,000 for the nine months ended September 30, 2022, an increase of $651,000, or 54.0%. The increase is primarily attributable to the increase in interest expense due to higher interest rates relating to the use of the Webster Credit Line. (See Note 45 to the consolidated financial statements included elsewhere in this quarterly report on Form 10-Q).
General and administrative expenses
General and administrative expenses for the ninethree months ended September 30, 2023March 31, 2024 were approximately $1,274,000$410,000 compared to approximately $1,125,000$496,000 for the ninethree months ended September 30, 2022, an increaseMarch 31, 2023, a decrease of $149,000,$86,000, or 13.2%17.3%. The increasedecrease is primarily attributable to a special bonus to officers in 2023 for extending the Webster Credit Line, andpartially offset by increases in marketing, insurance,bank fees and in travel and meals expenses, partially offset by a decrease in advertising expense.expenses.
Net income
Net income for the ninethree months ended September 30, 2023March 31, 2024 was approximately $4,128,000$1,476,000 compared to approximately $4,018,000$1,260,000 for the ninethree months ended September 30, 2022,March 31, 2023, an increase of $110,000,$216,000, or 2.7%17.1%. This increase is primarily attributable to the increase in interest income from loans and the decrease in general and administrative expenses, partially offset by the increase in interest expense.
Liquidity and Capital Resources
At September 30, 2023,March 31, 2024, we had cash of approximately $133,000,$87,000, compared to cash of approximately $104,000 at December 31, 2022.2023, not including restricted cash, which mainly represents collections received, pending clearance, from the Company’s commercial loans and is primarily dedicated to the reduction of the Webster Credit Line.
For the ninethree months ended September 30, 2023,March 31, 2024, net cash provided by operating activities was approximately $4,137,000,$1,253,000, compared to approximately $4,019,000$1,315,000 for the ninethree months ended September 30, 2022.March 31, 2023. The increasedecrease in net cash provided by operating activities primarily resulted from the increase in net incomeinterest receivable on loans and the decrease in interest receivable on loans,deferred origination fees, partially offset by the decreaseincrease in accounts payable and accrued expenses and deferred revenue.net income.
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For the ninethree months ended September 30, 2023,March 31, 2024, net cash provided by investing activities was approximately $3,697,000,$452,000, compared to approximately $6,988,000 net cash used in investing activities$2,546,000 for the ninethree months ended September 30, 2022.March 31, 2023. Net cash provided by investing activities for the ninethree months ended September 30,March 31, 2024 consisted of the collection of our commercial loans of approximately $10,103,000, offset by the issuance of commercial loans of approximately $9,650,000. Net cash provided by investing activities for the three months ended March 31, 2023 mainly consisted of the collection of our commercial loans of approximately $44,513,000,$16,286,000, offset by the issuance of commercial loans of approximately $40,811,000. During the period ended September 30, 2022, net cash used in investing activities mainly consisted of the issuance of commercial loans of approximately $49,242,000, offset by the collection of our commercial loans of approximately $42,255,000.$13,735,000.
For the ninethree months ended September 30, 2023,March 31, 2024, net cash used in financing activities was approximately $7,805,000,$2,999,000, compared to approximately $3,369,000 net cash provided by financing activities$3,889,000 for the ninethree months ended September 30, 2022.March 31, 2023. Net cash used in financing activities for the ninethree months ended September 30,March 31, 2024 reflects the repayment of the Webster Credit Line of approximately $1,702,000, a dividend payment of approximately $1,287,000 and the purchase of treasury shares of approximately $10,000. Net cash used in financing activities for the three months ended March 31, 2023 reflects the repayment of the Webster Credit Line of approximately $3,561,000,$2,414,000, a dividend paymentspayment of approximately $4,019,000, purchase of treasury shares of approximately $186,000$1,437,000 and payments for deferred financing costs of approximately $38,000. Net cash provided by financing activities for the nine months ended September 30, 2022 reflects the net proceeds from the Webster Credit Line of approximately $7,716,000, offset by dividend payments of approximately $4,311,000 and deferred financing costs of approximately $36,000.
Our Amended and Restated Credit and Security Agreement with Webster, Flushing Bank and Mizrahi provides for the Webster Credit Line. Currently, the Webster Credit Line provides us with a credit line of $32.5 million in the aggregate until February 28, 2026, secured by assignments of mortgages and other collateral. The interest rates relating to the Webster Credit Line equal (i) SOFR plus a premium, which rate aggregated approximately 8.9%, including a 0.5% agency fee, as of September 30, 2023,March 31, 2024, or (ii) a Base Rate (as defined in the Amended and Restated Credit Agreement) plus 2.00% and a 0.5% agency fee, as chosen by the Company for each drawdown.
The Webster Credit Line contains various covenants and restrictions including covenants limiting the amount that the Company can borrow relative to the value of the underlying collateral, maintaining various financial ratios and limitations on the terms of loans the Company makes to its customers, limiting the Company’s ability to pay dividends under certain circumstances, and limiting the Company’s ability to repurchase its common shares, sell assets, engage in mergers or consolidations, grant liens, and enter into transactions with affiliates. In addition, the Webster Credit Line contains a cross default provision which will deem any default under any indebtedness owed by us or our subsidiary, MBC Funding II, as a default under the credit line. Under the Amended and Restated Credit Agreement, the Company may repurchase, redeem or otherwise retire its equity securities in an amount not to exceed ten percent of our annual net income from the prior fiscal year. Further, the Company may issue up to $20 million in bonds through its subsidiary, of which not more than $10 million of such bonds may be secured by mortgage notes receivable, and provided that the terms and conditions of such bonds are approved by Webster, subject to its reasonable discretion.
On January 31, 2023, we entered into anotheran amendment, effective as of January 2, 2023, with respect to the Amended and Restated Credit Agreement with the Lenders and Mr. Ran, as guarantor, to (i) extend the maturity date of the credit line by three years to February 28, 2026; (ii) transition the applicable benchmark from LIBOR to SOFR and adjust the applicable margin with respect to Base Rate Loans and SOFR Loans; (iii) update the required calculation with respect to the fixed charge coverage ratio covenant; (iv) further increase the limit on individual loans and the concentration of any mortgagor (together with guarantors and other related entities and affiliates); and (v) eliminate the requirement to pledge an additional mortgage loans as collateral for the credit line. In addition, the terms of the personal guaranty provided by Mr. Ran were amended such that the potential sums owed under such guaranty will not exceed the sum of $1,000,000 plus any costs relating to the enforcement of the personal guaranty.
We were in compliance with all covenants of the Webster Credit Line, as amended, as of September 30, 2023.March 31, 2024. At September 30, 2023,March 31, 2024, the outstanding amount under the Amended and Restated Credit Agreement was $21,433,094.$23,450,677. The interest rate on the amount outstanding fluctuates daily. The rate, including a 0.5% agency fee, was approximately 8.9% as of September 30, 2023.March 31, 2024.
MBC Funding II has $6,000,000 of outstanding principal amount of Notes. The Notes mature on April 22, 2026, unless redeemed earlier, and accrue interest at a rate of 6% per annum commencing on May 16, 2016 and will be payable monthly, in arrears, in cash, on the 15th day of each calendar month, commencing June 2016.
Under the terms of the Indenture, the aggregate outstanding principal balance of the mortgage loans held by MBC Funding II, together with its cash on hand, must always equal at least 120% of the aggregate outstanding principal amount of the Notes at all times. To the extent the aggregate principal amount of the mortgage loans owned by MBC Funding II plus its cash on hand is less than 120% of the aggregate outstanding principal balance of the Notes, MBC Funding II is required to repay, on a monthly basis, the principal amount of the Notes equal to the amount necessary such that, after giving effect to such repayment, the aggregate principal amount of all mortgage loans owned by it plus, its cash on hand at such time is equal to or greater than 120% of the outstanding principal amount of the Notes. For this purpose, each mortgage loan is deemed to have a value equal to its outstanding principal balance, unless the borrower is in default of its obligations.
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The Notes are secured by a first priority lien on all of MBC Funding II’s assets, including, primarily, mortgage notes, mortgages and other transaction documents entered into in connection with first mortgage loans originated and funded by us, which MBC Funding II acquired from MBC pursuant to an asset purchase agreement. MBC Funding II may redeem the Notes, in whole or in part, at any time after April 22, 2019 upon at least 30 days prior written notice to the noteholders. The redemption price will be equal to the outstanding principal amount of the Notes redeemed plus the accrued but unpaid interest thereon up to, but not including, the date of redemption, without penalty or premium. No Notes were redeemed by MBC Funding II as of September 30, 2023.March 31, 2024.
MBC Funding II is obligated to offer to redeem the Notes if there occurs a “change of control” with respect to us or MBC Funding II or if we or MBC Funding II sell any assets unless, in the case of an asset sale, the proceeds are reinvested in the business of the seller. The redemption price in connection with a “change of control” will be 101% of the principal amount of the Notes redeemed plus accrued but unpaid interest thereon up to, but not including, the date of redemption. The redemption price in connection with an asset sale will be the outstanding principal amount of the Notes redeemed plus accrued but unpaid interest thereon up to, but not including, the date of redemption.
We guarantee MBC Funding II’s obligations under the Notes, which are secured by our pledge of 100% of the outstanding common shares of MBC Funding II that we own.
On April 11, 2023, our Boardboard of Directorsdirectors authorized a share buy backbuyback program pursuant to which we may, from time to time, purchasefor the repurchase of up to 100,000 of our common shares. Thisshares in the next twelve months. Before this program does not obligate the Company to purchase any shares and expiresexpired on April 10, 2024. The authorization for the program is able to be terminated, increased or decreased by the Company’s Board of Directors in its discretion at any time. As of September 30, 2023,2024, we havehad purchased an aggregate of 37,86056,294 common shares under this repurchase program, at an aggregate cost of approximately $186,000.$271,000.
We anticipate that our current cash balances and the Amended and Restated Credit Agreement, as described above, together with our cash flows from operations will be sufficient to fund our operations for the next 12 months. In addition, from time to time, we receive short termshort-term unsecured loans from our executive officers and others in order to provide us with the flexibility necessary to maintain a steady deployment of capital. However, we expect our working capital requirements to increase over the next 12 months as we continue to strive for growth.growth at the right condition.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 4. CONTROLS AND PROCEDURES
| (a) | Evaluation and Disclosure Controls and Procedures |
(a)Evaluation and Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2023March 31, 2024 (the “Evaluation Date”). Based upon that evaluation, the chief executive officer and the chief financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) are recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) are accumulated and communicated to our management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
| (b) | Changes in Internal Control Over Financial Reporting |
(b)Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the fiscal quarter ended September 30, 2023March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II OTHER INFORMATION
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On April 11, 2023, our Boardboard of Directorsdirectors authorized a share buy backbuyback program pursuant to which we may, from time to time, purchasefor the repurchase of up to 100,000 of our common shares. Thisshares in the next twelve months. Before this program does not obligate us to purchase any shares and expiresexpired on April 10, 2024. The authorization for the program is able to be terminated, increased or decreased by our Board2024, we had repurchased an aggregate of Directors in its discretion56,294 common shares at any time.an aggregate cost of approximately $271,000.
As set forth in the table below, during the quarter ended September 30, 2023,March 31, 2024, we repurchased 4,5002,000 of our common shares under the share buy backbuyback program at an aggregate cost of $20,885.$9,800.
ISSUER PURCHASES OF EQUITY SECURITIES
| Period | (a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or Unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | (d) | ||||||||||||
| July 1-31, 2023 | 0 | $ | — | 0 | 66,640 | |||||||||||
| August 1-31, 2023 | 2 | $ | 4.63 | 2 | 66,638 | |||||||||||
| September 1-30, 2023 | 4,498 | $ | 4.64 | 4,498 | 62,140 | |||||||||||
| Total | 4,500 | $ | 4.64 | 4,500 | 62,140 | |||||||||||
| Period | (a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or Unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs | ||||||||||||
| January 1-31, 2024 | 2,000 | $ | 4.90 | 2,000 | 43,706 | |||||||||||
| February 1-29, 2024 | 0 | $ | — | 0 | 43,706 | |||||||||||
| March 1-31, 2024 | 0 | $ | — | 0 | 43,706 | |||||||||||
| Total | 2,000 | $ | 4.90 | 2,000 | 43,706 | |||||||||||
Item 6. EXHIBITS
| Exhibit No. | Description | |
| 10.1 | Amendment No. 7 to Amended and Restated Credit and Security Agreement, effective March 31, 2024, among Manhattan Bridge Capital, Inc., Webster Business Credit Corporation, Flushing Bank, Mizrahi and Assaf Ran | |
| 31.1 | Chief Executive Officer Certification under Rule 13a-14 | |
| 31.2 | Chief Financial Officer Certification under Rule 13a-14 | |
| 32.1* | Chief Executive Officer Certification pursuant to 18 U.S.C. section 1350 | |
| 32.2* | Chief Financial Officer Certification pursuant to 18 U.S.C. section 1350 | |
| 101.INS | Inline XBRL Instance Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Schema Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). |
| * | Furnished, not filed, in accordance with item 601(32)(ii) of Regulation S-K. |
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.
| Manhattan Bridge Capital, Inc. (Registrant) | ||
| Date: | By: | /s/ Assaf Ran |
| (Principal Executive Officer) | ||
| Date: | By: | /s/ Vanessa Kao |
| Vanessa Kao, Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||