NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
As of
June 30, 2018
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
ORGANIZATION
(A) Organization
The
Company is a Nevada corporation whose principal activities together
with its affiliates, acquires, owns, and operates manufactured
housing communities. Mobile Home Rental Holdings
(“MHRH”) was formed in April 2016 to acquire the assets
for Pecan Grove MHP in November 2016 and Butternut MHP in April
2017. To continue the acquisition and aggregation of mobile home
parks, MHRH intend to raise capital in the public markets.
Therefore, on October 21, 2017, MHRH was acquired by and merged
with a public entity Stack-it Storage, Inc. (OTC: STAK). As
part of the merger transaction, Stack-it Storage, Inc.
changed its name to Manufactured Housing Properties Inc. (OTC:
MHPC).
For
accounting purposes, this transaction is being accounted for as a
reverse merger and has been treated as a recapitalization of
Stack-it Storage, Inc. with Manufactured Housing Properties
Inc. as the accounting acquirer.
(B)Critical Accounting Policies
We
believe that the following accounting policies are the most
critical to aid you in fully understanding and evaluating these
condensed consolidated financial statements.
Basis of Presentation
These
unaudited condensed Consolidated Financial Statements have been
prepared pursuant to Securities and Exchange Commission
(“SEC”) rules and regulations. Accordingly, they do not
include all of the information and note disclosures required by
U.S. Generally Accepted Accounting Principles ("GAAP") for complete
financial statements and should be read in conjunction with the
financial statements and notes thereto included in
the 2017 Form 10.
The
following notes to the condensed Consolidated Financial Statements
highlight significant changes to the notes included in
the 2017 Form 10 and present interim disclosures as
required by the SEC. The accompanying condensed Consolidated
Financial Statements reflect, in the opinion of management, all
adjustments and estimates necessary for a fair presentation of the
interim financial statements, which are of a normal, recurring
nature. Revenues and expenses are subject to seasonal fluctuations
and accordingly, quarterly interim results may not be indicative of
full year results.
The
Company prepares its financial statements under the accrual basis
of accounting, in conformity with accounting principles generally
accepted in the United States of America
(“GAAP”).
The
Company’s subsidiaries are all formed in the state of North
Carolina as Limited Liability Companies. The acquisition and date
of consolidation are as follows:
Date of Consolidation
|
|
Subsidiary
|
|
Ownership
|
October
2016
|
|
Pecan
Grove MHP, LLC
|
|
75%
|
April
2017
|
|
Butternut MHP,
LLC
|
|
100%
|
November
2017
|
|
Azalea
MHP, LLC
|
|
100%
|
November
2017
|
|
Holly
Faye MHP, LLC
|
|
100%
|
November
2017
|
|
Chatham
MHP, LLC
|
|
100%
|
November
2017
|
|
Lake
View MHP, LLC
|
|
100%
|
December,
2017
|
|
Maple
Hills MHP, LLC
|
|
100%
|
All
intercompany transactions and balances have been eliminated in
consolidation. The Company does not have a majority or minority
interest in any other company, either consolidated or
unconsolidated.
MANUFACTURED
HOUSING PROPERTIES INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
As of
June 30, 2018
The
following unaudited pro-forma information presents the combined
results of operations for the periods as if the above acquisitions
of manufactured housing communities had been completed on January
1, 2017.
|
|
|
|
Total
Revenue
|
$
965,427
|
Total
(Expenses)
|
(1,063,280
)
|
Net
(Loss)
|
(97,854
)
|
Net Income
Attributable to non-controlling interest
|
9,008
|
Net Loss
Attributable to the Company
|
(106,862
)
|
Net Loss per
common share, basic and diluted
|
$
(0.01
)
|
Revenue Recognition
The
Company follows paragraph 606 of the FASB Accounting Standards
Codification for revenue recognition and ASU 2014--09. On January
1, 2018, the Company adopted ASU 2014-09, which is a
comprehensive new revenue recognition model that requires revenue
to be recognized in a manner to depict the transfer of goods or
services to a customer at an amount that reflects the consideration
expected to be received in exchange for those goods or
services. The Company considers revenue realized or realizable
and earned when all the five following criteria are met: (1)
Identify the Contract with a Customer, (2) Identify the Performance
Obligations in the Contract, (3) Determine the Transaction Price,
(4) Allocate the Transaction Price to the Performance Obligations
in the Contract, and (5) Recognize Revenue When (or As) the Entity
Satisfies a Performance Obligation. Results for reporting
periods beginning after January 1, 2018 are presented under ASU
2014-09, while prior period amounts are not adjusted and continue
to be reported under the previous accounting standards. There was
no impact to revenues as a result of applying ASU 2014-09 for the
six months ended June 30, 2018, and there have not been any
significant changes to our business processes, systems, or internal
controls as a result of implementing the standard.
Net Income (Loss) Per Share
Basic
net income (loss) per share is calculated by dividing net income
(loss) by the weighted average number of common shares outstanding
during the period. Diluted net income (loss) per share is
calculated by dividing net income (loss) by the weighted average
number of common shares outstanding plus the weighted average
number of net shares that would be issued upon exercise of stock
options pursuant to the treasury stock method. Total dilutive
securities outstanding as of June 30, 2018 and 2017 totaled 698,000
and 0 stock options, respectively and 786,695 and 0 convertible
shares, respectively.
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
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 financial
statements and the reported amounts of revenues and expenses during
the reporting period.
The
Company’s significant accounting estimates and assumptions
affecting the consolidated financial statements were the estimates
and assumptions used in valuation of equity and derivative
instruments. Those significant accounting estimates or assumptions
bear the risk of change due to the fact that there are
uncertainties attached to those estimates or assumptions, and
certain estimates or assumptions are difficult to measure or
value.
Management bases
its estimates on historical experience and on various assumptions
that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily
apparent from other sources.
Management
regularly reviews its estimates utilizing currently available
information, changes in facts and circumstances, historical
experience and reasonable assumptions. After such reviews, and if
deemed appropriate, those estimates are adjusted accordingly.
Actual results could differ from those estimates. Significant
estimates include the assumptions used in valuing
equity-based transactions, valuation of deferred tax assets,
depreciable lives of property and equipment and valuation of
investment property.
Investment Property and Equipment and Depreciation
Property and
equipment are carried at cost. Depreciation for Sites and Building
is computed principally on the straight-line method over the
estimated useful lives of the assets (ranging from 15 to 25 years).
Depreciation of Improvements to Sites and Buildings, Rental Homes
and Equipment and Vehicles is computed principally on the
straightline method over the estimated useful lives of the
assets (ranging from 3 to 25 years). Land Development Costs are not
depreciated until they are put in use, at which time they are
capitalized as Sites and Land Improvements. Interest Expense
pertaining to Land Development Costs are capitalized. Maintenance
and Repairs are charged to expense as incurred and improvements are
capitalized. The costs and related accumulated depreciation of
property sold or otherwise disposed of are removed from the
financial statement and any gain or loss is reflected in the
current year’s results of operations.
MANUFACTURED
HOUSING PROPERTIES INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
As of
June 30, 2018
Impairment Policy
The
Company applies Financial Accounting Standards Board Accounting
Standards Codification (“ASC”) 36010, Property,
Plant & Equipment (“ASC 36010”) to measure
impairment in real estate investments. Rental properties are
individually evaluated for impairment when conditions exist which
may indicate that it is probable that the sum of expected future
cash flows (on an undiscounted basis without interest) from a
rental property is less than the carrying value under its
historical net cost basis. These expected future cash flows
consider factors such as future operating income, trends and
prospects as well as the effects of leasing demand, competition and
other factors. Upon determination that a permanent impairment has
occurred, rental properties are reduced to their fair value. For
properties to be disposed of, an impairment loss is recognized when
the fair value of the property, less the estimated cost to sell, is
less than the carrying amount of the property measured at the time
there is a commitment to sell the property and/or it is actively
being marketed for sale. A property to be disposed of is reported
at the lower of its carrying amount or its estimated fair value,
less its cost to sell. Subsequent to the date that a property is
held for disposition, depreciation expense is not
recorded.
Cash and Cash Equivalents
The
Company considers all highly liquid financial instruments purchased
with an original maturity of three months or less to be cash
equivalents.
The
Company maintains cash balances at banks and deposits at times may
exceed federally insured limits. Management believes that the
financial institutions that hold the Company's cash are financially
secure and, accordingly, minimal credit risk exists. At June 30,
2018 and 2017, the Company had no cash balances above the
FDIC-insured limit, respectively.
Stock Based Compensation
All
stock based payments to employees, non-employee consultants,
and to non-employee directors for their services as directors,
including any grants of restricted stock and stock options, are
measured at fair value on the grant date and recognized in the
statements of operations as compensation or other expense over the
relevant service period. Stock based payments to
non-employees are recognized as an expense over the period of
performance. Such payments are measured at fair value at the
earlier of the date a performance commitment is reached or the date
performance is completed. In addition, for awards that vest
immediately and are non-forfeitable the measurement date is
the date the award is issued.
Fair Value of Financial Instruments
We
follow paragraph 825105010 of the FASB Accounting
Standards Codification for disclosures about fair value of our
financial instruments and paragraph 820103537 of
the FASB Accounting Standards Codification (“Paragraph
820103537”) to measure the fair value of
our financial instruments. Paragraph 820103537
establishes a framework for measuring fair value in accounting
principles generally accepted in the United States of America
(“U.S. GAAP”) and expands disclosures about fair value
measurements. To increase consistency and comparability in fair
value measurements and related disclosures, Paragraph
820103537 establishes a fair value hierarchy
which prioritizes the inputs to valuation techniques used to
measure fair value into broad levels. The fair value hierarchy
gives the highest priority to quoted prices (unadjusted) in active
markets for identical assets or liabilities and the lowest priority
to unobservable inputs.
Recent Accounting Pronouncements
In May
2017, the FASB issued ASU No. 2017-09, “Compensation Stock
Compensation (Topic 718): Scope of Modification Accounting.”
ASU 2017-09 clarifies which changes to the terms or conditions of a
share-based payment award are subject to the guidance on
modification accounting under FASB Accounting Standards
Codification Topic 718. Entities would apply the modification
accounting guidance unless the value, vesting requirements and
classification of a share-based payment award are the same
immediately before and after a change to the terms or conditions of
the award. ASU No. 2017-09 is effective for fiscal years beginning
after December 15, 2017, including interim periods within those
fiscal years. The Company has evaluated the potential impact this
standard may have on the consolidated financial statements and
determined that it had no impact on the consolidated financial
statements.
On
February 22, 2017, the FASB issued ASU No. 2017-05, “Other
IncomeGains and Losses from the Derecognition of Nonfinancial
Assets.” ASU 2017-05 provides guidance for recognizing gains
and losses from the transfer of nonfinancial assets and insubstance
nonfinancial assets in contracts with noncustomers, unless other
specific guidance applies. The standard requires a company to
derecognize nonfinancial assets once it transfers control of a
distinct nonfinancial asset or distinct in substance nonfinancial
asset. Additionally, when a company transfers its controlling
interest in a nonfinancial asset, but retains a noncontrolling
ownership interest, the company is required to measure any
noncontrolling interest it receives or retains at fair value. The
guidance requires companies to recognize a full gain or loss on the
transaction. As a result of the new guidance, the guidance specific
to real estate sales in ASC 360-20 will be eliminated. As such,
sales and partial sales of real estate assets will now be subject
to the same derecognition model as all other nonfinancial assets.
The guidance is effective for annual periods beginning after
December 15, 2017, including interim periods within that reporting
period. The Company has evaluated the potential impact this
standard may have on the consolidated financial statements and
determined that it had no impact on the consolidated financial
statements.
In
August 2016, the FASB issued ASU No. 2016-15, “Statement of
Cash Flows (Topic 230), Classification of Certain Cash Receipts and
Cash Payments.” ASU 2016-15 will make eight targeted changes
to how cash receipts and cash payments are presented and classified
in the statement of cash flows. ASU 2016-15 is effective for annual
reporting periods, including interim reporting periods within those
periods, beginning after December 15, 2017. Early adoption is
permitted. The Company believes that the adoption of this standard
will not have a material impact on our financial position, results
of operations or cash flows. The Company has evaluated the
potential impact this standard may have on the consolidated
financial statements and determined that it had no impact on the
consolidated financial statements.
MANUFACTURED
HOUSING PROPERTIES INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
As of
June 30, 2018
In
June 2016, the FASB issued ASU No. 2016-13, “Financial
Instruments – Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments.” ASU 2016-13 requires
that entities use a new forward looking “expected loss”
model that generally will result in the earlier recognition of
allowance for credit losses. The measurement of expected credit
losses is based upon historical experience, current conditions, and
reasonable and supportable forecasts that affect the collectability
of the reported amount. ASU No. 2016-13 is effective for annual
reporting periods, including interim reporting periods within those
periods, beginning after December 15, 2019. The Company is
currently evaluating the potential impact this standard may have on
the consolidated financial statements.
In
February 2016, the FASB issued ASU 2016-02, “Leases.”
ASU 2016-02 amends the existing accounting standards for lease
accounting, including requiring lessees to recognize most leases on
their balance sheets and making targeted changes to lessor
accounting. The standard requires a modified retrospective
transition approach for all leases existing at, or entered into
after, the date of initial application, with an option to use
certain transition relief. ASU 2016-02 will be effective for annual
reporting periods beginning after December 15, 2018. Early adoption
is permitted. The Company is currently evaluating the potential
impact this standard may have on the consolidated financial
statements and the timing of adoption.
In
January 2016, the FASB issued ASU 2016-01, “Financial
Instruments – Overall: Recognition and Measurement of
Financial Assets and Financial Liabilities.” ASU 2016-01
requires equity investments (except those accounted for under the
equity method of accounting, or those that result in consolidation
of the investee) to be measured at fair value with changes in fair
value recognized in net income, requires public business entities
to use the exit price notion when measuring the fair value of
financial instruments for disclosure purposes, requires separate
presentation of financial assets and financial liabilities by
measurement category and form of financial asset, and eliminates
the requirement for public business entities to disclose the
method(s) and significant assumptions used to estimate the fair
value that is required to be disclosed for financial instruments
measured at amortized cost. ASU 2016-01 is effective for annual
reporting periods, including interim reporting periods within those
periods, beginning after December 15, 2017, and early adoption is
permitted. The Company has evaluated the potential impact this
standard may have on the consolidated financial statements and
determined that it had no impact on the consolidated financial
statements.
Management
does not believe that any other recently issued, but not yet
effective accounting pronouncements, if adopted, would have a
material effect on the accompanying Consolidated Financial
Statements.
NOTE 2 – GOING CONCERN
The
ability of the Company to continue its operations as a going
concern is dependent on management’s plans, which include the
raising of capital through debt and/or equity markets with some
additional funding from other traditional financing sources,
including term notes, until such time that funds provided by
operations are sufficient to fund working capital requirements.
There is substantial doubt about the Company’s ability to
continue as a going concern.
The
Company will require additional funding to finance the growth of
its current and expected future operations as well as to achieve
its strategic objectives. The Company believes its current
available cash along with anticipated revenues may be insufficient
to meet its cash needs for the near future. There can be no
assurance that financing will be available in amounts or terms
acceptable to the Company, if at all. The accompanying condensed
consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. These
condensed consolidated financial statements do not include any
adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should
the Company be unable to continue as a going concern.
NOTE 3 – Fixed Assets
Property and
equipment consists of the following as of:
|
|
|
|
|
Land
|
$
4,357,950
|
$
4,357,950
|
Site and Land
Improvements
|
6,773,247
|
6,773,316
|
Buildings and
Improvements
|
1,277,352
|
1,239,504
|
Acquisition
Cost
|
140,758
|
140,758
|
|
12,549,307
|
12,511,528
|
Less: accumulated
depreciation and amortization
|
(430,878
)
|
(164,894
)
|
|
$
12,118,429
|
$
12,346,634
|
MANUFACTURED
HOUSING PROPERTIES INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
As of
June 30, 2018
Depreciation
and amortization expense totaled $133,162 and $33,821 for the three
months ended June 30, 2018, and 2017
,
respectively, and
$265,984 and $35,984 for the six months ended June 30, 2018,
and 2017
,
respectively.
NOTE 4 – PROMISSORY NOTES
During
the years ended December 31, 2017 and 2016, the company entered
into promissory notes payable to lenders related to the acquisition
of seven manufactured housing communities containing
approximately.
Except
our line of credit, generally, the promissory notes range from 4.5%
to 7.0% with 20 to 25 years principal amortization. Two of the
promissory notes had an initial 6 months period of interest only
payments. The Line of Credit is interest only payment based on 10%,
and 8% deferred interest until maturity to be paid with principal
balance. The Line of Credit awarded the lender 455,000 shares of
common stock as compensation, which resulted in making the lender a
related party due to their significant ownership. The promissory
notes are secured by the real estate assets, and the line of credit
is guaranteed by the owner of the principal stockholder of the
company.
The
following are terms of our secured outstanding debt:
|
Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Butternut MHP Land
LLC
|
3/30/20
|
6.500
%
|
$
1,144,036
|
$
1,155,619
|
Butternut MHP Land
LLC Mezz
|
4/1/27
|
7.000
%
|
291,212
|
294,160
|
Pecan Grove MHP
LLC
|
11/4/26
|
4.500
%
|
1,292,442
|
1,310,345
|
Azalea MHP
LLC
|
11/10/27
|
5.000
%
|
493,017
|
495,023
|
Holly Faye MHP
LLC
|
10/1/38
|
4.000
%
|
479,250
|
505,500
|
Chatham MHP
LLC
|
12/1/22
|
5.125
%
|
1,381,057
|
1,395,000
|
Lake View MHP
LLC
|
12/1/22
|
5.125
%
|
1,228,713
|
1,250,000
|
Maple MHP
LLC
|
1/1/23
|
5.125
%
|
2,772,014
|
2,800,000
|
Totals note
payables
|
|
|
9,081,741
|
9,205,647
|
|
|
|
|
Convertible notes
payable (**)
|
12/12/21
|
18.000
%
|
2,754,550
|
2,754,550
|
Related Party notes
payable
|
12/31/20
|
(*)
|
719,421
|
441,882
|
Total convertible
note and notes payable including related party
|
|
|
$
12,555,712
|
$
12,402,079
|
(*)
As of June 30, 2018, a related
party entity with a common ownership to the Company’s
president loaned the Company $719,421 for working capital. The note
has a five-year term with no annual interest and principal payments
are deferred to maturity date. The Company imputed interest on the
loan in the amount of $19,316 and $0 during the six months ended
June 30, 2018 and 2017, respectively.
(**)
The line of credit, which is guaranteed by the owner of the
principal stockholder of the company, has a conversion option
whereby the lender can convert the ratio of total outstanding debt
at time of exercise of the option into an amount of newly issued
shares of the company’s common stock equal determined by
dividing the outstanding indebtedness by $3,000,000 multiplied by
10% with a cap of 864,500 shares. As of June 30, 2018, the
indebtedness under the line of credit was $2,754,550 and this
amount would have resulted in a conversion into 786,695 newly
issued shares.
The
line of credit also gives the lender an option to purchase up to
864,500 shares of newly issued common stock for a purchase price of
$3,000,000 minus the value of the outstanding principal of the
Note, if any, previously converted into equity.
MANUFACTURED
HOUSING PROPERTIES INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
As of
June 30, 2018
Maturities
of Long Term Obligations for Five Years and Beyond
The
minimum annual principal payments of notes payable at June 30, 2018
were:
2018
|
$
323,633
|
2019
|
4,083,044
|
2020
|
228,156
|
2021
|
233,135
|
2022 and
Thereafter
|
7,778,744
|
Total minimum
principal payments
|
$
12,555,712
|
NOTE 5 – COMMITMENTS AND CONTINGENCIES
The
Company has no commitments and contingencies as of June 30, 2018
and December 31, 2017.
From
time to time, the Company may become involved in various lawsuits
and legal proceedings, which arise in the ordinary course of
business. However, litigation is subject to inherent uncertainties,
and an adverse result in these or other matters may arise that may
harm its business. The Company is currently not aware of any such
legal proceedings or claims that they believe will have,
individually or in the aggregate, a material adverse effect on its
business, financial condition or operating results.
NOTE 6 – STOCKHOLDERS’ EQUITY
Common Stock
Our
authorized capital stock consists of 200,000,000 shares of common
stock, par value $0.01 per share.
Preferred Stock
Our
Articles of Incorporation, as amended, further authorize the Board
of Directors to issue, from time to time, without stockholder
approval, up to 10,000,000 shares of preferred stock ($0.01par
value). As of the date hereof, no shares of preferred stock are
issued and outstanding.
Common Stock
(A)- Stock Split
In
March 2018, the Company completed a 1for6 reverse split
of its outstanding shares of common stock resulting in our total
outstanding common shares to be 10,000,000 from 60,000,000. The
financial statements have been retroactively adjusted to reflect
the stock split.
(B) Equity Incentive Plan
In
December 2017, the Board of Directors, with the approval of a
majority interest of the stockholders of the Company, adopted the
Equity Incentive Plan (the “Plan”) which will be
administered by a committee appointed by the Board.
The
Company, under its Equity Incentive Plan, issues options to various
officers and directors. One third of the options vest immediately,
and two thirds vest in equal annual installments over a two-year
period. All of the options are exercisable at a purchase price of
$.01 per share.
The
company recorded stock option expense of $245 and $0 during the six
months ended June 30, 2018 and 2017, respectively.
MANUFACTURED
HOUSING PROPERTIES INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
As of
June 30, 2018
The
following table summarizes the stock options outstanding as of June
30, 2018 and December 31, 2017:
|
|
Weighted
Average
exercise
price
(per
share)
|
Weighted
average
remaining
contractual
term
(in years)
|
Outstanding at
December 31, 2017
|
698,000
|
$
0.01
|
10.0
|
Granted
|
-
|
-
|
-
|
Exercised
|
-
|
-
|
-
|
Forfeited /
cancelled / expired
|
-
|
-
|
-
|
Outstanding at June
30, 2018
|
698,000
|
$
0.01
|
9.5
|
The
aggregate intrinsic value in the table above represents the total
intrinsic value (the difference between the Company’s closing
stock price at fiscal period-end and the exercise price,
multiplied by the number of in-the-money options) that
would have been received by the option holder had all options
holders exercised their options on June 30, 2018. As of June 30,
2018, the aggregate intrinsic value of all stock options was $0.
There were no “in-the-money” options at
June 30, 2018.
The
following table summarizes information concerning options
outstanding as of June 30, 2018:
|
Outstanding
stock options
|
Weighted
average remaining contractual term (in years)
|
Weighted
average outstanding strike price
|
|
Weighted
average vested strike price
|
|
|
|
|
|
|
$
0.01
|
698,000
|
9.5
|
$
0.01
|
232,667
|
$
0.01
|
The
table below presents the weighted average expected life in years of
options granted under the Plan as described above. The risk-free
rate of the stock options is based on the U.S. Treasury yield curve
in effect at the time of grant, which corresponds with the expected
term of the option granted.
The
fair value of stock options was estimated using the Black Scholes
option pricing model with the following assumptions for grants made
during the periods indicated.
|
|
|
Riskfree
interest rate
|
--
|
1.95
%
|
Expected dividend
yield
|
--
|
0.00
%
|
Expected
volatility
|
--
|
16.71
%
|
Expected life of
options (in years)
|
--
|
10
|
(D) Non-Controlling Interest
The
Company owns 75% of membership interest in Pecan Grove MHP LLC. The
remaining 25% are owned by unaffiliated non-controlling investors.
During the six months ended June 30, 2018 and 2017, the
Company made total distribution of $24,007 and $26,257 to the
non-controlling interest, respectively.
MANUFACTURED
HOUSING PROPERTIES INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
As of
June 30, 2018
NOTE 7 RELATED PARTY TRANSACTIONS
As of
June 30, 2018, an entity with a common ownership to the
Company’s president loaned the Company $719,421 for working
capital. The note has a five-year term with no annual interest and
principal payments are deferred to maturity date. The Company
imputed interest on the loan in the amount of $19,316 and $0 during
the six months ended June 30, 2018 and 2017,
respectively.
The
Company entered into a debt agreement for a line of credit. The
line of credit, which is guaranteed by the owner of the principal
stockholder of the company, has a conversion option whereby the
lender can convert the ratio of total outstanding debt at time of
exercise of the option into an amount of newly issued shares of the
company’s common stock equal determined by dividing the
outstanding indebtedness by $3,000,000 multiplied by 10% with a cap
of 864,500 shares. As of June 30, 2018, the
indebtedness under the line of credit was $2,754,550 and this
amount would have resulted in a conversion into 786,695 newly
issued shares.
The
line of credit also gives the lender an option to purchase up to
864,500 shares of newly issued common stock for a purchase price of
$3,000,000 minus the value of the outstanding principal of the
Note, if any, previously converted into equity.
NOTE 8 – SUBSEQUENT EVENTS
From
July 1, 2018 through August 14, 2018, the Company borrowed an
additional $47,000 from a related party under our working capital
note (See Note 4).