10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

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 incorporation or organization)	(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.          [X] 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).                [X] 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	[X]	Smaller reporting company	[X]
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 [X] No

As of October 20, 2020, the registrant had a total of 9,619,945 common shares, $.001 par value per share, outstanding.

MANHATTAN BRIDGE CAPITAL, INC.

TABLE OF CONTENTS

		Page Number
Part I	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited)	2
	Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019	2
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019	3
	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2020 and 2019	4
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	15
Item 4.	Controls and Procedures	16
Part II	OTHER INFORMATION
Item 1A.	Risk Factors	16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 6.	Exhibits	17
SIGNATURES		18
EXHIBITS

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 and (ix) if the effect of the COVID-19 pandemic on our business is greater than anticipated. 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, 2019. 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.

PART I. FINANCIAL INFORMATION

Item 1. CONSOLIDATED FINANCIAL STATEMENTS

MANHATTAN BRIDGE CAPITAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

	September 30, 2020			December 31, 2019
	(unaudited)			(audited)
Assets
Loans receivable	$	57,883,068		$	53,485,014
Interest receivable on loans		809,975			675,996
Cash		156,715			118,407
Other assets		88,554			53,218
Operating lease right-of-use asset, net		52,627			87,754
Deferred financing costs		29,917			22,637
Total assets	$	59,020,856		$	54,443,026
Liabilities and Stockholders’ Equity
Liabilities:
Line of credit	$	19,779,851		$	15,232,993
Senior secured notes (net of deferred financing costs of $416,099 and $472,413, respectively)		5,583,901			5,527,587
Deferred origination fees		452,914			322,119
Accounts payable and accrued expenses		132,582			151,823
Operating lease liability		55,566			91,025
Other liabilities		—			15,000
Dividends payable		—			1,159,061
Total liabilities		26,004,814			22,499,608
Commitments and contingencies
Stockholders’ equity:
Preferred shares - $.01 par value; 5,000,000 shares authorized; none issued		—			—
Common shares - $.001 par value; 25,000,000 shares authorized; 9,882,058 issued; 9,619,945 and 9,658,844 outstanding, respectively		9,882			9,882
Additional paid-in capital		33,153,830			33,144,032
Treasury stock, at cost – 262,113 and 223,214 shares		(798,939	)		(619,688	)
Retained earnings (accumulated deficit)		651,269			(590,808	)
Total stockholders’ equity		33,016,042			31,943,418
Total liabilities and stockholders’ equity	$	59,020,856		$	54,443,026

The accompanying notes are an integral part of these consolidated financial statements.

2

MANHATTAN BRIDGE CAPITAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020			2019
Interest income from loans	$	1,521,474	$	1,618,735	$	4,485,414		$	4,608,936
Origination fees		264,878		298,222		753,111			875,449
Total revenue		1,786,352		1,916,957		5,238,525			5,484,385
Operating costs and expenses:
Interest and amortization of debt service costs		337,901		454,307		1,016,590			1,220,700
Referral fees		1,641		861		3,569			3,569
General and administrative expenses		305,407		314,820		968,914			913,175
Total operating costs and expenses		644,949		769,988		1,989,073			2,137,444
Income from operations		1,141,403		1,146,969		3,249,452			3,346,941
Other income		9,500		3,000		15,500			9,000
Income before income tax expense		1,150,903		1,149,969		3,264,952			3,355,941
Income tax expense		—		—		(645	)		(572	)
Net income	$	1,150,903	$	1,149,969	$	3,264,307		$	3,355,369
Basic and diluted net income per common share outstanding:
—Basic	$	0.12	$	0.12	$	0.34		$	0.35
—Diluted	$	0.12	$	0.12	$	0.34		$	0.35
Weighted average number of common shares outstanding
—Basic		9,625,140		9,658,608		9,635,107			9,657,911
—Diluted		9,625,140		9,659,764		9,635,107			9,659,012

The accompanying notes are an integral part of these consolidated financial statements.

3

MANHATTAN BRIDGE CAPITAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020

	Common Shares				Additional Paid in		Treasury Stock					Retained
	Shares		Amount		Capital		Shares		Cost			Earnings			Totals
Balance, July 1, 2020		9,882,058	$	9,882	$	33,150,564		255,213	$	(771,559	)	$	463,050		$	32,851,937
Purchase of treasury shares								6,900		(27,380	)					(27,380	)
Non - cash compensation						3,266										3,266
Dividends paid													(962,684	)		(962,684	)
Net income													1,150,903			1,150,903
Balance, September 30, 2020		9,882,058	$	9,882	$	33,153,830		262,113	$	(798,939	)	$	651,269		$	33,016,042

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019

	Common Shares				Additional Paid in			Treasury Stock					Retained
	Shares		Amount		Capital			Shares		Cost			Earnings			Totals
Balance, July 1, 2019		9,881,191	$	9,881	$	33,137,501			223,214	$	(619,688	)	$	597,161		$	33,124,855
Exercise of warrants		867		1		(1	)										0
Non-cash compensation						3,266											3,266
Dividends paid														(1,158,957	)		(1,158,957	)
Net income														1,149,969			1,149,969
Balance, September 30, 2019		9,882,058	$	9,882	$	33,140,766			223,214	$	(619,688	)	$	588,173		$	33,119,133

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020

	Common Shares				Additional Paid in		Treasury Stock					Accumulated Deficit (Retained
	Shares		Amount		Capital		Shares		Cost			Earnings)			Totals
Balance, January 1, 2020		9,882,058	$	9,882	$	33,144,032		223,214	$	(619,688	)	$	(590,808	)	$	31,943,418
Non-cash compensation						9,798										9,798
Purchase of treasury shares								38,899		(179,251	)					(179,251	)
Dividends paid													(2,022,230	)		(2,022,230	)
Net income													3,264,307			3,264,307
Balance, September 30, 2020		9,882,058	$	9,882	$	33,153,830		262,113	$	(798,939	)	$	651,269		$	33,016,042

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

	Common Shares				Additional Paid in		Treasury Stock					Accumulated Deficit (Retained
	Shares		Amount		Capital		Shares		Cost			Earnings)			Totals
Balance, January 1, 2019		9,874,191	$	9,874	$	33,110,536		218,214	$	(590,234	)	$	(448,801	)	$	32,081,375
Exercise of options and warrants		7,867		8		20,432										20,440
Purchase of treasury shares								5,000		(29,454	)					(29,454	)
Non-cash compensation						9,798										9,798
Dividends paid													(2,318,395	)		(2,318,395	)
Net income													3,355,369			3,355,369
Balance, September 30, 2019		9,882,058	$	9,882	$	33,140,766		223,214	$	(619,688	)	$	588,173		$	33,119,133

The accompanying notes are an integral part of these consolidated financial statements.

4

MANHATTAN BRIDGE CAPITAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Nine Months
	Ended September 30,
		2020			2019
Cash flows from operating activities:
Net income	$	3,264,307		$	3,355,369
Adjustments to reconcile net income to net cash provided by  operating activities -
Amortization of deferred financing costs		76,136			70,867
Adjustment to operating lease right-of-use asset and liability		(333	)		—
Depreciation		744			1,157
Non-cash compensation expense		9,798			9,798
Changes in operating assets and liabilities:
Interest receivable on loans		(163,650	)		(167,194	)
Other assets		(35,156	)		(26,209	)
Accounts payable and accrued expenses		(19,241	)		(19,134	)
Deferred origination fees		130,795			(461	)
Net cash provided by operating activities		3,263,400			3,224,193
Cash flows from investing activities:
Issuance of short term loans		(35,410,076	)		(38,246,965	)
Collections received from loans		31,041,693			33,375,420
Release of loan holdback relating to mortgage receivable		(15,000	)		—
Purchase of fixed assets		(923	)		—
Net cash used in investing activities		(4,384,306	)		(4,871,545	)
Cash flows from financing activities:
Proceeds from line of credit, net		4,546,858			5,241,895
Dividends paid		(3,181,291	)		(3,477,112	)
Purchase of treasury shares		(179,251	)		(29,454	)
Deferred financing costs incurred		(27,102	)		—
Proceeds from exercise of stock options		—			20,440
Net cash provided by financing activities		1,159,214			1,755,769
Net increase in cash		38,308			108,417
Cash, beginning of period		118,407			355,057
Cash, end of period	$	156,715		$	463,474
Supplemental Cash Flow Information:
Taxes paid during the period	$	645		$	572
Interest paid during the period	$	954,622		$	1,144,425
Operating leases paid during the period	$	40,973		$	39,628
Non-cash Investing Activities:
Establishment of right-of-use asset and operating lease liability	$	—		$	135,270
Interest receivable converted to loans receivable in connection with forbearance agreements	$	29,671		$	—
Loan holdback relating to mortgage receivable	$	—		$	15,000

The accompanying notes are an integral part of these consolidated financial statements.

5

MANHATTAN BRIDGE CAPITAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

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”), 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 (“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 GAAP for complete 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, 2019 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 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 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. 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) 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

In May 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019-05, “Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief,” which requires that entities use a new forward looking “expected loss” model that generally will result in the earlier recognition of an allowance for credit losses. This ASU also allows entities to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost upon adoption of ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” The Company adopted both ASU 2016-13 and ASU 2019-05 effective January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued. The amendments in the ASU are effective for all entities as of March 12, 2020 through December 31, 2022. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements.

6

3. COMMERCIAL LOANS

Loans Receivable

The Company offers short-term secured non–banking loans to real estate investors (also known as hard money) 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, generally, accompanied by personal guarantees from the principals of the borrowers. The loans are generally for a term of one year. The short term loans are initially recorded, and carried thereafter, in the 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, 2020, the Company was committed to $5,191,959 in construction loans that can be drawn by the borrowers when certain conditions are met.

At September 30, 2020, no one entity has 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, 2020 and December 31, 2019:

Performing loans	Developers- Residential		Developers- Commercial		Developers- Mixed Used		Total outstanding loans
September 30, 2020	$	54,494,205	$	1,564,863	$	1,824,000	$	57,883,068
December 31, 2019	$	48,395,014	$	1,975,000	$	3,115,000	$	53,485,014

At September 30, 2020, the Company’s loans receivable consisted of loans in the amount of $367,500, $1,594,463, $1,520,000 and $5,883,071, originally due in 2016, 2017, 2018 and 2019, respectively. During the second quarter of 2020, the Company agreed to grant forbearances, due to the COVID-19 pandemic, in an aggregate amount of approximately $30,000 to two of its long term borrowers deferring two to three months of interest payments to the scheduled payoff date. Since the date of the forbearance agreements, such borrowers have paid monthly interest.

In all instances the borrowers are currently paying their interest and, generally, the Company receives a fee in connection with the extension of the loans. Accordingly, at September 30, 2020, no loan impairments exist and there are no provisions for impairments of loans or recoveries thereof.

Subsequent to the balance sheet date, $2,534,425 of the loans receivable at September 30, 2020 were paid off, including $1,005,000 originally due on or before September 30, 2020.

7

4. LINE OF CREDIT

The Company has executed an Amended and Restated Credit and Security Agreement, as amended (the “Amended and Restated Credit Agreement”), with Webster Business Credit Corporation (“Webster”), Flushing Bank (“Flushing”) and Mizrahi Tefahot Bank Ltd (“Mizrahi”), 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, secured by assignments of mortgages and other collateral. 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, as a default under the credit line.

Effective July 11, 2018, the Company entered into a Waiver and Amendment No. 1 to the Amended and Restated Credit Agreement (“Amendment No. 1”) with Webster, Flushing and Mr. Assaf Ran, the Company’s President and Chief Executive Officer, as guarantor. Pursuant to the terms of Amendment No. 1, the Company’s existing Webster Credit Line was increased by $5 million to $25 million in the aggregate. In addition, the interest rates relating to the Webster Credit Line were amended such that the interest rates now equal (i) LIBOR plus a premium, which rate aggregated approximately 4.15%, including a 0.5% agency fee, as of September 30, 2020, or (ii) a Base Rate (as defined in the Amended and Restated Credit Agreement) plus 2.25% plus a 0.5% agency fee, as chosen by the Company for each drawdown. Amendment No. 1 also permits the Company to 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. In addition, Mr. Ran has provided a personal guaranty to the Webster Credit Line, which shall not exceed the sum of $500,000 plus any costs relating to the enforcement of the personal guaranty. Furthermore, on December 31, 2019, the Company entered into Amendment No. 2 to the Amended and Restated Credit and Security Agreement with Webster and Flushing to amend certain required fixed charge coverage requirements.

On February 25, 2020, the Company entered into Amendment No. 3 to the Amended and Restated Credit and Security Agreement (“Amendment No. 3”) with Webster, Flushing, Mizrahi, and Mr. Ran, as guarantor. Pursuant to the terms of Amendment No. 3, the Company’s existing Webster Credit Line was increased by $7.5 million to $32.5 million in the aggregate and the term of the Webster Credit Line was extended to February 28, 2023. Amendment No. 3 also provides that the Company may issue up to $20 million in bonds through its subsidiary, of which not more than $10 million of such notes 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.

The costs to establish and amend the Webster Credit Line are being amortized over the term of the respective agreement, using the straight-line method. The amortization costs for the nine months ended September 30, 2020 and 2019 were $19,822 and $14,552, respectively.

The Company was in compliance with all covenants of the Webster Credit Line, as amended, as of September 30, 2020. At September 30, 2020, the outstanding amount under the Amended Credit Agreement was $19,779,851. The interest rate on the amount outstanding fluctuates daily. The rate, including a 0.5% Agency Fee, at September 30, 2020 was approximately 4.15%.

5. SENIOR SECURED NOTES

On April 25, 2016, in an initial public offering, MBC Funding 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, 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.

8

Under the terms of the Indenture, the aggregate outstanding principal balance of the mortgage loans held by MBC Funding, together with MBC Funding’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 plus MBC Funding’s cash on hand is less than 120% of the aggregate outstanding principal balance of the Notes, MBC Funding 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 plus, MBC Funding’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 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; provided that (i) if the Notes are redeemed on or after April 22, 2019 but prior to April 22, 2020, the redemption price will be 103% of the principal amount of the Notes redeemed and (ii) if the Notes are redeemed on or after April 22, 2020 but prior to April 22, 2021, the redemption price will be 101.5% of the principal amount of the Notes redeemed plus, in either case, the accrued but unpaid interest on the Notes redeemed up to, but not including, the date of redemption. No Notes were redeemed prior to April 22, 2020.

Each Noteholder has the right to cause MBC Funding to redeem his, her or its Notes on April 22, 2021. The redemption price will be equal to the outstanding principal amount of the Notes redeemed plus the accrued but unpaid interest up to, but not including, the date of redemption, without penalty or premium. In order to exercise this right, the Noteholder must notify MBC Funding, in writing, no earlier than November 22, 2020 and no later than January 22, 2021. All Notes that are subject to a properly and timely notice will be redeemed on April 22, 2021. Any Noteholder who fails to make a proper and timely election will be deemed to have waived his, her or its right to have his, her or its Notes redeemed prior to the maturity date.

MBC Funding is obligated to offer to redeem the Notes if there occurs a “change of control” with respect to MBC Funding or the Company or if MBC Funding 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.

6. STOCKHOLDERS’ EQUITY

The Company adopted a share buy back program on February 26, 2020 for the repurchase of up to 100,000 of the Company’s common shares in the next twelve months. The Company has purchased an aggregate of 38,899 common shares under this repurchase program, at an aggregate cost of approximately $179,000, as of September 30, 2020.

7. EARNINGS PER SHARE OF COMMON SHARE

Basic and diluted earnings per share are calculated in accordance with Accounting Standards Codification (“ASC”) 260, “Earnings Per Share” (“ASC 260”). Under ASC 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.

9

The denominator is based on the following weighted average number of common shares:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Basic weighted average common shares outstanding		9,625,140		9,658,608		9,635,107		9,657,911
Incremental shares for assumed exercise of warrants		—		1,156		—		1,101
Diluted weighted average common shares outstanding		9,625,140		9,659,764		9,635,107		9,659,012

For each of the three and nine months ended September 30, 2020, vested warrants to purchase 33,612 common shares were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive. For the three and nine months ended September 30, 2019, 42,106 and 42,161, exercisable warrants were not included in the diluted earnings per share calculation, respectively, because their effect would have been anti-dilutive.

8. STOCK–BASED COMPENSATION

Stock based compensation expense recognized under ASC 718, “Compensation-Stock Compensation,” for each of the nine months ended September 30, 2020 and 2019 of $9,798 represents the amortization of the fair value of 1,000,000 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 15 years.

On August 15, 2016, in connection with a public offering of the Company’s common shares, the Company issued warrants to purchase up to 33,612 common shares, with an exercise price of $7.4375 per common share, to the representative of the underwriters of the offering (the “August 2016 Representative Warrants”). The warrants are exercisable at any time, and from time to time, in whole or in part, commencing on August 9, 2017 and expire on August 9, 2021. The fair value of these warrants, using the Black-Scholes option pricing model, on the date of issuance was $47,020. At September 30, 2020 all of the August 2016 Representative Warrants were outstanding.

9. COVID-19

As a result of the COVID-19 pandemic, the Company may experience difficulties collecting monthly interest on time from its borrowers, property values may decline and certain of its originated loans may need to be extended. For example, during the second quarter of 2020, two of our long term borrowers requested forbearance agreements, due to the impact of the COVID-19 pandemic, deferring two to three months of interest payments to the scheduled payoff date, and we agreed to accommodate the request. Since the date of the forbearance agreements, such borrowers have paid monthly interest. Since the onset of the COVID-19 pandemic, the Company has continued to originate loans as well as continued to service its existing loans, though the Company has observed lower demand for new loans. The Company has also held discussions with its borrowers and they have expressed their general concern about the uncertain economic condition, though these concerns have been partially alleviated due to lowered interest rates. To date, the Company has not been materially impacted by the COVID-19 pandemic and will continue to closely monitor the impact of the COVID-19 pandemic on all aspects of its business. If the COVID-19 pandemic worsens in the geographic areas in which the Company operates, the pandemic could materially affect its financial and operational results.

10. SUBSEQUENT EVENT

In accordance with the dividend declared by the Company’s Board of Directors on July 30, 2020, a cash dividend of $0.10 per share in an aggregate amount of $961,995 was paid on October 15, 2020 to all shareholders of record on October 9, 2020.

********

10

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 this Quarterly Report on Form 10-Q. The discussion and analysis contains 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 $30,000 to a maximum of $2.5 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 million. Our loans typically have a maximum initial term of 12 months bearing interest at a fixed rate of 9% to 14% 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 this business in 2007, we have made approximately 910 loans and never foreclosed on a property. We currently manage approximately 130 loans. In addition, none of our loans have ever gone into default although sometimes we have renewed or extended our loans 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.

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 loans and carefully manage our portfolio of first mortgage real estate loans in a manner designed to generate attractive risk-adjusted returns across a variety of market conditions and economic cycles. We believe that the demand for relatively small loans secured by residential and commercial real estate held for investment around the New York metropolitan market remains relatively strong, but weakened due to the COVID-19 pandemic, and that traditional lenders, including banks and other financial institutions, that usually address this market are unable to satisfy this demand. This demand/supply imbalance has created an opportunity for non-bank “hard money” real estate lenders like us to selectively originate high-quality first mortgage loans and this condition should persist for a number of years. However, we have observed more intense competition in our industry from both small and large lenders, which has resulted in more liquidity in the real estate markets in the geographic areas in which we operate. We also believe that certain of our competitors will not survive the COVID-19 pandemic.

Since the onset of the COVID-19 pandemic, we have continued to originate loans as well as continued to service our existing loans, though we have observed lower demand for new loans. In addition, we may experience difficulties collecting the monthly interest on time, property values may decline and certain of our originated loans may need to be extended, though to date we have not experienced many borrowers requiring such accommodations. In that regard, during the second quarter of 2020, two of our long term borrowers requested forbearance agreements, due to the impact of the COVID-19 pandemic, deferring two to three months of interest payments to the scheduled payoff date, and we agreed to accommodate the request. Since the date of the forbearance agreements, such borrowers have paid monthly interest. We have also held discussions with our borrowers and they have expressed their general concern about the uncertain economic condition, yet we believe that it’s premature to determine the magnitude of the impact at this point.

11

We expect the significance of the COVID-19 pandemic, including the extent of its effect on our financial and operational results, to be dictated by, among other things, its duration, the success of efforts to contain it and the impact of actions taken in response. For instance, recent government action to provide substantial financial support to businesses has provided helpful mitigation for us and certain of our borrowers; its ultimate impact, however, is not yet clear. While we are not able at this time to estimate the future impact of the COVID-19 pandemic on our financial and operational results, it could be material.

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 in terms of meeting the needs of 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 from 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 nine months ended September 30, 2020 and 2019, the total amounts of $35,410,076 and $38,246,965, respectively, have been lent, offset by collections received from borrowers, under our commercial loans in the amount of $31,041,693 and $33,375,420, respectively.

At September 30, 2020, we were committed to $5,191,959 in construction loans that can be drawn by the borrowers when certain conditions are met.

To date, we have not experienced any defaults and none of the loans previously made have been non-collectable, although no assurances can be given that existing or future loans may not go into default or prove to be non-collectible in the future.

We satisfied all of the requirements to be taxed as a 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, 2020 compared to three months ended September 30, 2019

Revenue

Total revenues for the three months ended September 30, 2020 were approximately $1,786,000 compared to approximately $1,917,000 for the three months ended September 30, 2019, a decrease of $131,000 or 6.8%. The decrease in revenue was primarily attributable to lower interest rates and origination fees charged on loans due to market conditions and intense competition from other lenders, as well as lower demand for new loans resulting from the COVID-19 pandemic. For the three months ended September 30, 2020 and 2019, approximately $1,521,000 and $1,619,000, respectively, of our revenues were attributable to interest income on secured commercial loans that we offer to small businesses, and approximately $265,000 and $298,000, respectively, of our revenues were attributable to origination fees on such loans. The loans are principally secured by collateral consisting of real estate and, generally, accompanied by personal guarantees from the principals of the borrowers.

12

Interest and amortization of debt service costs

Interest and amortization of debt service costs for the three months ended September 30, 2020 were approximately $338,000 compared to approximately $454,000 for the three months ended September 30, 2019, a decrease of $116,000, or 25.6%. The decrease was primarily attributable to decreased interest expense due to lower LIBOR rates (See Note 4 to the consolidated financial statements included elsewhere in this quarterly report).

General and administrative expenses

General and administrative expenses for the three months ended September 30, 2020 were approximately $305,000 compared to approximately $315,000 for the three months ended September 30, 2019, a decrease of $10,000, or 3.2%. The decrease is primarily attributable to decreases in travel expenses and in legal fees, partially offset by an increase in payroll expense.

Net income

Net income for the three months ended September 30, 2020 was approximately $1,151,000 compared to approximately $1,150,000 for the three months ended September 30, 2019.

Nine months ended September 30, 2020 compared to nine months ended September 30, 2019

Revenue

Total revenues for the nine months ended September 30, 2020 were approximately $5,239,000 compared to approximately $5,484,000 for the nine months ended September 30, 2019, a decrease of $245,000, or 4.5%. The decrease in revenue was primarily attributable to lower interest rates and origination fees charged on loans due to market conditions and intense competition from other lenders, as well as lower demand for new loans resulting from the COVID-19 pandemic. For the nine months ended September 30, 2020 and 2019, revenues of approximately $4,485,000 and $4,609,000, respectively, were attributable to interest income on the secured commercial loans that we offer to small businesses, and approximately $753,000 and $875,000, respectively, of our revenues were attributable to origination fees on such loans. The loans are principally secured by collateral consisting of real estate and, generally, accompanied by personal guarantees from the principals of the borrowers.

Interest and amortization of debt service costs

Interest and amortization of debt service costs for the nine months ended September 30, 2020 were approximately $1,017,000 compared to approximately $1,221,000 for the nine months ended September 30, 2019, a decrease of $204,000, or 16.7%. The decrease was primarily attributable to decreased interest expense due to lower LIBOR rates (See Note 4 to the consolidated financial statements included elsewhere in this quarterly report).

General and administrative expenses

General and administrative expenses for the nine months ended September 30, 2020 were approximately $969,000 compared to approximately $913,000 for the nine months ended September 30, 2019, an increase of $56,000, or 6.1%. The increase is primarily attributable to increases in payroll expense, bank fees and compensation to members of our board of directors, as well as a special bonus paid to our Chief Financial Officer in the first quarter of 2020, partially offset by decreases in travel and meal expenses, and decreases in appraisal fees.

13

Net Income

Net income for the nine months ended September 30, 2020 was approximately $3,264,000 compared to approximately $3,355,000 for the nine months ended September 30, 2019, a decrease of $91,000, or 2.7%. This decrease is primarily attributable to the decrease in revenue, partially offset by the decrease in interest expense.

Liquidity and Capital Resources

At September 30, 2020, we had cash of approximately $157,000 compared to cash of approximately $118,000 at December 31, 2019.

For the nine months ended September 30, 2020, net cash provided by operating activities was approximately $3,263,000, compared to approximately $3,224,000 for the nine months ended September 30, 2019. The increase in net cash provided by operating activities primarily resulted from an increase in deferred origination fees, offset by a decrease in net income.

For the nine months ended September 30, 2020, net cash used in investing activities was approximately $4,384,000, compared to approximately $4,872,000 for the nine months ended September 30, 2019. Net cash used in investing activities for the nine months ended September 30, 2020 mainly consisted of the issuance of commercial loans of approximately $35,410,000, offset by collection of our commercial loans of approximately $31,042,000. In the period ended September 30, 2019, net cash used in investing activities consisted of the issuance of commercial loans of approximately $38,247,000, offset by collection of our commercial loans of approximately $33,375,000.

For the nine months ended September 30, 2020, net cash provided by financing activities was approximately $1,159,000, compared to approximately $1,756,000 for the nine months ended September 30, 2019. Net cash provided by financing activities for the nine months ended September 30, 2020 reflects the net proceeds from the Webster Credit Line of an aggregate of approximately $4,547,000, offset by the dividend payments of approximately $3,181,000, the purchase of treasury shares of approximately $179,000 and deferred financing costs of approximately $27,000. Net cash provided by financing activities for the nine months ended September 30, 2019 reflects the net proceeds from the Webster Credit Line of approximately $5,242,000 and proceeds from the exercise of options of approximately $20,000, offset by the dividend payments of approximately $3,477,000 and the purchase of treasury shares of approximately $29,000.

We maintain the Webster Credit Line which currently provides us with a credit line of $32.5 million in the aggregate secured by assignments of mortgages and other collateral. On August 8, 2017, we entered into the Amended and Restated Credit Agreement. The Amended and Restated Credit Agreement established the Webster Credit Line.

Effective July 11, 2018, we entered into a Waiver and Amendment No. 1 to the Amended and Restated Credit Agreement (“Amendment No. 1”) with Webster, Flushing and Mr. Ran, as guarantor. In conjunction with the execution of Amendment No. 1, we also entered into an Amended and Restated Revolving Credit Note in the principal aggregate amount of $10,000,000 with Flushing (the “Amended Flushing Note”) and a Second Amended and Restated Fee Letter with Webster and Flushing, each dated July 11, 2018. Pursuant to the terms of Amendment No. 1, the Company’s existing Webster Credit Line was increased by $5 million to $25 million in the aggregate. In addition, the interest rates relating to Webster Credit Line were amended such that the interest rates now equal (i) LIBOR plus a premium, which rate aggregated approximately 4.15%, including a 0.5% agency fee, as of September 30, 2020, or (ii) a Base Rate (as defined in the Amended and Restated Credit Agreement) plus 2.25% plus a 0.5% agency fee, as chosen by the Company for each drawdown. Amendment No. 1 also permits the Company to 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. In addition, Mr. Ran has provided a personal guaranty to the Webster Credit Line, which shall not exceed the sum of $500,000 plus any costs relating to the enforcement of the personal guaranty. Furthermore, on December 31, 2019, we entered into Amendment No. 2 to the Amended and Restated Credit and Security Agreement (“Amendment No. 2”) with Webster and Flushing to amend certain required fixed charge coverage requirements.

14

On February 25, 2020, we entered into Amendment No. 3 to the Amended and Restated Credit and Security Agreement (“Amendment No. 3”) with Webster, Flushing, Mizrahi, and Mr. Ran, as guarantor. In conjunction with the execution of Amendment No. 3, we also entered into an Amended and Restated Revolving Credit Note in the principal aggregate amount of $7,500,000 with Mizrahi and a Third Amended and Restated Fee Letter with Webster each dated February 25, 2020. Pursuant to the terms of Amendment No. 3, our existing Webster Credit Line was increased by $7.5 million to $32.5 million in the aggregate and the term of the Webster Credit Line was extended to February 28, 2023. Amendment No. 3 also provides that the Company may issue up to $20 million in bonds through its subsidiary, of which not more than $10 million of such notes 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.

We were in compliance with all covenants of the Webster Credit Line, as amended, as of September 30, 2020. At September 30, 2020, the outstanding amount under the Amended and Restated Credit Agreement was $19,779,851. The interest rate on the amount outstanding fluctuates daily. The rate, including a 0.5% agency fee, at September 30, 2020 was approximately 4.15%.

On February 26, 2020, our Board of Directors authorized a share buy back program, pursuant to which we may, from time to time, purchase up to 100,000 of our common shares. This program does not obligate the Company to purchase any shares and expires on February 25, 2021. 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, 2020, the Company has purchased a total of 38,899 common shares pursuant to the share buy back program, at an aggregate cost of approximately $179,000.

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 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.

As a result of the COVID-19 pandemic, we have experienced a slow down in the deployment of capital and lower demand for new loans. In addition, during the second quarter of 2020, two of our long-term borrowers requested forbearance agreements, due to the impact of the COVID-19 pandemic, deferring two to three months of interest payments to the scheduled payoff date, and we agreed to accommodate the request. Since the date of the forbearance agreements, such borrowers have paid monthly interest. However, to date, we have not been materially impacted by the COVID-19 pandemic and have not experienced any material disruptions in our business operations. We will continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business. If the COVID-19 pandemic worsens in the New York area in which we operate, the pandemic could materially affect our financial and operational results.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet transactions, arrangements or other relationships with unconsolidated entities or other persons that are likely to affect liquidity or the availability of our requirements for capital resources.

Changes to Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

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.

15

Item 4. 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, 2020 (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 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

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, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

Item 1A. RISK FACTORS

Other than the addition of the text below, there have been no material changes from risk factors previously disclosed in the Company’s most recent Annual Report on Form 10-K. See the discussion of the Company’s risk factors under Part I, Item 1A in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

The COVID-19 pandemic may adversely affect our business.

In December 2019, a novel strain of coronavirus, COVID-19, was identified in Wuhan, China. This virus continues to spread globally including in the United States. As a result of the COVID-19 pandemic, we have experienced a slow down in the deployment of capital and lower demand for new loans. In addition, during the second quarter of 2020, two of our long term borrowers requested forbearance agreements, due to the impact of the COVID-19 pandemic, deferring two to three months of interest payments to the scheduled payoff date, and we agreed to accommodate the request. Since the date of the forbearance agreements, such borrowers have paid monthly interest. To date, we have not been materially impacted by the COVID-19 pandemic, but we will continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business. If the COVID-19 pandemic worsens in the New York area in which we operate, the pandemic could materially affect our financial and operational results.

The extent to which the coronavirus impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. While the New York area in which we primarily operate has begun to roll back its “stay-at-home” orders and reopen certain businesses, the current outlook remains uncertain and it is possible the spread of COVID-19 may re-emerge in the New York area. We expect the significance of the COVID-19 pandemic, including the extent of its effect on our financial and operational results, to be dictated by, among other things, its duration, the success of efforts to contain it and the impact of actions taken in response. For instance, recent government action to provide substantial financial support to businesses could provide helpful mitigation for us and certain of our borrowers; its ultimate impact, however, is not yet clear. While we are not able at this time to estimate the future impact of the COVID-19 pandemic on our financial and operational results, it could be material.

16

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On February 26, 2020, our Board of Directors authorized a share buy back program, pursuant to which we may, from time to time, purchase up to 100,000 of our common shares. This program does not obligate the Company to purchase any shares and expires on February 25, 2021. 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 set forth in the table below, during the quarter ended September 30, 2020, the Company repurchased 6,900 shares of the Company’s common shares under the stock buy-back program at an aggregate cost of $27,380.

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) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
July 1-31, 2020		0	$	—		0		68,001
August 1-31, 2020		0	$	—		0		68,001
September 1-30, 2020		6,900	$	3.968		6,900		61,101
Total		6,900	$	3.968		6,900		61,101

Item 6. EXHIBITS

Exhibit No.	Description
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	XBRL Instance Document
101.CAL	XBRL Taxonomy Extension Schema Document
101.SCH	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

* Furnished, not filed, in accordance with item 601(32)(ii) of Regulation S-K.

17

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: October 20, 2020	By:	/s/ Assaf Ran
		Assaf Ran, President and Chief Executive Officer
		(Principal Executive Officer)
Date: October 20, 2020	By:	/s/ Vanessa Kao
		Vanessa Kao, Chief Financial Officer
		(Principal Financial and Accounting Officer)

18

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Assaf Ran, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Manhattan Bridge Capital, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 20, 2020
	/s/ Assaf Ran
	Assaf Ran
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Vanessa Kao, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Manhattan Bridge Capital, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 20, 2020
	/s/ Vanessa Kao
	Vanessa Kao
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

In connection with the Quarterly Report on Form 10-Q of Manhattan Bridge Capital, Inc. (the “Company”) for the period ended September 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Assaf Ran, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, that, to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: October 20, 2020

/s/ Assaf Ran

Assaf Ran

President and Chief Executive Officer

(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

In connection with the Quarterly Report on Form 10-Q of Manhattan Bridge Capital, Inc. (the “Company”) for the period ended September 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Vanessa Kao, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, that, to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: October 20, 2020

/s/ Vanessa Kao

Vanessa Kao

Chief Financial Officer

(Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2020	Oct. 20, 2020
Cover [Abstract]
Entity Registrant Name	MANHATTAN BRIDGE CAPITAL, INC
Entity Central Index Key	0001080340
Document Type	10-Q
Document Period End Date	Sep. 30, 2020
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business Flag	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		9,619,945
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2020

XML

Consolidated Balance Sheets - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Assets
Loans receivable	$ 57,883,068	$ 53,485,014
Interest receivable on loans	809,975	675,996
Cash	156,715	118,407
Other assets	88,554	53,218
Operating lease right-of-use asset, net	52,627	87,754
Deferred financing costs	29,917	22,637
Total assets	59,020,856	54,443,026
Liabilities:
Line of credit	19,779,851	15,232,993
Senior secured notes (net of deferred financing costs of $416,099 and $472,413, respectively)	5,583,901	5,527,587
Deferred origination fees	452,914	322,119
Accounts payable and accrued expenses	132,582	151,823
Operating lease liability	55,566	91,025
Other liabilities		15,000
Dividends payable		1,159,061
Total liabilities	26,004,814	22,499,608
Commitments and contingencies
Stockholders' equity:
Preferred shares - $.01 par value; 5,000,000 shares authorized; none issued
Common shares - $.001 par value; 25,000,000 shares authorized; 9,882,058 issued; 9,619,945 and 9,658,844 outstanding, respectively	9,882	9,882
Additional paid-in capital	33,153,830	33,144,032
Treasury stock, at cost - 262,113 and 223,214 shares	(798,939)	(619,688)
Retained earnings (accumulated deficit)	651,269	(590,808)
Total stockholders' equity	33,016,042	31,943,418
Total liabilities and stockholders' equity	$ 59,020,856	$ 54,443,026

XML

Consolidated Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Senior secured notes, deferred financing costs	$ 416,099	$ 472,413
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	25,000,000	25,000,000
Common stock, shares issued	9,882,058	9,882,058
Common stock, shares outstanding	9,619,945	9,658,844
Treasury stock, shares	262,113	223,214

XML

Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Income Statement [Abstract]
Interest income from loans	$ 1,521,474	$ 1,618,735	$ 4,485,414	$ 4,608,936
Origination fees	264,878	298,222	753,111	875,449
Total revenue	1,786,352	1,916,957	5,238,525	5,484,385
Operating costs and expenses:
Interest and amortization of debt service costs	337,901	454,307	1,016,590	1,220,700
Referral fees	1,641	861	3,569	3,569
General and administrative expenses	305,407	314,820	968,914	913,175
Total operating costs and expenses	644,949	769,988	1,989,073	2,137,444
Income from operations	1,141,403	1,146,969	3,249,452	3,346,941
Other income	9,500	3,000	15,500	9,000
Income before income tax expense	1,150,903	1,149,969	3,264,952	3,355,941
Income tax expense			(645)	(572)
Net income	$ 1,150,903	$ 1,149,969	$ 3,264,307	$ 3,355,369
Basic and diluted net income per common share outstanding:
-Basic	$ 0.12	$ 0.12	$ 0.34	$ 0.35
-Diluted	$ 0.12	$ 0.12	$ 0.34	$ 0.35
Weighted average number of common shares outstanding
-Basic	9,625,140	9,658,608	9,635,107	9,657,911
-Diluted	9,625,140	9,659,764	9,635,107	9,659,012

XML

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($)	Common Stock [Member]	Additional Paid in Capital [Member]	Treasury Stock [Member]	Accumulated Deficit (Retained Earnings) [Member]	Total
Beginning balance at Dec. 31, 2018	$ 9,874	$ 33,110,536	$ (590,234)	$ (448,801)	$ 32,081,375
Beginning balance, shares at Dec. 31, 2018	9,874,191		218,214
Exercise of options and warrants	$ 8	20,432			20,440
Exercise of options and warrants, shares	7,867
Purchase of treasury shares			$ (29,454)		(29,454)
Purchase of treasury shares, shares			5,000
Non - cash compensation		9,798			9,798
Dividends paid				(2,318,395)	(2,318,395)
Net income				3,355,369	3,355,369
Ending balance at Sep. 30, 2019	$ 9,882	33,140,766	$ (619,688)	588,173	33,119,133
Ending balance, shares at Sep. 30, 2019	9,882,058		223,214
Beginning balance at Jun. 30, 2019	$ 9,881	33,137,501	$ (619,688)	597,161	33,124,855
Beginning balance, shares at Jun. 30, 2019	9,881,191		223,214
Exercise of warrants	$ 1	(1)			0
Exercise of warrants, shares	867
Non - cash compensation		3,266			3,266
Dividends paid				(1,158,957)	(1,158,957)
Net income				1,149,969	1,149,969
Ending balance at Sep. 30, 2019	$ 9,882	33,140,766	$ (619,688)	588,173	33,119,133
Ending balance, shares at Sep. 30, 2019	9,882,058		223,214
Beginning balance at Dec. 31, 2019	$ 9,882	33,144,032	$ (619,688)	(590,808)	31,943,418
Beginning balance, shares at Dec. 31, 2019	9,882,058		223,214
Purchase of treasury shares			$ (179,251)		(179,251)
Purchase of treasury shares, shares			38,899
Non - cash compensation		9,798			9,798
Dividends paid				(2,022,230)	(2,022,230)
Net income				3,264,307	3,264,307
Ending balance at Sep. 30, 2020	$ 9,882	33,153,830	$ (798,939)	651,269	33,016,042
Ending balance, shares at Sep. 30, 2020	9,882,058		262,113
Beginning balance at Jun. 30, 2020	$ 9,882	33,150,564	$ (771,559)	463,050	32,851,937
Beginning balance, shares at Jun. 30, 2020	9,882,058		255,213
Purchase of treasury shares			$ (27,380)		(27,380)
Purchase of treasury shares, shares			6,900
Non - cash compensation		3,266			3,266
Dividends paid				(962,684)	(962,684)
Net income				1,150,903	1,150,903
Ending balance at Sep. 30, 2020	$ 9,882	$ 33,153,830	$ (798,939)	$ 651,269	$ 33,016,042
Ending balance, shares at Sep. 30, 2020	9,882,058		262,113

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flows from operating activities:
Net income	$ 3,264,307	$ 3,355,369
Adjustments to reconcile net income to net cash provided by operating activities -
Amortization of deferred financing costs	76,136	70,867
Adjustment to operating lease right-of-use asset and liability	(333)
Depreciation	744	1,157
Non-cash compensation expense	9,798	9,798
Changes in operating assets and liabilities:
Interest receivable on loans	(163,650)	(167,194)
Other assets	(35,156)	(26,209)
Accounts payable and accrued expenses	(19,241)	(19,134)
Deferred origination fees	130,795	(461)
Net cash provided by operating activities	3,263,400	3,224,193
Cash flows from investing activities:
Issuance of short term loans	(35,410,076)	(38,246,965)
Collections received from loans	31,041,693	33,375,420
Release of loan holdback relating to mortgage receivable	(15,000)
Purchase of fixed assets	(923)
Net cash used in investing activities	(4,384,306)	(4,871,545)
Cash flows from financing activities:
Proceeds from line of credit, net	4,546,858	5,241,895
Dividends paid	(3,181,291)	(3,477,112)
Purchase of treasury shares	(179,251)	(29,454)
Deferred financing costs incurred	(27,102)
Proceeds from exercise of stock options		20,440
Net cash provided by financing activities	1,159,214	1,755,769
Net increase in cash	38,308	108,417
Cash, beginning of period	118,407	355,057
Cash, end of period	156,715	463,474
Supplemental Cash Flow Information:
Taxes paid during the period	645	572
Interest paid during the period	954,622	1,144,425
Operating leases paid during the period	40,973	39,628
Non-cash Investing Activities:
Establishment of right-of-use asset and operating lease liability		135,270
Interest receivable converted to loans receivable in connection with forbearance agreements	29,671
Loan holdback relating to mortgage receivable		$ 15,000

XML

The Company

9 Months Ended

Sep. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The Company

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”), 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 (“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 GAAP for complete 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, 2019 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 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 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. 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) 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.

XML

Recent Technical Accounting Pronouncements

9 Months Ended

Sep. 30, 2020

Accounting Changes and Error Corrections [Abstract]

Recent Technical Accounting Pronouncements

2. RECENT TECHNICAL ACCOUNTING PRONOUNCEMENTS

In May 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019-05, “Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief,” which requires that entities use a new forward looking “expected loss” model that generally will result in the earlier recognition of an allowance for credit losses. This ASU also allows entities to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost upon adoption of ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” The Company adopted both ASU 2016-13 and ASU 2019-05 effective January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued. The amendments in the ASU are effective for all entities as of March 12, 2020 through December 31, 2022. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements.

XML

Commercial Loans

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Commercial Loans

3. COMMERCIAL LOANS

Loans Receivable

The Company offers short-term secured non–banking loans to real estate investors (also known as hard money) 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, generally, accompanied by personal guarantees from the principals of the borrowers. The loans are generally for a term of one year. The short term loans are initially recorded, and carried thereafter, in the 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, 2020, the Company was committed to $5,191,959 in construction loans that can be drawn by the borrowers when certain conditions are met.

At September 30, 2020, no one entity has 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, 2020 and December 31, 2019:

Performing loans	Developers- Residential		Developers- Commercial		Developers- Mixed Used		Total outstanding loans
September 30, 2020	$	54,494,205	$	1,564,863	$	1,824,000	$	57,883,068
December 31, 2019	$	48,395,014	$	1,975,000	$	3,115,000	$	53,485,014

At September 30, 2020, the Company’s loans receivable consisted of loans in the amount of $367,500, $1,594,463, $1,520,000 and $5,883,071, originally due in 2016, 2017, 2018 and 2019, respectively. During the second quarter of 2020, the Company agreed to grant forbearances, due to the COVID-19 pandemic, in an aggregate amount of approximately $30,000 to two of its long term borrowers deferring two to three months of interest payments to the scheduled payoff date. Since the date of the forbearance agreements, such borrowers have paid monthly interest.

In all instances the borrowers are currently paying their interest and, generally, the Company receives a fee in connection with the extension of the loans. Accordingly, at September 30, 2020, no loan impairments exist and there are no provisions for impairments of loans or recoveries thereof.

Subsequent to the balance sheet date, $2,534,425 of the loans receivable at September 30, 2020 were paid off, including $1,005,000 originally due on or before September 30, 2020.

XML

Line of Credit

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Line of Credit

4. LINE OF CREDIT

The Company has executed an Amended and Restated Credit and Security Agreement, as amended (the “Amended and Restated Credit Agreement”), with Webster Business Credit Corporation (“Webster”), Flushing Bank (“Flushing”) and Mizrahi Tefahot Bank Ltd (“Mizrahi”), 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, secured by assignments of mortgages and other collateral. 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, as a default under the credit line.

Effective July 11, 2018, the Company entered into a Waiver and Amendment No. 1 to the Amended and Restated Credit Agreement (“Amendment No. 1”) with Webster, Flushing and Mr. Assaf Ran, the Company’s President and Chief Executive Officer, as guarantor. Pursuant to the terms of Amendment No. 1, the Company’s existing Webster Credit Line was increased by $5 million to $25 million in the aggregate. In addition, the interest rates relating to the Webster Credit Line were amended such that the interest rates now equal (i) LIBOR plus a premium, which rate aggregated approximately 4.15%, including a 0.5% agency fee, as of September 30, 2020, or (ii) a Base Rate (as defined in the Amended and Restated Credit Agreement) plus 2.25% plus a 0.5% agency fee, as chosen by the Company for each drawdown. Amendment No. 1 also permits the Company to 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. In addition, Mr. Ran has provided a personal guaranty to the Webster Credit Line, which shall not exceed the sum of $500,000 plus any costs relating to the enforcement of the personal guaranty. Furthermore, on December 31, 2019, the Company entered into Amendment No. 2 to the Amended and Restated Credit and Security Agreement with Webster and Flushing to amend certain required fixed charge coverage requirements.

On February 25, 2020, the Company entered into Amendment No. 3 to the Amended and Restated Credit and Security Agreement (“Amendment No. 3”) with Webster, Flushing, Mizrahi, and Mr. Ran, as guarantor. Pursuant to the terms of Amendment No. 3, the Company’s existing Webster Credit Line was increased by $7.5 million to $32.5 million in the aggregate and the term of the Webster Credit Line was extended to February 28, 2023. Amendment No. 3 also provides that the Company may issue up to $20 million in bonds through its subsidiary, of which not more than $10 million of such notes 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.

The costs to establish and amend the Webster Credit Line are being amortized over the term of the respective agreement, using the straight-line method. The amortization costs for the nine months ended September 30, 2020 and 2019 were $19,822 and $14,552, respectively.

The Company was in compliance with all covenants of the Webster Credit Line, as amended, as of September 30, 2020. At September 30, 2020, the outstanding amount under the Amended Credit Agreement was $19,779,851. The interest rate on the amount outstanding fluctuates daily. The rate, including a 0.5% Agency Fee, at September 30, 2020 was approximately 4.15%.

XML

Senior Secured Notes

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Senior Secured Notes

5. SENIOR SECURED NOTES

On April 25, 2016, in an initial public offering, MBC Funding 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, 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, together with MBC Funding’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 plus MBC Funding’s cash on hand is less than 120% of the aggregate outstanding principal balance of the Notes, MBC Funding 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 plus, MBC Funding’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 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; provided that (i) if the Notes are redeemed on or after April 22, 2019 but prior to April 22, 2020, the redemption price will be 103% of the principal amount of the Notes redeemed and (ii) if the Notes are redeemed on or after April 22, 2020 but prior to April 22, 2021, the redemption price will be 101.5% of the principal amount of the Notes redeemed plus, in either case, the accrued but unpaid interest on the Notes redeemed up to, but not including, the date of redemption. No Notes were redeemed prior to April 22, 2020.

Each Noteholder has the right to cause MBC Funding to redeem his, her or its Notes on April 22, 2021. The redemption price will be equal to the outstanding principal amount of the Notes redeemed plus the accrued but unpaid interest up to, but not including, the date of redemption, without penalty or premium. In order to exercise this right, the Noteholder must notify MBC Funding, in writing, no earlier than November 22, 2020 and no later than January 22, 2021. All Notes that are subject to a properly and timely notice will be redeemed on April 22, 2021. Any Noteholder who fails to make a proper and timely election will be deemed to have waived his, her or its right to have his, her or its Notes redeemed prior to the maturity date.

MBC Funding is obligated to offer to redeem the Notes if there occurs a “change of control” with respect to MBC Funding or the Company or if MBC Funding 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.

XML

Stockholders' Equity

9 Months Ended

Sep. 30, 2020

Equity [Abstract]

Stockholders' Equity

6. STOCKHOLDERS’ EQUITY

The Company adopted a share buy back program on February 26, 2020 for the repurchase of up to 100,000 of the Company’s common shares in the next twelve months. The Company has purchased an aggregate of 38,899 common shares under this repurchase program, at an aggregate cost of approximately $179,000, as of September 30, 2020.

XML

Earnings Per Share of Common Share

9 Months Ended

Sep. 30, 2020

Basic and diluted net income per common share outstanding:

Earnings Per Share of Common Share

7. EARNINGS PER SHARE OF COMMON SHARE

Basic and diluted earnings per share are calculated in accordance with Accounting Standards Codification (“ASC”) 260, “Earnings Per Share” (“ASC 260”). Under ASC 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.

The denominator is based on the following weighted average number of common shares:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Basic weighted average common shares outstanding		9,625,140		9,658,608		9,635,107		9,657,911
Incremental shares for assumed exercise of warrants		—		1,156		—		1,101
Diluted weighted average common shares outstanding		9,625,140		9,659,764		9,635,107		9,659,012

For each of the three and nine months ended September 30, 2020, vested warrants to purchase 33,612 common shares were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive. For the three and nine months ended September 30, 2019, 42,106 and 42,161, exercisable warrants were not included in the diluted earnings per share calculation, respectively, because their effect would have been anti-dilutive.

XML

Stock-Based Compensation

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

8. STOCK–BASED COMPENSATION

Stock based compensation expense recognized under ASC 718, “Compensation-Stock Compensation,” for each of the nine months ended September 30, 2020 and 2019 of $9,798 represents the amortization of the fair value of 1,000,000 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 15 years.

On August 15, 2016, in connection with a public offering of the Company’s common shares, the Company issued warrants to purchase up to 33,612 common shares, with an exercise price of $7.4375 per common share, to the representative of the underwriters of the offering (the “August 2016 Representative Warrants”). The warrants are exercisable at any time, and from time to time, in whole or in part, commencing on August 9, 2017 and expire on August 9, 2021. The fair value of these warrants, using the Black-Scholes option pricing model, on the date of issuance was $47,020. At September 30, 2020 all of the August 2016 Representative Warrants were outstanding.

XML

Covid-19

9 Months Ended

Sep. 30, 2020

Covid-19

Covid-19

9. COVID-19

As a result of the COVID-19 pandemic, the Company may experience difficulties collecting monthly interest on time from its borrowers, property values may decline and certain of its originated loans may need to be extended. For example, during the second quarter of 2020, two of our long term borrowers requested forbearance agreements, due to the impact of the COVID-19 pandemic, deferring two to three months of interest payments to the scheduled payoff date, and we agreed to accommodate the request. Since the date of the forbearance agreements, such borrowers have paid monthly interest. Since the onset of the COVID-19 pandemic, the Company has continued to originate loans as well as continued to service its existing loans, though the Company has observed lower demand for new loans. The Company has also held discussions with its borrowers and they have expressed their general concern about the uncertain economic condition, though these concerns have been partially alleviated due to lowered interest rates. To date, the Company has not been materially impacted by the COVID-19 pandemic and will continue to closely monitor the impact of the COVID-19 pandemic on all aspects of its business. If the COVID-19 pandemic worsens in the geographic areas in which the Company operates, the pandemic could materially affect its financial and operational results.

XML

Subsequent Event

9 Months Ended

Sep. 30, 2020

Subsequent Events [Abstract]

Subsequent Event

10. SUBSEQUENT EVENT

In accordance with the dividend declared by the Company’s Board of Directors on July 30, 2020, a cash dividend of $0.10 per share in an aggregate amount of $961,995 was paid on October 15, 2020 to all shareholders of record on October 9, 2020.

XML

Commercial Loans (Tables)

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Schedule of Credit Risk

Credit risk profile based on loan activity as of September 30, 2020 and December 31, 2019:

Performing loans	Developers- Residential		Developers- Commercial		Developers- Mixed Used		Total outstanding loans
September 30, 2020	$	54,494,205	$	1,564,863	$	1,824,000	$	57,883,068
December 31, 2019	$	48,395,014	$	1,975,000	$	3,115,000	$	53,485,014

XML

Earnings Per Share of Common Share (Tables)

9 Months Ended

Sep. 30, 2020

Basic and diluted net income per common share outstanding:

Schedule of Weighted Average Number of Common Shares

The denominator is based on the following weighted average number of common shares:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Basic weighted average common shares outstanding		9,625,140		9,658,608		9,635,107		9,657,911
Incremental shares for assumed exercise of warrants		—		1,156		—		1,101
Diluted weighted average common shares outstanding		9,625,140		9,659,764		9,635,107		9,659,012

XML

Commercial Loans (Details Narrative)	9 Months Ended
	Sep. 30, 2020 USD ($)
Loan term	1 year
Loan outstanding percentage	10.00%
Long term borrowings	$ 30,000
Subsequent Balance Sheet Date [Member]
Loans paid off	2,534,425
Originally Due in 2016 [Member]
Loans receivable	367,500
Originally Due in 2017 [Member]
Loans receivable	1,594,463
Originally Due in 2018 [Member]
Loans receivable	1,520,000
Originally Due in 2019 [Member]
Loans receivable	5,883,071
Originally Due on or Before September 2020 [Member] | Subsequent Balance Sheet Date [Member]
Loans paid off	1,005,000
Construction Loans [Member]
Principal amount committed in construction loans	$ 5,191,959

XML

Commercial Loans - Schedule of Credit Risk (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Total outstanding loans	$ 57,883,068	$ 53,485,014
Developers Residential [Member]
Total outstanding loans	54,494,205	48,395,014
Developers Commercial [Member]
Total outstanding loans	1,564,863	1,975,000
Developers Mixed Used [Member]
Total outstanding loans	$ 1,824,000	$ 3,115,000

XML

Line of Credit (Details Narrative) - USD ($)			9 Months Ended
	Feb. 25, 2020	Jul. 11, 2018	Sep. 30, 2020	Sep. 30, 2019
Amortization of financing costs			$ 76,136	$ 70,867
Amended and Restated Credit Agreement [Member]
Maximum borrowing capacity		$ 25,000,000
Line of credit facility, interest rate description		The interest rates relating to the Webster Credit Line were amended such that the interest rates now equal (i) LIBOR plus a premium, which rate aggregated approximately 4.15%, including a 0.5% agency fee, as of September 30, 2020, or (ii) a Base Rate (as defined in the Amended and Restated Credit Agreement) plus 2.25% plus a 0.5% agency fee, as chosen by the Company for each drawdown.	The rate, including a 0.5% Agency Fee, at September 30, 2020 was approximately 4.15%.
Line of credit facility, interest rate at period end			4.15%
Percentage of agency fee			0.50%
Line of credit, current			$ 19,779,851
Amended and Restated Credit Agreement [Member] | Base Rate Plus [Member]
Line of credit facility, interest rate at period end		2.25%
Percentage of agency fee		0.50%
Amended and Restated Credit Agreement [Member] | Minimum [Member]
Credit line increased value		$ 5,000,000
Amended and Restated Revolving Credit Note [Member]
Maximum borrowing capacity	$ 32,500,000
Amended and Restated Revolving Credit Note [Member] | Minimum [Member]
Credit line increased value	$ 7,500,000
Webster Credit Line [Member]
Maximum borrowing capacity			32,500,000
Line of credit, expiration date	Feb. 28, 2023
Amortization of financing costs			$ 19,822	$ 14,552
Webster Credit Line [Member] | Amended and Restated Credit Agreement [Member] | Mr. Ran [Member]
Debt guaranteed amount		$ 500,000
Webster Credit Line [Member] | Amended and Restated Credit and Security Agreement [Member]
Mortgage notes receivable, description	The Company may issue up to $20 million in bonds through its subsidiary, of which not more than $10 million of such notes 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.

XML

Senior Secured Notes (Details Narrative)	Apr. 25, 2016 USD ($)	Apr. 25, 2016 USD ($)
After April 22, 2019 But Prior to April 22, 2020 [Member]
Debt instrument, redemption price, percentage	103.00%
After April 22, 2020 But Prior to April 22, 2021 [Member]
Debt instrument, redemption price, percentage	101.50%
MBC Funding II Corp [Member]
Debt instrument description	Under the terms of the Indenture, the aggregate outstanding principal balance of the mortgage loans held by MBC Funding, together with MBC Funding'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 plus MBC Funding's cash on hand is less than 120% of the aggregate outstanding principal balance of the Notes, MBC Funding 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 plus, MBC Funding'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 Corp [Member] | Change of Control [Member]
Debt instrument, redemption price, percentage	101.00%
Senior Secured Notes [Member]
Principal amount of each note	$ 1,000	$ 1,000
Debt instrument collateral, percentage	120.00%	120.00%
Senior Secured Notes [Member] | Indenture [Member]
Debt instrument interest rate	6.00%	6.00%
Debt instrument maturity date		Apr. 22, 2026
Debt instrument face amount	$ 6,000,000	$ 6,000,000

XML

Stockholders' Equity (Details Narrative) - USD ($)	Sep. 30, 2020	Feb. 26, 2020
Stock repurchase program, number of common stock repurchased, shares	38,899
Stock repurchase program, number of common stock, aggregate cost	$ 179,000
Maximum [Member]
Stock repurchase program, number of common stock repurchased, shares		100,000

XML

Earnings Per Share of Common Share (Details Narrative) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Vested Warrants [Member]
Anti-dilutive earning per share common shares	33,612		33,612
Exercisable Warrants [Member]
Anti-dilutive earning per share common shares		42,106		42,161

XML

Earnings Per Share of Common Share - Schedule of Weighted Average Number of Common Shares (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Accounting Policies [Abstract]
Basic weighted average common shares outstanding	9,625,140	9,658,608	9,635,107	9,657,911
Incremental shares for assumed exercise of warrants		1,156		1,101
Diluted weighted average common shares outstanding	9,625,140	9,659,764	9,635,107	9,659,012

XML

Stock-Based Compensation (Details Narrative) - USD ($)			9 Months Ended
	Aug. 15, 2016	Sep. 09, 2011	Sep. 30, 2020	Sep. 30, 2019
Share-based compensation expense			$ 9,798	$ 9,798
August 2016 Representative Warrants [Member]
Warrants to purchase common shares	33,612
Warrant exercise price	$ 7.4375
Warrant expire date	Aug. 09, 2021
Fair value of warrant issuance	$ 47,020
Chief Executive Officer [Member]
Share based compensation expense of restricted, shares		1,000,000
Share based compensation expense of restricted, value		$ 195,968
Fair value of restricted shares amortization period		15 years

XML

Subsequent Event (Details Narrative) - Board of Directors [Member] - USD ($)	Oct. 15, 2020	Jul. 30, 2020
Cash dividend per share		$ 0.10
Subsequent Event [Member]
Aggregate amount of dividend	$ 961,995