UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended:
or
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
| (Registrant’s telephone number, including area code) |
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Securities registered pursuant to Section 12(b) of the Act: None
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.
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 during the preceding
12 months (or for such shorter period that the registrant was required to submit such files).
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 | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for comply with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 13, 2022, there were
Manufactured Housing Properties Inc.
Quarterly Report on Form 10-Q
Period Ended March 31, 2022
TABLE OF CONTENTS
| PART I FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements. | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 26 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | 37 |
| Item 4. | Controls and Procedures. | 37 |
| PART II | ||
| FINANCIA INFORMATION | ||
| Item 1. | Legal Proceedings. | 38 |
| Item 1A. | Risk Factors. | 38 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 38 |
| Item 3. | Defaults Upon Senior Securities. | 38 |
| Item 4. | Mine Safety Disclosures. | 38 |
| Item 5. | Other Information. | 38 |
| Item 6. | Exhibits. | 39 |
i
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
MANUFACTURED HOUSING PROPERTIES INC.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1
MANUFACTURED HOUSING PROPERTIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2022 AND DECEMBER 31, 2021
| March 31, 2022 | December 31, 2021 | |||||||
| Assets | (unaudited) | |||||||
| Investment Property | ||||||||
| Land | $ | $ | ||||||
| Site and Land Improvements | ||||||||
| Buildings and Improvements | ||||||||
| Construction in Process | ||||||||
| Total Investment Property | ||||||||
| Accumulated Depreciation | ( | ) | ( | ) | ||||
| Net Investment Property | ||||||||
| Cash and Cash Equivalents, including restricted cash of $ | ||||||||
| Accounts Receivable | ||||||||
| Other Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities | ||||||||
| Accounts Payable | $ | $ | ||||||
| Notes Payable, net of $ | ||||||||
| Lines of Credit – Variable Interest Entity, net of $ | ||||||||
| Line of Credit – Related Party | ||||||||
| Note Payable – Related Party | ||||||||
| Accrued Liabilities including amounts due to related parties of $ | ||||||||
| Tenant Security Deposits | ||||||||
| Series C Redeemable Preferred Stock, par value $ | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (See note 6) | ||||||||
| Redeemable Preferred Stock – subject to redemption | ||||||||
| Series A Cumulative Redeemable Convertible Preferred Stock, par value $ | ||||||||
| Series B Cumulative Redeemable Preferred Stock, par value $ | ||||||||
| Deficit | ||||||||
| Common Stock, par value $ | ||||||||
| Additional Paid in Capital | ( | ) | ( | ) | ||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Total Manufactured Housing Properties Inc. Deficit | ( | ) | ( | ) | ||||
| Non-controlling interest in Variable Interest Entities | ( | ) | ( | ) | ||||
| Total Deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND DEFICIT | $ | $ | ||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
2
MANUFACTURED HOUSING PROPERTIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(UNAUDITED)
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenue | ||||||||
| Rental and related income | $ | $ | ||||||
| Property sales | ||||||||
| Total revenues | ||||||||
| Community operating expenses | ||||||||
| Repair and maintenance | ||||||||
| Real estate taxes | ||||||||
| Utilities | ||||||||
| Insurance | ||||||||
| General and administrative expense | ||||||||
| Total community operating expenses | ||||||||
| Corporate payroll and overhead | ||||||||
| Depreciation expense | ||||||||
| Interest expense | ||||||||
| Refinancing costs | - | |||||||
| Total expenses | ||||||||
| Net loss before provision for income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net income (loss) attributable to non-controlling interest variable interest entities | ( | ) | ||||||
| Net income (loss) attributable to Manufactured Housing Properties, Inc. | ( | ) | ( | ) | ||||
| Preferred stock dividends and put option value accretion | ||||||||
| Series A preferred dividends | ||||||||
| Series A preferred put option value accretion | ||||||||
| Series B preferred dividends | ||||||||
| Series B preferred put option value accretion | ||||||||
| Total preferred stock dividends and put option value accretion | ||||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares - basic and fully diluted | ||||||||
| Net loss per share – basic and fully diluted | $ | ( | ) | $ | ( | ) | ||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
3
MANUFACTURED HOUSING PROPERTIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(UNAUDITED)
| COMMON STOCK | ADDITIONAL | TOTAL MANUFACTURING | NON | |||||||||||||||||||||||||
| SHARES | PAR VALUE | PAID IN CAPITAL | ACCUMULATED DEFICIT | HOUSING PROPERTIES INC. | CONTROLLING INTEREST | DEFICIT | ||||||||||||||||||||||
| Balance at January 1, 2021 | $ | $ | ( | ) | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| Stock option expense | - | |||||||||||||||||||||||||||
| Preferred shares Series A dividends | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series A put option value accretion | - | - | ( | ) | - | ( | ) | ( | ) | |||||||||||||||||||
| Preferred shares Series B dividends | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series B put option value accretion | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Common Stock issuance to preferred share holders | ||||||||||||||||||||||||||||
| Contributions to VIE | - | |||||||||||||||||||||||||||
| Distributions from VIE | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Balance at March 31, 2021 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||
| Balance at January 1, 2022 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||
| Stock option expense | - | |||||||||||||||||||||||||||
| Preferred shares Series A dividends | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series A put option value accretion | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series B dividends | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Preferred shares Series B put option value accretion | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Distributions from VIE | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Net Loss | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Balance at March 31, 2022 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
4
MANUFACTURED HOUSING PROPERTIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(UNAUDITED)
| March 31, 2022 | March 31, 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Stock option expense | ||||||||
| Amortization of debt issuance costs | ||||||||
| Write off debt issuance costs recorded as debt discount | - | |||||||
| Write off acquisition and development pursuit costs | - | |||||||
| Loss on sale of homes | - | |||||||
| Depreciation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Other assets | ||||||||
| Accounts payable | ( | ) | ||||||
| Tenant security deposits | ||||||||
| Accrued liabilities | ( | ) | ||||||
| Net Cash Provided by (Used in) Operating Activities | ( | ) | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Capital improvements | ( | ) | ( | ) | ||||
| Proceeds from sale of homes | - | |||||||
| Purchases of investment properties | ( | ) | - | |||||
| Payment of pursuit costs | ( | ) | ||||||
| Payment of acquisition costs | ( | ) | - | |||||
| Net Cash Used in Investing Activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from line of credit – related party | - | |||||||
| Repayment of notes payable | ( | ) | ( | ) | ||||
| Repayment of lines of credit - VIEs | ( | ) | - | |||||
| Proceeds from issuance of preferred stock | ||||||||
| Payment of debt costs and Series C Preferred Stock costs recorded as debt discount | ( | ) | ( | ) | ||||
| Series A and Series B Preferred share dividends | ( | ) | ( | ) | ||||
| Contribution to VIE | - | |||||||
| Distributions from VIE | ( | ) | ( | ) | ||||
| Net Cash Provided by Financing Activities | ||||||||
| Net change in cash, cash equivalents and restricted cash | ( | ) | ||||||
| Cash, cash equivalents and restricted cash at beginning of the period | ||||||||
| Cash, cash equivalents and restricted cash at end of the period | $ | $ | ||||||
| Cash, cash equivalents and restricted cash consist of the following: | ||||||||
| End of period | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total | $ | $ | ||||||
| Cash, cash equivalents and restricted cash consist of the following: | ||||||||
| Beginning of period | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total | $ | $ | ||||||
| Cash paid for: | ||||||||
| Income Taxes | $ | $ | ||||||
| Interest | $ | $ | ||||||
| Series C Preferred share dividends included in interest expense | $ | $ | ||||||
| Non-Cash Investing and Financing Activities | ||||||||
| Acquisition of property in accounts payable | $ | $ | ||||||
| Notes related to acquisitions | $ | $ | ||||||
| Non-cash Preferred stock accretion | $ | $ | ||||||
| Stock issued in connection with Series B Preferred Stock issuance | $ | - | $ | |||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
5
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
Organization
Manufactured Housing Properties Inc. (the “Company”) is a Nevada corporation whose principal activities are to acquire, own, and operate manufactured housing communities.
Basis of Presentation
The Company prepares its consolidated financial statements under the accrual basis of accounting, in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q of Regulation S-X. They do not include all information and footnotes required by GAAP for complete financial statements. The December 31, 2021 consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 31, 2022. The interim unaudited condensed consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for a fair statement of the financial statements, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.
6
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company, entities controlled by the Company through its direct or indirect ownership of a majority interest, and any other entities in which the Company has a controlling financial interest. The Company consolidates variable interest entities (“VIEs”) where the Company is the primary beneficiary. The primary beneficiary of a VIE is the party that has both the power to direct the activities that most significantly impact the VIE’s economic performance, and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.
The Company’s formation of all subsidiaries and VIE’s date of consolidation are as follows:
| Name of Subsidiary | State of Formation | Date of Formation | Ownership | |||||
All intercompany transactions and balances have been eliminated in consolidation. The Company does not have a majority or minority interest in any other company, either consolidated or unconsolidated.
7
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
Revenue Recognition
Mobile home rental and related income is generated from lease agreements for our sites and homes. The lease component of these agreements is accounted for under Topic 842 of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, for leases.
Under ASC 842, the Company must assess on an individual lease basis whether it is probable that we will collect the future lease payments. The Company considers the tenant’s payment history and current credit status when assessing collectability. When collectability is not deemed probable, the Company will write-off the tenant’s receivables, including straight-line rent receivable, and limit lease income to cash received.
The Company’s revenues primarily consist of rental revenues and fee and other income. The Company has the following revenue sources and revenue recognition policies:
| ● | Rental revenues include revenues from the leasing of land lot or a combination of both, the mobile home and land at our properties to tenants. |
| ● | Revenues from the leasing of land lot or a combination of both, the mobile home and land at the Company’s properties to tenants include (i) lease components, including land lot or a combination of both, the mobile home and land, and (ii) reimbursement of utilities and account for the components as a single lease component in accordance with ASC 842. |
| ● | Revenues derived from fixed lease payments are recognized on a straight-line basis over the non-cancelable period of the lease. The Company commences rental revenue recognition when the underlying asset is available for use by the lessee. Revenue derived from the reimbursement of utilities are generally recognized in the same period as the related expenses are incurred. The Company’s leases are month-to-month. |
Accounts Receivable
Accounts receivable consist primarily of amounts currently due from residents. Accounts receivables are reported in the balance sheet at outstanding principal adjusted for any charge-offs and the allowance for losses. The Company records an allowance for bad debt when receivables are over 90 days old.
Acquisitions
The Company accounts for acquisitions as asset acquisitions in accordance with ASC 805, “Business Combinations,” and allocates the purchase price of the property based upon the fair value of the assets acquired, which generally consist of land, site and land improvements, buildings and improvements and rental homes. The Company allocates the purchase price of an acquired property generally determined by internal evaluation as well as third-party appraisal of the property obtained in conjunction with the purchase.
8
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
Variable Interest Entities
In December 2020, the Company entered into a property
management agreement with Gvest Finance LLC, a company owned and controlled by the Company’s parent company, Gvest Real Estate Capital
LLC, an entity whose sole owner is Raymond M. Gee, the Company’s chairman and chief executive officer, and has subsequently entered
into property management agreements with Gvest Homes I LLC, Gvest Anderson Homes LLC, Gvest Capital
View Homes LLC, Gvest Hidden Oaks Homes LLC, Gvest Springlake Homes LLC, Gvest Carolinas 4 Homes LLC, Gvest Sunnyland Homes LLC and Gvest
Warrenville Homes LLC, which are wholly owned subsidiaries of Gvest Finance LLC. Under the property management agreements, the
Company manages the homes owned by the VIEs and the VIEs remit to the Company all income, less any sums paid out for debt service plus
Additionally,
during 2021, the Company formed two entities, Brainerd Place LLC and Bull Creek LLC, for the purpose of exploring opportunities to develop
mobile home communities. The Company owns
A company with interests in a VIE must consolidate the entity if the company is deemed to be the primary beneficiary of the VIE; that is, if it has both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. Such a determination requires management to evaluate circumstances and relationships that may be difficult to understand and to make a significant judgment, and to repeat the evaluation at each subsequent reporting date. Primarily due to the Company’s common ownership by Mr. Gee, its power to direct the activities of these entities that most significantly impact their economic performance, and the fact that the Company has the obligation to absorb losses or the right to receive benefits from these entities that could potentially be significant to these entities, the entities listed above are considered to be VIEs in accordance applicable GAAP.
Net Income (Loss) Per Share
Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding, including vested penny stock options during the period. Diluted net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding plus the weighted average number of net shares that would be issued upon exercise of stock options pursuant to the treasury stock method.
For the three months ended March 31, 2022, the potentially dilutive penny options for the purchase of
For the three months ended March 31, 2021, the
potentially dilutive penny options for the purchase of
Use of Estimates
The presentation of financial statements in conformity with GAAP requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.
Investment Property and Depreciation
Investment real property and equipment are carried
at cost. Depreciation of buildings, improvements to sites and buildings, rental homes, equipment, and vehicles is computed principally
on the straight-line method over the estimated useful lives of the assets (ranging from
9
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
Impairment Policy
The Company applies FASB ASC 360-10, “Property, Plant & Equipment,” to measure impairment in real estate investments. Rental properties are individually evaluated for impairment when conditions exist which may indicate that it is probable that the sum of expected future cash flows (on an undiscounted basis without interest) from a rental property is less than the carrying value under its historical net cost basis. These expected future cash flows consider factors such as future operating income, trends and prospects as well as the effects of leasing demand, competition and other factors. Upon determination that a permanent impairment has occurred, rental properties are reduced to their fair value. For properties to be disposed of, an impairment loss is recognized when the fair value of the property, less the estimated cost to sell, is less than the carrying amount of the property measured at the time there is a commitment to sell the property and/or it is actively being marketed for sale. A property to be disposed of is reported at the lower of its carrying amount or its estimated fair value, less its cost to sell. Subsequent to the date that a property is held for disposition, depreciation expense is not recorded. There was no impairment during the three months ended March 31, 2022 and 2021.
Cash and Cash Equivalents
The Company considers all highly liquid financial instruments purchased with an original maturity of three months or less to be cash equivalents.
The Company maintains cash balances at banks and
deposits at times may exceed federally insured limits. Management believes that the financial institutions that hold the Company’s
cash are financially secure and, accordingly, minimal credit risk exists. At March 31, 2022 and December 31, 2021, the Company had approximately
$
Stock Based Compensation
All stock based payments to employees, nonemployee
consultants, and to nonemployee directors for their services as directors, including any grants of restricted stock and stock options,
are measured at fair value on the grant date and recognized in the statements of operations as compensation or other expense over the
relevant service period in accordance with FASB ASC Topic 718. Stock based payments to nonemployees are recognized as an expense over
the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is reached, or
the date performance is completed. In addition, for awards that vest immediately and are nonforfeitable the measurement date is the date
the award is issued. The Company recorded stock option expense of $
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10 of the FASB ASC for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB ASC to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. Most of the Company’s financial assets do not have a quoted market value. Therefore, estimates of fair value are necessarily based on a number of significant assumptions (many of which involve events outside the control of management). Such assumptions include assessments of current economic conditions, perceived risks associated with these financial instruments and their counterparties, future expected loss experience and other factors. Given the uncertainties surrounding these assumptions, the reported fair values represent estimates only and, therefore, cannot be compared to the historical accounting model. Use of different assumptions or methodologies is likely to result in significantly different fair value estimates.
The fair value of cash and cash equivalents, accounts receivables, and accounts payable approximates their current carrying amounts since all such items are short-term in nature. The fair value of variable and fixed rate mortgages payable and lines of credit approximate their current carrying amounts on the balance sheet since such amounts payable are at approximately a weighted average current market rate of interest.
10
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
The Company records uncertain tax positions in
accordance with ASC 740 on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that
the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the
more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than
The Company recognizes interest and penalties, if any, with income tax expense in the accompanying unaudited condensed consolidated statement of operations. As of March 31, 2022, and December 31, 2021, there were no such accrued interest or penalties.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires that entities use a new forward looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU No. 2016-13 is effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2022. The Company is currently evaluating the potential impact this standard may have on the unaudited condensed consolidated financial statements.
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying unaudited condensed consolidated financial statements.
11
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
Impact of Coronavirus Pandemic
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. On March 11, 2020, the World Health Organization declared the outbreak a pandemic, and on March 13, 2020, the United States declared a national emergency.
Some states and cities, including some where the Company’s properties are located, reacted by instituting quarantines, restrictions on travel, “stay at home” rules and restrictions on the types of businesses that may continue to operate and is what capacity, as well as guidance in response to the pandemic and the need to contain it.
The rules and restrictions put in place have had a negative impact on the economy and business activity and may adversely impact the ability of the Company’s tenants, many of whom may be restricted in their ability to work, to pay their rent as and when due. In addition, the Company’s property managers may be limited in their ability to properly maintain the Company’s properties. Enforcing the Company’s rights as landlord against tenants who fail to pay rent or otherwise do not comply with the terms of their leases may not be possible as many jurisdictions, including those where are properties are located, have established rules and/or regulations preventing us from evicting tenants for certain periods in response to the pandemic. If the Company is unable to enforce its rights as landlords, our business would be materially affected.
If the current pace of the pandemic does not continue to slow and the spread of the virus is not contained, the Company’s business operations could be further delayed or interrupted. Government and health authorities may announce new or extend existing restrictions, which could require the Company to make further adjustments to its operations in order to comply with any such restrictions. The duration of any business disruption cannot be reasonably estimated at this time but may materially affect the Company’s ability to operate its business and result in additional costs.
The extent to which the pandemic may impact the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this report, including new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. Nevertheless, the pandemic and the current financial, economic and capital markets environment present material uncertainty and risk with respect to the Company’s performance, financial condition, results of operations and cash flows.
12
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
NOTE 2 – VARIABLE INTEREST ENTITIES
During the three months ended March 31, 2022, Gvest Finance LLC formed two wholly owned subsidiaries, Gvest Sunnyland Homes LLC and Gvest Warrenville Homes LLC, both of which are considered VIEs. The Company consolidates the accounts of Gvest Finance LLC, Gvest Homes I LLC, Gvest Anderson Homes LLC, Gvest Capital View Homes LLC, Gvest Hidden Oaks Homes LLC, Gvest Springlake Homes LLC, Gvest Carolinas 4 Homes LLC, Gvest Sunnyland Homes LLC, Gvest Warrenville Homes LLC, Brainerd Place LLC, and Bull Creek LLC and will continue to do so until they are no longer considered VIEs.
Included
in the unaudited condensed consolidated results of operations for the three months ended March 31, 2022 and 2021 were net loss of $
The consolidated balance sheets as of March 31, 2022 and December 31, 2021 included the following amounts related to the consolidated VIEs.
| March 31, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Investment Property | $ | $ | ||||||
| Accumulated Depreciation | ( | ) | ( | ) | ||||
| Net Investment Property | ||||||||
| Cash and Cash Equivalents | ||||||||
| Accounts Receivable | ||||||||
| Other Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Deficit | ||||||||
| Accounts Payable | $ | $ | ||||||
| Notes Payable | ||||||||
| Line of Credit, net of $ | ||||||||
| Accrued Liabilities* | ||||||||
| Total Liabilities | ||||||||
| Non-controlling Interest | ( | ) | ( | ) | ||||
| Total Non-controlling Interest in Variable Interest Entities | ( | ) | ( | ) | ||||
| * |
13
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
NOTE 3 – INVESTMENT PROPERTY
The following table summarizes the Company’s property and equipment balances are generally used to depreciate the assets on a straight-line basis:
March 31, | December 31, 2021 | |||||||
| Investment Property | (Unaudited) | |||||||
| Land | $ | $ | ||||||
| Site and Land Improvements | ||||||||
| Buildings and Improvements | ||||||||
| Construction in Process | ||||||||
| Total Investment Property | ||||||||
| Accumulated Depreciation | ( | ) | ( | ) | ||||
| Net Investment Property | $ | $ | ||||||
Depreciation expense totaled
$
During the
three months ended March 31, 2022, Gvest Finance LLC, the Company’s VIE, purchased nine new manufactured homes for approximately
$
During the
year ended December 31, 2021, Gvest Finance LLC, acquired thirty-four new manufactured homes for approximately $
NOTE 4 – ACQUISITIONS AND DISPOSITIONS
During the three months ended March 31, 2022, the Company acquired three communities. These were acquisitions from third parties and have been accounted for as asset acquisitions.
On January 31, 2022,
14
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
On March 31, 2022, the Company purchased two manufactured housing communities
located in Warrenville, South Carolina consisting of 85 sites on approximately
During the three months ended March 31, 2021, the Company acquired one community. This was an acquisition from a third party and has been accounted for as an asset acquisition.
On March 31, 2021, the Company purchased a manufactured housing community
located in Brunswick, Georgia consisting of 113 sites on approximately
| Acquisition Date | Name (number of communities) | Land | Improvements | Building | Total Purchase Price | |||||||||||||
| Golden Isles MHP | $ | $ | $ | $ | ||||||||||||||
| Golden Isles Gvest | ||||||||||||||||||
| Total Purchase Price | $ | $ | $ | $ | ||||||||||||||
| Acquisition Costs | ||||||||||||||||||
| Total Investment Property | $ | $ | $ | $ | ||||||||||||||
| Sunnyland MHP | $ | $ | $ | $ | ||||||||||||||
| Sunnyland Gvest | ||||||||||||||||||
| Warrenville MHP | ||||||||||||||||||
| Warrenville Gvest | ||||||||||||||||||
| Total Purchase Price | $ | $ | $ | $ | ||||||||||||||
| Acquisition Costs | ||||||||||||||||||
| Total Investment Property | $ | $ | $ | $ | ||||||||||||||
Pro-forma Financial Information
The following unaudited pro-forma information presents the combined results of operations for the three months ended March 31, 2021 as if all acquisitions of manufactured housing communities during the year ended December 31, 2021 had occurred on January 1, 2021.
The Company determined that the acquisitions made during the three months ended March 31, 2022 were not significant acquisitions, therefore, proforma financial information related to these acquisitions is not reported below.
| Three months ended March 31, 2021 Pro Forma | ||||
| Revenue | ||||
| Community operating expenses | ||||
| Corporate payroll and overhead expenses | ||||
| Depreciation expense | ||||
| Interest expense | ||||
| Net income (loss) | ( | ) | ||
| Net loss attributable to non-controlling interest | ||||
| Net loss attributable to Manufactured Housing Properties, Inc | ( | ) | ||
| Preferred stock dividends / accretion | ||||
| Net income (loss) | ( | ) | ||
| Net loss per share | ( | ) | ||
15
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
NOTE 5 – PROMISSORY NOTES AND LINES OF CREDIT
Promissory Notes
The Company
has issued promissory notes payable to lenders related to the acquisition of its manufactured housing communities and mobile homes. The
interest rates on these promissory notes range from
As of March 31, 2022,
the outstanding balance on these notes was $
| Maturity Date | Interest Rate | Balance March 31, 2022 | Balance December 31, 2021 | |||||||||||
| Pecan Grove MHP LLC | % | $ | $ | |||||||||||
| Azalea MHP LLC | % | |||||||||||||
| Holly Faye MHP LLC | % | |||||||||||||
| Chatham MHP LLC | % | |||||||||||||
| Lakeview MHP LLC | % | |||||||||||||
| B&D MHP LLC | % | |||||||||||||
| Hunt Club MHP LLC | % | |||||||||||||
| Crestview MHP LLC | % | |||||||||||||
| Maple Hills MHP LLC | % | |||||||||||||
| Springlake MHP LLC | % | |||||||||||||
| ARC MHP LLC | % | |||||||||||||
| Countryside MHP LLC | % | |||||||||||||
| Evergreen MHP LLC | % | |||||||||||||
| Golden Isles MHP LLC | % | |||||||||||||
| Anderson MHP LLC* | % | |||||||||||||
| Capital View MHP LLC* | % | |||||||||||||
| Hidden Oaks MHP LLC* | % | |||||||||||||
| North Raleigh MHP LLC | % | |||||||||||||
| Charlotte 3 Park MHP LLC (Dixie, Driftwood, Meadowbrook)(1) | % | |||||||||||||
| Carolinas 4 MHP LLC (Asheboro, Morganton)* | % | |||||||||||||
| Sunnyland MHP LLC* | % | |||||||||||||
| Warrenville MHP LLC* | % | |||||||||||||
| Gvest Finance LLC (B&D homes) | % | |||||||||||||
| Gvest Finance LLC (Countryside homes) | % | |||||||||||||
| Gvest Finance LLC (Golden Isles homes) | % | |||||||||||||
| Gvest Anderson Homes LLC* | % | |||||||||||||
| Gvest Capital View Homes LLC* | % | |||||||||||||
| Gvest Hidden Oaks Homes LLC* | % | |||||||||||||
| Gvest Carolinas 4 Homes LLC (Asheboro, Morganton)* | % | |||||||||||||
| Gvest Sunnyland Homes LLC* | % | |||||||||||||
| Gvest Warrenville Homes LLC* | % | |||||||||||||
| Total Notes Payable | ||||||||||||||
| Discount Direct Lender Fees | ( | ) | ( | ) | ||||||||||
| Total Net of Discount | $ | $ | ||||||||||||
| (1) |
| * |
16
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
Lines of Credit – Variable Interest Entities
| Facility | Borrower | Community | Maturity Date | Interest | Maximum Credit Limit | Balance March 31, 2022 | Balance December 31, 2021 | |||||||||||||
| Occupied Home Facility(1) | $ | $ | $ | |||||||||||||||||
| Multi-Community Rental Home Facility | $ | $ | $ | |||||||||||||||||
| Multi-Community Floorplan Home Facility(1), (2) | $ | $ | $ | |||||||||||||||||
| Springlake Home Facility(2) | $ | $ | $ | |||||||||||||||||
| Total Lines of Credit - VIEs | $ | $ | ||||||||||||||||||
| Discount Direct Lender Fees | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Total Net of Discount | $ | $ | ||||||||||||||||||
| (1) |
| (2) |
| (3) |
The agreements for each of the above line of credit facilities require the maintenance of certain financial ratios or other affirmative and negative covenants. All the above line of credit facilities are guaranteed by Raymond M. Gee.
17
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
Metrolina Promissory Note
On October 22, 2021, the Company issued a promissory
note to Metrolina Loan Holdings, LLC (“Metrolina”), a significant stockholder, in the principal amount of $
Raymond M. Gee Promissory Note
On October 1, 2017, the Company issued a revolving
promissory note to Raymond M. Gee, pursuant to which the Company could borrow up to $
Gvest Revolving Promissory Note
On December 27, 2021, the Company issued a revolving
promissory note to Gvest Real Estate Capital, LLC, an entity whose sole owner is Raymond M. Gee, the Company’s chairman and chief
executive officer, pursuant to which the Company may borrow up to $
Maturities of Long-Term Obligations for Five Years and Beyond
The minimum annual principal payments of notes payable and lines of credit at March 31, 2022 by fiscal year were:
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total minimum principal payments | $ |
NOTE 6 – COMMITMENTS AND CONTINGENCIES
From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise that may harm its business. The Company is currently not aware of any such legal proceedings or claims that they believe will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.
NOTE 7 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is authorized to issue up to
Series A Cumulative Convertible Preferred Stock
On May 8, 2019, the Company filed a certificate
of designation with the Nevada Secretary of State pursuant to which the Company designated
Ranking. The Series A Preferred Stock ranks, as to dividend rights and rights upon our liquidation, dissolution, or winding up, senior to the Common Stock and pari passu with the Series B Preferred Stock and Series C Preferred Stock (as defined below). The terms of the Series A Preferred Stock will not limit the Company’s ability to (i) incur indebtedness or (ii) issue additional equity securities that are equal or junior in rank to the shares of Series A Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up.
18
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
Dividend Rate and Payment Dates.
Dividends on the Series A Preferred Stock are cumulative and payable monthly in arrears to all holders of record on the applicable record
date. Holders of Series A Preferred Stock will be entitled to receive cumulative dividends in the amount of $
Liquidation Preference. The liquidation
preference for each share of Series A Preferred Stock is $
Stockholder Optional Conversion.
Each share of Series A Preferred Stock is convertible, at any time and from time to time, at the option of the holder thereof and without
the payment of additional consideration, into that number of shares of Common Stock determined by dividing the liquidation preference
of such share by the conversion price then in effect. The conversion price is initially equal $
Company Call and Stockholder Put Options.
Voting Rights. The Company may not authorize or issue any class or series of equity securities ranking senior to the Series A Preferred Stock as to dividends or distributions upon liquidation (including securities convertible into or exchangeable for any such senior securities) or amend the Company’s articles of incorporation (whether by merger, consolidation, or otherwise) to materially and adversely change the terms of the Series A Preferred Stock without the affirmative vote of at least two-thirds of the votes entitled to be cast on such matter by holders of the outstanding shares of Series A Preferred Stock, voting together as a class. Otherwise, holders of the shares of Series A Preferred Stock do not have any voting rights.
As of March 31, 2022, there were
Series B Cumulative Redeemable Preferred Stock
On December 2, 2019, the Company filed a certificate
of designation with the Nevada Secretary of State pursuant to which the Company designated
Ranking. The Series B Preferred Stock rank, as to dividend rights and rights upon liquidation, dissolution, or winding up, senior to the Common Stock and pari passu with the Series A Preferred Stock and Series C Preferred Stock. The terms of the Series B Preferred Stock will not limit the Company’s ability to (i) incur indebtedness or (ii) issue additional equity securities that are equal or junior in rank to the shares of Series B Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up.
Dividend Rate and Payment Dates.
Dividends on the Series B Preferred Stock are cumulative and payable monthly in arrears to all holders of record on the applicable record
date.
Liquidation Preference. The liquidation
preference for each share of Series B Preferred Stock is $
19
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
Company Call and Stockholder Put Options.
Commencing on the fifth anniversary of the initial issuance of shares of Series B Preferred Stock and continuing indefinitely thereafter,
the Company will have a right to call for redemption the outstanding shares of Series B Preferred Stock at a call price equal to $15.00,
or 150% of the original issue price of the Series B Preferred Stock, and correspondingly, each holder of shares of Series B Preferred
Stock shall have a right to put the shares of Series B Preferred Stock held by such holder back to the Company at a put price equal to
$15.00, or 150% of the original issue purchase price of such shares. During the three months ended March 31, 2022 and 2021, the Company
recorded a put option value accretion of $
Voting Rights. The Company may not authorize or issue any class or series of equity securities ranking senior to the Series B Preferred Stock as to dividends or distributions upon liquidation (including securities convertible into or exchangeable for any such senior securities) or amend the Company’s articles of incorporation (whether by merger, consolidation, or otherwise) to materially and adversely change the terms of the Series B Preferred Stock without the affirmative vote of at least two-thirds of the votes entitled to be cast on such matter by holders of outstanding shares of Series B Preferred Stock, voting together as a class. Otherwise, holders of the shares of Series B Preferred Stock do not have any voting rights.
No Conversion Right. The Series B Preferred Stock is not convertible into shares of Common Stock.
This offering terminated on March 30, 2021 thus,
the Company sold no shares of Series B Preferred Stock during the three months ended March 31, 2022. During the three months ended March
31, 2021, the Company sold an aggregate of
As of March 31, 2022, there were
Series C Cumulative Redeemable Preferred Stock
On May 24,
2021, the Company filed an amended and restated certificate of designation with the Nevada Secretary of State pursuant to which the Company
designated
Ranking. The Series C Preferred Stock ranks, as to dividend rights and rights upon liquidation, dissolution, or winding up, senior to Common Stock and pari passu with Series A Preferred Stock and Series B Preferred Stock. The terms of the Series C Preferred Stock do not limit the Company’s ability to (i) incur indebtedness or (ii) issue additional equity securities that are equal or junior in rank to the shares of Series C Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up.
20
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
Stated
Value. Each share of Series C Preferred Stock has an initial stated value of $
Dividend
Rate and Payment Dates. Dividends on the Series C Preferred Stock are cumulative and payable monthly in arrears to all holders
of record on the applicable record date.
Liquidation Preference. Upon a liquidation, dissolution or winding up of the Company, holders of shares of Series C Preferred Stock are entitled to receive, before any payment or distribution is made to the holders of Common Stock and on a pari passu basis with holders of Series A Preferred Stock and Series B Preferred Stock, a liquidation preference equal to the stated value per share, plus accrued but unpaid dividends thereon.
Redemption
Request at the Option of a Holder. Once per calendar quarter, a holder will have the opportunity to request that the Company redeem
that holder’s Series C Preferred Stock. The board of directors may, however, suspend cash redemptions at any time in its discretion
if it determines that it would not be in the best interests of the Company to effectuate cash redemptions at a given time because the
Company does not have sufficient cash, including because the board believes that the Company’s cash on hand should be utilized for
other business purposes. Redemptions will be limited to four percent (
| ● | 8% if the redemption is requested after the first anniversary and on or before the second anniversary of the original issuance of such shares; |
| ● | 5% if the redemption is requested after the second anniversary and on or before the third anniversary of the original issuance of such shares; and |
Optional
Redemption by the Company. The Company has the right (but not the obligation) to redeem shares of Series C Preferred Stock at
a redemption price equal to the stated value of such redeemed shares, plus any accrued but unpaid dividends thereon; provided, however,
that if the Company redeems any shares of Series C Preferred Stock prior to the fourth (4th) anniversary of their issuance,
then the redemption price shall include a premium equal to ten percent (
Mandatory Redemption by the Company. The Company must redeem the outstanding shares of Series C Preferred Stock on the fourth (4th) anniversary of their issuance at a redemption price equal to the stated value of such redeemed shares, plus any accrued but unpaid dividends thereon.
Voting Rights. The Series C Preferred Stock has no voting rights.
21
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
No Conversion Right. The Series C Preferred Stock is not convertible into shares of Common Stock.
In accordance with ASC 480-10, the Series C Preferred Stock is treated as a liability and is presented net of unamortized debt issuance costs on the balance sheet because the Company has an unconditional obligation to redeem the Series C Preferred Stock and dividends on the Preferred C Stock are included in interest expense.
On June 11, 2021, the Company launched a new offering
under Regulation A of Section 3(6) of the Securities Act for Tier 2 offerings, pursuant to which the Company is offering up to
During the
three months ended March 31, 2022, the Company sold an aggregate of
As of March
31, 2022 there were
Common Stock
The Company is authorized to issue up to
Stock Issued for Cash
During the three months ended March 31, 2021,
the Company issued
Equity Incentive Plan
In December 2017, the Board of Directors, with
the approval of a majority of the stockholders of the Company, adopted the Manufactured Housing Properties Inc. Stock Compensation Plan
(the “Plan”) which is administered by the Compensation Committee. As of March 31, 2022, there were
The Company has issued options to directors and
officers under the Plan. One third of the options vest immediately, and two thirds vest in equal annual installments over a -year period.
During the three months ended March 31, 2022 and 2021, the Company issued
22
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
The following table summarizes the stock options outstanding as of March 31, 2022:
| Number of options | Weighted average exercise price (per share) | Weighted average remaining contractual term (in years) | ||||||||||
| Outstanding at December 31, 2021 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited / cancelled / expired | ||||||||||||
| Outstanding at March 31, 2022 | $ | |||||||||||
| Exercisable at March 31, 2022 | $ | |||||||||||
As of March 31, 2022, there were
The following table summarizes information concerning options outstanding as of March 31, 2022.
| Strike Price Range ($) | Outstanding stock options | Weighted average remaining contractual term (in years) | Weighted average outstanding strike price | Vested stock options | Weighted average vested strike price | |||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
The table below presents the weighted average expected life in years of options granted under the Plan as described above. The risk-free rate of the stock options is based on the U.S. Treasury yield curve in effect at the time of grant, which corresponds with the expected term of the option granted.
The fair value of stock options was estimated using the Black Scholes option pricing model with the following assumptions for grants made during the periods indicated.
| Stock option assumptions | March 31, 2022 | March 31, 2021 | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected dividend yield | % | % | ||||||
| Expected volatility | % | % | ||||||
| Expected life of options (in years) | ||||||||
NOTE 8 – RELATED PARTY TRANSACTIONS
See Note 5 for information regarding the promissory notes issued to Metrolina, a significant stockholder, and the revolving promissory note issued to Gvest Real Estate Capital, LLC, an entity whose sole owner is Raymond M. Gee, the Company’s chairman and chief executive officer.
In August 2019, the Company entered into an office
lease agreement with 136 Main Street LLC, an entity whose sole owner is Gvest Real Estate LLC, whose sole owner is Mr. Gee, for the lease
of the Company’s offices. The lease is $
23
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
During the three months ended March 31, 2022,
Raymond M. Gee received fees totaling $
See Note 2 for information regarding related party VIEs.
NOTE 9 – SUBSEQUENT EVENTS
Additional Closings of Regulation A Offering
Subsequent to March 31, 2022, we sold an aggregate
of
York Purchase and Sale Agreement
On November
2, 2021, Bull Creek LLC, a VIE, entered into a purchase and sale agreement with Rachel Holler for the purchase of
Spaulding Purchase and Sale Agreement
On January
19, 2022, MHP Pursuits LLC entered into a purchase and sale agreement with Spaulding Enterprises, Inc. for the purchase of a manufactured
housing community located in Brunswick, Georgia consisting of
Clyde Purchase and Sale Agreement
On February
10, 2022, MHP Pursuits LLC entered into a purchase and sale agreement with Harold and Brenda Allen for the purchase of a manufactured
housing community located in Clyde, North Carolina, a part of the Asheville Metropolitan Statistical Area, consisting of
Solid Rock Purchase and Sale Agreement
On February 25, 2022, MHP Pursuits
LLC entered into a purchase and sale agreement with K10 Enterprises LLC for the purchase of a manufactured housing community located in
Leesville, South Carolina, consisting of
24
MANUFACTURED HOUSING PROPERTIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
(UNAUDITED)
Resaca Portfolio Purchase and Sale Agreement
On April 1, 2022, MHP Pursuits LLC entered into a purchase and sale
agreement with William Darryl Edwards for the purchase of three manufactured housing communities located in Murray County, Georgia, consisting
of
Country Estates Purchase and Sale Agreement
On April 5, 2022, MHP Pursuits LLC entered into a purchase and sale
agreement with Ted Brown for the purchase of a manufactured housing community located in Cameron, North Carolina, consisting of
Stock Option Grant
On April 11, 2022, the Company issued
Charlotte 3 Park (Dixie, Driftwood, and Meadowbook) Refinance and Gvest Revolving Promissory Note Repayment
On April 14, 2022, Charlotte 3 Park MHP LLC entered into a loan agreement
with Townebank for a loan in the principal amount of $
The Townebank note bears interest at
The Townebank loan is secured by a first-priority security interest in the land at the Dixie, Driftwood, and Meadowbrook communities and lot rent due under all leases at these communities and is guaranteed by Raymond M. Gee. The loan agreement and note contain customary financial and other covenants and events of default for a loan of its type.
North Carolina Core 3 Park Portfolio Purchase and Sale Agreement
On May 16, 2022, MHP Pursuits LLC entered into
a purchase and sale agreement with Statesville Estates MHC LLC, North Side MHC LLC, and Timber View LLC for the purchase of three manufactured
housing communities located in Statesville, North Carolina, Thomasville, North Carolina, and Trinity, North Carolina, respectively, consisting
of
25
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Use of Terms
Except as otherwise indicated by the context and for the purposes of this report only, references in this report to “we,” “our” and the “Company” refer to Manufactured Housing Properties Inc., a Nevada corporation, and its consolidated subsidiaries and variable interest entities, or VIEs.
Special Note Regarding Forward Looking Statements
This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation and availability of resources. These forward-looking statements include, without limitation: statements concerning projections, predictions, expectations, estimates or forecasts for our business, financial and operating results and future economic performance; statements of management’s goals and objectives; trends affecting our financial condition, results of operations or future prospects; statements regarding our financing plans or growth strategies; statements concerning litigation or other matters; and other similar expressions concerning matters that are not historical facts. Words such as “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes” and “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements.
Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times, or by which, that performance or those results will be achieved. Forward-looking statements are based on information available at the time they are made and/or management’s good faith beliefs as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.
Potential investors should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. Potential investors should not make an investment decision based solely on our projections, estimates or expectations.
The specific discussions herein about our company include financial projections and future estimates and expectations about our company’s business. The projections, estimates and expectations are presented in this report only as a guide about future possibilities and do not represent actual amounts or assured events. All the projections and estimates are based exclusively on our management’s own assessment of our business, the industry in which we operate and the economy at large and other operational factors, including capital resources and liquidity, financial condition, fulfillment of contracts and opportunities. The actual results may differ significantly from the projections.
Overview
We are a self-administered, self-managed, vertically integrated owner and operator of manufactured housing communities. We earn income from leasing manufactured home sites to tenants who own their own manufactured home and the rental of company-owned manufactured homes to residents of the communities.
26
We own and operate forty-six manufactured housing communities containing approximately 2,195 developed sites and 1,142 company-owned, manufactured homes. Our communities are located in Georgia, North Carolina, South Carolina and Tennessee.
As of March 31, 2022, our portfolio of manufactured housing properties consisted of the following:
| ● | Pecan Grove – a 82 lot, all-age community situated on 10.71 acres and located in Charlotte, North Carolina. |
| ● | Azalea Hills – a 41 lot, all-age community situated on 7.46 acres and located in Gastonia, North Carolina, a suburb of Charlotte, North Carolina. |
| ● | Holly Faye – a 35 lot all-age community situated on 8.01 acres and located in Gastonia, North Carolina, a suburb of Charlotte North Carolina. |
| ● | Lakeview – a 84 lot all-age community situated on 17.26 acres in Spartanburg, South Carolina. |
| ● | Chatham Pines – a 49 lot all-age community situated on 23.57 acres and located in Chapel Hill, North Carolina. |
| ● | Maple Hills – a 74 lot all-age community situated on 21.20 acres and located in Mills River, North Carolina, which is part of the Asheville, North Carolina, Metropolitan Statistical Area. |
| ● | Hunt Club Forest – a 79 lot all-age community situated on 13.02 acres and located in the Columbia, South Carolina metro area. | |
| ● | B&D – a 95 lot all-age community situated on 17.75 acres and located in Chester, South Carolina. | |
| ● | Crestview – a 113 lot all age community situated on 17.1 acres and located in the Asheville, North Carolina, Metropolitan Statistical Area. | |
| ● | Springlake – three all-age communities with 224 lots situated on 72.7 acres and located in Warner Robins, Georgia. | |
| ● | ARC – five all-age communities with 180 lots situated on 39.34 acres and located in Lexington, South Carolina. | |
| ● | Countryside – a 110 lot all-age community situated on 35 acres and located in Lancaster, North Carolina. |
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| ● | Evergreen – a 65 lot all-age community situated on 28.4 acres and located in Dandridge, Tennessee. | |
| ● | Golden Isles – a 113 lots all-age community situated on 16.76 acres and located in Brunswick, Georgia. | |
| ● | Anderson – ten all-age communities with 178 lots situated on 50 acres and located in Anderson, South Carolina. | |
| ● | Capital View – a 32 lot all-age community situated on 9.84 acres and located in Gaston, South Carolina. | |
| ● | Hidden Oaks - a 44 lot all-age community situated on 8.96 acres and located in West Columbia, South Carolina. | |
| ● | North Raleigh – five all-age communities with 137 lots situated on 135 acres and located in Franklin and Granville Counties, North Carolina. | |
| ● | Dixie – a 37 lot all-age community situated on 3.43 acres and located in Kings Mountain, North Carolina. | |
| ● | Driftwood – a 26 lot all-age community situated on 34.92 acres and located in Charlotte, North Carolina. | |
| ● | Meadowbrook – a 94 lot all-age community situated on 40.1 acres and located in York, South Carolina. | |
| ● | Morganton – a 61 lot all-age community situated on 31.29 acres and located in Morganton, North Carolina. | |
| ● | Asheboro – a 84 lot all-age community situated on 45.4 acres and located in Asheboro, North Carolina. | |
| ● | Sunnyland – a 73 lot all-age community situated on 18.57 acres and an adjacent parcel of 15 acres of undeveloped land both located in Byron, Georgia. | |
| ● | Warrenville – two all-age communities with 85 lots situated on 45 acres and located in Warrenville, South Carolina. |
Manufactured housing communities are residential developments designed and improved for the placement of detached, single-family manufactured homes that are produced off-site and installed on residential sites within the community. The owner of a manufactured home leases the site on which it is located or the lessee of a manufactured home leases both the home and site on which the home is located.
We believe that manufactured housing is one of the only non-subsidized affordable housing options in the U.S. and that manufactured housing is an economically attractive alternative to traditional single-family and multi-family housing, as it provides a housing alternative that has characteristics of single-family housing (no shared walls, dedicated parking and a yard), yet is more attainable than single-family while being competitively priced to multi-family. Demand for housing affordability continues to increase, but supply of manufactured housing remains virtually static, as there are not many new manufactured housing communities being developed, and many are redeveloped to higher and better uses. We are committed to providing this affordable housing option and an improved level of service to our residents, while producing an attractive and stable risk adjusted return to our investors.
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Recent Developments
Additional Closings of Regulation A Offering
Subsequent to March 31, 2022, we sold an aggregate of 1,380 shares of Series C Preferred Stock in additional closings of the Regulation A offering described below for total gross proceeds of $1,380,000. After deducting a placement fee, we received net proceeds of approximately $1,286,850.
Resaca Portfolio Purchase and Sale Agreement
On April 1, 2022, MHP Pursuits LLC entered into a purchase and sale agreement with William Darryl Edwards for the purchase of three manufactured housing communities located in Murray County, Georgia, consisting of 91 sites on approximately 79 acres for a total purchase price of $4,488,000. As of the date of this report, acquisition of this community has not yet occurred.
Country Estates Purchase and Sale Agreement
On April 5, 2022, MHP Pursuits LLC entered into a purchase and sale agreement with Ted Brown for the purchase of a manufactured housing community located in Cameron, North Carolina, consisting of 63 sites on approximately 86 acres for a total purchase price of $2,050,000. As of the date of this report, acquisition of this community has not yet occurred.
Charlotte 3 Park (Dixie, Driftwood, and Meadowbook) Refinance and Gvest Revolving Promissory Note Repayment
On April 14, 2022, Charlotte 3 Park MHP LLC entered into a loan agreement with Townebank for a loan in the principal amount of $3,158,400 and issued a promissory note to the lender in the same amount. The funds from the loan were used on April 15, 2022 to pay off the $850,000 revolving promissory note outstanding principal balance and accrued interest of $19,979 due to Gvest Real Estate Capital LLC.
The Townebank note bears interest at 4.25% per annum with payments to begin May 1, 2022 and matures on October 1, 2028. Payment for the first eighteen (18) months of the term of the note shall be interest-only based on the principal outstanding, days in the period, and daily interest rate. Thereafter, principal and interest shall be due and payable based on a twenty (20) year amortization schedule. Charlotte 3 Park MHP LLC may prepay the note in part or in full subject to prepayment penalties set out in the loan agreement if repaid before May 1, 2027 and without penalty if repaid on or subsequent to that date.
The Townebank loan is secured by a first-priority security interest in the land at the Dixie, Driftwood, and Meadowbrook communities and lot rent due under all leases at these communities and is guaranteed by Raymond M. Gee. The loan agreement and note contain customary financial and other covenants and events of default for a loan of its type.
North Carolina Core 3 Park Portfolio Purchase and Sale Agreement
On May 13, 2022, MHP Pursuits LLC entered into a purchase and sale agreement with Statesville Estates MHC LLC, North Side MHC LLC, and Timber View LLC for the purchase of three manufactured housing communities located in Statesville, North Carolina, Thomasville, North Carolina, and Trinity, North Carolina, respectively, consisting of 122 sites on approximately 74 acres for a total purchase price of $5,350,000. As of the date of this report, acquisition of this community has not yet occurred.
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Impact of Coronavirus Pandemic
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. On March 11, 2020, the World Health Organization declared the outbreak a pandemic, and on March 13, 2020, the United States declared a national emergency.
Some states and cities, including some where the Company’s properties are located, reacted by instituting quarantines, restrictions on travel, “stay at home” rules and restrictions on the types of businesses that may continue to operate and is what capacity, as well as guidance in response to the pandemic and the need to contain it.
The rules and restrictions put in place have had a negative impact on the economy and business activity and may adversely impact the ability of the Company’s tenants, many of whom may be restricted in their ability to work, to pay their rent as and when due. In addition, the Company’s property managers may be limited in their ability to properly maintain the Company’s properties. Enforcing the Company’s rights as landlord against tenants who fail to pay rent or otherwise do not comply with the terms of their leases may not be possible as many jurisdictions, including those where are properties are located, have established rules and/or regulations preventing us from evicting tenants for certain periods in response to the pandemic. If the Company is unable to enforce its rights as landlords, our business would be materially affected.
If the current pace of the pandemic does not continue to slow and the spread of the virus is not contained, the Company’s business operations could be further delayed or interrupted. Government and health authorities may announce new or extend existing restrictions, which could require the Company to make further adjustments to its operations in order to comply with any such restrictions. The duration of any business disruption cannot be reasonably estimated at this time but may materially affect the Company’s ability to operate its business and result in additional costs.
The extent to which the pandemic may impact the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this report, including new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. Nevertheless, the pandemic and the current financial, economic and capital markets environment present material uncertainty and risk with respect to the Company’s performance, financial condition, results of operations and cash flows.
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Results of Operations
Comparison of Three Months Ended March 31, 2022 and 2021
The following table sets forth key components of our results of operations during the three months ended March 31, 2022 and 2021, both in dollars and as a percentage of our revenues.
| Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | |||||||||||||||
| Amount | Percent of Revenues | Amount | Percent of Revenues | |||||||||||||
| Revenue | ||||||||||||||||
| Rental and related income | $ | 3,040,022 | 99.51 | % | $ | 1,663,681 | 97.53 | % | ||||||||
| Property sales | 15,000 | 0.49 | % | 42,182 | 2.47 | % | ||||||||||
| Total revenues | 3,055,022 | 100.00 | % | 1,705,863 | 100.00 | % | ||||||||||
| Community operating expenses | ||||||||||||||||
| Repair and maintenance | 221,019 | 7.23 | % | 107,796 | 6.32 | % | ||||||||||
| Real estate taxes | 180,829 | 5.92 | % | 142,395 | 8.35 | % | ||||||||||
| Utilities | 235,895 | 7.72 | % | 156,987 | 9.20 | % | ||||||||||
| Insurance | 60,298 | 1.97 | % | 27,788 | 1.63 | % | ||||||||||
| General and administrative expense | 376,196 | 12.31 | % | 145,008 | 8.50 | % | ||||||||||
| Total community operating expenses | 1,074,237 | 35.16 | % | 579,974 | 34.00 | % | ||||||||||
| Corporate payroll and overhead | 909,078 | 29.76 | % | 580,734 | 34.04 | % | ||||||||||
| Depreciation expense | 759,704 | 24.87 | % | 441,623 | 25.89 | % | ||||||||||
| Interest expense | 1,101,693 | 36.06 | % | 446,048 | 26.15 | % | ||||||||||
| Refinancing costs | - | 0.00 | % | 16,675 | 0.98 | % | ||||||||||
| Total expenses | 3,844,712 | 125.85 | % | 2,065,054 | 121.06 | % | ||||||||||
| Net loss | $ | (789,690 | ) | (25.84 | )% | $ | (359,191 | ) | (21.06 | )% | ||||||
| Net loss attributable to non-controlling interest Variable interest entity share of net income (loss) | (159,570 | ) | (5.22 | )% | 55,085 | 3.23 | % | |||||||||
| Net loss attributable to common shareholders | (630,120 | ) | (20.63 | )% | (414,276 | ) | (24.29 | )% | ||||||||
| Preferred stock dividends and put option value accretion | 548,210 | 17.94 | % | 529,540 | 31.04 | % | ||||||||||
| Net loss attributable to common stockholders | $ | (1,178,330 | ) | (38.57 | )% | $ | (943,816 | ) | (55.33 | )% | ||||||
Revenues. For the three months ended March 31, 2022, we earned total revenues of $3,055,022, as compared to $1,705,863 for the three months ended March 31, 2021, an increase of $1,349,159, or 79.09%. The increase in revenues between the periods was primarily due to $1,109,834 of rental income from the acquisition of twenty-four manufactured housing communities during 2021 that occurred on or subsequent to March 31, 2021. The remaining increase was due to occupancy and rental rate increases.
Community Operating Expenses. For the three months ended March 31, 2022, we incurred total community operating expenses of $1,074,237, as compared to $579,974 for the three months ended March 31, 2021, an increase of $494,263, or 85.22%. The increase in community operating expenses was primarily due to additional expenses associated with the twenty-four properties acquired on or subsequent to March 31, 2021. We incurred additional repairs and maintenance, insurance, and real estate tax expenses and we hired additional on-site maintenance staff at several of our new parks to help us to increase efficiencies and decrease contract labor costs.
Corporate Payroll and Overhead Expenses. For the three months ended March 31, 2022, we incurred corporate payroll and overhead expenses of $909,078, as compared to $580,734 for the three months ended March 31, 2021, an increase of $328,344, or 56.54%. This increase was primarily due to increased payroll including corporate salaries and benefits expense of $185,015 and an increase in stock compensation expense of $49,114 due to hiring additional personnel to support our growth, approximately $78,000 of additional marketing and travel expenses, and $59,486 of pursuit costs written off in relation to abandoned potential acquisitions.
Depreciation Expense. For the three months ended March 31, 2022, we recorded depreciation of $759,704, as compared to $441,623 for the three months ended March 31, 2021, an increase of $318,081 or 72.03%. The increase in depreciation was driven by approximately $295,000 related to the acquisition of depreciable assets in twenty-four manufactured housing communities on or subsequent to March 31, 2021. The remaining increase was due to depreciation of capital improvement projects completed subsequent to March 31, 2021, such as home renovations and new home installations.
Interest Expense. For the three months ended March 31, 2022, we incurred interest expense of $1,101,693, as compared to $446,048 for the three months ended March 31, 2021, an increase of $655,645, or 146.99%. The increase was primarily due to $316,990 of interest on additional debt incurred to acquire new properties and new homes on or subsequent to March 31, 2021, $81,293 of interest on the related party notes issued during the fourth quarter of 2021 described below, and $135,145 of dividends to preferred stockholders, which are included in interest expense given the liability treatment of the mandatorily redeemable Series C Preferred Stock.
Net Loss. The factors described above resulted in a net loss of $789,690 for the three months ended March 31, 2022, as compared to $359,191 for the three months ended March 31, 2021, an increase of $430,499, or 119.85%.
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Liquidity and Capital Resources
As of March 31, 2022, we had cash and cash equivalents of $2,096,699, including restricted cash of $754,079. In addition to cash generated through operations, we use a variety of sources to fund our cash needs, including acquisitions and sales of properties. We intend to continue to increase our real estate investments. Our business plan includes acquiring communities that yield more than our cost of funds and then investing in physical improvements, including adding rental homes onto otherwise vacant sites. Our ability to continue acquiring communities are dependent on our ability to raise capital. There is no guarantee that any of these additional opportunities will materialize or that we will be able to take advantage of such opportunities. The growth of our real estate portfolio depends on the availability of suitable properties which meet our investment criteria and appropriate financing.
We will require additional funding to finance the growth of our current and expected future operations as well as to achieve our strategic objectives. We believe that our current available cash along with anticipated revenues is sufficient to meet our cash needs for the near future. There can be no assurance that financing will be available in amounts or terms acceptable to us, if at all.
We plan to meet our short-term liquidity requirements for the next twelve months, generally through available cash as well as cash provided by operating activities and with funds available to us under the existing $1.5 million revolving note described below.
Summary of Cash Flow
The following table provides detailed information about our net cash flow for the period indicated:
Cash Flow
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Net cash provided by (used in) operating activities | $ | (101,818 | ) | $ | 946,181 | |||
| Net cash used in investing activities | (2,029,556 | ) | (307,994 | ) | ||||
| Net cash provided by financing activities | 2,121,744 | 672,904 | ||||||
| Net increase (decrease) in cash and cash equivalents | (9,630 | ) | 1,311,091 | |||||
| Cash and cash equivalents at beginning of period | 2,106,329 | 1,988,857 | ||||||
| Cash and cash equivalent at end of period | $ | 2,096,699 | $ | 3,299,948 | ||||
Net cash used in operating activities was $101,818 for the three months ended March 31, 2022, as compared to $946,181 net cash provided by operating activities for the three months ended March 31, 2021. For the three months ended March 31, 2022, the net loss of $789,690 and decrease in accrued liabilities of $728,086 related to the payment of accrued 2021 employee bonuses, guarantee fees, and real estate taxes in January 2022, offset by depreciation in the amount of $759,704, amortization of debt issuance costs in the amount of $162,328, and a decrease in other assets of $269,602 were the primary drivers of the net cash used in operating activities. For the three months ended March 31, 2021, the net loss of $359,191, offset by depreciation in the amount of $441,623 and an increase in accrued liabilities in the amount of $1,162,968 due to accruing for real estate taxes and the acquisition of Golden Isles, a decrease in accounts payable in the amount of $706,920, and an increase in other assets in the amount of $257,635 were the primary drivers of the net cash provided by operating activities.
Net cash used in investing activities was $2,029,556 for the three months ended March 31, 2022, as compared to $307,994 for the three months ended March 31, 2021. Net cash used in investing activities for the three months ended March 31, 2022 consisted of purchase of investment properties in the amount of $1,050,000 and payment of related acquisition costs of $163,578, as well as cash paid for capital improvements in the amount of $764,907 and cash paid for advanced pursuit costs and deposits of $66,071. Net cash used in investing activities for the three months ended March 31, 2021 consisted of capital improvements in the amount of $307,994.
Net cash provided by financing activities was $2,121,744 for the three months ended March 31, 2022, as compared to $672,904 net cash provided by financing activities for the three months ended March 31, 2021. For the three months ended March 31, 2022, net cash provided by financing activities consisted primarily of proceeds from issuance of preferred stock of $4,289,444 and proceeds from related party line of credit of $700,000, offset by repayment of notes payable of $199,464, payment of mortgage costs and financing costs recorded as debt discount of $847,499, and Series A and Series B Preferred Stock dividends of $242,785. The Company repaid the Charlotte 3 Park MHP LLC note payable of $1,500,000 on March 1, 2022. This community was subsequently refinanced on April 14, 2022. For the three months ended March 31, 2021, net cash provided by financing activities consisted primarily of Series A and Series B Preferred Stock dividends of $225,576 and payment of mortgage costs recorded as debt discount of $121,375, offset by proceeds from issuance of preferred stock of $1,087,485.
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Current Regulation A Offering
On June 11, 2021, we launched a new offering under Regulation A of Section 3(6) of the Securities Act for Tier 2 offerings, pursuant to which we are offering up to 47,000 shares of Series C Preferred Stock at an offering price of $1,000 per share for a maximum offering amount of $47 million.
During the three months ended March 31, 2022, the Company sold an aggregate of 4,293 shares of Series C Preferred Stock for total gross proceeds of $4,289,444. After deducting a placement fee and other expenses, the Company received net proceeds of $4,004,110.
Promissory Notes
The Company has issued promissory notes payable to lenders related to the acquisition of its manufactured housing communities and mobile homes. The interest rates on these promissory notes range from 3.250% to 5.875% with 5 to 30 years principal amortization. Three of the promissory notes had an initial 12 month, six have an initial 24 month, six have an initial 36 month, one has an initial 60 month, and one promissory note has a 180-month period of interest only payments. The promissory notes are secured by the real estate assets and twenty notes totaling $43,602,376 are guaranteed by Raymond M. Gee.
As of March 31, 2022, the outstanding balance on these notes was $53,456,310. The following are the terms of these notes:
| Maturity Date | Interest Rate | Balance March 31, 2022 | Balance December 31, 2021 | |||||||||||||
| Pecan Grove MHP LLC | 02/22/29 | 5.250 | % | $ | 2,951,049 | $ | 2,969,250 | |||||||||
| Azalea MHP LLC | 03/01/29 | 5.400 | % | 813,683 | 790,481 | |||||||||||
| Holly Faye MHP LLC | 03/01/29 | 5.400 | % | 549,485 | 579,825 | |||||||||||
| Chatham MHP LLC | 04/01/24 | 5.875 | % | 1,689,459 | 1,698,800 | |||||||||||
| Lakeview MHP LLC | 03/01/29 | 5.400 | % | 1,796,163 | 1,805,569 | |||||||||||
| B&D MHP LLC | 05/02/29 | 5.500 | % | 1,765,818 | 1,779,439 | |||||||||||
| Hunt Club MHP LLC | 01/01/33 | 3.430 | % | 2,386,572 | 2,398,689 | |||||||||||
| Crestview MHP LLC | 12/31/30 | 3.250 | % | 4,649,631 | 4,682,508 | |||||||||||
| Maple Hills MHP LLC | 12/01/30 | 3.250 | % | 2,324,815 | 2,341,254 | |||||||||||
| Springlake MHP LLC | 12/10/26 | 4.750 | % | 4,016,250 | 4,016,250 | |||||||||||
| ARC MHP LLC | 01/01/30 | 5.500 | % | 3,790,188 | 3,809,742 | |||||||||||
| Countryside MHP LLC | 03/20/50 | 5.500 | % | 1,675,929 | 1,684,100 | |||||||||||
| Evergreen MHP LLC | 04/01/32 | 3.990 | % | 1,109,917 | 1,115,261 | |||||||||||
| Golden Isles MHP LLC | 03/31/26 | 4.000 | % | 787,500 | 787,500 | |||||||||||
| Anderson MHP LLC* | 07/10/26 | 5.210 | % | 2,153,807 | 2,153,807 | |||||||||||
| Capital View MHP LLC* | 09/10/26 | 5.390 | % | 817,064 | 817,064 | |||||||||||
| Hidden Oaks MHP LLC* | 09/10/26 | 5.330 | % | 823,440 | 823,440 | |||||||||||
| North Raleigh MHP LLC | 11/01/26 | 4.750 | % | 5,276,246 | 5,304,409 | |||||||||||
| Charlotte 3 Park MHP LLC (Dixie, Driftwood, Meadowbrook)(1) | 03/01/22 | 5.000 | % | - | 1,500,000 | |||||||||||
| Carolinas 4 MHP LLC (Asheboro, Morganton)* | 01/10/27 | 5.300 | % | 3,105,070 | 3,105,070 | |||||||||||
| Sunnyland MHP LLC* | 02/10/27 | 5.370 | % | 1,123,980 | - | |||||||||||
| Warrenville MHP LLC* | 03/10/27 | 5.590 | % | 1,218,870 | - | |||||||||||
| Gvest Finance LLC (B&D homes) | 05/01/24 | 5.000 | % | 644,510 | 657,357 | |||||||||||
| Gvest Finance LLC (Countryside homes) | 03/20/50 | 5.500 | % | 1,281,595 | 1,287,843 | |||||||||||
| Gvest Finance LLC (Golden Isles homes) | 03/31/36 | 4.000 | % | 787,500 | 787,500 | |||||||||||
| Gvest Anderson Homes LLC* | 07/10/26 | 5.210 | % | 2,006,193 | 2,006,193 | |||||||||||
| Gvest Capital View Homes LLC* | 09/10/26 | 5.390 | % | 342,936 | 342,936 | |||||||||||
| Gvest Hidden Oaks Homes LLC* | 09/10/26 | 5.330 | % | 416,560 | 416,560 | |||||||||||
| Gvest Carolinas 4 Homes LLC (Asheboro, Morganton)* | 01/10/27 | 5.300 | % | 1,294,930 | 1,294,930 | |||||||||||
| Gvest Sunnyland Homes LLC* | 02/10/27 | 5.370 | % | 636,020 | - | |||||||||||
| Gvest Warrenville Homes LLC* | 03/10/27 | 5.590 | % | 1,221,130 | - | |||||||||||
| Total Notes Payable | 53,456,310 | 50,955,777 | ||||||||||||||
| Discount Direct Lender Fees | (2,229,776 | ) | (2,064,294 | ) | ||||||||||||
| Total Net of Discount | $ | 51,226,534 | $ | 48,891,483 | ||||||||||||
| (1) | The Company repaid the Charlotte 3 Park MHP LLC note payable of $1,500,000 on March 1, 2022. This community was refinanced on April 14, 2022 with a different lender. See Subsequent Event Note 9. |
| * | The notes indicated above are subject to certain financial covenants. |
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Lines of Credit – Variable Interest Entities
| Facility | Borrower | Community | Maturity Date |
Interest Rate |
Maximum Credit Limit | Balance March 31, 2022 | Balance December 31, 2021 | |||||||||||||
| Occupied Home Facility1 | Gvest Homes I LLC | ARC, Crestview, Maple | 01/01/30 | 8.375% | $ | 20,000,000 | $ | 2,507,435 | $ | 2,517,620 | ||||||||||
| Multi-Community Rental Home Facility | Gvest Finance LLC | ARC | 12/17/31 | Greater of 3.25% or Prime, + 375 bps | $ | 4,000,000 | $ | 819,376 | $ | 838,000 | ||||||||||
| Multi-Community Floorplan Home Facility(1), (2) | Gvest Finance LLC | Golden Isles, Springlake, Sunnyland, Crestview | Various(3) | LIBOR + 6 – 8% based on days outstanding | $ | 2,000,000 | $ | 1,528,669 | $ | 1,104,255 | ||||||||||
| Springlake Home Facility(2) | Gvest Finance LLC | Springlake | 12/10/26 | 6.75% | $ | 3,300,000 | $ | 1,892,482 | $ | 1,892,481 | ||||||||||
| Total Lines of Credit - VIEs | $ | 6,747,962 | $ | 6,352,356 | ||||||||||||||||
| Discount Direct Lender Fees | $ | (166,504 | ) | $ | (151,749 | ) | ||||||||||||||
| Total Net of Discount | $ | 6,581,458 | $ | 6,200,607 | ||||||||||||||||
| (1) | During the three months ended March 31, 2022, the Company drew down $19,145 related to the Occupied Home Facility and $424,414 related to the Multi-Community Floorplan Home Facility. |
| (2) | Payments on the Multi-Community Floorplan Home Facility advances are interest only until each advance is paid off or transferred to the Multi-Community Rental Home Facility and payments on the Springlake Home Facility are interest only for the first six months. |
| (3) | The maturity date of the of the Multi-Community Floorplan Line of Credit will vary based on each statement of financial transaction (“SOFT”), a report identifying the funded homes and the applicable financial terms. |
The agreements for each of the above line of credit facilities require the maintenance of certain financial ratios or other affirmative and negative covenants. All the above line of credit facilities are guaranteed by Raymond M. Gee.
Metrolina Promissory Note
On October 22, 2021, the Company issued a promissory note to Metrolina Loan Holdings, LLC (“Metrolina”), a significant stockholder, in the principal amount of $1,500,000. The note bears interest at a rate of 18% per annum and matures on April 1, 2023. During the first six months of the note, any prepayment would require the Company to pay a yield maintenance fee equal to six months of interest. Thereafter, the loan may be prepaid at any time without penalty or fee. The note is guaranteed by Raymond M. Gee. As of March 31, 2022 and December 31, 2021, the balance on this note was $1,500,000. During the three months ended March 31, 2022 and 2021, interest expense totaled $66,575 and $0, respectively.
Raymond M. Gee Revolving Promissory Note
On October 1, 2017, the Company issued a revolving promissory note to Raymond M. Gee, pursuant to which the Company could borrow up to $1,500,000 from Mr. Gee on a revolving basis for working capital purposes. In September 2020, the Company paid off the full balance; however, the line of credit remained available to the Company until it was cancelled in December 2021. As of March 31, 2022 and December 31, 2021, the outstanding balance on this note was $0.
Gvest Revolving Promissory Note
On December 27, 2021, the Company issued a revolving promissory note to Gvest Real Estate Capital, LLC, an entity whose sole owner is Raymond M. Gee, the Company’s chairman and chief executive officer, pursuant to which the Company may borrow up to $1,500,000 on a revolving basis for working capital or acquisition purposes. On the same date, the Company borrowed $150,000. During the three months ended March 31, 2022, the Company borrowed an additional $700,000. As of March 31, 2022 and December 31, 2021, the outstanding balance on this note was $850,000 and $150,000, respectively. This note has a five-year term and is interest-only based on an 15% annual rate through the maturity date and is unsecured. During the three months ended March 31, 2022 and 2021, interest expense totaled $14,718 and $0, respectively. The outstanding principal and accrued interest balance on this note was repaid on April 15, 2022.
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Off-Balance Sheet Arrangements
As of March 31, 2022, we had no off-balance sheet arrangements.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these unaudited condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our unaudited condensed consolidated financial statements. Actual results may differ from these estimates under different assumptions or conditions.
Critical accounting policies are defined as those that involve significant judgment and potentially could result in materially different results under different assumptions and conditions. Management believes the following critical accounting policies are affected by our more significant judgments and estimates used in the preparation of our unaudited condensed consolidated financial statements.
Revenue Recognition Mobile home rental and related income is generated from lease agreements for our sites and homes. The lease component of these agreements is accounted for under Topic 842 of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, for leases.
Under ASC 842, we must assess on an individual lease basis whether it is probable that we will collect the future lease payments. We consider the tenant’s payment history and current credit status when assessing collectability. When collectability is not deemed probable, we write-off the tenant’s receivables, including straight-line rent receivable, and limit lease income to cash received.
Our revenues primarily consist of rental revenues and tenant fee income. We have the following revenue sources and revenue recognition policies:
| ● | Rental revenues include revenues from the leasing land lot or a combination of both, the mobile home and land at our properties to tenants. |
| ● | Revenues from the leasing of land lot or a combination of both, the mobile home and land at our properties to tenants include (i) lease components, including land lot or a combination of both, the mobile home and land, and (ii) reimbursement of utilities and account for the components as a single lease component in accordance with ASC 842. |
| ● | Revenues derived from fixed lease payments are recognized on a straight-line basis over the non-cancelable period of the lease. We commence rental revenue recognition when the underlying asset is available for use by the lessee. Revenue derived from the reimbursement of utilities are generally recognized in the same period as the related expenses are incurred. Our leases are month-to-month. |
Acquisitions. We account for acquisitions as asset acquisitions in accordance with ASC 805, “Business Combinations,” and allocate the purchase price of the property based upon the fair value of the assets acquired, which generally consist of land, site and land improvements, buildings and improvements and rental homes. We allocate the purchase price of an acquired property generally determined by internal evaluation as well as third-party appraisal of the property obtained in conjunction with the purchase.
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Variable Interest Entities. In December 2020, the Company entered into a property management agreement with Gvest Finance LLC, a company owned and controlled by the Company’s parent company, Gvest Real Estate Capital LLC, an entity whose sole owner is Raymond M. Gee, the Company’s chairman and chief executive officer, and has subsequently entered into property management agreements with Gvest Homes I LLC, Gvest Anderson Homes LLC, Gvest Capital View Homes LLC, Gvest Hidden Oaks Homes LLC, Gvest Springlake Homes LLC, Gvest Carolinas 4 Homes LLC, Gvest Sunnyland Home LLC and Gvest Warrenville Homes LLC, which are wholly owned subsidiaries of Gvest Finance LLC. Under the property management agreements, the Company manages the homes owned by the VIEs and the VIEs remit to the Company all income, less any sums paid out for debt service plus 5% of the debt service payment.
Additionally, during 2021, the Company formed two entities, Brainerd Place LLC and Bull Creek LLC, for the purpose of exploring opportunities to develop mobile home communities. The Company owns 49% of these entities and Gvest Real Estate LLC, an entity whose sole owner is Raymond M. Gee, owns 51%. The Company also executed operating agreements with these entities which designate Gvest Capital Management LLC, a company owned and controlled by Gvest Real Estate Capital LLC, as manager with the authority, power, and discretion to manage and control the entities’ business decisions. The operating agreements require the Company to make cash contributions to the entities to fund their activities, operations, and existence, if the Company approves the contribution requests from the manager, which ultimately provides the Company with power to direct the economically significant activities of these entities.
A company with interests in a VIE must consolidate the entity if the company is deemed to be the primary beneficiary of the VIE; that is, if it has both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. Such a determination requires management to evaluate circumstances and relationships that may be difficult to understand and to make a significant judgment, and to repeat the evaluation at each subsequent reporting date. Primarily due to the Company’s common ownership by Mr. Gee, its power to direct the activities of these entities that most significantly impact their economic performance, and the fact that the Company has the obligation to absorb losses or the right to receive benefits from these entities that could potentially be significant to these entities, the entities listed above are considered to be VIEs in accordance applicable GAAP.
Investment Property and Equipment and Depreciation. Investment real property and equipment are carried at cost. Depreciation of buildings, improvements to sites and buildings, rental homes, equipment, and vehicles is computed principally on the straight-line method over the estimated useful lives of the assets (ranging from 3 to 25 years). Land development costs are not depreciated until they are put in use, at which time they are capitalized as land improvements. Interest Expense pertaining to Land Development Costs are capitalized. Maintenance and Repairs are charged to expense as incurred and improvements are capitalized. The costs and related accumulated depreciation of property sold or otherwise disposed of are removed from the financial statement and any gain or loss is reflected in the current period’s results of operations.
Impairment Policy. We apply FASB ASC 360-10, “Property, Plant & Equipment,” to measure impairment in real estate investments. Rental properties are individually evaluated for impairment when conditions exist which may indicate that it is probable that the sum of expected future cash flows (on an undiscounted basis without interest) from a rental property is less than the carrying value under its historical net cost basis. These expected future cash flows consider factors such as future operating income, trends and prospects as well as the effects of leasing demand, competition and other factors. Upon determination that a permanent impairment has occurred, rental properties are reduced to their fair value. For properties to be disposed of, an impairment loss is recognized when the fair value of the property, less the estimated cost to sell, is less than the carrying amount of the property measured at the time there is a commitment to sell the property and/or it is actively being marketed for sale. A property to be disposed of is reported at the lower of its carrying amount or its estimated fair value, less its cost to sell. After the date we determine a property is held for disposition, depreciation expense is not recorded. There was no impairment during the three months ended March 31, 2022 and 2021.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by Rule 13a-15(e) of the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of March 31, 2022. Based upon, and as of the date of this evaluation, our chief executive officer and chief financial officer determined that, because of the material weaknesses described in Item 9A “Controls and Procedures” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and further referenced below, which we are still in the process of remediating as of March 31, 2022, our disclosure controls and procedures were not effective.
During its evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2022, our management identified the following material weaknesses:
| ● | We lack proper segregation of duties due to the limited number of employees within the accounting department. |
| ● | We lack effective closing procedures. |
To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of legal and accounting professionals. As we grow, we expect to increase our number of employees, which will enable us to implement adequate segregation of duties within the internal control framework.
To cure the foregoing material weakness, we have taken or plan to take the following remediation measures:
| ● | We have added and plan to continue to add additional employees to assist in the financial closing procedures. |
| ● | As necessary, we will continue to engage consultants or outside accounting firms to ensure proper accounting for our consolidated financial statements. |
We intend to complete the remediation of the material weaknesses discussed above as soon as practicable, but we can give no assurance that we will be able to do so. Designing and implementing an effective disclosure controls and procedures is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to devote significant resources to maintain a financial reporting system that adequately satisfies our reporting obligations. The remedial measures that we have taken and intend to take may not fully address the material weaknesses that we have identified, and material weaknesses in our disclosure controls and procedures may be identified in the future. Should we discover such conditions, we intend to remediate them as soon as practicable. We are committed to taking appropriate steps for remediation, as needed.
Changes in Internal Controls Over Financial Reporting
We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.
There were no changes in our internal controls over financial reporting during the first quarter of fiscal year 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We have not sold any equity securities during the three months ended March 31, 2022 that were not previously disclosed in a current report on Form 8-K that was filed during the quarter.
During the three months ended March 31, 2022, we did not repurchase any shares of our common stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
We have no information to disclose that was required to be in a report on Form 8-K during the first quarter of fiscal year 2022 but was not reported. There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.
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ITEM 6. EXHIBITS.
39
| * | Filed herewith |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: May 16, 2022 | MANUFACTURED HOUSING PROPERTIES INC. | |
| /s/ Raymond M. Gee | ||
| Name: | Raymond M. Gee | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| /s/ Chelsea H. Gee | ||
| Name: | Chelsea H. Gee | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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Exhibit 10.16
MODIFICATION AGREEMENT
This MODIFICATION AGREEMENT (“Agreement”) is entered into effective as of March __, 2022, by and between FIRSTBANK, a Tennessee banking corporation (“Lender”), and SPRINGLAKE MHP LLC, a Georgia limited liability company (“Borrower”), MANUFACTURED HOUSING PROPERTIES, INC., a Nevada limited liability company (“MHPI”), and RAYMOND M. GEE (individually each a “Guarantor” and, collectively, the “Guarantors”).
A. Lender previously made a loan to Borrower on November 12, 2021, in the maximum principal amount of $4,016,250.00 (as increased herein, the “Loan”), which Loan is evidenced, governed, and/or secured by the following (collectively, the “Original Loan Documents”): (a) that certain Loan Agreement dated November 12, 2021 by and between Lender and Borrower (the “Loan Agreement”); (b) that certain Promissory Note dated November 12, 2021 made by Borrower payable to the order of Lender in the original principal amount of $4,016,250.00 (the “Note”); (c) those certain Guaranties each dated November 12, 2021 executed by each Guarantor for the benefit of Lender (each a “Guaranty” and, collectively, the “Guaranties”); (d) that certain Assignment of Ownership Interest dated November 12, 2021 by and between Lender and MHPI (the “Assignment”); (e) that certain Assignment of Management Agreement dated November 12, 2021 by and between Lender and Mobile Homes Rentals LLC, a North Carolina limited liability company (the “Acknowledgement”); (f) that certain Environmental Indemnity Agreement dated November 12, 2021 by and between Lender, Borrower, and Affiliated Home Owner (the “Indemnity Agreement”); (g) that Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing dated November 12, 2021 made by Borrower for the benefit of Lender (the “Mortgage”); and (h) the other related documents executed by Borrower, a Guarantor, or third parties pertaining to, evidencing, and/or securing the Loan.
B. Lender, Borrower, and each Guarantor now propose to modify certain of the terms and provisions of the Original Loan Documents.
NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lender, Borrower, and each Guarantor hereby agree as follows:
1. Recitals. The above recitals serve as the basis for this Agreement and are incorporated herein and made a part hereof for all purposes. Borrower, Guarantors, and Lender each hereby acknowledge the above recitals to be true and correct as of the date hereof are incorporated herein and made a part hereof for all purposes. The recitals are a substantive, contractual part of this Agreement.
2. Loan Documents. “Loan Documents” means, collectively, the Original Loan Documents, as amended herein, this Agreement, and each document, paper or certificate executed, furnished or delivered in connection with this Agreement, including, without limitation, those documents referenced in Section 3 herein, and all other documents, certificates, reports, and instruments that this Agreement requires or that were executed or delivered (or both) at Lender’s request, all as the same may be amended, modified or supplemented from time to time. Capitalized terms not otherwise defined herein shall have such meaning as set forth in the applicable Loan Documents.
3. Conditions Precedent. The obligation of Lender to modify certain of the terms and provisions of the Original Loan Documents, or make any additional advances hereunder or under the Loan (as amended, modified, or extended hereby) is subject to the conditions precedent that Lender shall have received all of the following, duly executed and in form and substance satisfactory to Lender and its legal counsel:
(a) this Agreement.
Modification Agreement - Page 1 of 8
(b) a Modification Agreement by Lender, Affiliated Home Owner, and the Guarantors (as defined in such Modification Agreement).
(c) a closing statement dated as of the date hereof by and between Lender and Borrower.
(d) a copy of the resolutions or written consents of Borrower approving this Agreement and authorizing the execution and delivery of the same.
(e) a copy of the resolutions or written consents of MHPI, approving this Agreement and authorizing the execution and delivery of the same.
(f) a current certificate of good standing for Borrower and MHPI from their respective states of formation.
(g) UCC, bankruptcy, judgment, tax, and Lien search on Borrower, satisfactory to Lender.
(h) all fees and expenses (including attorneys’ fees) incurred by Lender in connection with this Agreement and the Loan Documents.
(i) if required by Lender, a post-closing obligations letter dated as of the date hereof from Borrower for the benefit of Lender.
4. Current Note Balance. As of the date hereof, the current outstanding principal balance of the Note is $4,016,250.
5. Amendments to Loan Agreement. The Loan Agreement is hereby amended, modified, or restated as follows:
(a) The defined term “ Affiliated Home Owner Loan” set forth in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and replaced with:
“Affiliated Home Owner Loan” means the Debt owed by Affiliated Home Owner to Lender evidenced, governed, and/or secured by that certain Promissory Note dated November 12, 2021 made by Affiliated Home Owner payable to the order of Lender in the maximum principal amount of $2,000,000.00, as amended and restated pursuant to that certain Amended and Restated Promissory Note dated March 29, 2022 made by Affiliated Home Owner payable to the order of Lender in the maximum principal amount of $3,300,000.00, and that certain Loan and Security Agreement dated November 12, 2021 by and between Lender, Affiliated Home Owner, and the other parties thereto, as amended pursuant to that certain Modification Agreement dated March 29, 2022 by and between Lender, Affiliated Home Owner, and the other parties thereto.
(b) The year “2021” set forth in Section 5.2(a) and (b), is hereby deleted and replaced with “2022.”
6. Additional Modifications. All references to the Loan Agreement in any of the Loan Documents shall hereinafter hereby refer to the Loan Agreement, as amended by this Agreement, and as the same may be amended, extended and modified from time to time. All references to the Loan Documents in any of the Loan Documents shall hereinafter hereby refer to the Loan Documents, as amended by this Agreement, and as the same may be amended, extended and modified from time to time.
7. Acknowledgment by Borrower. Except as otherwise specified herein, the terms and provisions hereof shall in no manner impair, limit, restrict or otherwise affect the obligations of Borrower or any third party to Lender, as evidenced by the Loan Documents. Borrower hereby acknowledges, agrees and represents that (a) Borrower is indebted to Lender pursuant to the terms of the Note; (b) the liens, security interests and assignments created and evidenced by the Loan Documents are, respectively, valid and subsisting liens, security interests and assignments of the respective dignity and priority recited in the Loan Documents; (c) there are no claims or offsets against, or defenses or counterclaims to, the terms or provisions of the Loan Documents, and the other obligations created or evidenced by the Loan Documents; (d) Borrower has no claims, offsets, defenses or counterclaims arising from any of Lender’s acts or omissions with respect to the Collateral, the Loan Documents or Lender’s performance under the Loan Documents or with respect to the Collateral; (e) the representations and warranties contained in the Loan Documents are true and correct representations and warranties of Borrower in all material respects, as of the date hereof; and (f) Borrower is not in default and no event has occurred which, with the passage of time, giving of notice, or both, would constitute a default by Borrower of Borrower’s obligations under the terms and provisions of the Loan Documents. To the extent Borrower has, any claims, offsets, defenses or counterclaims against Lender or the repayment of all or a portion of the Loan, whether known or unknown, fixed or contingent, same are hereby forever irrevocably waived and released in their entirety.
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8. Release. Borrower and each Guarantor, individually and collectively, hereby release, acquit, waive, and forever discharge Lender, and each and every past and present subsidiary, affiliate, stockholder, officer, director, agent, servant, employee, representative, and attorney of Lender, from any and all claims, causes of action, suits, debts, liens, obligations, liabilities, demands, losses, costs and expenses (including attorneys’ fees) of any kind, character, or nature whatsoever, known or unknown, fixed or contingent, which Borrower or any Guarantor may have or claim to have now or which may hereafter arise out of or connected with any act of commission or omission of Lender existing or occurring prior to the date of this Agreement or any instrument executed prior to the date of this Agreement including, without limitation, any claims, liabilities or obligations arising with respect to the indebtedness evidenced by the Note. Borrower and each Guarantor, individually and collectively, waive any claim contesting the existence and the adequacy of the consideration given with respect to this Agreement.
9. Miscellaneous Provisions.
(a) No Waiver of Remedies. Except as may be expressly set forth herein, nothing contained in this Agreement shall prejudice, act as, or be deemed to be a waiver of any right or remedy available to Lender by reason of the occurrence or existence of any fact, circumstance or event constituting a default under the Note or the other Loan Documents.
(b) Notices. Notices or other communications required or permitted under this Agreement or the Loan Documents shall be provided in accordance with the requirements therefor as set forth in the Loan Documents.
(c) Costs and Expenses. Contemporaneously with the execution and delivery hereof, Borrower shall pay, or cause to be paid, all costs and expenses incident to the preparation, execution and recordation hereof and the consummation of the transaction contemplated hereby, including, but not limited to, search fees, recording fees, and reasonable fees and expenses of legal counsel to Lender.
(d) Additional Documentation. From time to time, Borrower shall execute or procure and deliver to Lender such other and further documents and instruments evidencing, securing or pertaining to the Loan or the Loan Documents as shall be reasonably requested by Lender so as to evidence or effect the terms and provisions hereof.
Modification Agreement - Page 3 of 8
(e) Effectiveness of the Loan Documents. Except as expressly modified by the terms and provisions hereof, each of the terms and provisions of the Loan Documents are hereby ratified and shall remain in full force and effect.
(f) Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee without regard to provisions regarding conflicts of law, except as otherwise expressly stated herein. Borrower hereby submits to the jurisdiction and venue of any United States Federal or Tennessee State court sitting in Knoxville, Tennessee, and agrees that all claims in respect of any such suit, action or proceeding shall be heard and determined in such courts.
(g) Waiver of Jury Trial. LENDER, BORROWER, AND EACH GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, THE LOAN DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (ORAL OR WRITTEN), OR ACTIONS OF LENDER OR BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER ENTERING INTO THIS AGREEMENT.
(h) Time. Time is of the essence in the performance of the covenants contained herein and in the Loan Documents.
(i) Binding Agreement. This Agreement shall be binding upon the heirs, executors, administrators, personal representatives, successors and assigns of the parties hereto.
(j) Headings. The section headings hereof are inserted for convenience of reference only and shall in no way alter, amend, define or be used in the construction or interpretation of the text of such section.
(k) Construction. Whenever the context hereof so requires, reference to the singular shall include the plural and likewise, the plural shall include the singular; words denoting gender shall be construed to mean the masculine, feminine or neuter, as appropriate; and specific enumeration shall not exclude the general, but shall be construed as cumulative of the general recitation. Capitalized terms not otherwise defined herein shall have such meaning as set forth in the Loan Agreement.
(l) Severability. If any clause or provision of this Agreement is or should ever be held to be illegal, invalid or unenforceable under any present or future law applicable to the terms hereof, then and in that event, it is the intention of the parties hereto that the remainder of this Agreement shall not be affected thereby, and that in lieu of each such clause or provision of this Agreement that is illegal, invalid or unenforceable, such clause or provision shall be judicially construed and interpreted to be as similar in substance and content to such illegal, invalid or unenforceable clause or provision, as the context thereof would reasonably suggest, so as to thereafter be legal, valid and enforceable.
(m) Counterparts. To facilitate execution, this Agreement may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature and acknowledgment of, or on behalf of, each party, or that the signature and acknowledgment of all persons required to bind any party, appear on each counterpart. All counterparts shall collectively constitute a single instrument. It shall not be necessary in making proof of this Agreement to produce or account for more than a single counterpart containing the respective signatures and acknowledgment of, or on behalf of, each of the parties hereto. Any signature and acknowledgment page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures and acknowledgments thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature and acknowledgment pages.
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(n) Electronic Transmission. The parties agree that if a copy this Agreement executed by one or more of the parties (an “Executed Copy”) is sent by electronic transmission, (i) the Executed Copy shall be treated in all respects as a paper original of this Agreement executed by the same parties whose signatures appear on the Executed Copy and (ii) the Executed Copy shall have the same binding and legal effect as a paper original of this Agreement executed by the same parties whose signatures appear on the Executed Copy. At the request of any party who receives an Executed Copy, this Agreement shall be re-executed by the parties who signed the Executed Copy and the executed paper original Agreement shall be sent to the requesting party by any method permitted herein other than by electronic transmission. Each of the parties further agree that it will not raise the transmission of this Agreement or the Executed Copy by electronic transmission as a defense in any proceeding or action in which the validity of this Agreement is at issue and hereby forever waives such defense. “Electronic transmission” means any form of communication, such as facsimile or email, not directly involving the physical transmission of actual paper, which creates a record of the actual paper that may be retained, retrieved, reviewed and printed by the recipient.
(o) Notice of Final Agreement. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND THERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO OR THERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO OR THERETO. THE PROVISIONS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE AMENDED OR WAIVED ONLY BY AN INSTRUMENT IN WRITING SIGNED BY THE RESPECTIVE PARTIES TO SUCH DOCUMENTS.
[Signature page follows]
Modification Agreement - Page 5 of 8
This Modification Agreement is executed effective as of the date first above written.
| LENDER: | ||
| FIRSTBANK | ||
| By: | /s/ Owen B. Ray II | |
| Owen B. Ray II, MH Relationship Manager, VP | ||
Modification Agreement - Page 6 of 8
| BORROWER: | ||
| SPRINGLAKE MHP LLC | ||
| By: Manufactured Housing Properties Inc., a Nevada corporation, its Sole Member | ||
| By: | /s/ Michael Z. Anise | |
| Michael Z. Anise, President | ||
STATE OF North Carolina)
COUNTY OF Mecklenburg)
Before me, the undersigned, a Notary Public of said County and State, personally appeared Michael Z. Anise, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath, acknowledged himself to be the President of Manufactured Housing Properties Inc., a Nevada corporation, which is the Sole Member of SPRINGLAKE MHP LLC, a Georgia limited liability company, the within named Borrower, and that he in such capacity, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the Borrower in such capacity..
WITNESS my hand and seal as of March 29, 2022.
| By: | /s/ Janalyn M. Bailey | |
| Notary Public |
My Commission Expires: 03/25/2024
Modification Agreement - Page 7 of 8
| GUARANTORS: | |
| /s/ Raymond M. Gee | |
| RAYMOND M. GEE |
STATE OF North Carolina
COUNTY OF Mecklenburg
Personally appeared before me, the undersigned Notary of said State and County, RAYMOND M. GEE, the within named bargainor, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath, swore to and acknowledged that he executed the within instrument for the purposes therein contained.
WITNESS my hand and seal as of March 21, 2022.
| /s/ Janalyn M. Bailey | |
| Notary Public |
My commission expires: 03/25/2024
| MANUFACTURED HOUSING PROPERTIES, INC. | ||
| By: | /s/ Michael Z. Anise | |
| Michael Z. Anise, President | ||
STATE OF North Carolina)
COUNTY OF Mecklenburg)
Before me, the undersigned, a Notary Public of said County and State, personally appeared Michael Z. Anise, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath, acknowledged himself to be the President of MANUFACTURED HOUSING PROPERTIES, INC., a Nevada limited liability company, the within named Grantor, and that he in such capacity, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the Grantor in such capacity.
WITNESS my hand and seal as of March 21, 2022.
| /s/ Janalyn M. Bailey\\ | |
| Notary Public |
My Commission Expires: 03/25/2024
Modification Agreement - Page 8 of 8
Exhibit 10.17
MODIFICATION AGREEMENT
This MODIFICATION AGREEMENT (“Agreement”) is entered into effective as of March __, 2022, by and between FIRSTBANK, a Tennessee banking corporation (“Lender”), and GVEST SPRINGLAKE HOMES LLC, a Delaware limited liability company (“Borrower”), GVEST FINANCE LLC, a North Carolina limited liability company (“GVEST Finance”), and RAYMOND M. GEE (individually each a “Guarantor” and, collectively, the “Guarantors”).
A. Lender previously made a loan to Borrower on November 12, 2021, in the maximum principal amount of $2,000,000.00 (as increased herein, the “Loan”), which Loan is evidenced, governed, and/or secured by the following (collectively, the “Original Loan Documents”): (a) that certain Loan and Security Agreement dated November 12, 2021 by and between Lender, Borrower, and the Guarantors (the “Loan Agreement”); (b) that certain Promissory Note dated November 12, 2021 made by Borrower payable to the order of Lender in the original principal amount of $2,000,000.00 (the “Note”); (c) those certain Guaranties each dated November 12, 2021 executed by each Guarantor for the benefit of Lender (each a “Guaranty” and, collectively, the “Guaranties”); (d) that certain Assignment of Ownership Interest dated November 12, 2021 by and between Lender and GVEST Finance (the “Assignment”); (e) that certain Assignment of Management Agreement dated November 12, 2021 by and between Lender and Mobile Homes Rentals LLC, a North Carolina limited liability company (the “Acknowledgement”); (f) that certain Remarketing Agreement dated November 12, 2021 by and between Lender and the other parties thereto (the “Remarketing Agreement”); and (g) the other related documents executed by Borrower, a Guarantor, or third parties pertaining to, evidencing, and/or securing the Loan.
B. Lender, Borrower, and each Guarantor now propose to (a) increase the principal amount of the Loan and (b) modify certain of the terms and provisions of the Original Loan Documents.
NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lender, Borrower, and each Guarantor hereby agree as follows:
1. Recitals. The above recitals serve as the basis for this Agreement and are incorporated herein and made a part hereof for all purposes. Borrower, Guarantors, and Lender each hereby acknowledge the above recitals to be true and correct as of the date hereof are incorporated herein and made a part hereof for all purposes. The recitals are a substantive, contractual part of this Agreement.
2. Loan Documents. “Loan Documents” means, collectively, the Original Loan Documents, as amended herein, this Agreement, and each document, paper or certificate executed, furnished or delivered in connection with this Agreement, including, without limitation, those documents referenced in Section 3 herein, and all other documents, certificates, reports, and instruments that this Agreement requires or that were executed or delivered (or both) at Lender’s request, all as the same may be amended, modified or supplemented from time to time. Capitalized terms not otherwise defined herein shall have such meaning as set forth in the applicable Loan Documents.
3. Conditions Precedent. The obligation of Lender to increase the principal amount of the Loan, modify certain of the terms and provisions of the Original Loan Documents, or make any additional advances hereunder or under the Loan (as amended, modified, or extended hereby) is subject to the conditions precedent that Lender shall have received all of the following, duly executed and in form and substance satisfactory to Lender and its legal counsel:
(a) the Renewal Note.
(b) this Agreement.
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(c) an Amended and Restated Guaranty from each Guarantor in favor of Lender, dated as of the date hereof.
(d) a Modification Agreement by Lender, Land Borrower, and the Guarantors (as defined in the Land Loan Agreement).
(e) a closing statement dated as of the date hereof by and between Lender and Borrower.
(f) a copy of the resolutions or written consents of Borrower authorizing the execution and delivery of the Renewal Note, this Agreement, and the execution and delivery of the Loan Documents.
(g) a copy of the resolutions or written consents of GVEST Finance, authorizing the execution and delivery of this Agreement, an Amended and Restated Guaranty, and the execution and delivery of the Loan Documents.
(h) a current certificate of good standing for Borrower and GVEST Finance from their respective states of formation.
(i) UCC, bankruptcy, judgment, tax, and Lien search on Borrower, satisfactory to Lender.
(j) all fees and expenses (including attorneys’ fees) incurred by Lender in connection with this Agreement and the Loan Documents.
(k) if required by Lender, a post-closing obligations letter dated as of the date hereof from Borrower for the benefit of Lender.
4. Current Note Balance. As of the date hereof, the current outstanding principal balance of the Note is $1,892,481.
5. Increase of Note and Loan. The stated principal amount of the Loan is increased by the amount of One Million Three Hundred Thousand AND NO/l00 DOLLARS ($1,300,000.00), to the amount of Three Million Three Hundred Thousand and No/100 Dollars ($3,300,000.00). Borrower hereby promises to pay to the order of Lender the principal sum of the Note, as hereby increased, or so much thereof as may be advanced, less any repayments of the principal thereof heretofore made, together with interest thereon at the rate, on the dates and in the manner specified in the Note as modified hereby.
6. Renewal Promissory Note. Contemporaneously with the execution and delivery of this Agreement, Borrower shall execute and deliver to Lender that certain Amended and Restated Promissory Note (“Renewal Note”) in the principal amount of Three Million Three Hundred Thousand and No/100 Dollars ($3,300,000.00) to evidence the indebtedness originally evidenced by the Note as increased herein. The Renewal Note shall be in renewal and restatement of the terms and provisions governing the repayment of the indebtedness evidenced by the Note. Notwithstanding such renewal and restatement, Borrower acknowledges that the indebtedness originally evidenced by the Note shall be renewed by and continued in full force and effect (and the Renewal Note shall not extinguish, be substituted for, or effect a novation of the Note) in accordance with the terms and conditions of the Renewal Note, and the Renewal Note shall be secured by the liens and security interests of the Loan Documents as modified herein.
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7. Amendments to Loan Agreement. The Loan Agreement is hereby amended, modified, or restated as follows:
(a) Section 2.2 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
Promissory Note. The Loan is evidenced by that certain Promissory Note dated as of November 12, 2021 made by Borrower payable to the order of Lender in the original principal amount of $2,000,000.00, as amended and restated pursuant to that certain Amended and Restated Promissory Note dated as of March 29, 2022 made by Borrower payable to the order of Lender in the original principal amount of $3,300,000.00 (and all amendments, restatements, renewals, modifications, and extensions thereof, the “Note”). Interest on the principal amount outstanding from time to time shall be charged as provided in the Note and, should the rate of interest as calculated thereunder exceed that allowed by law, the applicable rate of interest will be the maximum rate of interest allowed by applicable law.
(b) The year “2021” set forth in Section 8.23(a)(i) and (a)(ii), is hereby deleted and replaced with “2022.”
(c) Exhibit A, Section 5 of the Loan Agreement is hereby amended by deleting the phrase “Two Million Three Hundred Thousand and No/100 Dollars ($2,000,000.00)” and replacing with “Three Million Three Hundred Thousand and No/100 Dollars ($3,300,000.00).”
8. Additional Modifications. All references to the Note in any of the Loan Documents shall hereinafter hereby refer to the Renewal Note, as the same may be amended, extended and modified from time to time. All references to the Loan Agreement in any of the Loan Documents shall hereinafter hereby refer to the Loan Agreement, as amended by this Agreement, and as the same may be amended, extended and modified from time to time. All references in any of the Loan Documents to the Loan, the amount constituting the Loan, any defined terms, or to any of the other Loan Documents shall be deemed, from and after the date hereof, to refer to the Loan, the amount constituting the Loan, defined terms and to such other Loan Documents, as modified herein, within the Renewal Note, or within the Loan Documents. All references to the Loan Documents in any of the Loan Documents shall hereinafter hereby refer to the Loan Documents, as amended by this Agreement, and as the same may be amended, extended and modified from time to time.
9. Grant. If the increase in the Note and Loan pursuant hereto or the Renewal Note is ever deemed or construed not to constitute a debt or obligation which is included within the scope of the Loan Agreement, the Borrower and Lender hereby agree that, from and after the date hereof, the lien of the Loan Agreement shall secure the payment of the aggregate amount of the Loan, the Note, the Renewal Note as increased hereby, and the Land Loan. To effectuate same, Borrower does hereby GRANT, BARGAIN, SELL and CONVEY, under and pursuant to the terms and provisions of the Loan Agreement, unto Lender and Lender’s successors and assigns, forever, all and singular, the Collateral, TO HAVE AND TO HOLD the Collateral, forever, upon and subject to each and every term and provision contained in the Loan Agreement, all of which are incorporated herein by reference to secure the repayment of the Note, as herein increased and modified, the Renewal Note, the performance by the Borrower and other parties of the terms, covenants and provisions of the Loan Documents, as hereby modified, and the Land Loan.
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10. Acknowledgment by Borrower. Except as otherwise specified herein, the terms and provisions hereof shall in no manner impair, limit, restrict or otherwise affect the obligations of Borrower or any third party to Lender, as evidenced by the Loan Documents. Borrower hereby acknowledges, agrees and represents that (a) Borrower is indebted to Lender pursuant to the terms of the Note as amended and restated pursuant to the Renewal Note; (b) the liens, security interests and assignments created and evidenced by the Loan Documents are, respectively, valid and subsisting liens, security interests and assignments of the respective dignity and priority recited in the Loan Documents; (c) there are no claims or offsets against, or defenses or counterclaims to, the terms or provisions of the Loan Documents, and the other obligations created or evidenced by the Loan Documents; (d) Borrower has no claims, offsets, defenses or counterclaims arising from any of Lender’s acts or omissions with respect to the Collateral, the Loan Documents or Lender’s performance under the Loan Documents or with respect to the Collateral; (e) the representations and warranties contained in the Loan Documents are true and correct representations and warranties of Borrower in all material respects, as of the date hereof; and (f) Borrower is not in default and no event has occurred which, with the passage of time, giving of notice, or both, would constitute a default by Borrower of Borrower’s obligations under the terms and provisions of the Loan Documents. To the extent Borrower has, any claims, offsets, defenses or counterclaims against Lender or the repayment of all or a portion of the Loan, whether known or unknown, fixed or contingent, same are hereby forever irrevocably waived and released in their entirety.
11. Release. Borrower and each Guarantor, individually and collectively, hereby release, acquit, waive, and forever discharge Lender, and each and every past and present subsidiary, affiliate, stockholder, officer, director, agent, servant, employee, representative, and attorney of Lender, from any and all claims, causes of action, suits, debts, liens, obligations, liabilities, demands, losses, costs and expenses (including attorneys’ fees) of any kind, character, or nature whatsoever, known or unknown, fixed or contingent, which Borrower or any Guarantor may have or claim to have now or which may hereafter arise out of or connected with any act of commission or omission of Lender existing or occurring prior to the date of this Agreement or any instrument executed prior to the date of this Agreement including, without limitation, any claims, liabilities or obligations arising with respect to the indebtedness evidenced by the Note. Borrower and each Guarantor, individually and collectively, waive any claim contesting the existence and the adequacy of the consideration given with respect to this Agreement.
12. Miscellaneous Provisions.
(a) No Waiver of Remedies. Except as may be expressly set forth herein, nothing contained in this Agreement shall prejudice, act as, or be deemed to be a waiver of any right or remedy available to Lender by reason of the occurrence or existence of any fact, circumstance or event constituting a default under the Note, the Renewal Note, or the other Loan Documents.
(b) Notices. Notices or other communications required or permitted under this Agreement or the Loan Documents shall be provided in accordance with the requirements therefor as set forth in the Loan Documents.
(c) Costs and Expenses. Contemporaneously with the execution and delivery hereof, Borrower shall pay, or cause to be paid, all costs and expenses incident to the preparation, execution and recordation hereof and the consummation of the transaction contemplated hereby, including, but not limited to, search fees, recording fees, and reasonable fees and expenses of legal counsel to Lender.
(d) Additional Documentation. From time to time, Borrower shall execute or procure and deliver to Lender such other and further documents and instruments evidencing, securing or pertaining to the Loan or the Loan Documents as shall be reasonably requested by Lender so as to evidence or effect the terms and provisions hereof.
(e) Effectiveness of the Loan Documents. Except as expressly modified by the terms and provisions hereof, each of the terms and provisions of the Loan Documents are hereby ratified and shall remain in full force and effect.
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(f) Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee without regard to provisions regarding conflicts of law, except as otherwise expressly stated herein. Borrower hereby submits to the jurisdiction and venue of any United States Federal or Tennessee State court sitting in Knoxville, Tennessee, and agrees that all claims in respect of any such suit, action or proceeding shall be heard and determined in such courts.
(g) Waiver of Jury Trial. LENDER, BORROWER, AND EACH GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, THE LOAN DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (ORAL OR WRITTEN), OR ACTIONS OF LENDER OR BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER ENTERING INTO THIS AGREEMENT.
(h) Time. Time is of the essence in the performance of the covenants contained herein and in the Loan Documents.
(i) Binding Agreement. This Agreement shall be binding upon the heirs, executors, administrators, personal representatives, successors and assigns of the parties hereto.
(j) Headings. The section headings hereof are inserted for convenience of reference only and shall in no way alter, amend, define or be used in the construction or interpretation of the text of such section.
(k) Construction. Whenever the context hereof so requires, reference to the singular shall include the plural and likewise, the plural shall include the singular; words denoting gender shall be construed to mean the masculine, feminine or neuter, as appropriate; and specific enumeration shall not exclude the general, but shall be construed as cumulative of the general recitation. Capitalized terms not otherwise defined herein shall have such meaning as set forth in the Loan Agreement.
(l) Severability. If any clause or provision of this Agreement is or should ever be held to be illegal, invalid or unenforceable under any present or future law applicable to the terms hereof, then and in that event, it is the intention of the parties hereto that the remainder of this Agreement shall not be affected thereby, and that in lieu of each such clause or provision of this Agreement that is illegal, invalid or unenforceable, such clause or provision shall be judicially construed and interpreted to be as similar in substance and content to such illegal, invalid or unenforceable clause or provision, as the context thereof would reasonably suggest, so as to thereafter be legal, valid and enforceable.
(m) Counterparts. To facilitate execution, this Agreement may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature and acknowledgment of, or on behalf of, each party, or that the signature and acknowledgment of all persons required to bind any party, appear on each counterpart. All counterparts shall collectively constitute a single instrument. It shall not be necessary in making proof of this Agreement to produce or account for more than a single counterpart containing the respective signatures and acknowledgment of, or on behalf of, each of the parties hereto. Any signature and acknowledgment page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures and acknowledgments thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature and acknowledgment pages.
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(n) Electronic Transmission. The parties agree that if a copy this Agreement executed by one or more of the parties (an “Executed Copy”) is sent by electronic transmission, (i) the Executed Copy shall be treated in all respects as a paper original of this Agreement executed by the same parties whose signatures appear on the Executed Copy and (ii) the Executed Copy shall have the same binding and legal effect as a paper original of this Agreement executed by the same parties whose signatures appear on the Executed Copy. At the request of any party who receives an Executed Copy, this Agreement shall be re-executed by the parties who signed the Executed Copy and the executed paper original Agreement shall be sent to the requesting party by any method permitted herein other than by electronic transmission. Each of the parties further agree that it will not raise the transmission of this Agreement or the Executed Copy by electronic transmission as a defense in any proceeding or action in which the validity of this Agreement is at issue and hereby forever waives such defense. “Electronic transmission” means any form of communication, such as facsimile or email, not directly involving the physical transmission of actual paper, which creates a record of the actual paper that may be retained, retrieved, reviewed and printed by the recipient.
(o) Notice of Final Agreement. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND THERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO OR THERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO OR THERETO. THE PROVISIONS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE AMENDED OR WAIVED ONLY BY AN INSTRUMENT IN WRITING SIGNED BY THE RESPECTIVE PARTIES TO SUCH DOCUMENTS.
[Signature page follows]
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This Modification Agreement is executed effective as of the date first above written.
| LENDER: | ||
| FIRSTBANK | ||
| By: | /s/ Owen B. Ray II | |
| Owen B. Ray II, MH Relationship Manager, VP | ||
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| BORROWER: | ||
| GVEST SPRINGLAKE HOMES LLC | ||
| By: | /s/ Raymond M. Gee | |
| Raymond M. Gee, Manager | ||
| STATE OF North Carolina) | ||
|
COUNTY OF Mecklenburg) |
||
Before me, the undersigned, a Notary Public of said County and State, personally appeared Raymond M. Gee, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath, acknowledged himself to be the Manager of GVEST SPRINGLAKE HOMES LLC, a Delaware limited liability company, the within named bargainor, and that he in such capacity, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the bargainor in such capacity.
WITNESS my hand and seal as of March 21, 2022.
| /s/ Janalyn M. Bailey | |
| Notary Public | |
| My Commission Expires: 03/25/2024 |
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| GUARANTORS: | |
| /s/ Raymond M. Gee | |
| RAYMOND M. GEE | |
| STATE OF North Carolina_ | |
| COUNTY OF Mecklenburg |
Personally appeared before me, the undersigned Notary of said State and County, RAYMOND M. GEE, the within named bargainor, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath, swore to and acknowledged that he executed the within instrument for the purposes therein contained.
WITNESS my hand and seal as of March 21, 2022.
| /s/ Janalyn M. Bailey | |
| Notary Public | |
| My Commission Expires: 03/25/2024 |
| GVEST FINANCE LLC | ||
| By: | /s/ Raymond M. Gee | |
| Raymond M. Gee, Manager | ||
| STATE OF North Carolina) | ||
| COUNTY OF Mecklenburg) | ||
Before me, the undersigned, a Notary Public of said County and State, personally appeared Raymond M. Gee, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath, acknowledged himself to be the Manager of GVEST FINANCE LLC, a North Carolina limited liability company, the within named Grantor, and that he in such capacity, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the Grantor in such capacity.
WITNESS my hand and seal as of March 21, 2022.
| /s/ Janalyn M. Bailey | |
| Notary Public | |
| My Commission Expires: 03/25/2024 |
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Exhibit 10.18
AMENDED AND RESTATED PROMISSORY NOTE
| $3,300,000.00 | March 29, 2022 |
PROMISE TO PAY: GVEST SPRINGLAKE HOMES LLC, a Delaware limited liability company (“Borrower”), promises to pay to FIRSTBANK, a Tennessee banking corporation (“Lender”), at 520 W. Summit Hill Dr., Suite 801, Knoxville, Tennessee 37902 the aggregate outstanding balance of all advances (each an “Advance” and collectively, the “Advances”) under this Amended and Restated Promissory Note (the “Note”) which Advances shall not, unless otherwise agreed by the Lender, exceed the principal sum of Three Million Three Hundred Thousand and No/100 Dollars ($3,300,000.00) (the “Maximum Amount”), together with all accrued but unpaid interest thereon from time to time outstanding until fully paid, computed and payable in the manner set forth below.
The Borrower’s right and ability to obtain an Advance shall at all times be subject to the requirements and conditions set forth in that certain Loan and Security Agreement of even date herewith by and between Borrower, Guarantors, and Lender (the “Loan Agreement”), the terms of which are incorporated herein by this reference. All capitalized terms used herein shall have the same meanings assigned in the Loan Agreement unless otherwise defined herein. This Note constitutes a revolving credit facility on which the Borrower may make payments of outstanding principal from time to time and the Borrower may borrow and re-borrow loan proceeds from time to time prior to the Commitment Termination Date (as defined in the Loan Agreement) or any extension thereof as provided herein. The Borrower shall have no right to obtain an Advance and the Lender shall have no obligation to fund any request for an Advance hereunder upon the occurrence of an Event of Default, which has not been cured to the satisfaction of the Lender, in the Lender’s reasonable determination.
INTEREST RATE: Interest will accrue on the outstanding principal balance of this Note at a variable rate (the “Interest Rate”) equal to Wall Street Journal Prime plus one percent (1.00%) per annum adjusted on the first day of each calendar quarter (each a “Change Date”); provided, however, that the Interest Rate shall never be less than six and three-quarters percent (6.75%) per annum, nor shall the Interest Rate exceed the maximum amount permitted by applicable law. Interest shall be calculated on the basis of a 360-day year and the actual number of calendar days elapsed.
“Wall Street Journal Prime” means the per annum rate of interest identified as the “Prime Rate” as published each day in The Wall Street Journal. If The Wall Street Journal ceases to be published or if it ceases to publish a Prime Rate, then Lender will choose a substitute prime rate. If the Wall Street Journal Prime is published as a range of rates, the highest rate will be considered the Wall Street Journal Prime for the purposes of this Note. On such days that The Wall Street Journal is not published (such as holidays and weekends), the Wall Street Journal Prime shall be the Wall Street Journal Prime stated in the most recently published edition of The Wall Street Journal.
DUE DATE: Each payment due hereunder shall be due on the tenth (10th) day of each month (each a “Due Date”) during the term of this Note.
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PAYMENT:
| (a) | Beginning on April 10, 2022, and continuing on each Due Date thereafter until the Commitment Termination Date, Borrower shall pay to Lender interest on the unpaid principal balance of this Note at the Interest Rate. | |
| (b) | On each Due Date during the months of February, May, August, and November, Borrower shall pay Lender a quarterly principal payment (each a “Quarterly Payment”) equal to the sum determined under subsection (b)(i) below, if any. | |
| (i) | the aggregate amount of principal that would be due and payable on each Advance allocated to each Home during the immediately preceding Calendar Quarter, as shown on Lender’s records, had: | |
| 1. | each Advance allocated to each New Home been amortized over one hundred eighty (180) consecutive monthly installments of principal and interest, at the then-current Interest Rate, and payable in consecutive monthly installments of principal and interest; | |
| 2. | each Advance allocated to each Used Home greater than one year old but less than fifteen years old, as shown on Lender’s records, been amortized over one hundred forty-four (144) consecutive monthly installments of principal and interest, at the then-current Interest Rate, and payable in consecutive monthly installments of principal and interest; | |
| 3. | each Advance allocated to each Used Home greater than fourteen years old and but less than twenty years old, as shown on Lender’s records, been amortized over ninety-six (96) consecutive monthly installments of principal and interest, at the then-current Interest Rate, and payable in consecutive monthly installments of principal and interest; | |
| 4. | each Advance allocated to each Used Home greater than twenty years old and but less than forty years old, as shown on Lender’s records, been amortized over sixty (60) consecutive monthly installments of principal and interest, at the then-current Interest Rate, and payable in consecutive monthly installments of principal and interest; and | |
| 5. | each Advance allocated to each Home owned by Borrower as of the date hereof that is financed by Lender, as shown on Lender’s records, been amortized over one hundred eighty (180) consecutive monthly installments of principal and interest, beginning on that date that is six (6) months after the Advance allocated to each such Home was made at the then-current Interest Rate, and payable in consecutive monthly installments of principal and interest. | |
| (ii) | after giving credit to any payments made pursuant to subjection (b)(i) immediately above, the amount, if any, by which the MH Contract Note Balance (as defined herein) exceeds the MH Contract Balance (as defined herein) as determined by Lender as of the last day of the immediately preceding Calendar Quarter. | |
| (c) | With respect to the mandatory prepayments of Section 2.6(a) of the Loan Agreement, Borrower shall immediately pay to Lender a principal payment (plus all accrued interest, fees, costs and expenses) in an amount equal to any excess over the Maximum Amount. With respect to the mandatory prepayments of Sections 2.6(b) & 2.6(c) of the Loan Agreement, Borrower shall immediately pay to Lender a principal payment (plus all accrued interest, fees, costs and expenses) equal to that portion of the unpaid balance of this Note allocated to the applicable Home as shown on Lender’s records. |
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| (d) | On the Commitment Termination Date, this Note shall mature and Borrower shall pay to Lender an amount equal to all accrued interest, plus all outstanding principal, costs, fees and expenses as shown on Lender’s records. | |
| (e) | Capitalized terms used herein shall have the meanings ascribed below: | |
| (i) | “Calendar Quarter” shall mean one of the following three (3)-month periods of a calendar year: January 1st – March 31st; April 1 – June 30th; July 1 – September 30th; and October 1- December 31st. | |
| (ii) | “MH Contract Note Balance” means the aggregate amount of principal outstanding under this Note on each Advance allocated to each Home sold by Borrower pursuant to an MH Contract, as shown on Lender’s records. | |
| (iii) | “MH Contract Balance” means the aggregate amount of the Individual MH Contract Balances for each MH Contract secured by a Home that is the subject of an Advance, as shown on Lender’s records. | |
| (iv) | “Individual MH Contract Balances” means, for each MH Contract, the amount of principal outstanding with respect to such MH Contract as of such date of determination. | |
PREPAYMENT: Borrower may pay the amount owed earlier than it is due subject to the payment of the exit fees set out in the Loan Agreement.
LATE CHARGE: If a payment is eleven (11) calendar days or more late, Borrower will be charged five percent (5%) of the regularly scheduled payment in addition to any interest owing pursuant to this Note. Borrower acknowledges that such payment represents reimbursement to Lender for its administrative costs incurred in connection with such late payment and that such payment is not to be construed as a penalty.
EVENT OF DEFAULT: Borrower shall be in default under this Note if an Event of Default (as defined in the Loan Agreement) occurs (subject to the cure rights permitted in the Loan Agreement), under the Loan Agreement or under any other Loan Document.
LENDER’S RIGHTS: Subject to any cure rights permitted in the Loan Agreement, at any time after any Event of Default has occurred, Lender may, without presentment, demand, protest or further notice of any kind (all of which are hereby expressly waived) and, notwithstanding the provisions contained in any other document or instrument executed or to be executed by Borrower to Lender hereunder or contained in any other agreement, take any one or more of the following actions:
| (a) | Declare the entire principal and any accrued interest owing hereunder, together with all costs and expenses, to be immediately due and payable, and to enforce payment thereof by any means permitted by law or in equity; |
| (b) | Without accelerating payment, enforce the payment of sums of principal and interest then due (including any default interest or late payment charges); and |
| (c) | Exercise any other remedy or right provided in law or in equity or permitted under this Note, the Loan Agreement or any document securing this Note. |
Upon the occurrence of an Event of Default, Lender, at its option, may also, if permitted under applicable law, increase the interest rate on this Note to the maximum rate permitted by applicable law (the “Default Rate”). Any and all remedies conferred upon Lender shall be deemed cumulative with, and nonexclusive of any other remedy conferred hereby or by law, and Lender in the exercise of any one remedy shall not be precluded from the exercise of any other. If this Note is placed in the hands of an attorney, for collection, by suit or otherwise, or to enforce its collection, or to protect the security for its payment, the Borrower will pay all costs of collection and litigation, together with a reasonable attorney’s fee.
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This Note shall be governed by and construed in accordance with the laws of Tennessee. This Note has been delivered to Lender and accepted by Lender in the State of Tennessee. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction and venue of all State or Federal courts within the County of Knox, State of Tennessee. Borrower hereby waives any personal service of any and all process and agrees that all the service of process may be made upon Borrower by certified or registered mail, return receipt requested, addressed to Borrower, at the address set forth in the Loan Agreement and service so made shall be complete ten (10) days after the same has been posted. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE OTHER.
COLLATERAL: In order to secure payment of this Note, Borrower and the members of Borrower have granted Lender a lien and security interest in the real and personal property described in the Loan Agreement and in the other Loan Documents. Reference is made to these instruments for various rights and remedies of the parties thereto.
NOTICES: All notices or elections required or permitted under this Note will be in writing and will be transmitted in the manner and to the addresses set forth in the Loan Agreement.
MISCELLANEOUS: Lender may delay or forego enforcing any of its rights or remedies under this Note or under the other Loan Documents without waiving such rights and remedies. Borrower understands and agrees that, with or without any notice to anyone other than Borrower, Lender may: (a) make one or more additional secured or unsecured loans or otherwise extend additional credit; (b) alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms any indebtedness, including increases or decreases of the rate of interest on the indebtedness; (c) exchange, enforce, waive, subordinate, and release any security, with or without the substitution of new collateral; or (d) apply such security and direct the order or manner of sale thereof, including without limitation, any nonjudicial sale permitted by the terms of the controlling security agreements, as Lender in its discretion may determine. Borrower, to the extent allowed by law, waives presentment, demand for payment, protest and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan, or release any party or collateral, or impair or fail to realize upon Lender’s security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this Note without the consent of or notice to anyone other than Borrower.
ELECTRONIC TRANSMISSION: If a copy this Note executed by Borrower (an “Executed Copy”) is sent by electronic transmission, (a) the Executed Copy shall be treated in all respects as a paper original of this Note executed by the same parties whose signatures appear on the Executed Copy and (b) the Executed Copy shall have the same binding and legal effect as a paper original of this Note executed by Borrower. At the request of Lender, this Note shall be re-executed by Borrower and the executed paper original Note shall be sent to Lender by any method other than by electronic transmission. Borrower agrees that it will not raise the transmission of this Note or the Executed Copy by electronic transmission as a defense in any proceeding or action in which the validity of this Note is at issue and hereby forever waives such defense. “Electronic transmission” means any form of communication, such as facsimile or email, not directly involving the physical transmission of actual paper, which creates a record of the actual paper that may be retained, retrieved, reviewed and printed by the recipient.
NO NOVATION: This Note amends and restates that certain Promissory Note made by Borrower, dated November 12, 2021, payable to the order of Lender in the original principal amount of $2,000,000.00, (collectively, the “Prior Note”). This Note is not intended to, and will not, effect a novation, extinguishment, or substitution of the Prior Note. This Note shall be entitled to the same benefit (and priority) of the Loan Documents, and the lien of the Loan Documents is not intended to be released, altered or changed in any manner except as specifically stated herein or in the documents executed by Borrower and Lender in connection with this Note.
BORROWER RECOGNIZES AND AGREES THAT THE PROCEEDS OF THE LOAN WILL BE USED SOLELY FOR THE COMMERCIAL PURPOSES. PRIOR TO SIGNING THIS NOTE, BORROWER HAS READ AND UNDERSTANDS ALL OF THE PROVISIONS OF THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS NOTE.
[Signature page follows]
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This Amended and Restated Promissory Note is executed as of the day and year first written above:
| BORROWER: | ||
| GVEST SPRINGLAKE HOMES LLC | ||
| By: | /s/ Raymond M. Gee | |
| Raymond M. Gee, Manager | ||
| STATE OF North Carolina) | |
| COUNTY OF Mecklenburg) |
Before me, the undersigned, a Notary Public of said County and State, personally appeared Raymond M. Gee, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath, acknowledged himself to be the Manager of GVEST SPRINGLAKE HOMES LLC, a Delaware limited liability company, the within named bargainor, and that he in such capacity, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the bargainor in such capacity.
| WITNESS my hand and seal as of March 21, 2022. | |
| /s/ Janalyn M. Bailey | |
| Notary Public | |
| My Commission Expires: 03/25/2024 |
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Exhibit 10.19
AMENDED AND RESTATED GUARANTY
THIS AMENDED AND RESTATED GUARANTY (“Guaranty”) is entered into effective as of March 29, 2022 by GVEST FINANCE LLC, a North Carolina limited liability company (“Guarantor,” whether one or more), with an address for notice of 136 Main Street, Pineville, NC 28134, for the benefit of FIRSTBANK, a Tennessee banking corporation, and its successors and assigns (“Lender”), with an address for notice of 520 W. Summit Hill Drive, Suite 801, Knoxville, Tennessee 37902.
A. Gvest Springlake Homes LLC, a Delaware limited liability company (“Borrower”), is indebted to Lender pursuant to the following loan (“Loan”) evidenced, governed, and/or secured by the following (collectively, the “Loan Documents”): (i) that certain Promissory Note (“Note”) dated November 12, 2021 from Borrower to Lender in the principal amount of $2,000,000.00, as amended and restated pursuant to that certain Amended and Restated Promissory Note dated of even date herewith from Borrower to Lender in the principal amount of $3,300,000.00; (ii) that certain Loan and Security Agreement (“Loan Agreement”) dated November 12, 2021 by and between Borrower, Lender, Guarantor, and the other parties thereto, as amended pursuant to that certain Modification Agreement dated as of the date hereof by and between Borrower, Lender, Guarantor, and the other parties thereto; (iii) that that certain Guaranty dated as of November 12, 2021 from Guarantor to Lender, as amended and restated by this Amended and Restated Guaranty; and (iv) those Loan Documents (as defined in the Loan Agreement), all as the same may from time to time be amended, restated, modified, consolidated, renewed or replaced.
B. Lender is not willing to make the Loan, or otherwise extend credit, to Borrower unless Guarantor unconditionally guarantees payment and performance to Lender of the Guaranteed Obligations (defined below).
C. Guarantor is the owner of a direct or indirect interest in Borrower, and Guarantor will directly benefit from Lender’s making the Loan to Borrower.
NOW, THEREFORE, as an inducement to Lender to make the Loan to Borrower, and to extend such additional credit as Lender may from time to time agree to extend under the Note, the Loan Agreement, and the Loan Documents, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties hereby agree as follows.
1. Continuing Guaranty. Guarantor hereby irrevocably and unconditionally guarantees to Lender (and its successors and assigns), jointly and severally, the payment and performance of the Guaranteed Obligations as and when due and payable, whether by lapse of time, by acceleration of maturity or otherwise. Guarantor hereby irrevocably and unconditionally covenants and agrees that Guarantor is jointly and severally liable for the Guaranteed Obligations as a primary obligor, and that Guarantor shall fully perform, jointly and severally, each and every term and provision hereof.
2. Guaranteed Obligations. For the purposes of this Guaranty, “Guaranteed Obligations” is used in its most comprehensive sense and means and includes any and all of Borrower’s obligations to make any payment and perform any obligation to Lender pursuant to the Note or the Loan Documents, whether now existing or hereinafter incurred or created, including all outstanding principal and all accrued but unpaid interest (including any late charges and default interest) owing under the Note plus all fees, costs, and expenses (including reasonable attorney’s fees) incurred by or on behalf of Lender in connection with the Loan.
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3. Nature of Guaranty; Joint and Several Obligation. Guarantor’s liability under this Guaranty shall be open and continuous for so long as this Guaranty remains in force. Guarantor intends to guarantee at all times the performance and prompt payment when due, whether at maturity or earlier by reason of acceleration or otherwise, of all Guaranteed Obligations. Accordingly, no payments made upon the Guaranteed Obligations will discharge or diminish the continuing liability of Guarantor in connection with any remaining portions of the Guaranteed Obligations or any portion of the Guaranteed Obligations that subsequently arises or is thereafter incurred or contracted. Guarantor recognizes that there may be other guarantors of certain of the Guaranteed Obligations and that Guarantor’s liability hereunder is joint and several with respect to such other Guarantors.
4. Duration of Guaranty. This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full force until all Guaranteed Obligations incurred or contracted before receipt by Lender of any notice of revocation shall have been fully and finally paid and satisfied and all other obligations of Guarantor under this Guaranty shall have been performed in full. This Guaranty will continue to bind Guarantor for all Guaranteed Obligations incurred by Borrower or committed by Lender prior to receipt of Guarantor’s written notice of revocation, including any extensions, renewals, substitutions or modifications of the Guaranteed Obligations. All renewals, extensions, substitutions and modifications of the Guaranteed Obligations granted after Guarantor’s revocation, are contemplated under this Guaranty and, specifically will not be considered to be new Guaranteed Obligations. This Guaranty shall bind the estate of Guarantor as to any Guaranteed Obligations created both before and after the death or incapacity of Guarantor, regardless of Lender’s actual notice of Guarantor’s death. Release of any other guarantor or termination of any other guaranty of the Guaranteed Obligations shall not affect the liability of Guarantor under this Guaranty. A revocation received by Lender from any one or more Guarantors, shall not affect the liability of any remaining Guarantor under this Guaranty. This Guaranty is binding upon Guarantor and Guarantor’s heirs, estate, successors and assigns so long as any of the Guaranteed Obligations remain unpaid and even though the Guaranteed Obligations may from time to time be zero dollars ($0.00).
5. Guarantor’s Authorization to Lender. Guarantor authorizes Lender, either before or after any revocation hereof, without notice or demand, and without lessening Guarantor’s liability under this Guaranty, from time to time: (a) to alter, compromise, renew, extend, accelerate, or otherwise change the time for payment or other terms of the Guaranteed Obligations or any part of the Guaranteed Obligations, including increases and decreases of the rate of interest on the Guaranteed Obligations; extensions may be repeated and may be for longer than the original term; (b) to take and hold security for the payment and performance of the Guaranteed Obligations, and exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any such security, with or without the substitution of new collateral; (c) to release, substitute, agree not to sue, or deal with any one or more of Borrower’s sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (d) to determine how, when and what application of payments and credits shall be made on the Guaranteed Obligations; (e) to apply such security and direct the order or manner of sale thereof, including without limitation, any nonjudicial sale permitted by the terms of the controlling security agreement, mortgage, or deed of trust, as Lender in its reasonable discretion may determine; (f) to sell, transfer, assign, or grant participants in all or any part of the Guaranteed Obligations; and (g) to assign or transfer this Guaranty in whole or in part. In connection with clause (g) above, upon sale, transfer or assignment of the Note and any, some, or all of the Loan Documents, or any interest therein, by Lender to any third party (“Third Party”), this Guaranty may also be assigned by Lender to the Third Party and the undersigned Guarantor acknowledges liability under this Guaranty to such Third Party.
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6. Guarantor’s Representations, and Warranties, and Covenants. Guarantor represents and warrants and covenants to Lender that: (a) no representations or agreements of any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (b) this Guaranty is executed at Borrower’s request and not at the request of Lender; (c) Guarantor has full power, right and authority to enter into this Guaranty; (d) the provisions of this Guaranty do not conflict with or result in a default under any agreement or other instruments binding upon Guarantor and do not result in a violation of any law, regulation, court decree or order applicable to Guarantor; (e) Guarantor has not and will not, without the prior written consent of Lender, sell, assign, transfer, or otherwise dispose of substantially all of Guarantor’s assets if such sale, assignment, transfer or disposition would have a material adverse effect upon Guarantor’s ability to satisfy Guarantor’s obligation under this Guaranty; (f) upon Lender’s request, Guarantor will provide to Lender financial, tax, and credit information in form reasonably acceptable to Lender, and all such financial and tax information (including tax returns) which currently has been, and all future financial and tax information (including tax returns) which will be provided to Lender is and will be true and correct in all material respects and fairly present the financial condition since the date of the most recent financial statements provided to Lender and no event has occurred which may materially adversely affect Guarantor’s financial condition; (g) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Guarantor is pending or threatened that would have a material adverse effect on Guarantor’s ability to satisfy Guarantor’s obligations under this Guaranty; (h) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (i) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrower’s financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances which might in any way affect Guarantor’s risks under this Guaranty, and Guarantor further agrees that, absent a request for information, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship with Borrower.
In addition, the Guarantor agrees to provide Lender: (i) as soon as available, and in any event within one hundred twenty (120) days after the end of each calendar year, Guarantor shall furnish Lender with Guarantor’s personal financial statements and contingent debt schedules of Guarantor in each case in comparative form to the figures for the previous year all in reasonable detail and prepared in accordance with sound and consistently applied accounting principles, all as acceptable to Lender in form and substance; and (ii) copies of Guarantor’s federal tax returns and extension filings acceptable to Lender as soon as available, and in any event within thirty (30) days of when such were due to be filed (or within ten (10) days after the last date of any extension period, if applicable) (and which filings Guarantor agrees to timely make with the Internal Revenue Service).
7. Guarantor’s Waivers. Except as prohibited by applicable law. Guarantor waives any right to require Lender: (a) to continue lending money or to extend other credit to Borrower; (b) to make any presentment, protest, demand, or notice of any kind, including notice of any nonpayment of the Guaranteed Obligations or of any nonpayment related to any collateral, or notice of any action or nonaction on the part of the Borrower, Lender, any surety, endorser, or other guarantor in connection with the Guaranteed Obligations or in connection with the creation of new or additional loans or obligations; (c) any defense based upon a failure of Lender to comply with the notice requirements of the applicable version of Uniform Commercial Code Section 9-504; (d) to resort for payment or to proceed directly or at once against any person, including Borrower or any other guarantor; (e) to proceed directly against or exhaust any collateral held by Lender from Borrower, any other guarantor, or any other person; (f) to pursue any other remedy within Lender’s power; or (g) to commit any act or omission of any kind, or at any time, with respect to any matter whatsoever.
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the Guaranteed Obligations shall not at all times until paid be fully secured by collateral pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor of Lender and Borrower, and their respective successors, any claim or right to payment Guarantor may now have or hereafter have or acquire against Borrower, by subrogation or otherwise, so that at no time shall Guarantor be or become a “creditor” of Borrower within the meaning of 11 U.S.C. Section 547(b), or any successor provision of the federal bankruptcy laws.
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Guarantor also waives any and all rights or defenses arising by reason of (a) any “one action” or “anti-deficiency” law or any other law which may prevent Lender from bringing any action, including a claim for deficiency, against Guarantor, before or after Lender’s commencement or completion of any foreclosure action, either judicially or by exercise of a power of sale; (b) any election of remedies by Lender which destroys or otherwise adversely affects Guarantor’s subrogation rights or Guarantor’s rights to proceed against Borrower for reimbursement, including without limitation, any loss of rights Guarantor may suffer by reason of any law limiting, qualifying, or discharging the Guaranteed Obligations; (c) any disability or other defense of Borrower, of any other guarantor, of any other person, or by reason of the cessation of Borrower’ liability from any cause whatsoever, other than payment in full in legal tender, of the Guaranteed Obligations; (d) any right to claim discharge of the Guaranteed Obligations on the basis of unjustified impairment of any collateral for the indebtedness; (e) any statute of limitations, if at any time any action or suit brought by Lender against Guarantor is commenced there is outstanding amount owing by Borrower to Lender under the Guaranteed Obligations that is not barred by any applicable statute of limitations; or (f) any defenses given to guarantors at law or in equity other than actual payment and performance of the Guaranteed Obligations. If payment is made by Borrower, whether voluntarily or otherwise, or by any third party, on the Guaranteed Obligations and thereafter Lender is forced to remit the amount of that payment to Borrower’s trustee in bankruptcy or to any similar person under any federal or state bankruptcy law or law for the relief of debtors, the Guaranteed Obligations shall be considered unpaid for the purpose of enforcement of this Guaranty.
Guarantor further waives and agrees not to assert or claim at any time any deductions to the amount guaranteed under this Guaranty for any claim of setoff, counterclaim, counter demands, recoupment or similar right, whether such claim, demand or right may be asserted by the Borrower, the Guarantor, or both.
8. Guarantor’s Understanding With Respect to Waivers. Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantor’s full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy.
9. Subordination of Borrower’s Debts to Guarantor. Guarantor agrees that the Guaranteed Obligations owing by Borrower to Lender, whether now existing or hereafter created, shall be prior to any claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Guaranteed Obligations. Guarantor hereby assigns to Lender all claims that they may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Guaranteed Obligations. If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender hereby is authorized, in the name of Guarantor, from time to time to execute and file financing statements and continuation statements and to execute such other documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty.
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10. Miscellaneous Provisions. The following miscellaneous provisions are a part of this Guaranty:
a) Amendments. This Guaranty, together with any Loan Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Guaranty. No alteration of or amendment to this Guaranty shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.
b) Applicable Law; Venue; Jurisdiction. This Guaranty has been delivered to Lender and accepted by Lender in the State of Tennessee. This Guaranty shall be governed by and construed in accordance with the laws of the State of Tennessee (without regard to conflicts of law), except to the extent that greater rights are granted to Lender under federal law, in which case federal law shall control. Guarantor hereby waives any personal service of any and all process and consents to the service of process in any action (“Actions”) pertaining to the Lender, the Loan guaranteed hereunder, the Guaranteed Obligations, the Borrower and/or this Guaranty by certified mail, return receipt requested, addressed to Guarantor, at the address set forth above in this Guaranty (or as such address may be updated from time to time by written notice from Guarantor to Lender), and service so made shall be complete ten (10) calendar days after the same has been posted. The undersigned Guarantor does further consent to and agree that any Action for the enforcement of this Guaranty may be brought in the courts of the State of Tennessee sitting in Knox County, Tennessee or any Federal court sitting in Knox County, Tennessee and consents to the non-exclusive jurisdiction of such courts. The undersigned Guarantor hereby waives any objection that Guarantor may now or hereafter have to the venue of any such Action or any such court or that suit is brought in an inconvenient court.
c) Waiver of Jury Trial. GUARANTOR HEREBY IRREVOCABLY AND ABSOLUTELY WAIVES ANY RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS GUARANTY. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY GUARANTOR, AND GUARANTOR ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON ACTING ON BEHALF OF LENDER HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. GUARANTOR ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO THIS GUARANTY, THAT GUARANTOR AND LENDER HAVE ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS GUARANTY AND THAT EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. GUARANTOR FURTHER ACKNOWLEDGES THAT GUARANTOR HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS GUARANTY AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL.
d) Attorneys’ Fees; Expenses. Guarantor agrees to pay upon demand all of Lender’s costs and expenses, including reasonable attorneys’ fees and Lender’s legal expenses, incurred in connection with the enforcement of this Guaranty. Lender may pay someone else to help enforce this Guaranty, and Guarantor shall pay the costs and reasonable expenses of such enforcement. Costs and expenses include Lender’s reasonable attorneys’ fees and legal expenses whether or not there is a lawsuit, including reasonable attorneys’ fees and legal expenses for bankruptcy proceedings (and including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post judgment collection services shall be paid by Guarantor. Guarantor also shall pay all court costs and such additional fees as may be directed by the court.
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e) Notices. All notices required or allowed to be given hereunder shall be in writing, and shall be personally delivered, or sent by Federal Express or other recognized overnight express courier service, or sent by United States Mail, first-class, postage prepaid, certified with return-receipt requested, addressed to each party as set forth above. Any such notice shall be deemed to be given, if personally delivered, on the date such notice is personally delivered to the address set forth above for the party to whom such notice is given; if sent by Federal Express, or other recognized overnight express courier service, on the date said notice is dispatched or deposited with said courier service, all charges prepaid, addressed as herein provided; and, if mailed, on the date said notice is deposited in the United States Mail, first-class, postage prepaid, certified with return-receipt requested, addressed as herein provided. Any party may change the address to which notices hereunder are to be sent by giving written notice thereof to the other parties as set forth herein.
f) Interpretation. The words “Guarantor,” “Borrower,” and “Lender” include the heirs, successors, assigns and transferees of each of them. Caption headings in this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions of this Guaranty. If a court of competent jurisdiction finds any provision of this Guaranty to be invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances, and all provisions of this Guaranty in all other respects shall remain valid and enforceable. Capitalized terms not otherwise defined herein shall have such meaning as set forth in the applicable Loan Agreement.
g) Waiver. Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Guaranty shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or any other provision of this Guaranty. No prior waiver by Lender, or any course of dealing between Lender and Guarantor shall constitute a waiver of any of Lender’s rights or of any of Guarantor’s obligations as to any future transactions. Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.
h) Electronic Transmission. Guarantor agrees that if a paper original of this Guaranty executed by Guarantor is sent by electronic transmission (an “Executed Copy”), (i) the Executed Copy shall be treated in all respects as a paper original of this Guaranty executed by the Guarantor and (ii) the Executed Copy shall have the same binding and legal effect as a paper original of this Guaranty executed by the Guarantor. At the request of any party who receives an Executed Copy, this Guaranty shall be re-executed by Guarantor and the executed paper original Guaranty shall be sent to the requesting party by any method permitted herein other than by electronic transmission. Guarantor further agrees that it will not raise the transmission of this Guaranty or the Executed Copy by electronic transmission as a defense in any proceeding or action in which the validity of this Guaranty is at issue and hereby forever waives such defense. “Electronic transmission” means any form of communication, such as facsimile or email, not directly involving the physical transmission of actual paper, which creates a record (including a .PDF file) of the actual paper that may be retained, retrieved, reviewed and printed by the recipient.
i) THE UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL OF THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, THE GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR’S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY.” NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE.
[Signature page follows]
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This Amended and Restated Guaranty is executed as of the day and year first written above.
| GUARANTOR: | ||
| GVEST FINANCE LLC | ||
By: |
/s/ Raymond M. Gee | |
| Raymond M. Gee, Manager | ||
| STATE OF North Carolina) | ||
| COUNTY OF Mecklenburg) | ||
Before me, the undersigned, a Notary Public of said County and State, personally appeared Raymond M. Gee, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath, acknowledged himself to be the Manager of GVEST FINANCE LLC, a North Carolina limited liability company, the within named Grantor, and that he in such capacity, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the Grantor in such capacity.
WITNESS my hand and seal as of March 21, 2022.
| /s/ Janalyn M. Bailey | |
| Notary Public | |
| My Commission Expires: 03/25/2024 |
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Exhibit 31.1
CERTIFICATIONS
I, Raymond M. Gee, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Manufactured Housing Properties Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a 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: May 16, 2022
| /s/ Raymond M. Gee | |
| Raymond M. Gee | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATIONS
I, Chelsea H. Gee, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Manufactured Housing Properties Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a 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: May 16, 2022
| /s/ Chelsea H. Gee | |
| Chelsea H. Gee | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
The undersigned Chief Executive Officer of MANUFACTURED HOUSING PROPERTIES INC. (the “Company”), DOES HEREBY CERTIFY that:
| 1. | The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
IN WITNESS WHEREOF, the undersigned has executed this statement on May 16, 2022.
| /s/ Raymond M. Gee | |
| Raymond M. Gee | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
A signed original of this written statement required by Section 906 has been provided to Manufactured Housing Properties Inc. and will be retained by Manufactured Housing Properties Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
The undersigned Chief Financial Officer of MANUFACTURED HOUSING PROPERTIES INC. (the “Company”), DOES HEREBY CERTIFY that:
| 1. | The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
IN WITNESS WHEREOF, the undersigned has executed this statement on May 16, 2022.
| /s/ Chelsea H. Gee | |
| Chelsea H. Gee | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
A signed original of this written statement required by Section 906 has been provided to Manufactured Housing Properties Inc. and will be retained by Manufactured Housing Properties Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Condensed Consolidated Statements of Changes in Deficit (Unaudited) - USD ($) |
Total |
COMMON STOCK |
ADDITIONAL PAID IN CAPITAL |
ACCUMULATED DEFICIT |
TOTAL MANUFACTURING HOUSING PROPERTIES INC. |
NON CONTROLLING INTEREST |
|---|---|---|---|---|---|---|
| Balance at Dec. 31, 2020 | $ (4,922,064) | $ 124,016 | $ (1,052,611) | $ (3,574,194) | $ (4,502,789) | $ (419,275) |
| Balance (in Shares) at Dec. 31, 2020 | 12,398,580 | |||||
| Stock option expense | 646 | 646 | 646 | |||
| Preferred shares Series A dividends | (96,167) | (96,167) | (96,167) | |||
| Preferred shares Series A put option value accretion | (118,125) | (118,125) | (118,125) | |||
| Preferred shares Series B dividends | (129,409) | (129,409) | (129,409) | |||
| Preferred shares Series B put option value accretion | (185,839) | (185,839) | (185,839) | |||
| Common Stock issuance to preferred share holders | 1,377 | $ 51 | 1,326 | 1,377 | ||
| Common Stock issuance to preferred share holders (in Shares) | 5,100 | |||||
| Contributions to VIE | 12,371 | 12,371 | ||||
| Distributions from VIE | (20,000) | (20,000) | ||||
| Net loss | (359,191) | (414,276) | (414,276) | 55,085 | ||
| Balance at Mar. 31, 2021 | (5,816,401) | $ 124,067 | (1,580,179) | (3,988,470) | (5,444,582) | (371,819) |
| Balance (in Shares) at Mar. 31, 2021 | 12,403,680 | |||||
| Balance at Dec. 31, 2021 | (8,686,725) | $ 124,037 | (3,160,712) | (4,672,537) | (7,709,212) | (977,513) |
| Balance (in Shares) at Dec. 31, 2021 | 12,403,680 | |||||
| Stock option expense | 49,760 | 49,760 | 49,760 | |||
| Preferred shares Series A dividends | (94,300) | (94,300) | (94,300) | |||
| Preferred shares Series A put option value accretion | (117,871) | (117,871) | (117,871) | |||
| Preferred shares Series B dividends | (151,785) | (151,785) | (151,785) | |||
| Preferred shares Series B put option value accretion | (184,254) | (184,254) | (184,254) | |||
| Distributions from VIE | (30,000) | (30,000) | ||||
| Net loss | (789,690) | (630,120) | (630,120) | (159,570) | ||
| Balance at Mar. 31, 2022 | $ (10,004,865) | $ 124,037 | $ (3,659,162) | $ (5,302,657) | $ (8,837,782) | $ (1,167,083) |
| Balance (in Shares) at Mar. 31, 2022 | 12,403,680 |
Summary of Significant Accounting Policies and Organization |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION | NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
Organization
Manufactured Housing Properties Inc. (the “Company”) is a Nevada corporation whose principal activities are to acquire, own, and operate manufactured housing communities.
Basis of Presentation
The Company prepares its consolidated financial statements under the accrual basis of accounting, in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q of Regulation S-X. They do not include all information and footnotes required by GAAP for complete financial statements. The December 31, 2021 consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 31, 2022. The interim unaudited condensed consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for a fair statement of the financial statements, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company, entities controlled by the Company through its direct or indirect ownership of a majority interest, and any other entities in which the Company has a controlling financial interest. The Company consolidates variable interest entities (“VIEs”) where the Company is the primary beneficiary. The primary beneficiary of a VIE is the party that has both the power to direct the activities that most significantly impact the VIE’s economic performance, and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.
The Company’s formation of all subsidiaries and VIE’s date of consolidation are as follows:
All intercompany transactions and balances have been eliminated in consolidation. The Company does not have a majority or minority interest in any other company, either consolidated or unconsolidated.
Revenue Recognition
Mobile home rental and related income is generated from lease agreements for our sites and homes. The lease component of these agreements is accounted for under Topic 842 of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, for leases.
Under ASC 842, the Company must assess on an individual lease basis whether it is probable that we will collect the future lease payments. The Company considers the tenant’s payment history and current credit status when assessing collectability. When collectability is not deemed probable, the Company will write-off the tenant’s receivables, including straight-line rent receivable, and limit lease income to cash received.
The Company’s revenues primarily consist of rental revenues and fee and other income. The Company has the following revenue sources and revenue recognition policies:
Accounts Receivable
Accounts receivable consist primarily of amounts currently due from residents. Accounts receivables are reported in the balance sheet at outstanding principal adjusted for any charge-offs and the allowance for losses. The Company records an allowance for bad debt when receivables are over 90 days old.
Acquisitions
The Company accounts for acquisitions as asset acquisitions in accordance with ASC 805, “Business Combinations,” and allocates the purchase price of the property based upon the fair value of the assets acquired, which generally consist of land, site and land improvements, buildings and improvements and rental homes. The Company allocates the purchase price of an acquired property generally determined by internal evaluation as well as third-party appraisal of the property obtained in conjunction with the purchase.
Variable Interest Entities
In December 2020, the Company entered into a property management agreement with Gvest Finance LLC, a company owned and controlled by the Company’s parent company, Gvest Real Estate Capital LLC, an entity whose sole owner is Raymond M. Gee, the Company’s chairman and chief executive officer, and has subsequently entered into property management agreements with Gvest Homes I LLC, Gvest Anderson Homes LLC, Gvest Capital View Homes LLC, Gvest Hidden Oaks Homes LLC, Gvest Springlake Homes LLC, Gvest Carolinas 4 Homes LLC, Gvest Sunnyland Homes LLC and Gvest Warrenville Homes LLC, which are wholly owned subsidiaries of Gvest Finance LLC. Under the property management agreements, the Company manages the homes owned by the VIEs and the VIEs remit to the Company all income, less any sums paid out for debt service plus 5% of the debt service payment.
Additionally, during 2021, the Company formed two entities, Brainerd Place LLC and Bull Creek LLC, for the purpose of exploring opportunities to develop mobile home communities. The Company owns 49% of these entities and Gvest Real Estate LLC, an entity whose sole owner is Raymond M. Gee, owns 51%. The Company also executed operating agreements with these entities which designate Gvest Capital Management LLC, a company owned and controlled by Gvest Real Estate Capital LLC, as manager with the authority, power, and discretion to manage and control the entities’ business decisions. The operating agreements require the Company to make cash contributions to the entities to fund their activities, operations, and existence, if the Company approves the contribution requests from the manager, which ultimately provides the Company with power to direct the economically significant activities of these entities.
A company with interests in a VIE must consolidate the entity if the company is deemed to be the primary beneficiary of the VIE; that is, if it has both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. Such a determination requires management to evaluate circumstances and relationships that may be difficult to understand and to make a significant judgment, and to repeat the evaluation at each subsequent reporting date. Primarily due to the Company’s common ownership by Mr. Gee, its power to direct the activities of these entities that most significantly impact their economic performance, and the fact that the Company has the obligation to absorb losses or the right to receive benefits from these entities that could potentially be significant to these entities, the entities listed above are considered to be VIEs in accordance applicable GAAP.
Net Income (Loss) Per Share
Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding, including vested penny stock options during the period. Diluted net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding plus the weighted average number of net shares that would be issued upon exercise of stock options pursuant to the treasury stock method.
For the three months ended March 31, 2022, the potentially dilutive penny options for the purchase of 704,508 shares of Common Stock were included in basic loss per share. Other securities outstanding as of March 31, 2022 not included in dilutive loss per share, as the effect would be anti-dilutive, were 1,886,000 shares of Series A Cumulative Redeemable Convertible Preferred Stock, which are convertible into Common Stock for a total of 1,886,000 shares.
For the three months ended March 31, 2021, the potentially dilutive penny options for the purchase of 519,675 shares of Common Stock were included in basic loss per share. Other securities outstanding as of March 31, 2021 not included in dilutive loss per share, as the effect would be anti-dilutive, were 1,890,000 shares of Series A Cumulative Redeemable Convertible Preferred Stock, which are convertible into Common Stock for a total of 1,890,000 shares.
Use of Estimates
The presentation of financial statements in conformity with GAAP requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.
Investment Property and Depreciation
Investment real property and equipment are carried at cost. Depreciation of buildings, improvements to sites and buildings, rental homes, equipment, and vehicles is computed principally on the straight-line method over the estimated useful lives of the assets (ranging from 3 to 25 years). Land development costs are not depreciated until they are put in use, at which time they are capitalized as land improvements. Interest Expense pertaining to Land Development Costs are capitalized. Maintenance and Repairs are charged to expense as incurred and improvements are capitalized. The costs and related accumulated depreciation of property sold or otherwise disposed of are removed from the financial statement and any gain or loss is reflected in the current period’s results of operations.
Impairment Policy
The Company applies FASB ASC 360-10, “Property, Plant & Equipment,” to measure impairment in real estate investments. Rental properties are individually evaluated for impairment when conditions exist which may indicate that it is probable that the sum of expected future cash flows (on an undiscounted basis without interest) from a rental property is less than the carrying value under its historical net cost basis. These expected future cash flows consider factors such as future operating income, trends and prospects as well as the effects of leasing demand, competition and other factors. Upon determination that a permanent impairment has occurred, rental properties are reduced to their fair value. For properties to be disposed of, an impairment loss is recognized when the fair value of the property, less the estimated cost to sell, is less than the carrying amount of the property measured at the time there is a commitment to sell the property and/or it is actively being marketed for sale. A property to be disposed of is reported at the lower of its carrying amount or its estimated fair value, less its cost to sell. Subsequent to the date that a property is held for disposition, depreciation expense is not recorded. There was no impairment during the three months ended March 31, 2022 and 2021.
Cash and Cash Equivalents
The Company considers all highly liquid financial instruments purchased with an original maturity of three months or less to be cash equivalents.
The Company maintains cash balances at banks and deposits at times may exceed federally insured limits. Management believes that the financial institutions that hold the Company’s cash are financially secure and, accordingly, minimal credit risk exists. At March 31, 2022 and December 31, 2021, the Company had approximately $763,000 above the FDIC-insured limit, including restricted cash held for tenant security deposits of $754,079 and $705,195, respectively.
Stock Based Compensation
All stock based payments to employees, nonemployee consultants, and to nonemployee directors for their services as directors, including any grants of restricted stock and stock options, are measured at fair value on the grant date and recognized in the statements of operations as compensation or other expense over the relevant service period in accordance with FASB ASC Topic 718. Stock based payments to nonemployees are recognized as an expense over the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is reached, or the date performance is completed. In addition, for awards that vest immediately and are nonforfeitable the measurement date is the date the award is issued. The Company recorded stock option expense of $49,760 and $646 during the three months ended March 31, 2022 and 2021, respectively.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10 of the FASB ASC for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB ASC to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. Most of the Company’s financial assets do not have a quoted market value. Therefore, estimates of fair value are necessarily based on a number of significant assumptions (many of which involve events outside the control of management). Such assumptions include assessments of current economic conditions, perceived risks associated with these financial instruments and their counterparties, future expected loss experience and other factors. Given the uncertainties surrounding these assumptions, the reported fair values represent estimates only and, therefore, cannot be compared to the historical accounting model. Use of different assumptions or methodologies is likely to result in significantly different fair value estimates.
The fair value of cash and cash equivalents, accounts receivables, and accounts payable approximates their current carrying amounts since all such items are short-term in nature. The fair value of variable and fixed rate mortgages payable and lines of credit approximate their current carrying amounts on the balance sheet since such amounts payable are at approximately a weighted average current market rate of interest.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
The Company recognizes interest and penalties, if any, with income tax expense in the accompanying unaudited condensed consolidated statement of operations. As of March 31, 2022, and December 31, 2021, there were no such accrued interest or penalties.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires that entities use a new forward looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU No. 2016-13 is effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2022. The Company is currently evaluating the potential impact this standard may have on the unaudited condensed consolidated financial statements.
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying unaudited condensed consolidated financial statements.
Impact of Coronavirus Pandemic
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. On March 11, 2020, the World Health Organization declared the outbreak a pandemic, and on March 13, 2020, the United States declared a national emergency.
Some states and cities, including some where the Company’s properties are located, reacted by instituting quarantines, restrictions on travel, “stay at home” rules and restrictions on the types of businesses that may continue to operate and is what capacity, as well as guidance in response to the pandemic and the need to contain it.
The rules and restrictions put in place have had a negative impact on the economy and business activity and may adversely impact the ability of the Company’s tenants, many of whom may be restricted in their ability to work, to pay their rent as and when due. In addition, the Company’s property managers may be limited in their ability to properly maintain the Company’s properties. Enforcing the Company’s rights as landlord against tenants who fail to pay rent or otherwise do not comply with the terms of their leases may not be possible as many jurisdictions, including those where are properties are located, have established rules and/or regulations preventing us from evicting tenants for certain periods in response to the pandemic. If the Company is unable to enforce its rights as landlords, our business would be materially affected.
If the current pace of the pandemic does not continue to slow and the spread of the virus is not contained, the Company’s business operations could be further delayed or interrupted. Government and health authorities may announce new or extend existing restrictions, which could require the Company to make further adjustments to its operations in order to comply with any such restrictions. The duration of any business disruption cannot be reasonably estimated at this time but may materially affect the Company’s ability to operate its business and result in additional costs.
The extent to which the pandemic may impact the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this report, including new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. Nevertheless, the pandemic and the current financial, economic and capital markets environment present material uncertainty and risk with respect to the Company’s performance, financial condition, results of operations and cash flows. |
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Variable Interest Entities |
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| Variable Interest Entities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| VARIABLE INTEREST ENTITIES | NOTE 2 – VARIABLE INTEREST ENTITIES
During the three months ended March 31, 2022, Gvest Finance LLC formed two wholly owned subsidiaries, Gvest Sunnyland Homes LLC and Gvest Warrenville Homes LLC, both of which are considered VIEs. The Company consolidates the accounts of Gvest Finance LLC, Gvest Homes I LLC, Gvest Anderson Homes LLC, Gvest Capital View Homes LLC, Gvest Hidden Oaks Homes LLC, Gvest Springlake Homes LLC, Gvest Carolinas 4 Homes LLC, Gvest Sunnyland Homes LLC, Gvest Warrenville Homes LLC, Brainerd Place LLC, and Bull Creek LLC and will continue to do so until they are no longer considered VIEs.
Included in the unaudited condensed consolidated results of operations for the three months ended March 31, 2022 and 2021 were net loss of $159,570 and net income of $55,085, respectively, after deducting an additional management fee equal to cash flow after debt service per the management agreement of $83,013 and $0, respectively.
The consolidated balance sheets as of March 31, 2022 and December 31, 2021 included the following amounts related to the consolidated VIEs.
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Investment Property |
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| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INVESTMENT PROPERTY | NOTE 3 – INVESTMENT PROPERTY
The following table summarizes the Company’s property and equipment balances are generally used to depreciate the assets on a straight-line basis:
Depreciation expense totaled $759,704 and $441,623 for the three months ended March 31, 2022 and 2021, respectively.
During the three months ended March 31, 2022, Gvest Finance LLC, the Company’s VIE, purchased nine new manufactured homes for approximately $424,000 for use in the Springlake, Sunnyland, and Crestview communities that are not yet occupiable and still in the set-up phase as of March 31, 2022. These nine homes and several homes purchased at the end of 2021 are included in Construction in Process on the balance sheet.
During the year ended December 31, 2021, Gvest Finance LLC, acquired thirty-four new manufactured homes for approximately $1,900,000 including set up costs for use in the Springlake community and fourteen new manufactured homes for approximately $860,000 including set up costs for use in the Golden Isles community that were not yet occupiable and were still in the set-up phase as of December 31, 2021 and were included in Construction in Process on the balance sheet as of that date. |
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| ACQUISITIONS AND DISPOSITIONS | NOTE 4 – ACQUISITIONS AND DISPOSITIONS
During the three months ended March 31, 2022, the Company acquired three communities. These were acquisitions from third parties and have been accounted for as asset acquisitions.
On January 31, 2022, the Company purchased a manufactured housing community located in Byron, Georgia consisting of 73 sites on approximately 18.57 acres and an adjacent parcel of 15.09 acres of undeveloped land for a total purchase price of $2,200,000. Sunnyland MHP LLC purchased the land and land improvements and the Company’s VIE, Gvest Sunnyland Homes LLC, purchased the homes.
On March 31, 2022, the Company purchased two manufactured housing communities located in Warrenville, South Carolina consisting of 85 sites on approximately 45 acres for a total purchase price of $3,050,000. Warrenville MHP LLC purchased the land and land improvements and the Company’s VIE, Gvest Warrenville Homes LLC, purchased the homes.
During the three months ended March 31, 2021, the Company acquired one community. This was an acquisition from a third party and has been accounted for as an asset acquisition.
On March 31, 2021, the Company purchased a manufactured housing community located in Brunswick, Georgia consisting of 113 sites on approximately 17 acres for a total purchase price of $2,325,000. Golden Isles MHP LLC purchased the land and land improvements and the Company’s VIE, Gvest Finance LLC, purchased the homes.
Pro-forma Financial Information
The following unaudited pro-forma information presents the combined results of operations for the three months ended March 31, 2021 as if all acquisitions of manufactured housing communities during the year ended December 31, 2021 had occurred on January 1, 2021.
The Company determined that the acquisitions made during the three months ended March 31, 2022 were not significant acquisitions, therefore, proforma financial information related to these acquisitions is not reported below.
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| PROMISSORY NOTES AND LINES OF CREDIT | NOTE 5 – PROMISSORY NOTES AND LINES OF CREDIT
Promissory Notes
The Company has issued promissory notes payable to lenders related to the acquisition of its manufactured housing communities and mobile homes. The interest rates on these promissory notes range from 3.250% to 5.875% with 5 to 30 years principal amortization. Three of the promissory notes had an initial 12 month, six have an initial 24 month, six have an initial 36 month, one has an initial 60 month, and one promissory note has a 180 month period of interest only payments. The promissory notes are secured by the real estate assets and twenty loans totaling $43,602,376 are guaranteed by Raymond M. Gee.
As of March 31, 2022, the outstanding balance on these notes was $53,456,310. The following are the terms of these notes:
Lines of Credit – Variable Interest Entities
The agreements for each of the above line of credit facilities require the maintenance of certain financial ratios or other affirmative and negative covenants. All the above line of credit facilities are guaranteed by Raymond M. Gee.
Metrolina Promissory Note
On October 22, 2021, the Company issued a promissory note to Metrolina Loan Holdings, LLC (“Metrolina”), a significant stockholder, in the principal amount of $1,500,000. The note bears interest at a rate of 18% per annum and matures on April 1, 2023. During the first six months of the note, any prepayment would require the Company to pay a yield maintenance fee equal to six months of interest. Thereafter, the loan may be prepaid at any time without penalty or fee. The note is guaranteed by Raymond M. Gee. As of March 31, 2022 and December 31, 2021, the balance on this note was $1,500,000. During the three months ended March 31, 2022 and 2021, interest expense totaled $66,575 and $0, respectively.
Raymond M. Gee Promissory Note
On October 1, 2017, the Company issued a revolving promissory note to Raymond M. Gee, pursuant to which the Company could borrow up to $1,500,000 from Mr. Gee on a revolving basis for working capital purposes. In September 2020, the Company paid off the full balance; however, the line of credit remained available to the Company until it was cancelled in December 2021. As of March 31, 2022 and December 31, 2021, the outstanding balance on this note was $0.
Gvest Revolving Promissory Note
On December 27, 2021, the Company issued a revolving promissory note to Gvest Real Estate Capital, LLC, an entity whose sole owner is Raymond M. Gee, the Company’s chairman and chief executive officer, pursuant to which the Company may borrow up to $1,500,000 on a revolving basis for working capital or acquisition purposes. On the same date, the Company borrowed $150,000. During the three months ended March 31, 2022, the Company borrowed an additional $700,000. As of March 31, 2022 and December 31, 2021, the outstanding balance on this note was $850,000 and $150,000, respectively. This note has a five-year term and is interest-only based on an 15% annual rate through the maturity date and is unsecured. During the three months ended March 31, 2022 and 2021, interest expense totaled $14,718 and $0, respectively. The outstanding principal and accrued interest balance on this note was repaid on April 15, 2022.
Maturities of Long-Term Obligations for Five Years and Beyond
The minimum annual principal payments of notes payable and lines of credit at March 31, 2022 by fiscal year were:
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Commitments and Contingencies |
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| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | NOTE 6 – COMMITMENTS AND CONTINGENCIES
From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise that may harm its business. The Company is currently not aware of any such legal proceedings or claims that they believe will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results. |
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| STOCKHOLDERS' EQUITY | NOTE 7 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is authorized to issue up to 10,000,000 shares of preferred stock, $0.01 par value.
Series A Cumulative Convertible Preferred Stock
On May 8, 2019, the Company filed a certificate of designation with the Nevada Secretary of State pursuant to which the Company designated 4,000,000 shares of its preferred stock as Series A Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”). The Series A Preferred Stock has the following voting powers, designations, preferences and relative rights, qualifications, limitations or restrictions:
Ranking. The Series A Preferred Stock ranks, as to dividend rights and rights upon our liquidation, dissolution, or winding up, senior to the Common Stock and pari passu with the Series B Preferred Stock and Series C Preferred Stock (as defined below). The terms of the Series A Preferred Stock will not limit the Company’s ability to (i) incur indebtedness or (ii) issue additional equity securities that are equal or junior in rank to the shares of Series A Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up.
Dividend Rate and Payment Dates. Dividends on the Series A Preferred Stock are cumulative and payable monthly in arrears to all holders of record on the applicable record date. Holders of Series A Preferred Stock will be entitled to receive cumulative dividends in the amount of $0.017 per share each month, which is equivalent to the rate of 8% of the $2.50 liquidation preference per share. Dividends on shares of Series A Preferred Stock will continue to accrue even if any of the Company’s agreements prohibit the current payment of dividends or the Company does not have earnings. During the three months ended March 31, 2022 and 2021, the Company paid dividends of $94,300 and $96,167, respectively.
Liquidation Preference. The liquidation preference for each share of Series A Preferred Stock is $2.50. Upon a liquidation, dissolution or winding up of the Company, holders of shares of Series A Preferred Stock will be entitled to receive, before any payment or distribution is made to the holders of Common Stock and on a pari passu basis with holders of Series B Preferred Stock and Series C Preferred Stock, the liquidation preference with respect to their shares plus an amount equal to any accrued but unpaid dividends (whether or not declared) to, but not including, the date of payment with respect to such shares.
Stockholder Optional Conversion. Each share of Series A Preferred Stock is convertible, at any time and from time to time, at the option of the holder thereof and without the payment of additional consideration, into that number of shares of Common Stock determined by dividing the liquidation preference of such share by the conversion price then in effect. The conversion price is initially equal $2.50, subject to adjustment as set forth in the certificate of designation. In addition, if at any time the trading price of the Common Stock is greater than the liquidation preference of $2.50, the Company may deliver a written notice to all holders to cause each holder to convert all or part of such holders’ Series A Preferred Stock.
Company Call and Stockholder Put Options. Commencing on the fifth anniversary of the initial issuance of shares of Series A Preferred Stock and continuing indefinitely thereafter, the Company will have a right to call for redemption the outstanding shares of Series A Preferred Stock at a call price equal to $3.75, or 150% of the original issue price of the Series A Preferred Stock, and correspondingly, each holder of shares of Series A Preferred Stock shall have a right to put the shares of Series A Preferred Stock held by such holder back to the Company at a put price equal to $3.75, or 150% of the original issue purchase price of such shares. During the three months ended March 31, 2022 and 2021, the Company recorded a put option value accretion of $117,871 and $118,125, respectively.
Voting Rights. The Company may not authorize or issue any class or series of equity securities ranking senior to the Series A Preferred Stock as to dividends or distributions upon liquidation (including securities convertible into or exchangeable for any such senior securities) or amend the Company’s articles of incorporation (whether by merger, consolidation, or otherwise) to materially and adversely change the terms of the Series A Preferred Stock without the affirmative vote of at least two-thirds of the votes entitled to be cast on such matter by holders of the outstanding shares of Series A Preferred Stock, voting together as a class. Otherwise, holders of the shares of Series A Preferred Stock do not have any voting rights.
As of March 31, 2022, there were 1,886,000 shares of Series A Preferred Stock issued and outstanding. As of March 31, 2022, the Series A Preferred Stock balance was made up of Series A Preferred Stock totaling $4,715,000 and accretion of put options totaling $1,244,646. As of December 31, 2021, the Series A Preferred Stock balance was made up of Series A Preferred Stock totaling $4,715,000 and accretion of put options totaling $1,126,771.
Series B Cumulative Redeemable Preferred Stock
On December 2, 2019, the Company filed a certificate of designation with the Nevada Secretary of State pursuant to which the Company designated 1,000,000 shares of its preferred stock as Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”). The Series B Preferred Stock has the following voting powers, designations, preferences and relative rights, qualifications, limitations or restrictions:
Ranking. The Series B Preferred Stock rank, as to dividend rights and rights upon liquidation, dissolution, or winding up, senior to the Common Stock and pari passu with the Series A Preferred Stock and Series C Preferred Stock. The terms of the Series B Preferred Stock will not limit the Company’s ability to (i) incur indebtedness or (ii) issue additional equity securities that are equal or junior in rank to the shares of Series B Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up.
Dividend Rate and Payment Dates. Dividends on the Series B Preferred Stock are cumulative and payable monthly in arrears to all holders of record on the applicable record date. Holders of Series B Preferred Stock will be entitled to receive cumulative dividends in the amount of $0.067 per share each month, which is equivalent to the annual rate of 8% of the $10.00 liquidation preference per share; provided that upon an event of default (generally defined as the Company’s failure to pay dividends when due or to redeem shares when requested by a holder), such amount shall be increased to $0.083 per month, which is equivalent to the annual rate of 10% of the $10.00 liquidation preference per share. During the three months ended March 31, 2022 and 2021, the Company paid dividends of $151,785 and $129,409, respectively.
Liquidation Preference. The liquidation preference for each share of Series B Preferred Stock is $10.00. Upon a liquidation, dissolution or winding up of the Company, holders of shares of Series B Preferred Stock will be entitled to receive, before any payment or distribution is made to the holders of Common Stock and on a pari passu basis with holders of Series A Preferred Stock and Series C Preferred Stock, the liquidation preference with respect to their shares plus an amount equal to any accrued but unpaid dividends (whether or not declared) to, but not including, the date of payment with respect to such shares.
Company Call and Stockholder Put Options. Commencing on the fifth anniversary of the initial issuance of shares of Series B Preferred Stock and continuing indefinitely thereafter, the Company will have a right to call for redemption the outstanding shares of Series B Preferred Stock at a call price equal to $15.00, or 150% of the original issue price of the Series B Preferred Stock, and correspondingly, each holder of shares of Series B Preferred Stock shall have a right to put the shares of Series B Preferred Stock held by such holder back to the Company at a put price equal to $15.00, or 150% of the original issue purchase price of such shares. During the three months ended March 31, 2022 and 2021, the Company recorded a put option value accretion of $184,254 and $185,839, respectively.
Voting Rights. The Company may not authorize or issue any class or series of equity securities ranking senior to the Series B Preferred Stock as to dividends or distributions upon liquidation (including securities convertible into or exchangeable for any such senior securities) or amend the Company’s articles of incorporation (whether by merger, consolidation, or otherwise) to materially and adversely change the terms of the Series B Preferred Stock without the affirmative vote of at least two-thirds of the votes entitled to be cast on such matter by holders of outstanding shares of Series B Preferred Stock, voting together as a class. Otherwise, holders of the shares of Series B Preferred Stock do not have any voting rights.
No Conversion Right. The Series B Preferred Stock is not convertible into shares of Common Stock.
On November 1, 2019, the Company launched an offering under Regulation A of Section 3(6) of the Securities Act of 1933, as, amended, for Tier 2 offerings, pursuant to which the Company offered up to 1,000,000 shares of Series B Preferred Stock at an offering price of $10.00 per share, for a maximum offering amount of $10,000,000. In addition, the Company offered bonus shares to early investors in this offering, whereby the first 400 investors received, in addition to Series B Preferred Stock, 100 shares of Common Stock, regardless of the amount invested, for a total of 40,000 shares of Common Stock.
This offering terminated on March 30, 2021 thus, the Company sold no shares of Series B Preferred Stock during the three months ended March 31, 2022. During the three months ended March 31, 2021, the Company sold an aggregate of 116,097 shares of Series B Preferred Stock for total gross proceeds of $1,160,970. After deducting a placement fee and other expenses, the Company received net proceeds of $1,079,702.
As of March 31, 2022, there were 758,551 shares of Series B Preferred Stock issued and outstanding and the Series B Preferred Stock balance was made up of Series B Preferred Stock, net of commissions, totaling $7,185,716 and accretion of put options totaling $1,517,132. As of December 31, 2021, there were 758,551 shares of Series B Preferred Stock issued and outstanding and the Series B Preferred Stock balance was made up of Series B Preferred Stock, net of commissions, totaling $7,185,716 and accretion of put options totaling $1,332,878.
Series C Cumulative Redeemable Preferred Stock
On May 24, 2021, the Company filed an amended and restated certificate of designation with the Nevada Secretary of State pursuant to which the Company designated 47,000 shares of its preferred stock as Series C Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”). The Series C Preferred Stock has the following voting powers, designations, preferences and relative rights, qualifications, limitations or restrictions:
Ranking. The Series C Preferred Stock ranks, as to dividend rights and rights upon liquidation, dissolution, or winding up, senior to Common Stock and pari passu with Series A Preferred Stock and Series B Preferred Stock. The terms of the Series C Preferred Stock do not limit the Company’s ability to (i) incur indebtedness or (ii) issue additional equity securities that are equal or junior in rank to the shares of Series C Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up.
Stated Value. Each share of Series C Preferred Stock has an initial stated value of $1,000, subject to appropriate adjustment in relation to certain events, such as recapitalizations, stock dividends, stock splits, stock combinations, reclassifications or similar events affecting the Series C Preferred Stock.
Dividend Rate and Payment Dates. Dividends on the Series C Preferred Stock are cumulative and payable monthly in arrears to all holders of record on the applicable record date. Holders of Series C Preferred Stock are entitled to receive cumulative monthly cash dividends at a per annum rate of 7% of the stated value (or $5.83 per share each month based on the initial stated value). Dividends on each share begin accruing on, and are cumulative from, the date of issuance and regardless of whether the board of directors declares and pays such dividends. Dividends on shares of Series C Preferred Stock will continue to accrue even if any of the Company’s agreements prohibit the current payment of dividends or the Company does not have earnings. During the three months ended March 31, 2022, the Company paid dividends of $96,126. Due to timing of payments, the company accrued dividends of $39,019 during the three months ended March 31, 2022 and total accrued dividends of $65,979 is presented in accrued liabilities on the balance sheet as of March 31, 2022.
Liquidation Preference. Upon a liquidation, dissolution or winding up of the Company, holders of shares of Series C Preferred Stock are entitled to receive, before any payment or distribution is made to the holders of Common Stock and on a pari passu basis with holders of Series A Preferred Stock and Series B Preferred Stock, a liquidation preference equal to the stated value per share, plus accrued but unpaid dividends thereon.
Redemption Request at the Option of a Holder. Once per calendar quarter, a holder will have the opportunity to request that the Company redeem that holder’s Series C Preferred Stock. The board of directors may, however, suspend cash redemptions at any time in its discretion if it determines that it would not be in the best interests of the Company to effectuate cash redemptions at a given time because the Company does not have sufficient cash, including because the board believes that the Company’s cash on hand should be utilized for other business purposes. Redemptions will be limited to four percent (4%) of the total outstanding Series C Preferred Stock per quarter and any redemptions in excess of such limit or to the extent suspended, shall be redeemed in subsequent quarters on a first come, first served, basis. The Company will redeem shares at a redemption price equal to the stated value of such redeemed shares, plus any accrued but unpaid dividends thereon, less the applicable redemption fee (if any). As a percentage of the aggregate redemption price of a holder’s shares to be redeemed, the redemption fee shall be:
Optional Redemption by the Company. The Company has the right (but not the obligation) to redeem shares of Series C Preferred Stock at a redemption price equal to the stated value of such redeemed shares, plus any accrued but unpaid dividends thereon; provided, however, that if the Company redeems any shares of Series C Preferred Stock prior to the fourth (4th) anniversary of their issuance, then the redemption price shall include a premium equal to ten percent (10%) of the stated value.
Mandatory Redemption by the Company. The Company must redeem the outstanding shares of Series C Preferred Stock on the fourth (4th) anniversary of their issuance at a redemption price equal to the stated value of such redeemed shares, plus any accrued but unpaid dividends thereon.
Voting Rights. The Series C Preferred Stock has no voting rights.
No Conversion Right. The Series C Preferred Stock is not convertible into shares of Common Stock.
In accordance with ASC 480-10, the Series C Preferred Stock is treated as a liability and is presented net of unamortized debt issuance costs on the balance sheet because the Company has an unconditional obligation to redeem the Series C Preferred Stock and dividends on the Preferred C Stock are included in interest expense.
On June 11, 2021, the Company launched a new offering under Regulation A of Section 3(6) of the Securities Act for Tier 2 offerings, pursuant to which the Company is offering up to 47,000 shares of Series C Preferred Stock at an offering price of $1,000 per share for a maximum offering amount of $47 million.
During the three months ended March 31, 2022, the Company sold an aggregate of 4,293 shares of Series C Preferred Stock for total gross proceeds of $4,289,444. After deducting a placement fee and other expenses, the Company received net proceeds of $4,004,110.
As of March 31, 2022 there were 10,027 shares of Series C Preferred Stock issued and outstanding and the Series C Preferred Stock balance was made up of Series C Preferred Stock gross proceeds totaling $10,023,840 net of total unamortized debt issuance costs of $774,961. As of December 31, 2021, there were 5,734 shares of Series C Preferred Stock issued and outstanding and the Series C Preferred Stock balance was made up of Series C Preferred Stock gross proceeds totaling $5,734,400 net of total unamortized debt issuance costs of $520,030.
Common Stock
The Company is authorized to issue up to 200,000,000 shares of Common Stock, par value $0.01 per share. As of March 31, 2022 and December 31, 2021, there were 12,403,680 shares of Common Stock issued and outstanding.
Stock Issued for Cash
During the three months ended March 31, 2021, the Company issued 5,100 shares of Common Stock, valued at $1,377, to early investors in the prior Regulation A offering.
Equity Incentive Plan
In December 2017, the Board of Directors, with the approval of a majority of the stockholders of the Company, adopted the Manufactured Housing Properties Inc. Stock Compensation Plan (the “Plan”) which is administered by the Compensation Committee. As of March 31, 2022, there were 751,175 shares granted and 248,825 shares remaining available under the Plan.
The Company has issued options to directors and officers under the Plan. One third of the options vest immediately, and two thirds vest in equal annual installments over a -year period. During the three months ended March 31, 2022 and 2021, the Company issued 45,000 and 50,000 options and recorded stock option expense of $49,760 and $646, respectively. A total of 45,000 of the options granted during this period were granted at a price of $0.01 per share, which represents a price that may be deemed to be below the market value per share of the Company’s common stock as defined by the Plan.
The following table summarizes the stock options outstanding as of March 31, 2022:
As of March 31, 2022, there were 751,175 “in-the-money” options with an aggregate intrinsic value of $2,621,601. The aggregate intrinsic value represents the total intrinsic value (the difference between the Company’s closing stock price at fiscal year-end and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holder had all options holders exercised their options on March 31, 2022.
The following table summarizes information concerning options outstanding as of March 31, 2022.
The table below presents the weighted average expected life in years of options granted under the Plan as described above. The risk-free rate of the stock options is based on the U.S. Treasury yield curve in effect at the time of grant, which corresponds with the expected term of the option granted.
The fair value of stock options was estimated using the Black Scholes option pricing model with the following assumptions for grants made during the periods indicated.
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Related Party Transactions |
3 Months Ended |
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Mar. 31, 2022 | |
| Related Party Transactions [Abstract] | |
| RELATED PARTY TRANSACTIONS | NOTE 8 – RELATED PARTY TRANSACTIONS
See Note 5 for information regarding the promissory notes issued to Metrolina, a significant stockholder, and the revolving promissory note issued to Gvest Real Estate Capital, LLC, an entity whose sole owner is Raymond M. Gee, the Company’s chairman and chief executive officer.
In August 2019, the Company entered into an office lease agreement with 136 Main Street LLC, an entity whose sole owner is Gvest Real Estate LLC, whose sole owner is Mr. Gee, for the lease of the Company’s offices. The lease is $12,000 per month and is on a month-to-month term. During the three months ended March 31, 2022 and 2021, the Company paid $36,000 of rent expense to 136 Main Street LLC.
During the three months ended March 31, 2022, Raymond M. Gee received fees totaling $450,000 for his personal guaranty on certain promissory notes relating to the acquisitions of mobile home communities owned by the Company, including $250,000 in relation to the Asheboro and Morganton acquisitions which were accrued for at December 31, 2021 and paid in January 2022. During the three months ended March 31, 2021, Mr. Gee received no fees for his personal guaranty.
See Note 2 for information regarding related party VIEs. |
Subsequent Events |
3 Months Ended |
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Mar. 31, 2022 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 9 – SUBSEQUENT EVENTS
Additional Closings of Regulation A Offering
Subsequent to March 31, 2022, we sold an aggregate of 1,380 shares of Series C Preferred Stock in additional closings of this offering for total gross proceeds of $1,380,000. After deducting a placement fee, we received net proceeds of approximately $1,286,850.
York Purchase and Sale Agreement
On November 2, 2021, Bull Creek LLC, a VIE, entered into a purchase and sale agreement with Rachel Holler for the purchase of 150 acres of undeveloped land and a mobile home community with 60 sites on approximately 10 acres in York, South Carolina for a total purchase price of $2,200,000. As of the date of this report, acquisition of this community has not occurred.
Spaulding Purchase and Sale Agreement
On January 19, 2022, MHP Pursuits LLC entered into a purchase and sale agreement with Spaulding Enterprises, Inc. for the purchase of a manufactured housing community located in Brunswick, Georgia consisting of 72 sites and 28 homes on approximately 17 acres for a total purchase price of $2,000,000. As of the date of this report, acquisition of this community has not yet occurred.
Clyde Purchase and Sale Agreement
On February 10, 2022, MHP Pursuits LLC entered into a purchase and sale agreement with Harold and Brenda Allen for the purchase of a manufactured housing community located in Clyde, North Carolina, a part of the Asheville Metropolitan Statistical Area, consisting of 51 sites and 51 homes on approximately 9 acres for a total purchase price of $3,050,000. As of the date of this report, acquisition of this community has not yet occurred.
Solid Rock Purchase and Sale Agreement
On February 25, 2022, MHP Pursuits LLC entered into a purchase and sale agreement with K10 Enterprises LLC for the purchase of a manufactured housing community located in Leesville, South Carolina, consisting of 39 sites and homes on approximately 11 acres for a total purchase price of $1,700,000. As of the date of this report, acquisition of this community has not yet occurred.
Resaca Portfolio Purchase and Sale Agreement
On April 1, 2022, MHP Pursuits LLC entered into a purchase and sale agreement with William Darryl Edwards for the purchase of three manufactured housing communities located in Murray County, Georgia, consisting of 91 sites on approximately 79 acres for a total purchase price of $4,488,000. As of the date of this report, acquisition of this community has not yet occurred.
Country Estates Purchase and Sale Agreement
On April 5, 2022, MHP Pursuits LLC entered into a purchase and sale agreement with Ted Brown for the purchase of a manufactured housing community located in Cameron, North Carolina, consisting of 63 sites on approximately 86 acres for a total purchase price of $2,050,000. As of the date of this report, acquisition of this community has not yet occurred.
Stock Option Grant On April 11, 2022, the Company issued 100,000 stock options to a key employee pursuant to the Stock Compensation Plan administered by the Compensation Committee.
Charlotte 3 Park (Dixie, Driftwood, and Meadowbook) Refinance and Gvest Revolving Promissory Note Repayment
On April 14, 2022, Charlotte 3 Park MHP LLC entered into a loan agreement with Townebank for a loan in the principal amount of $3,158,400 and issued a promissory note to the lender in the same amount. The funds from the loan were used on April 15, 2022 to pay off the $850,000 revolving promissory note outstanding principal balance and accrued interest of $19,979 due to Gvest Real Estate Capital LLC.
The Townebank note bears interest at 4.25% per annum with payments to begin May 1, 2022 and matures on October 1, 2028. Payment for the first eighteen (18) months of the term of the note shall be interest-only based on the principal outstanding, days in the period, and daily interest rate. Thereafter, principal and interest shall be due and payable based on a twenty (20) year amortization schedule. Charlotte 3 Park MHP LLC may prepay the note in part or in full subject to prepayment penalties set out in the loan agreement if repaid before May 1, 2027 and without penalty if repaid on or subsequent to that date.
The Townebank loan is secured by a first-priority security interest in the land at the Dixie, Driftwood, and Meadowbrook communities and lot rent due under all leases at these communities and is guaranteed by Raymond M. Gee. The loan agreement and note contain customary financial and other covenants and events of default for a loan of its type.
North Carolina Core 3 Park Portfolio Purchase and Sale Agreement
On May 16, 2022, MHP Pursuits LLC entered into a purchase and sale agreement with Statesville Estates MHC LLC, North Side MHC LLC, and Timber View LLC for the purchase of three manufactured housing communities located in Statesville, North Carolina, Thomasville, North Carolina, and Trinity, North Carolina, respectively, consisting of 122 sites on approximately 74 acres for a total purchase price of $5,350,000. As of the date of this report, acquisition of this community has not yet occurred. |
Accounting Policies, by Policy (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization | Organization
Manufactured Housing Properties Inc. (the “Company”) is a Nevada corporation whose principal activities are to acquire, own, and operate manufactured housing communities.
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| Basis of Presentation | Basis of Presentation
The Company prepares its consolidated financial statements under the accrual basis of accounting, in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q of Regulation S-X. They do not include all information and footnotes required by GAAP for complete financial statements. The December 31, 2021 consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 31, 2022. The interim unaudited condensed consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for a fair statement of the financial statements, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.
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| Principles of Consolidation | Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company, entities controlled by the Company through its direct or indirect ownership of a majority interest, and any other entities in which the Company has a controlling financial interest. The Company consolidates variable interest entities (“VIEs”) where the Company is the primary beneficiary. The primary beneficiary of a VIE is the party that has both the power to direct the activities that most significantly impact the VIE’s economic performance, and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.
The Company’s formation of all subsidiaries and VIE’s date of consolidation are as follows:
All intercompany transactions and balances have been eliminated in consolidation. The Company does not have a majority or minority interest in any other company, either consolidated or unconsolidated.
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| Revenue Recognition | Revenue Recognition
Mobile home rental and related income is generated from lease agreements for our sites and homes. The lease component of these agreements is accounted for under Topic 842 of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, for leases.
Under ASC 842, the Company must assess on an individual lease basis whether it is probable that we will collect the future lease payments. The Company considers the tenant’s payment history and current credit status when assessing collectability. When collectability is not deemed probable, the Company will write-off the tenant’s receivables, including straight-line rent receivable, and limit lease income to cash received.
The Company’s revenues primarily consist of rental revenues and fee and other income. The Company has the following revenue sources and revenue recognition policies:
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| Accounts Receivable | Accounts Receivable
Accounts receivable consist primarily of amounts currently due from residents. Accounts receivables are reported in the balance sheet at outstanding principal adjusted for any charge-offs and the allowance for losses. The Company records an allowance for bad debt when receivables are over 90 days old.
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| Acquisitions | Acquisitions
The Company accounts for acquisitions as asset acquisitions in accordance with ASC 805, “Business Combinations,” and allocates the purchase price of the property based upon the fair value of the assets acquired, which generally consist of land, site and land improvements, buildings and improvements and rental homes. The Company allocates the purchase price of an acquired property generally determined by internal evaluation as well as third-party appraisal of the property obtained in conjunction with the purchase.
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| Variable Interest Entities | Variable Interest Entities
In December 2020, the Company entered into a property management agreement with Gvest Finance LLC, a company owned and controlled by the Company’s parent company, Gvest Real Estate Capital LLC, an entity whose sole owner is Raymond M. Gee, the Company’s chairman and chief executive officer, and has subsequently entered into property management agreements with Gvest Homes I LLC, Gvest Anderson Homes LLC, Gvest Capital View Homes LLC, Gvest Hidden Oaks Homes LLC, Gvest Springlake Homes LLC, Gvest Carolinas 4 Homes LLC, Gvest Sunnyland Homes LLC and Gvest Warrenville Homes LLC, which are wholly owned subsidiaries of Gvest Finance LLC. Under the property management agreements, the Company manages the homes owned by the VIEs and the VIEs remit to the Company all income, less any sums paid out for debt service plus 5% of the debt service payment.
Additionally, during 2021, the Company formed two entities, Brainerd Place LLC and Bull Creek LLC, for the purpose of exploring opportunities to develop mobile home communities. The Company owns 49% of these entities and Gvest Real Estate LLC, an entity whose sole owner is Raymond M. Gee, owns 51%. The Company also executed operating agreements with these entities which designate Gvest Capital Management LLC, a company owned and controlled by Gvest Real Estate Capital LLC, as manager with the authority, power, and discretion to manage and control the entities’ business decisions. The operating agreements require the Company to make cash contributions to the entities to fund their activities, operations, and existence, if the Company approves the contribution requests from the manager, which ultimately provides the Company with power to direct the economically significant activities of these entities.
A company with interests in a VIE must consolidate the entity if the company is deemed to be the primary beneficiary of the VIE; that is, if it has both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. Such a determination requires management to evaluate circumstances and relationships that may be difficult to understand and to make a significant judgment, and to repeat the evaluation at each subsequent reporting date. Primarily due to the Company’s common ownership by Mr. Gee, its power to direct the activities of these entities that most significantly impact their economic performance, and the fact that the Company has the obligation to absorb losses or the right to receive benefits from these entities that could potentially be significant to these entities, the entities listed above are considered to be VIEs in accordance applicable GAAP.
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| Net Income (Loss) Per Share | Net Income (Loss) Per Share
Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding, including vested penny stock options during the period. Diluted net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding plus the weighted average number of net shares that would be issued upon exercise of stock options pursuant to the treasury stock method.
For the three months ended March 31, 2022, the potentially dilutive penny options for the purchase of 704,508 shares of Common Stock were included in basic loss per share. Other securities outstanding as of March 31, 2022 not included in dilutive loss per share, as the effect would be anti-dilutive, were 1,886,000 shares of Series A Cumulative Redeemable Convertible Preferred Stock, which are convertible into Common Stock for a total of 1,886,000 shares.
For the three months ended March 31, 2021, the potentially dilutive penny options for the purchase of 519,675 shares of Common Stock were included in basic loss per share. Other securities outstanding as of March 31, 2021 not included in dilutive loss per share, as the effect would be anti-dilutive, were 1,890,000 shares of Series A Cumulative Redeemable Convertible Preferred Stock, which are convertible into Common Stock for a total of 1,890,000 shares.
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| Use of Estimates | Use of Estimates
The presentation of financial statements in conformity with GAAP requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.
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| Investment Property and Depreciation | Investment Property and Depreciation
Investment real property and equipment are carried at cost. Depreciation of buildings, improvements to sites and buildings, rental homes, equipment, and vehicles is computed principally on the straight-line method over the estimated useful lives of the assets (ranging from 3 to 25 years). Land development costs are not depreciated until they are put in use, at which time they are capitalized as land improvements. Interest Expense pertaining to Land Development Costs are capitalized. Maintenance and Repairs are charged to expense as incurred and improvements are capitalized. The costs and related accumulated depreciation of property sold or otherwise disposed of are removed from the financial statement and any gain or loss is reflected in the current period’s results of operations.
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| Impairment Policy | Impairment Policy
The Company applies FASB ASC 360-10, “Property, Plant & Equipment,” to measure impairment in real estate investments. Rental properties are individually evaluated for impairment when conditions exist which may indicate that it is probable that the sum of expected future cash flows (on an undiscounted basis without interest) from a rental property is less than the carrying value under its historical net cost basis. These expected future cash flows consider factors such as future operating income, trends and prospects as well as the effects of leasing demand, competition and other factors. Upon determination that a permanent impairment has occurred, rental properties are reduced to their fair value. For properties to be disposed of, an impairment loss is recognized when the fair value of the property, less the estimated cost to sell, is less than the carrying amount of the property measured at the time there is a commitment to sell the property and/or it is actively being marketed for sale. A property to be disposed of is reported at the lower of its carrying amount or its estimated fair value, less its cost to sell. Subsequent to the date that a property is held for disposition, depreciation expense is not recorded. There was no impairment during the three months ended March 31, 2022 and 2021.
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| Cash and Cash Equivalents | Cash and Cash Equivalents
The Company considers all highly liquid financial instruments purchased with an original maturity of three months or less to be cash equivalents.
The Company maintains cash balances at banks and deposits at times may exceed federally insured limits. Management believes that the financial institutions that hold the Company’s cash are financially secure and, accordingly, minimal credit risk exists. At March 31, 2022 and December 31, 2021, the Company had approximately $763,000 above the FDIC-insured limit, including restricted cash held for tenant security deposits of $754,079 and $705,195, respectively.
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| Stock Based Compensation | Stock Based Compensation
All stock based payments to employees, nonemployee consultants, and to nonemployee directors for their services as directors, including any grants of restricted stock and stock options, are measured at fair value on the grant date and recognized in the statements of operations as compensation or other expense over the relevant service period in accordance with FASB ASC Topic 718. Stock based payments to nonemployees are recognized as an expense over the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is reached, or the date performance is completed. In addition, for awards that vest immediately and are nonforfeitable the measurement date is the date the award is issued. The Company recorded stock option expense of $49,760 and $646 during the three months ended March 31, 2022 and 2021, respectively.
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| Fair Value of Financial Instruments | Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10 of the FASB ASC for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB ASC to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. Most of the Company’s financial assets do not have a quoted market value. Therefore, estimates of fair value are necessarily based on a number of significant assumptions (many of which involve events outside the control of management). Such assumptions include assessments of current economic conditions, perceived risks associated with these financial instruments and their counterparties, future expected loss experience and other factors. Given the uncertainties surrounding these assumptions, the reported fair values represent estimates only and, therefore, cannot be compared to the historical accounting model. Use of different assumptions or methodologies is likely to result in significantly different fair value estimates.
The fair value of cash and cash equivalents, accounts receivables, and accounts payable approximates their current carrying amounts since all such items are short-term in nature. The fair value of variable and fixed rate mortgages payable and lines of credit approximate their current carrying amounts on the balance sheet since such amounts payable are at approximately a weighted average current market rate of interest.
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| Income Taxes | Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
The Company recognizes interest and penalties, if any, with income tax expense in the accompanying unaudited condensed consolidated statement of operations. As of March 31, 2022, and December 31, 2021, there were no such accrued interest or penalties.
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires that entities use a new forward looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU No. 2016-13 is effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2022. The Company is currently evaluating the potential impact this standard may have on the unaudited condensed consolidated financial statements.
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying unaudited condensed consolidated financial statements.
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| Impact of Coronavirus Pandemic | Impact of Coronavirus Pandemic
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. On March 11, 2020, the World Health Organization declared the outbreak a pandemic, and on March 13, 2020, the United States declared a national emergency.
Some states and cities, including some where the Company’s properties are located, reacted by instituting quarantines, restrictions on travel, “stay at home” rules and restrictions on the types of businesses that may continue to operate and is what capacity, as well as guidance in response to the pandemic and the need to contain it.
The rules and restrictions put in place have had a negative impact on the economy and business activity and may adversely impact the ability of the Company’s tenants, many of whom may be restricted in their ability to work, to pay their rent as and when due. In addition, the Company’s property managers may be limited in their ability to properly maintain the Company’s properties. Enforcing the Company’s rights as landlord against tenants who fail to pay rent or otherwise do not comply with the terms of their leases may not be possible as many jurisdictions, including those where are properties are located, have established rules and/or regulations preventing us from evicting tenants for certain periods in response to the pandemic. If the Company is unable to enforce its rights as landlords, our business would be materially affected.
If the current pace of the pandemic does not continue to slow and the spread of the virus is not contained, the Company’s business operations could be further delayed or interrupted. Government and health authorities may announce new or extend existing restrictions, which could require the Company to make further adjustments to its operations in order to comply with any such restrictions. The duration of any business disruption cannot be reasonably estimated at this time but may materially affect the Company’s ability to operate its business and result in additional costs.
The extent to which the pandemic may impact the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this report, including new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. Nevertheless, the pandemic and the current financial, economic and capital markets environment present material uncertainty and risk with respect to the Company’s performance, financial condition, results of operations and cash flows. |
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Summary of Significant Accounting Policies and Organization (Tables) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of subsidiaries and VIE’s date of consolidation |
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Variable Interest Entities (Tables) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of consolidated balance sheets |
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Investment Property (Tables) |
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| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of property and equipment |
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Acquisitions and Dispositions (Tables) |
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| Acquisitions and Disposals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of asset acquisitions from third parties and have been accounted for as asset acquisitions |
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| Schedule of pro-forma information |
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Promissory Notes and Lines of Credit (Tables) |
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| Promissory Notes and Lines of Credit [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of lines of credit – variable interest entities |
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| Schedule of lines of credit – variable interest entities |
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| Schedule of minimum annual principal payments of notes payable |
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Stockholders' Equity (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of summarizes the stock options outstanding |
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| Schedule of summarizes information concerning options outstanding |
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| Schedule of black scholes option pricing model with the following assumptions for grants made during the periods indicated |
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Variable Interest Entities (Details) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
| Accounting Policies [Abstract] | |||
| Net income loss | $ 159,570 | $ 55,085 | |
| Management fee | 83,013 | $ 0 | |
| Accumulated manufactured housing properties | $ 2,319,620 | $ 1,515,715 | |
Variable Interest Entities (Details) - Schedule of consolidated balance sheets - Variable Interest Entities [Member] - USD ($) |
Mar. 31, 2022 |
Dec. 31, 2021 |
||
|---|---|---|---|---|
| Assets | ||||
| Investment Property | $ 16,956,601 | $ 14,144,268 | ||
| Accumulated Depreciation | (729,450) | (597,650) | ||
| Net Investment Property | 16,227,151 | 13,546,618 | ||
| Cash and Cash Equivalents | 44,016 | 98,900 | ||
| Accounts Receivable | 50,006 | 60,506 | ||
| Other Assets | 243,505 | 158,920 | ||
| Total Assets | 16,564,678 | 13,864,944 | ||
| Liabilities and Deficit | ||||
| Accounts Payable | 183,307 | 169,298 | ||
| Notes Payable | 8,601,996 | 6,793,319 | ||
| Line of Credit, net of $166,504 and $151,749 debt discount | 6,581,458 | 6,200,607 | ||
| Accrued Liabilities | [1] | 2,365,000 | 1,679,233 | |
| Total Liabilities | 17,731,761 | 14,842,457 | ||
| Non-controlling Interest | (1,167,083) | (977,513) | ||
| Total Non-controlling Interest in Variable Interest Entities | $ (1,167,083) | $ (977,513) | ||
| ||||
Variable Interest Entities (Details) - Schedule of consolidated balance sheets (Parentheticals) - Variable Interest Entities [Member] - USD ($) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2022 |
Dec. 31, 2021 |
|
| Condensed Balance Sheet Statements, Captions [Line Items] | ||
| Line of Credit, net | $ 166,504 | $ 166,504 |
| Line of Credit, debt discount | $ 151,749 | $ 151,749 |
Investment Property (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |
|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
| Investment Property (Details) [Line Items] | |||
| Depreciation expense | $ 759,704 | $ 441,623 | |
| Nine New Manufactured Homes [Member] | |||
| Investment Property (Details) [Line Items] | |||
| Manufactured homes | $ 424,000 | ||
| Thirty-Four New Manufactured Homes [Member] | |||
| Investment Property (Details) [Line Items] | |||
| Manufactured homes | $ 1,900,000 | ||
| Fourteen New Manufactured Homes [Member] | |||
| Investment Property (Details) [Line Items] | |||
| Manufactured homes | $ 860,000 | ||
Investment Property (Details) - Schedule of property and equipment - USD ($) |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Investment Property | ||
| Land | $ 20,554,318 | $ 18,854,760 |
| Site and Land Improvements | 37,041,232 | 35,133,079 |
| Buildings and Improvements | 17,048,182 | 14,666,296 |
| Construction in Process | 3,605,886 | 3,030,456 |
| Total Investment Property | 78,249,618 | 71,684,591 |
| Accumulated Depreciation | (5,586,597) | (4,832,300) |
| Net Investment Property | $ 72,663,021 | $ 66,852,291 |
Acquisitions and Dispositions (Details) |
1 Months Ended | ||
|---|---|---|---|
Jan. 31, 2022 |
Mar. 31, 2022
USD ($)
m²
|
Mar. 31, 2021
USD ($)
m²
|
|
| Acquisitions and Dispositions (Details) [Line Items] | |||
| Acres | m² | 45 | 17 | |
| Total purchase price | $ | $ 3,050,000 | $ 2,325,000 | |
| Land and land improvements [Member] | |||
| Acquisitions and Dispositions (Details) [Line Items] | |||
| Number of acres square description | the Company purchased a manufactured housing community located in Byron, Georgia consisting of 73 sites on approximately 18.57 acres and an adjacent parcel of 15.09 acres of undeveloped land for a total purchase price of $2,200,000. |
Acquisitions and Dispositions (Details) - Schedule of pro-forma information - Pro forma [Member] |
3 Months Ended |
|---|---|
|
Mar. 31, 2021
USD ($)
$ / shares
| |
| Acquisitions and Dispositions (Details) - Schedule of pro-forma information [Line Items] | |
| Revenue | $ 2,788,937 |
| Community operating expenses | 1,070,940 |
| Corporate payroll and overhead expenses | 597,409 |
| Depreciation and amortization expense | 756,006 |
| Interest expense | 695,241 |
| Net income (loss) | (330,659) |
| Net loss attributable to non-controlling interest | 131,939 |
| Net loss attributable to Manufactured Housing Properties, Inc | (462,598) |
| Preferred stock dividends / accretion | 529,540 |
| Net income (loss) | $ (992,138) |
| Net loss per share (in Dollars per share) | $ / shares | $ (0.08) |
Promissory Notes and Lines of Credit (Details) - Schedule of lines of credit – variable interest entities - USD ($) |
3 Months Ended | 12 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 |
Dec. 31, 2021 |
|||||||
| Promissory Notes and Lines of Credit (Details) - Schedule of lines of credit – variable interest entities [Line Items] | ||||||||
| Total Lines of Credit - VIEs | $ 6,747,962 | $ 6,352,356 | ||||||
| Discount Direct Lender Fees | (166,504) | (151,749) | ||||||
| Total Net of Discount | $ 6,581,458 | 6,200,607 | ||||||
| Occupied Home Facility [Member] | ||||||||
| Promissory Notes and Lines of Credit (Details) - Schedule of lines of credit – variable interest entities [Line Items] | ||||||||
| Borrower | [1] | Gvest Homes I LLC | ||||||
| Community | [1] | ARC, Crestview, Maple | ||||||
| Maturity Date | [1] | 01/01/30 | ||||||
| Interest Rate | [1] | 8.375% | ||||||
| Maximum Credit Limit | [1] | $ 20,000,000 | ||||||
| Total Lines of Credit - VIEs | [1] | $ 2,507,435 | 2,517,620 | |||||
| Multi-Community Rental Home Facility [Member] | ||||||||
| Promissory Notes and Lines of Credit (Details) - Schedule of lines of credit – variable interest entities [Line Items] | ||||||||
| Borrower | Gvest Finance LLC | |||||||
| Community | ARC | |||||||
| Maturity Date | 12/17/31 | |||||||
| Interest Rate | Greater of 3.25% or Prime, + 375 bps | |||||||
| Maximum Credit Limit | $ 4,000,000 | |||||||
| Total Lines of Credit - VIEs | $ 819,376 | 838,000 | ||||||
| Multi-Community Floorplan Home Facility [Member] | ||||||||
| Promissory Notes and Lines of Credit (Details) - Schedule of lines of credit – variable interest entities [Line Items] | ||||||||
| Borrower | [1],[2] | Gvest Finance LLC | ||||||
| Community | [1],[2] | Golden Isles, Springlake, Sunnyland, Crestview | ||||||
| Maturity Date | [1],[2],[3] | Various (3) | ||||||
| Interest Rate | [1],[2] | LIBOR + 6 – 8% based on days outstanding | ||||||
| Maximum Credit Limit | [1],[2] | $ 2,000,000 | ||||||
| Total Lines of Credit - VIEs | [1],[2] | $ 1,528,669 | 1,104,255 | |||||
| Springlake Home Facility [Member] | ||||||||
| Promissory Notes and Lines of Credit (Details) - Schedule of lines of credit – variable interest entities [Line Items] | ||||||||
| Borrower | [2] | Gvest Finance LLC | ||||||
| Community | [2] | Springlake | ||||||
| Maturity Date | [2] | 12/10/26 | ||||||
| Interest Rate | [2] | 6.75% | ||||||
| Maximum Credit Limit | [2] | $ 3,300,000 | ||||||
| Total Lines of Credit - VIEs | [2] | $ 1,892,482 | $ 1,892,481 | |||||
| ||||||||
Promissory Notes and Lines of Credit (Details) - Schedule of minimum annual principal payments of notes payable - Notes Payable [Member] |
3 Months Ended |
|---|---|
|
Mar. 31, 2022
USD ($)
| |
| Promissory Notes and Lines of Credit (Details) - Schedule of minimum annual principal payments of notes payable [Line Items] | |
| 2022 | $ 670,266 |
| 2023 | 3,734,002 |
| 2024 | 3,779,094 |
| 2025 | 1,311,018 |
| 2026 | 18,406,106 |
| Thereafter | 34,653,786 |
| Total minimum principal payments | $ 62,554,272 |
Stockholders' Equity (Details) - USD ($) |
3 Months Ended | 12 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|
Jun. 11, 2021 |
May 24, 2021 |
Dec. 02, 2019 |
Nov. 01, 2019 |
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
May 08, 2019 |
|
| Stockholders' Equity (Details) [Line Items] | ||||||||
| Option value accretion | $ 117,871 | $ 118,125 | ||||||
| Option value accretion | $ 185,839 | |||||||
| Designation, description | On November 1, 2019, the Company launched an offering under Regulation A of Section 3(6) of the Securities Act of 1933, as, amended, for Tier 2 offerings, pursuant to which the Company offered up to 1,000,000 shares of Series B Preferred Stock at an offering price of $10.00 per share, for a maximum offering amount of $10,000,000. | |||||||
| Accrued dividends | $ 65,979 | |||||||
| Redemptions limited percentage | 4.00% | |||||||
| Percentage of aggregate redemption price, description | ●11% if the redemption is requested on or before the first anniversary of the original issuance of such shares; ●8% if the redemption is requested after the first anniversary and on or before the second anniversary of the original issuance of such shares; ●5% if the redemption is requested after the second anniversary and on or before the third anniversary of the original issuance of such shares; and ●after the third anniversary of the date of original issuance of shares to be redeemed, no redemption fee shall be subtracted from the redemption price. | |||||||
| Redemption price include premium stated value | 10.00% | |||||||
| Common Stock, shares authorized (in Shares) | 200,000,000 | 200,000,000 | ||||||
| Common stock, par value (in Dollars per share) | $ 0.01 | $ 0.01 | ||||||
| Common stock shares outstanding (in Shares) | 12,403,680 | 12,403,680 | ||||||
| Common Stock, shares issued (in Shares) | 12,403,680 | 12,403,680 | ||||||
| Stock issued for cash shares (in Shares) | 5,100 | |||||||
| Granted shares (in Shares) | 706,175 | 751,175 | ||||||
| Granted price, per share (in Dollars per share) | $ 0.01 | |||||||
| Aggregate share of money options (in Shares) | 751,175 | |||||||
| Aggregate intrinsic value | $ 2,621,601 | |||||||
| Call and stockholder put options, description | Commencing on the fifth anniversary of the initial issuance of shares of Series A Preferred Stock and continuing indefinitely thereafter, the Company will have a right to call for redemption the outstanding shares of Series A Preferred Stock at a call price equal to $3.75, or 150% of the original issue price of the Series A Preferred Stock, and correspondingly, each holder of shares of Series A Preferred Stock shall have a right to put the shares of Series A Preferred Stock held by such holder back to the Company at a put price equal to $3.75, or 150% of the original issue purchase price of such shares. | |||||||
| Preferred Stock [Member] | ||||||||
| Stockholders' Equity (Details) [Line Items] | ||||||||
| Preferred stock shares, authorized (in Shares) | 10,000,000 | |||||||
| Preferred stock par value (in Dollars per share) | $ 0.01 | |||||||
| Equity Incentive Plan [Member] | ||||||||
| Stockholders' Equity (Details) [Line Items] | ||||||||
| Granted shares (in Shares) | 751,175 | |||||||
| Shares issued (in Shares) | 45,000 | |||||||
| Series A Preferred Stock [Member] | ||||||||
| Stockholders' Equity (Details) [Line Items] | ||||||||
| Preferred stock shares, authorized (in Shares) | 4,000,000 | 4,000,000 | ||||||
| Preferred stock par value (in Dollars per share) | $ 0.01 | $ 0.01 | ||||||
| Preferred stock, designated shares (in Shares) | 4,000,000 | |||||||
| Cumulative dividends, per shares (in Dollars per share) | $ 0.017 | |||||||
| Dividend rate, percentage | 8.00% | |||||||
| Liquidation preference per share (in Dollars per share) | $ 2.5 | |||||||
| Dividends paid | $ 94,300 | $ 96,167 | ||||||
| Liquidation preference (in Shares) | 2.5 | |||||||
| Conversion price (in Dollars per share) | $ 2.5 | |||||||
| Common Stock is greater than liquidation preference, per shares (in Dollars per share) | $ 2.5 | |||||||
| Preferred stock, issued (in Shares) | 1,886,000 | 1,886,000 | ||||||
| Preferred stock, outstanding (in Shares) | 1,886,000 | 1,886,000 | ||||||
| Preferred stock totaling | $ 4,715,000 | $ 4,715,000 | ||||||
| Accretion of put options totaling | $ 1,244,646 | $ 1,126,771 | ||||||
| Series B Preferred Stock [Member] | ||||||||
| Stockholders' Equity (Details) [Line Items] | ||||||||
| Preferred stock shares, authorized (in Shares) | 1,000,000 | 1,000,000 | ||||||
| Preferred stock par value (in Dollars per share) | $ 0.01 | $ 0.01 | ||||||
| Liquidation preference per share (in Dollars per share) | $ 10 | |||||||
| Dividends paid | $ 151,785 | $ 129,409 | ||||||
| Preferred stock, issued (in Shares) | 758,551 | 758,551 | ||||||
| Preferred stock, outstanding (in Shares) | 758,551 | 758,551 | ||||||
| Cumulative redeemable preferred stock (in Shares) | 1,000,000 | |||||||
| Dividend rate and payment dates, description | Holders of Series B Preferred Stock will be entitled to receive cumulative dividends in the amount of $0.067 per share each month, which is equivalent to the annual rate of 8% of the $10.00 liquidation preference per share; provided that upon an event of default (generally defined as the Company’s failure to pay dividends when due or to redeem shares when requested by a holder), such amount shall be increased to $0.083 per month, which is equivalent to the annual rate of 10% of the $10.00 liquidation preference per share. | |||||||
| Option value accretion | $ 184,254 | |||||||
| Offering bonus, description | In addition, the Company offered bonus shares to early investors in this offering, whereby the first 400 investors received, in addition to Series B Preferred Stock, 100 shares of Common Stock, regardless of the amount invested, for a total of 40,000 shares of Common Stock. | |||||||
| Aggregate sale of shares (in Shares) | 116,097 | |||||||
| Total gross proceeds | 1,160,970 | |||||||
| Received net proceeds | 1,079,702 | |||||||
| Net of commissions | 7,185,716 | $ 7,185,716 | ||||||
| Accretion of put options | 1,517,132 | |||||||
| Accretion of put options total | $ 1,332,878 | |||||||
| Series C Preferred Stock [Member] | ||||||||
| Stockholders' Equity (Details) [Line Items] | ||||||||
| Dividends paid | 96,126 | |||||||
| Preferred stock, issued (in Shares) | 47,000 | |||||||
| Total gross proceeds | 4,289,444 | |||||||
| Designated shares (in Dollars per share) | $ 47,000 | |||||||
| Initial stated value | $ 1,000 | |||||||
| Description of dividends | Holders of Series C Preferred Stock are entitled to receive cumulative monthly cash dividends at a per annum rate of 7% of the stated value (or $5.83 per share each month based on the initial stated value). | |||||||
| Accrued dividends | $ 39,019 | |||||||
| Preferred stock per share (in Dollars per share) | $ 1,000 | |||||||
| Maximum offering amount | $ 47,000,000 | |||||||
| Aggregate of shares (in Shares) | 4,293 | |||||||
| Received net proceed | $ 4,004,110 | |||||||
| Preferred stock, issued (in Shares) | 10,027 | 5,734 | ||||||
| Preferred stock, outstanding (in Shares) | 10,027 | 5,734 | ||||||
| Gross proceeds totaling | $ 10,023,840 | $ 5,734,400 | ||||||
| Net of total unamortized debt issuance costs | $ 774,961 | $ 520,030 | ||||||
| Common Stock [Member] | ||||||||
| Stockholders' Equity (Details) [Line Items] | ||||||||
| Common Stock, shares authorized (in Shares) | 200,000,000 | |||||||
| Common stock, par value (in Dollars per share) | $ 0.01 | |||||||
| Stock Issued for cash value | $ 1,377 | |||||||
| Equity Incentive Plan [Member] | ||||||||
| Stockholders' Equity (Details) [Line Items] | ||||||||
| Shares issued (in Shares) | 50,000 | |||||||
| Equity Incentive Plan [Member] | ||||||||
| Stockholders' Equity (Details) [Line Items] | ||||||||
| Granted shares (in Shares) | 45,000 | |||||||
| Remaining shares under plan (in Shares) | 248,825 | |||||||
| Annual installments over period | 2 years | |||||||
| Stock option expense | $ 49,760 | $ 646 | ||||||
| Granted price, per share (in Dollars per share) | $ 0.01 | |||||||
Stockholders' Equity (Details) - Schedule of summarizes the stock options outstanding |
3 Months Ended |
|---|---|
|
Mar. 31, 2022
$ / shares
shares
| |
| Schedule of summarizes the stock options outstanding [Abstract] | |
| Number of options, outstanding ending balance | shares | 706,175 |
| Weighted average exercise price (per share), outstanding ending balance | $ / shares | $ 0.01 |
| Weighted average remaining contractual term (in years), outstanding ending balance | 6 years 7 months 6 days |
| Number of options, granted | shares | 45,000 |
| Weighted average exercise price (per share), granted | $ / shares | $ 0.01 |
| Weighted average remaining contractual term (in years), granted | 9 years 9 months 18 days |
| Number of options, exercised | shares | |
| Weighted average exercise price (per share), exercised | $ / shares | |
| Weighted average remaining contractual term (in years), exercised | |
| Number of options, forfeited / cancelled / expired | shares | |
| Weighted average exercise price (per share), forfeited / cancelled / expired | $ / shares | |
| Weighted average remaining contractual term (in years), forfeited / cancelled / expired | |
| Number of options, outstanding beginning balance | shares | 751,175 |
| Weighted average exercise price (per share), outstanding beginning balance | $ / shares | $ 0.01 |
| Weighted average remaining contractual term (in years), outstanding beginning balance | 6 years 6 months |
| Number of options, exercisable | shares | 704,508 |
| Weighted average exercise price (per share), exercisable | $ / shares | $ 0.01 |
| Weighted average remaining contractual term (in years), exercisable | 6 years 3 months 18 days |
Stockholders' Equity (Details) - Schedule of summarizes information concerning options outstanding - Strike Price Range 0.01 [Member] |
3 Months Ended |
|---|---|
|
Mar. 31, 2022
$ / shares
shares
| |
| Stockholders' Equity (Details) - Schedule of summarizes information concerning options outstanding [Line Items] | |
| Strike Price Range | $ 0.01 |
| Outstanding stock options (in Shares) | shares | 519,675 |
| Weighted average remaining contractual term (in years) | 5 years 8 months 12 days |
| Weighted average outstanding strike price | $ 0.01 |
| Vested stock options (in Shares) | shares | 519,675 |
| Weighted average vested strike price | $ 0.01 |
| Strike Price Range | $ 0.01 |
| Outstanding stock options (in Shares) | shares | 136,500 |
| Weighted average remaining contractual term (in years) | 7 years 9 months 18 days |
| Weighted average outstanding strike price | $ 0.01 |
| Vested stock options (in Shares) | shares | 136,500 |
| Weighted average vested strike price | $ 0.01 |
| Strike Price Range | $ 0.01 |
| Outstanding stock options (in Shares) | shares | 50,000 |
| Weighted average remaining contractual term (in years) | 8 years 9 months 18 days |
| Weighted average outstanding strike price | $ 0.01 |
| Vested stock options (in Shares) | shares | 33,333 |
| Weighted average vested strike price | $ 0.01 |
| Strike Price Range | $ 0.01 |
| Outstanding stock options (in Shares) | shares | 45,000 |
| Weighted average remaining contractual term (in years) | 9 years 9 months 18 days |
| Weighted average outstanding strike price | $ 0.01 |
| Vested stock options (in Shares) | shares | 15,000 |
| Weighted average vested strike price | $ 0.01 |
Stockholders' Equity (Details) - Schedule of black scholes option pricing model with the following assumptions for grants made during the periods indicated |
3 Months Ended | |
|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
| Stockholders' Equity (Details) - Schedule of black scholes option pricing model with the following assumptions for grants made during the periods indicated [Line Items] | ||
| Expected dividend yield | 0.00% | 0.00% |
| Expected volatility | 245.51% | |
| Expected life of options (in years) | 6 years 6 months | 6 years 6 months |
| Minimum [Member] | ||
| Stockholders' Equity (Details) - Schedule of black scholes option pricing model with the following assumptions for grants made during the periods indicated [Line Items] | ||
| Risk-free interest rate | 1.55% | 0.26% |
| Expected volatility | 16.03% | |
| Maximum [Member] | ||
| Stockholders' Equity (Details) - Schedule of black scholes option pricing model with the following assumptions for grants made during the periods indicated [Line Items] | ||
| Risk-free interest rate | 1.76% | 1.40% |
| Expected volatility | 273.98% | |
Related Party Transactions (Details) - USD ($) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2022 |
Dec. 31, 2021 |
|
| Related Party Transactions [Abstract] | ||
| Lease amount per month | $ 12,000 | |
| Rent expense paid | 36,000 | $ 136 |
| Fees received | $ 450,000 | $ 250,000 |
Subsequent Events (Details) |
3 Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Apr. 15, 2022
USD ($)
|
Apr. 14, 2022
USD ($)
|
Mar. 31, 2022
USD ($)
shares
|
May 13, 2022
USD ($)
m²
|
Apr. 11, 2022
shares
|
Apr. 05, 2022
USD ($)
m²
|
Apr. 01, 2022
USD ($)
m²
|
Feb. 25, 2022
USD ($)
m²
|
Feb. 10, 2022
USD ($)
m²
|
Jan. 19, 2022
USD ($)
m²
|
Dec. 31, 2021
shares
|
Nov. 02, 2021
USD ($)
m²
|
|
| Subsequent Events (Details) [Line Items] | ||||||||||||
| Net proceeds | $ 1,286,850 | |||||||||||
| Stock options issued (in Shares) | shares | 706,175 | 751,175 | ||||||||||
| Payments maturity date | Oct. 01, 2028 | |||||||||||
| Percentage of interest rate | 4.25% | |||||||||||
| Subsequent event, description | Payment for the first eighteen (18) months of the term of the note shall be interest-only based on the principal outstanding, days in the period, and daily interest rate. Thereafter, principal and interest shall be due and payable based on a twenty (20) year amortization schedule. Charlotte 3 Park MHP LLC may prepay the note in part or in full subject to prepayment penalties set out in the loan agreement if repaid before May 1, 2027 and without penalty if repaid on or subsequent to that date. | |||||||||||
| Series C Preferred Stock [Member] | ||||||||||||
| Subsequent Events (Details) [Line Items] | ||||||||||||
| Aggregate of shares (in Shares) | shares | 1,380 | |||||||||||
| Total gross proceeds | $ 1,380,000 | |||||||||||
| Subsequent Event [Member] | ||||||||||||
| Subsequent Events (Details) [Line Items] | ||||||||||||
| Stock options issued (in Shares) | shares | 100,000 | |||||||||||
| Loan principal amount | $ 3,158,400 | |||||||||||
| Promissory note outstanding | $ 850,000 | |||||||||||
| Accrued interest | $ 19,979 | |||||||||||
| Forecast [Member] | ||||||||||||
| Subsequent Events (Details) [Line Items] | ||||||||||||
| Number of acres (in Square Meters) | m² | 74 | |||||||||||
| Number of sites | 122 | |||||||||||
| Total purchase price | $ 5,350,000 | |||||||||||
| Bull Creek LLC [Member] | ||||||||||||
| Subsequent Events (Details) [Line Items] | ||||||||||||
| Number of acres (in Square Meters) | m² | 150 | |||||||||||
| Number of sites | 60 | |||||||||||
| Total purchase price | $ 2,200,000 | |||||||||||
| Bull Creek LLC [Member] | York [Member] | ||||||||||||
| Subsequent Events (Details) [Line Items] | ||||||||||||
| Number of acres (in Square Meters) | m² | 10 | |||||||||||
| MHP Pursuits LLC [Member] | ||||||||||||
| Subsequent Events (Details) [Line Items] | ||||||||||||
| Number of acres (in Square Meters) | m² | 11 | 9 | 17 | |||||||||
| Number of sites | 39 | 51 | 72 | |||||||||
| Total purchase price | $ 1,700,000 | $ 3,050,000 | $ 2,000,000 | |||||||||
| Number of homes | 51 | 28 | ||||||||||
| MHP Pursuits LLC [Member] | Subsequent Event [Member] | ||||||||||||
| Subsequent Events (Details) [Line Items] | ||||||||||||
| Number of acres (in Square Meters) | m² | 86 | 79 | ||||||||||
| Number of sites | 63 | 91 | ||||||||||
| Total purchase price | $ 2,050,000 | $ 4,488,000 |