HBUV Hubilu Venture Corporation (PK)

Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations

The following is management’s discussion and analysis of financial condition and results of operations and is provided as a supplement to the accompanying unaudited financial statements and notes to help provide an understanding of our financial condition, results of operations and cash flows during the periods included in the accompanying unaudited financial statements.

In this Quarterly Report on Form 10-Q, “Company,” “the Company,” “us,” and “our” refer to Hubilu Venture Corporation, a Delaware corporation, unless the context requires otherwise. We intend the following discussion to assist in the understanding of our financial position and our results of operations for the three-months and nine-months ended September 30, 2017 and 2016, respectively. You should refer to the Financial Statements and related Notes in conjunction with this discussion.

Results of Operations

General

We commenced operations in March 2015, which, until June 2015, were limited to organizational and business development activities. We began implementing our business plan in June 2015. We are real estate advisory and consulting company that assists real estate investor professionals, as well as established companies, with advisory and consulting services focused on providing research, analysis and acquisition opportunities to them. In August 2016, we launched a real estate acquisitions division, which specializes in student housing income properties and the development of real estate opportunities located near Los Angeles Metro stations within the Los Angeles Metro/Subway system.

On August 18, 2016, we entered into a purchase contract (the Zinnia Agreement”) with Zinnia Investments, LLC (“Zinnia”), a Wyoming limited liability company, which was 100% owned by Esteban Coaloa. On January 3, 2017, Zinnia amended its operating agreement to admit Jacaranda Investments, Inc. (“Jacaranda”) as a 45% member and the Marisol Trust, Lorenzo Soria, as Trustee, as a 10% member. On January 3, 2017, all of the members of Zinnia approved the sale of Zinnia to us. Jacaranda is 100% owned by our Chairman and CEO and Esteban Coaloa is our Vice President. Under the terms of the Zinnia Agreement, we will acquire 100% of the membership interests of Zinnia for $925,000 (the “Purchase Price”). Zinnia’s sole asset is the real property located at 2909 South Catalina Street, Los Angeles, California (the “Property”). Under the terms of the Zinnia Agreement, our consideration for the Purchase Price is: (1) a $655,000 All Inclusive Deed of Trust, secured by the Property, and a promissory note (the “Note”), which bears interest at 6%, with $145,000 due in one (1) year and the balance due on in two (2) years; and (2) 270,000 share of our Series 1 Convertible Preferred Stock at an issuance price of $1.00 per share, for $270,000 (the “Zinnia Preferred Stock”). The interest rate on the Note will decrease to the greater of 3.5%, principal and interest or the 11 ^th District Cost of Funds Index plus 2.8% principal and interest, rounded up to the nearest 0.125% and adjusted every six (6) months starting the 1 ^st day of month 6 following the $145,000 payoff, and adjusting every 6 months thereafter. The Zinnia Preferred Stock is convertible into our common stock at the lesser of $0.50 per share or a 10% discount to the average closing price of our common stock for the five (5) days prior to the holders’ date of conversion. The Zinnia Preferred Stock pays a 5% dividend in-kind, annually. Under the terms of the Zinnia Agreement, the closing was subject to our verification of title, rental income and our satisfaction with the completion and results of Zinnia’s audited financial statements. On April 10, 2017, we closed the acquisition of Zinnia.

On September 26, 2016, we entered into a purchase contract (the Akebia Agreement”) with Akebia Investments, LLC (“Akebia”), a Wyoming limited liability company, which was 100% owned by Esteban Coaloa. On January 2, 2017, Akebia amended its operating agreement and admitted Jacaranda as a 90% member. On January 2, 2017, all of the members of Akebia approved the sale to us. Jacaranda and Esteban Coaloa are related parties as described above. We agreed to acquire 100% of the membership interests of Akebia for $890,000 (the “Purchase Price”). Akebia’s sole asset is the real property located at 3711 South Western Avenue, Los Angeles, California (the “Akebia Property”). The terms of the Akebia Agreement, our consideration for the Purchase Price is: (1) a $710,000 All Inclusive Deed of Trust, secured by the Akebia Property and a promissory note (the “Akebia Note”), which bears interest at 6%, with $100,000 due in one (1) year and the balance due on August 1, 2019; and (2) 180,000 shares of our Series 1 Convertible Preferred Stock at an issuance price of $1.00 per share, for $180,000 (the “Akebia Preferred Stock”). After the $100,000 is paid off, the interest rate on the balance of the note will decrease to 4% principal and interest. The Akebia Preferred Stock is convertible into our common stock at the lesser of $0.50 per share or a 10% discount to the average closing price of our common stock for the five (5) days prior to the holders’ date of conversion. The Akebia Preferred Stock pays a 5% dividend in-kind, annually. Under the terms of the Akebia Agreement, the closing was subject to our verification of title, rental income and our satisfaction with the completion and results of Akebia’s audited financial statements. On April 10, 2017, we closed the acquisition of Akebia.

Our mission statement is Strategic Growth through Smart Ventures, which is designed to focus us on real estate opportunities that we believe are recession proof and have limited downside risk, while offering high upside potential in equity appreciation and cash flow. We will also continue to assist investors and professionals in the early stage analysis of market opportunities and the evaluation of properties prior to them committing capital for the purchase or the leasing of real estate properties. For our consulting services, we are focusing our marketing efforts in the commercial markets; however, we are also looking at residential and income producing markets. We are using the Internet as well as the services of independent sales consultants to market our services to investors and professionals in Southern California with our primary efforts focused in Beverly Hills and Los Angeles near the University of Southern California campus. Our real estate acquisitions division will actively be pursuing real estate acquisitions near the University of Southern California campus. We have had limited consulting operations and have limited financial resources. Our auditors indicated in their report on our financial statements (the “Report”) that “the Company’s lack of business operations and early losses raise substantial doubt about our ability to continue as a going concern.” Our operations from March 2015 to June 2015 were devoted primarily to start-up, development and operational activities, which included:

Commencing in June 2015, we engaged our first client, 112 South Eucalyptus Avenue, LLC, which has a related party shareholder, to assist it in evaluating the best use of its property. We also negotiated with Camden Realty Group, a real estate brokerage firm, to provide consulting services to it and to have it provide brokerage services to our clients.

We are offering services to investors and professionals with the mission to assist them in investment and property evaluation strategies and provide hands-on support to reduce evaluation time and resources and increase the speed for them to determine whether to proceed with a real estate lease or investment. Besides general property evaluation services, we are offering services to assist the principals with property development ideas and investment structure.

In September 2016, appointed four new officers to the company:

On November 4, 2017, Stefano Coaloa, passed away. We will be looking to hire a vice president of real estate development in the near future.

In addition to executing two purchase contracts and expanding our staff, we updated and launched our website and began marketing the company on various social media platforms including LinkedIn, Twitter, and Facebook.

As of September 30, 2017, we had $5,886 in cash. Management does not believe this amount will satisfy our cash requirements for the next twelve months. We plan to satisfy our future cash requirements with loans from our shareholders or additional equity financing from related or third parties. The additional equity financings will likely be in the form of private placements of common stock. As of September 30, 2017, the Company has borrowed $356,220 from its majority shareholder.

Management believes that if subsequent private placements are successful, we will generate sales revenue within the following twelve months thereof. However, additional equity financing may not be available to us on acceptable terms or at all, and thus we could fail to satisfy our future cash requirements.

If we are unsuccessful in raising the additional proceeds through a private placement offering, we will then have to seek additional funds through debt financing, which would be highly difficult for a new development stage company with nominal assets to secure. Therefore, we are highly dependent upon the success of a future private placement offering and failure thereof would result in our having to seek capital from other resources such as debt financing, which may not even be available to us. However, if such financing were available, because we are a startup company with no operations to date, we would likely have to pay additional costs associated with high-risk loans and be subject to an above market interest rate. At such time these funds are required, management would evaluate the terms of such debt financing and determine whether the business could sustain operations and growth and manage the debt load. If we cannot raise additional proceeds via a private placement of our common stock or secure debt financing we would be required to cease business operations. As a result, investors in our common stock would lose all of their investment.

In April 2017, subsequent to our acquisitions of Akebia Investments, LLC and Zinnia Investments, LLC, we began evaluating other acquisition opportunities.

At the present time, we intend to seek various investors to obtain additional equity financing. There can be no assurance that we will be successful in obtaining additional capital from these negotiations. If are unable to raise additional capital, we will either suspend marketing operations until we do raise the cash, or cease operations entirely. Other than as described in this paragraph and the preceding paragraphs, we have no other financing plans.

Management does not plan to hire additional employees at this time. Our officers and directors, as well as independent contractors, will be responsible for providing consulting services.

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited financial statements for the three months and nine months ended September 30, 2017 and 2016, respectively, together with notes thereto, which are included in this Quarterly Report on Form 10-Q.

Three months ended September 30, 2017 compared to the three months ended September 30, 2016

Revenues . Our revenues increased $33,501, or 100.0%, to $33,501 for the three months ended September 30, 2017 compared to $0 for the comparable period in 2016. The increase in revenues is due to our acquisition of two rental properties.

Operating expenses. Operating expenses include general and administrative expenses as well as the other expenses listed below. In total, operating expenses increased $26,101, or 34.63%, to $101,466 for the three months ended September 30, 2017 compared to $75,367 for the comparable period in 2016. The components of operating expenses are discussed below.

General and administrative expenses decreased $13,357, or 47.48%, to $14,774 for the three months ended September 30, 2017 compared to $28,131 for the comparable period in 2016. The decrease is primarily due to a decrease in computer and internet expenses as well as business and licenses expenses.

Consulting expenses increased $4,784, or 20.95%, to $27,615 for the three months ended September 30, 2017 compared to $22,831 for the comparable period in 2016. The increase is due to the use of various social media and marketing consultants in 2017.

Depreciation expense increased $20,143 to $20,143 for the three months ended September 30, 2017 compared to $0 for the comparable period in 2016. The increase is due to the acquisition of our two rental properties.

Interest expense increased $16,113 to $16,113 for the three months ended September 30, 2017 compared to $0 for the comparable period in 2016. The increase is due to the mortgages payable acquired with the acquisition of our two rental properties in addition to the issuance of interest bearing promissory notes to the members of the acquired limited liability companies.

Professional fees decreased $14,358, or 80.64%, to $3,447 for the three months ended September 30, 2017 compared to $17,805 for the comparable period in 2016. The decrease is primarily due to a decrease in accounting fees.

Property tax expense increased $149 to $149 for the three months ended September 30, 2017 compared to $0 for the comparable period in 2016. The increase is due to the acquisition of our two rental properties.

Rent expense increased $600, or 9.09%, to $7,200 for the three months ended September 30, 2017 compared to $6,600 for the comparable period in 2016. The increase is due to the increase in rent under the Company’s office lease.

Repairs and maintenance expense increased $8,812 to $8,812 for the three months ended September 30, 2017 compared to $0 for the comparable period in 2016. The increase is due to the acquisition of our two rental properties.

Utilities expense increased $3,213 to $3,213 for the three months ended September 30, 2017 compared to $0 for the comparable period in 2016. The increase is due to the acquisition of our two rental properties.

Net loss. Our net loss decreased $7,402, or 9.82%, to $67,965 for the three months ended September 30, 2017 compared to $75,367 for the comparable period in 2016. The decrease is attributable to the increase in rental income offset by the increase in the operating expenses discussed above.

Nine months ended September 30, 2017 compared to the nine months ended September 30, 2016

Revenues . Our revenues increased $73,587 to $73,587 for the nine months ended September 30, 2017 compared to $0 for the comparable period in 2016. The increase in revenues is due to our acquisition of two rental properties.

Operating expenses. Operating expenses include general and administrative expenses as well as the other expenses listed below. In total, operating expenses increased $124,098, or 85.90%, to $268,563 for the nine months ended September 30, 2017 compared to $144,465 for the comparable period in 2016. The components of operating expenses are discussed below.

General and administrative expenses decreased $23,317, or 40.82%, to $33,801 for the nine months ended September 30, 2017 compared to $57,118 for the comparable period in 2016. The decrease is primarily due to a decrease in computer and internet expenses.

Consulting expenses increased $63,784, or 266.53%, to $87,715 for the nine months ended September 30, 2017 compared to $23,931 for the comparable period in 2016. The increase is due to the use of various social media and marketing consultants in 2017.

Depreciation expense increased $40,287 to $40,287 for the nine months ended September 30, 2017 compared to $0 for the comparable period in 2016. The increase is due to the acquisition of our two rental properties.

Interest expense increased $29,500 to $29,500 for the nine months ended September 30, 2017 compared to $0 for the comparable period in 2016. The increase is due to the acquisition of our two rental properties in addition to the issuance of interest bearing promissory notes to the members of the acquired limited liability companies.

Professional fees decreased $17,515, or 36.10%, to $30,997 for the nine months ended September 30, 2017 compared to $48,512 for the comparable period in 2016. The decrease is primarily due to a decrease in accounting fees.

Property tax expense increased $6,825 to $6,825 for the nine months ended September 30, 2017 compared to $0 for the comparable period in 2016. The increase is due to the acquisition of our two rental properties.

Rent expense increased $5,596, or 37.55%, to $20,500 for the nine months ended September 30, 2017 compared to $14,904 for the comparable period in 2016. The increase is due to the increase in rent under the Company’s office lease.

Repairs and maintenance expense increased $12,613 to $12,613 for the nine months ended September 30, 2017 compared to $0 for the comparable period in 2016. The increase is due to the acquisition of our two rental properties.

Utilities expense increased $6,323 to $6,323 for the nine months ended September 30, 2017 compared to $0 for the comparable period in 2016. The increase is due to the acquisition of our two rental properties.

Net loss. Our net loss increased $50,509, or 34.96%, to $194,974 for the nine months ended September 30, 2017 compared to $144,465 for the comparable period in 2016. The increase is attributable to the expenses discussed above.

Liquidity and Capital Resources . For the nine months ended September 30, 2017, we borrowed $201,960 from our majority shareholder, which it advanced to us interest free. We intend to seek additional financing for our working capital, in the form of equity or debt, to provide us with the necessary capital to accomplish our plan of operation. There can be no assurance that we will be successful in our efforts to raise additional capital.

Our total assets are $2,191,667 as of September 30, 2017, consisting of $2,175,501 in real estate investments, $5,886 in cash, $6,600 in deposits and $3,680 in prepaid expenses.

Our total liabilities are $2,564,310 as of September 30, 2017.

As of September 30, 2017, our accumulated deficit was $500,293 and our stockholders’ deficit was $372,643.

We had $180,670 in net cash used in operating activities for the nine months ended September 30, 2017, which included $194,974 in net loss, which amount was decreased by $40,287 in depreciation expense and increased by $1,182 in prepaid expenses, $22,401 in accounts payable and $2,400 in resident security deposits.

We had $14,918 in cash provided by investing activities for the nine months ended September 30, 2017 due to the cash acquired on the acquisition of the two limited liability companies, which each own a real estate asset.

We had $168,185 in cash provided by financing activities for the nine months ended September 30, 2017, which was due to $201,960 in related party advances, which was offset by $10,775 in principal mortgage payments and $23,000 in promissory notes payable.

The Company has $1,098,891 of mortgages payable and $233,652 in promissory notes payable as of September 30, 2017. It also has $460,400 in Series 1 Convertible Preferred shares, $400,788 in deferred taxes, $356,220 in related party advances, $3,419 in accounts payable and $10,940 in resident security deposits.

The Company has no current plans for the purchase or sale of any plant or equipment.

The Company has no current plans to make any changes in the number of employees.

Income Tax Expense (Benefit)

The Company has a prospective income tax benefit resulting from a net operating loss carry forward and startup costs that may offset any future operating profit.

Impact of Inflation

The Company believes that inflation has had a negligible effect on operations over the past quarter.

Capital Expenditures

The Company expended no amounts on capital expenditures for the three months ended September 30, 2017.

Plan of Operation

Our plan of operations, now that we have completed our registration statement and obtained our symbol, is as follows:

Expand and Enhance Our Website

Time Frame: 1 ^st to 3 ^rd months.

Material costs: $2,000 to $3,000.

We intend to further develop and enhance our website. Our Vice President – Investor Relations, Tracy Black, will be in charge of overseeing the further development and expansion of our website and the consulting and advisory services we intend to offer. We hired a web designer to help us with the development and functionality of the website and intend to continue to enhance it. We do not have any written agreements with any web designers at current time. The website expansion costs, including site upgrade will be approximately $2,000 to $3,000. Updating and improving our website will continue throughout the lifetime of our operations.

Negotiate agreements with potential referral sources and clients

Time Frame: Ongoing

No material costs.

Now that our website is operational, we have contacted and started negotiations with potential clients and referral sources. In June 2015, we engaged our first client. We will negotiate terms and conditions of collaboration. At the beginning, we plan to focus primarily on local advisors such as attorneys, accountants, insurance agents, title officers and financial planners. We do not expect to compensate any referral sources and will offer reciprocal referrals to any source that is willing to refer us clients; however, we may decide to compensate referral sources on a case-by-case basis. Then we plan to expand our target market to other service providers and investment professionals such as investment bankers. This activity will be ongoing throughout our operations. Even though the negotiation with potential customers and referral sources will be ongoing during the life of our operations, we cannot guarantee that we will be able to find successful agreements, in which case our business may fail, and we will have to cease our operations. We do not expect to enter into formal written agreements with our referral sources and intend for these agreements to be oral. We intend to enter into real estate consulting agreements with our clients that will set forth the scope of services we agree to with these clients and provide for the hourly or flat rate billing arrangements.

In the future, when/if we have available resources, operating history and experience, we plan to contact larger referrals sources that have more established clients. However, we anticipate encountering many market barriers in becoming a service provider to clients of large established professionals. Our competitors have gained customer loyalty and brand identification through their long-standing advertising and customer service efforts. This creates a barrier to market entry by forcing us to spend time and money to differentiate our product in the marketplace and overcome these loyalties. The large established service providers may require capital investments in personnel. Considering our lack of operating history and experience in being a real estate consulting firm, we may never become a consultant to large established clients.

Marketing Campaign

Time Frame: Immediately.

Material costs: $10,000 - $15,000.

We intend to use marketing strategies, such as web advertisements, direct mailing, and phone calls to acquire potential customers. We also plan to attend trade shows in real estate and consulting to showcase our services with a view to find new customers. We believe that we should begin to see results from our marketing campaign within 120 days from its initiation. We also will use Internet promotion tools on real estate and consulting websites as well as on Facebook and Twitter to advertise our services. We intend to spend from $10,000 - $15,000 on marketing efforts during the next year. Marketing is an ongoing matter that will continue during the life of our operations. Our campaign will consist of soliciting clients by offering to provide investment opportunities and real estate consulting services to clients.

Even if we are able to obtain sufficient number of consulting agreements at the end of the twelve-month period, there is no guarantee that we will be able to attract and more importantly retain enough customers to justify our expenditures. If we are unable to generate a significant amount of revenue and to successfully protect ourselves against those risks, then it would materially affect our financial condition and our business could be harmed.

Hire a Salesperson or Independent Contractors

Time Frame: 6 ^th -12 ^th months.

Material costs: $11,500-14,000.

We eventually intend to hire one consultant with good knowledge and broad connections in the real estate consulting industry to introduce our services. The salesperson’s job would be to find new potential clients, and to set up agreements with customers and referral sources to engage our consulting services. The negotiation of additional agreements with potential customers will be ongoing during the life of our operations.

There is no assurance that we will ever generate any further revenue from real estate consulting.

David Behrend, our president, will be devoting 40 hours per week to our operations. Mr. Behrend is a California licensed real estate broker and has orally agreed to limit his responsibilities of providing brokerage services to customers that do not require consulting services outside of the time he devotes to our operations.

We anticipate that the minimum additional capital necessary to fund our planned operations in this case for the 12-month period will be approximately $100,000 and will be needed for general administrative expenses, business development, marketing costs and costs associated with being a publicly reporting company. As a result, we will need to seek additional funding in the near future. The most likely source of this additional capital is through the sale of additional shares of common stock or advances from our sole director, our other director or our shareholders. Mr. Behrend, our sole director, through our majority shareholder, which he controls, has orally agreed to advance us any necessary capital. However, he has no firm commitment, arrangement or legal obligation to advance or loan funds to the Company.

If we are able to successfully complete the above goals within the estimated timeframes set forth and are able to raise proceeds additional proceeds that may be needed to secure additional personnel and marketing funds, those funds would be allocated as follows:

We believe that our operations are currently on a small scale that is manageable by these two individuals and can be supplemented by engaging independent contractors. Our management’s responsibilities are mainly administrative at this early stage. While we believe that the addition of employees is not required over the next six (6) months, the professionals we plan to utilize may be independent contractors. We do not intend to enter into any employment agreements with any of these professionals. Thus, these persons are not intended to be employees of our company.

Our management does not expect to incur any material research costs in the next twelve months; we currently do not own any plants or equipment that we would seek to sell in the near future; we do not have any off-balance sheet arrangements; and we have not paid for expenses on behalf of our officer or directors. Additionally, we believe that this fact shall not materially change.

Off-Balance Sheet Arrangements

None.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States ( “GAAP” ). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Use of Estimates:

Areas where significant estimation judgments are made and where actual results could differ materially from these estimates are the carrying value of certain assets and liabilities which are not readily apparent from other sources and the classification of net operating loss and tax credit carry forwards.

We believe the following is among the most critical accounting policies that impact our financial statements: We evaluate impairment of our long-lived assets by applying the provisions of ASC 360. In applying those provisions, we have not recognized any impairment charge on our long-lived assets during the three-months ended September 30, 2017.

We suggest that our significant accounting policies, as described in our financial statements in the Summary of Significant Accounting Policies, be read in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations.