UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): April 10, 2017

 

HUBILU VENTURE CORPORATION

(Exact Name of Registrant as Specified in Charter)

 

Delaware

(State or Other Jurisdiction of Incorporation)

 

333-204347   47-3342387

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

 

205 S. Beverly Drive, Suite 205    
Beverly Hills, California   90212
(Address of Principal Executive Offices)   (Zip Code)

 

310-308-7887

(Registrant’s Telephone Number, including Area Code)

 

N/A

(Former Name or Former Address, if Changed Since Last Report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

 

[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 
 

 

Forward-Looking Statements

 

This Current Report on Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “may increase,” “forecast” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts. Forward-looking statements are based on management’s current expectations or beliefs about the Company’s future, expectations and objectives. These forward-looking statements are not historical facts and are subject to risks and uncertainties that could cause the actual results to differ materially from those projected in these forward-looking statements including, the general economic climate; the supply of and demand for real properties; interest rate levels; the availability of financing; and other risks associated with the acquisition and ownership of properties, including risks that the tenants will not pay rent, or the costs may be greater than anticipated and other risk factors that may be described from time to time in the Company’s filings with the Securities and Exchange Commission. Readers of this release are cautioned not to place undue reliance on forward-looking statements contained herein, which speak only as of the date stated, or if no date is stated, as of the date of this Current Report. The Company undertakes no obligation to publicly update or revise the forward-looking statements contained herein to reflect changed events or circumstances after the date of this release, unless required by law.

 

Item 1.01 Entry into a Material Definitive Agreement.

 

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

 

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

 

On April 4, 2017, our auditors completed their audits of Zinnia’s and Akebia’s financial statements and, on April 7, 2017, our sole director approved of the audited results and the acquisitions of Zinnia and Akebia to close the transactions on April 10, 2017.

 

The foregoing description of the acquisition of Zinnia and the Zinnia Agreement and the transaction contemplated thereby contained herein is qualified in its entirety by reference to the Zinnia Agreement, a copy of which is attached hereto as Exhibit 10.1 and incorporated into this Item 1.01 by reference.

 

2  
 

 

The foregoing description of the acquisition of Akebia and the Akebia Agreement and the transaction contemplated thereby contained herein is qualified in its entirety by reference to the Akebia Agreement, a copy of which is attached hereto as Exhibit 10.2 and incorporated into this Item 1.01 by reference.

 

Set forth in Item 9.01 is the financial statement prepared pursuant to Rule 3-14 of Regulation S-X relating to the acquisition of Zinnia and Akebia, which are each individually significant within the meaning of Rule 3-14.

 

Item 2.01 Completion of Acquisition or Disposition of Assets.

 

(a) On April 10, 2017, we completed our acquisition of all the outstanding membership interests (the “Zinnia Acquisition”) of Zinnia Investments, LLC (“Zinnia”) for $925,000 (the “Purchase Price”). Zinnia’s sole asset is the real property located at 2909 South Catalina Street, Los Angeles, California (the “Property”). The Purchase Price consisted of a: (1) a $655,000 All Inclusive Deed of Trust, secured by the Property, and a promissory note (the “Zinnia Note”), which bears interest at 6%, interest only, with $145,000 due in one (1) year and the balance due on in two (2) years; and (2) 270,000 share of our Series 1 Convertible Preferred Stock at an issuance price of $1.00 per share, for $270,000 (the “Zinnia Preferred Stock”). The interest rate on the Zinnia Note will decrease to the greater of 3.5%, principal and interest or the 11 th District Cost of Funds Index plus 2.8% principal and interest, rounded up to the nearest 0.125% and adjusted every six (6) months starting the 1 st day of month 6  following the $145,000 payoff, and adjusting every 6 months thereafter. The Zinnia Preferred Stock is convertible into our common stock at the lesser of $0.50 per share or a 10% discount to the average closing price of our common stock for the five (5) days prior to the holders’ date of conversion. The Zinnia Preferred Stock pays a 5% dividend in-kind, annually.
   
  Zinnia’s membership was 45% owned by Jacaranda Investments, Inc., a corporation 100% owned by our Chairman and CEO and 45% owned by Esteban Coaloa, one of our officers. 10% was owned by an unrelated third-party. The Purchase Price was determined by an independent third party appraisal and the consideration given was approved by our sole director.
   
  The foregoing description of the Zinnia Acquisition and the Zinnia Purchase Agreement and the transaction contemplated thereby contained herein is qualified in its entirety by reference to the Zinnia Purchase Agreement, a copy of which is attached hereto as Exhibit 10.1 and incorporated into this Item 2.01 by reference.
   
(b) On April 10, 2017, we completed our acquisition of all of the outstanding membership interests (the “Akebia Acquisition”) of Akebia Investments, LLC (“Akebia”) for $890,000 (the “Purchase Price”). Akebia’s sole asset is the real property located at 3711 South Western Avenue, Los Angeles, California (the “Akebia Property”). The terms of the Akebia Agreement, our consideration for the Purchase Price is: (1) a $710,000 All Inclusive Deed of Trust, secured by the Akebia Property and a promissory note (the “Akebia Note”), which bears interest at 6%, interest only, with $100,000 due in one (1) year and the balance due on August 1, 2019; and (2) 180,000 shares of our Series 1 Convertible Preferred Stock at an issuance price of $1.00 per share, for $180,000 (the “Akebia Preferred Stock”). After the $100,000 is paid off, the interest rate on the balance of the note will decrease to 4% principal and interest. The Akebia Preferred Stock is convertible into our common stock at the lesser of $0.50 per share or a 10% discount to the average closing price of our common stock for the five (5) days prior to the holders’ date of conversion. The Akebia Preferred Stock pays a 5% dividend in-kind, annually.
   
  Akebia’s membership was 90% owned by Jacaranda Investments, Inc., a corporation 100% owned by our Chairman and CEO and 10% owned by Esteban Coaloa, one of our officers. The Purchase Price was determined by an independent third party appraisal and the consideration given was approved by our sole director.
   
  The foregoing description of the Akebia Acquisition and the Akebia Purchase Agreement and the transaction contemplated thereby contained herein is qualified in its entirety by reference to the Akebia Purchase Agreement, a copy of which is attached hereto as Exhibit 10.2 and incorporated into this Item 2.01 by reference.

 

Item 3.02 Unregistered Sales of Equity Securities

 

On April 10, 2017, the Company acquired 100% of the membership interest of Zinnia Investments, LLC for $925,000, which, as part of the consideration, included the issuance of 270,000 shares of our Series 1 Convertible Preferred Stock, at a price of $1.00 per share, in a private placement to 3 accredited investors, including 45% from an entity 100% controlled by our sole director, 45% from one of our officers, and 10% from an unrelated third-party member.

 

3  
 

 

We used the issuance as part of the consideration toward the Purchase Price as described under Item 1.01 above. The Zinnia Agreement is attached as Exhibit 10.1 to this Form 8-K and is incorporated herein by reference.

 

All the securities were issued and sold in reliance upon the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933 (the “Act” ) and Rule 506(b) promulgated thereunder. These securities may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements under the Act. The investors are accredited investors and there was no general solicitation.

 

On April 10, 2017, the Company acquired 100% of the membership interest of Akebia Investments, LLC for $890,000, which, as part of the consideration, included the issuance of 180,000 shares of our Series 1 Convertible Preferred Stock, at a price of $1.00 per share, in a private placement to 2 accredited investors, including 90% from an entity 100% controlled by our sole director and 10% from one of our officers.

 

We used the issuance of the Akebia Preferred Shares as part of the consideration toward the Purchase Price as described under Item 1.01 above. The Akebia Agreement is attached as Exhibit 10.2 to this Form 8-K and is incorporated herein by reference.

 

All the securities were issued and sold in reliance upon the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933 (the “Act” ) and Rule 506(b) promulgated thereunder. These securities may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements under the Act. The investors are accredited investors and there was no general solicitation.

 

Item 8.01 Other Events.

 

On April 14, 2017, we issued a press release announcing the completion of the acquisition of Zinnia Investments, LLC and Akebia Investments, LLC, a copy of which is attached hereto as Exhibit 99.4, and incorporated herein by reference.

 

On April 14, 2017, we adopted the mission statement “Strategic Growth Through Smart Ventures,” which we believe states our philosophy for approaching future acquisitions.

 

On April 14, 2017, we, in addition to continuing to seek real estate opportunities to acquire, will actively start seeking to acquire profitable operating, positive cash flow businesses located in CA, AZ and NV, with a preference to business located in Southern California. We are open to all industries, but have particular interest in Business Services (Property Management, Green, Healthcare, I.T./Cloud, and e-Commerce (B2B, B2C).

 

Item 9.01 Financial Statements and Exhibits.

 

(a) Financial Statements of Businesses Acquired

 

Zinnia Investments, LLC – The historical audited financial statements of Zinnia Investments, LLC at December 31, 2016 and 2015 and for each of the years in the periods ended December 31, 2016 and 2015 is attached as Exhibit 99.1 to this Current Report on Form 8-K. These financial statements include:

 

  Independent Auditors’ Report
     
  Balance Sheets for the years ended December 31, 2016 and 2015
     
  Statement of Operations for the years ended December 31, 2016 and 2015
     
  Statements of Changes in Member’s Equity (Deficit)
     
  Statement of Cash Flows for the years ended December 31, 2016 and 2015
     
  Notes to the Financial Statements for the years ended December 31, 2016 and 2015

 

Akebia Investments, LLC - The historical audited financial statements of Akebia Investments, LLC at December 31, 2016 and 2015 and for each of the years in the periods ended December 31, 2016 and 2015 is attached as Exhibit 99.2 to this Current Report on Form 8-K. These financial statements include:

 

  Independent Auditors’ Report
     
  Balance Sheets for the years ended December 31, 2016 and 2015
     
  Statement of Operations for the years ended December 31, 2016 and 2015
     
  Statements of Changes in Member’s Equity (Deficit)
     
  Statement of Cash Flows for the years ended December 31, 2016 and 2015
     
  Notes to the Financial Statements for the years ended December 31, 2016 and 2015

 

4  
 

 

(b) Pro Forma Financial Information

 

The unaudited pro forma consolidated combined financial information of the Company at December 31, 2016 and the year ended December 31, 2016 reflecting the acquisition of Zinnia Investments, LLC and Akebia Investments, LLC is attached as Exhibit 99.3 to this Current Report on Form 8-K. This financial information includes:

 

  Pro Forma Consolidated Balance Sheet for the years ended December 31, 2016 (Unaudited)
     
  Pro Forma Consolidated Statement of Operation for the year ended December 31, 2016 (Unaudited)
     
  Notes to the Pro Forma Consolidated Financial Statements for the years ended December 31, 2016 (Unaudited)

 

(d) Exhibits.

 

Exhibit Number   Description
     
10.1   Purchase Contract, dated as of August 18, 2016, among Hubilu Venture Corporation and Zinnia Investments, LLC.
     
10.2   Purchase Contract, dated as of September 26, 2016, among Hubilu Venture Corporation and Akebia Investments, LLC.
     
99.1   Audited Financial Statements of Zinnia Investments, LLC at December 31, 2016 and 2015.
     
99.2   Audited Financial Statements of Akebia Investments, LLC at December 31, 2016 and 2015.
     
99.3   Unaudited Pro Forma Consolidated Financial Information at December 31, 2016 and for the year ended December 31, 2016.
     
99.4   Press Release, dated April 14, 2017.

  

5  
 

 

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 hereunto duly authorized.

 

Dated: April 14, 2017 HUBILU VENTURE CORPORATION
     
  By: /s/ David Behrend
  Name: David Behrend
  Title: Chief Executive Officer

 

6  
 

 

EXHIBIT INDEX

 

Exhibit Number   Description
     
10.1   Purchase Contract, dated as of August 18, 2016, among Hubilu Venture Corporation and Zinnia Investments, LLC.
     
10.2   Purchase Contract, dated as of September 26, 2016, among Hubilu Venture Corporation and Akebia Investments, LLC.
     
99.1   Audited Financial Statements of Zinnia Investments, LLC at December 31, 2016 and 2015.
     
99.2   Audited Financial Statements of Akebia Investments, LLC at December 31, 2016 and 2015.
     
99.3   Unaudited Pro Forma Consolidated Financial Information at December 31, 2016 and for the year ended December 31, 2016.
     
99.4   Press Release, dated April 14, 2017.

  

7  
 

 

 

Exhibit 10.1

 

PURCHASE CONTRACT

TO PURCHASE PERSONAL PROPERTY

 

DATE: 8/18/2016
   
SALE: Esteban Coaloa, 100% Member of Zinnia Investments, LLC agrees to sell his respective membership interest in Zinnia Investments, LLC, a Wyoming Limited Liability Company, (“ZI”), 205 S. Beverly Drive, Suite 205, Beverly Hills, CA 90212 to Hubilu Venture Corporation, 205 S. Beverly Drive, Suite 205, Beverly Hills, CA 90212. Included in the sale is the 100% ownership interest that Zinnia Investments, LLC owns of the property at 2909 S. Catalina Street, Los Angeles, CA 90007 (“property”) Price is $925,000.00, based on the following terms:
   
TERMS: Hubilu agrees to secure Esteban Coaloa by recording a $655,000 AITD and Note at 6% interest only, $145,000 due in 1 year, balance due in 2 years. AITD to be secured by property. After the $145,000 is paid off, interest rate on the balance to decrease to greater of 3.5% principal & interest (‘P&I”) or 11 th District COFI plus 2.8% P&I, rounded up to the nearest 0.125%, adjusted every 6 months starting the 1 st of month 6 following the $145,000 payoff, and adjusting every 6 months thereafter. Rate can never be greater than 9.00%. In addition, Esteban Coaloa is to receive $270,000 in convertible preferred stock at $1.00 per share, convertible to common stock of Hubilu Venture Corporation at lesser of $0.50c per share or a 10% discount to the average closing price of the common for the 5 days prior to the date of conversion; 5% dividend PIK.
   
CLOSING: Sale to close within 7 business day after verification of all property documentation by buyer’s auditor.
   
TERMS: Due Diligence is subject to verification of title, rental income and satisfaction of audited results. Escrow Company to be Wilshire Escrow. Esteban Coaloa to indemnify Hubilu Venture Corporation of any liability with respect to Zinnia Investments, LLC and its assets prior to closing escrow. Each party to pay its own respective closing costs. Escrow fee is paid 50/50.

 

/s/ David Behrend   8/18/16   /s/ Esteban Coaloa   8/18/16
David Behrend, CEO   Date:   Esteban Coaloa, Manager   Date:
Hubilu Venture Corporation       Zinnia Investments, LLC    
             
/s/ Esteban Coaloa   8/18/16        
Esteban Coaloa   Date:        

 

 
 

 

 

Exhibit 10.2

 

PURCHASE CONTRACT

TO PURCHASE PERSONAL PROPERTY

 

 

DATE: 9/26/2016
   
SALE: Esteban Coaloa, 100% Member of Akebia Investments, LLC agrees to sell his membership interest in Akebia Investments, LLC, a Wyoming Limited Liability Company, (“AI”), 205 S. Beverly Drive, Suite 205, Beverly Hills, CA 90212 to Hubilu Venture Corporation, 205 S. Beverly Drive, Suite 205, Beverly Hills, CA 90212. Included in the sale is the 100% ownership interest that Akebia Investments, LLC owns of the property at 3711 S. Western Avenue Street, Los Angeles, CA 90018. (“property”) Purchase Price is $890,000.00, based on the following terms:
   
TERMS:  Hubilu Agrees to secure Esteban Coaloa by recording a $710,000 AITD and Note at 6% interest only, $100,000 due in 1 year, balance due by August 1 st , 2019. AITD to be secured by property. After the $100,000 is paid off, interest rate on the balance to decrease to 4% principal & interest. In addition Esteban Coaloa is to receive $180,000 in convertible preferred stock at $1.00 a share, convertible to common stock of Hubilu Venture Corporation at lesser of $0.50c per share or a 10% discount to the average closing price of the common for the 5 days prior to the date of conversion; 5% dividend PIK.
   
CLOSING: Sale to close within 7 business days after verification of all property documentation by buyer’s auditor.
   
TERMS: Due Diligence is subject to verification of title, rental income and satisfaction of audited results. Escrow Company to be Wilshire Escrow. Esteban Coaloa to indemnify Hubilu Venture Corporation of any liability with respect to Akebia Investments, LLC and its assets prior to closing escrow. Each party to pay its own respective closing costs. Escrow fee is paid 50/50.

 

/s/ David Behrend   9/26/16   /s/ Esteban Coaloa   9/26/16
David Behrend, CEO   Date:   Esteban Coaloa, Manager   Date:
Hubilu Venture Corporation       Akebia Investments, LLC    
             
/s/ Esteban Coaloa   9/26/16        
    Date:        

 

 
 

 

 

Exhibit 99.1

 

ZINNIA INVESTMENTS, LLC

FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

 
 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Member of Zinnia Investments LLC

 

We have audited the accompanying balance sheets of Zinnia Investments LLC as of December 31, 2016 and 2015 and the related statements of operations, cash flows and changes in member’s equity (deficit) for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, these financial statements present fairly, in all material respects, the financial position of Zinnia Investments LLC as of December 31, 2016 and 2015 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

 

Dale Matheson Carr-Hilton Labonte llp

CHARTERED PROFESSIONAL ACCOUNTANTS

Vancouver, Canada

April 5, 2017

 

 

 

 
 

 

ZINNIA INVESTMENTS, LLC

BALANCE SHEETS

AS OF DECEMBER 31, 2016 AND 2015

 

    2016     2015  

ASSETS

           
             
Investment in real estate, at cost   $ 512,000     $ 512,000  
Accumulated depreciation     (40,339 )     (21,721 )
Investment in real estate, net     471,661       490,279  
                 
Cash     9,374       7,388  
                 
Total assets   $ 481,035     $ 497,667  
                 

LIABILITIES AND MEMBER’S EQUITY (DEFICIT)

               
                 
Property indebtedness   $ 506,560     $ 347,571  
Advance payable     -       100,000  
Rental deposits     6,750       6,865  
Total liabilities     513,310       454,436  
                 
Member’s equity (deficit)     (32,275 )     42,231  
                 
Total liabilities and member’s equity (deficit)   $ 481,035     $ 497,667  

 

The accompanying notes are an integral part of these financial statements

 

 
 

 

ZINNIA INVESTMENTS, LLC

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

    2016     2015  
             
REVENUE                
Rental Income   $ 81,116     $ 35,694  
                 
OPERATING EXPENSES                
General and administrative     9,844       842  
Insurance     1,145       1,110  
Depreciation     18,618       18,618  
Property taxes     7,533       6,469  
Repairs and maintenance     5,245       52,404  
Utilities     3,717       5,047  
      46,102       84,490  

OTHER

               
Interest expense     25,520       33,362  
                 
Net income (loss) for the year   $ 9,494     $ (82,158 )

 

The accompanying notes are an integral part of these financial statements

 

 
 

 

ZINNIA INVESTMENTS, LLC

STATEMENT OF CHANGES IN MEMBERS’S EQUITY (DEFICIT)

 

    Initial Capital Contribution     Contributions     Draws     Net income (loss)     Total  
                               
Balance, December 31, 2014   $ 1,000     $ 183,000     $ (6,254 )   $ (93,107 )   $ 84,639  
                                         
Member contributions     -       40,750       -       -       40,750  
Net loss for the year     -       -       -       (82,158 )     (82,158 )
Balance, December 31, 2015     1,000       223,750       (6,254 )     (175,265 )     42,231  
                                         
Member draws     -       -       (85,000 )     -       (85,000 )
Net income for the year     -       -       -       9,494       9,494  
Balance, December 31, 2016   $ 1,000     $ 223,750     $ (91,254 )   $ (165,771 )   $ (32,275 )

 

The accompanying notes are an integral part of these financial statements

 

 
 

 

ZINNIA INVESTMENTS, LLC

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

    2016     2015  
             
CASH PROVIDED BY (USED IN)                
OPERATING ACTIVITIES                
                 
Net income (loss) for the year   $ 9,494     $ (82,158 )
Items not affecting cash:                
Depreciation     18,618       18,618  
Accrued interest     -       2,571  
Changes in non-cash working capital balances:                
Rental deposits     (115 )     6,865  
Cash provided by (used in) operating activities     27,997       (54,104 )
                 
FINANCING ACTIVITIES                
Member contributions     -       40,750  
Member draws     (85,000 )     -  
Proceeds from mortgage payable     510,000       -  
Principal payments on mortgage payable     (3,440 )     -  
Repayment of promissory note     (347,571 )     -  
Repayment of advance     (100,000 )     -  
Cash provided by (used in) financing activities     (26,011 )     40,750  
                 
CHANGE IN CASH     1,986       (13,354 )
                 
CASH, BEGINNING OF YEAR     7,388       20,742  
CASH, END OF YEAR   $ 9,374     $ 7,388  

 

The accompanying notes are an integral part of these financial statements

 

 
 

 

1. NATURE OF ORGANIZATION

 

Zinnia Investments, LLC (“Zinnia” or “the Company”) was formed on December 18, 2012 in accordance with the provisions of the Wyoming Limited Liability Company Act for the purpose of undertaking investments in real estate. On October 2, 2014, the Company executed an operating agreement with Esteban Coaloa (“the Member”) whereby in exchange for an initial capital contribution of $1,000, the Member obtained a 100% interest in the Company.

 

On October 9, 2014, the Company acquired a multi-residential property at 2909 South Catalina Street, Los Angeles, California (“the Catalina Property”).

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America.

 

Use of Estimates

 

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements. Actual results could differ from those estimates.

 

Rental Properties

 

Rental properties are carried at cost less accumulated depreciation. Costs incurred for the acquisition and development of the properties are capitalized. As at December 31, 2016, depreciation is computed using the straight-line method over the estimated useful lives of the Company’s real estate asset, which is estimated to be 27.5 years or 330 months. Tenant improvements, including allowances, are depreciated over the shorter of the base term of the lease or the estimated useful life. Expenditures for ordinary maintenance and repairs are charged to operations in the period incurred. Significant renovations and improvements, which improve or extend the useful life of the asset, are capitalized and depreciated over their estimated useful life.

 

Management reviews a property for impairment whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. The review of recoverability is based on an estimate of undiscounted future cash flows expected to result from its use and eventual disposition. If impairment exists due to the inability to recover the carrying value of the property, an impairment loss is recorded to the extent that the carrying value of the property exceeds its estimated fair value.

 

The Company evaluates each acquisition of real estate to determine if the acquired property meets the definition of a business and needs to be accounted for as a business combination. Under ASU 2017-1, the Company first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If this threshold is met, the acquired property does not meet the definition of a business and is accounted for as an asset acquisition. The Company expects that acquisitions of real estate properties will not meet the revised definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings, and related intangible assets).

 

Income taxes

 

No provision for federal, state or local taxes has been made in the accompanying financial statements as the Member is responsible for the reporting the Company’s taxable income.

 

 
 

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Recent Accounting Pronouncements

 

In January 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-1, “Business Combinations: Clarifying the Definition of a Business.” The pronouncement changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. The pronouncement requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company is evaluating the impact ASU 2017-1 will have on its financial statements.

 

In February 2016, the FASB issued ASU No. 2016-2, “Leases.” The pronouncement requires lessees to put most leases on their balance sheets but recognize expenses on their income statements. The guidance also eliminates real estate-specific provisions for all entities. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company plans to adopt the provisions of ASU No. 2016-2 effective January 1, 2019 using the modified retrospective approach. The ASU is expected to result in the recognition of a right-to-use asset and related liability to account for future obligations under ground lease agreements for which the Company is the lessee. The Company continues to evaluate the impact this pronouncement will have on the Company’s consolidated financial statements.

 

In April 2015, the FASB issued ASU No. 2015-3, “Interest – Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs.” The pronouncement requires reporting entities to present debt issuance costs related to a note as a direct deduction from the face amount of that note presented in the balance sheet. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. The Company adopted the provisions of ASU No. 2015-3 effective January 1, 2016. The adoption of ASU 2015-3 did not have a material impact on the Company’s financial statements.

 

In May 2014, the FASB issued ASU No. 2014-9, “Revenue from Contracts with Customers.” The pronouncement was issued to clarify the principles for recognizing revenue and to develop a common revenue standard and disclosure requirements for U.S. GAAP and International Financial Reporting Standards. The pronouncement is effective for reporting periods beginning after December 15, 2017. The Company plans to adopt the provisions of ASU No. 2014-9 effective January 1, 2018 using the modified retrospective approach. Leases are specifically excluded from this ASU and will be governed by the applicable lease codification; however, this update may have implications on certain variable payment terms included in lease agreements. The Company continues to evaluate the impact this pronouncement will have on the Company’s financial statements.

 

3. PROPERTY INDEBTEDNESS

 

Lone Oak Fund, LLC

 

On October 9, 2014, the Company issued a first trust deed in favor of Lone Oak Fund, LLC. In exchange, the Company received $345,000 by way of financing the acquisition of the Catalina Property and issued a promissory note payable to Lone Oak Fund, LLC having a principal balance of $345,000. The Company was required to make monthly interest only payments of $2,530. This note was secured by the deed of trust on the Catalina property.

 

 
 

 

3. PROPERTY INDEBTEDNESS (continued)

 

Belladonna Lily Investments, LLC

 

On September 29, 2015, the Company refinanced the Catalina Property by issuing a promissory note payable to Belladonna Lily Investments LLC (“Payee”) in exchange for a principal balance of $347,571. This note bore interest at the 8.8% per annum and required to the Company to make monthly interest only payments of $2,548.85 to the payee. This promissory note was secured by the deed of trust on the Catalina property. On July 25, 2016, the Company paid out the principal balance of $347,571 and accrued interest of $2,379 thereon payable on this note.

 

First Republic Bank

 

On July 25, 2016, the Company refinanced the Catalina Property by issuing a new first trust deed in favor of the First Republic Bank in exchange for a mortgage in the principal amount of $510,000.

 

The mortgage has an adjustable rate of interest that is currently set at 3.125% per annum and is secured by the Catalina Property. The Company is required to make monthly payments in respect of principal and interest in the amount of $2,184.70 with the mortgage having a maturity date of July 25, 2021. The mortgage payable to the First Republic Bank is being amortized over a period of 30 years.

 

The aggregate of the principal payments due over the next five years and thereafter are as follows:

 

Year ended December 31,      
2017   $ 10,538  
2018     10,871  
2019     11,216  
2020     11,571  
2021     11,938  
Thereafter     450,426  
    $ 506,560  

 

The Company paid interest on the property indebtedness as follows:

 

    December 31, 2016     December 31, 2015  
             
Lone Oak Fund, LLC   $ -     $ 25,341  
Belladonna Lily Investments, LLC     20,221       8,021  
First Republic Bank     5,299       -  
    $ 25,520     $ 33,362  

 

 
 

 

 

Exhibit 99.2

 

AKEBIA INVESTMENTS, LLC

FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

 
 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Member of Akebia Investments LLC

 

We have audited th e accompanying balance sheets of Akebia Investments LLC as of December 31, 2016 and 2015 and the related statements of operations, changes in member’s equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, these financial statements present fairly, in all material respects, the financial position of Akebia Investments LLC as of December 31, 2016 and 2015 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

 

Dale Matheson Carr-Hilton Labonte llp

CHARTERED PROFESSIONAL ACCOUNTANTS

 

Vancouver, Canada

April 5, 2017

 

 

 
 

 

AKEBIA INVESTMENTS, LLC

BALANCE SHEETS

AS OF DECEMBER 31, 2016 AND 2015

 

    2016     2015  

ASSETS

               
                 
Investment in real estate, at cost   $ 525,000       525,000  
Accumulated depreciation     (39,773 )     (20,682 )
Investment in real estate, net     485,227       504,318  
                 
Cash     5,791       4,303  
                 
Total assets   $ 491,018       508,621  
                 

LIABILITIES AND MEMBER’S EQUITY (DEFICIT)

               
                 
Property indebtedness   $ 608,424     $ 386,250  
Rental deposits     6,590       6,590  
Total liabilities     615,014       392,840  
                 
Member’s equity (deficit)     (123,996 )     115,781  
                 
Total liabilities and member’s equity (deficit)   $ 491,018     $ 508,621  

 

The accompanying notes are an integral part of these financial statements

 

 
 

 

AKEBIA INVESTMENTS, LLC

STATEMENTS OF OPERATIONS

FOR THE YEARS DECEMBER 31, 2016 AND 2015

 

    2016     2015  
             
REVENUE                
Rental Income   $ 75,677     $ 71,170  
                 
OPERATING EXPENSES                
General and administrative     7,456       5,104  
Insurance     1,792       1,756  
Depreciation     19,091       19,091  
Property taxes     9,167       7,321  
Repairs and maintenance     11,240       15,403  
Utilities     12,261       13,821  
     

61,007

      62,495  

OTHER

               
Finance fee     11,115       -  
Interest expense     17,725       15,523  
                 
Net loss   $

(14,170

)   $ (6,849 )

 

The accompanying notes are an integral part of these financial statements

 

 
 

 

AKEBIA INVESTMENTS, LLC

STATEMENT OF CHANGES IN MEMBERS’S EQUITY (DEFICIT)

 

    Initial Capital Contribution     Contributions     Draws     Net loss     Total  
                               
Balance, December 31, 2014   $ 1,000     $ 519,000     $ -     $ (8,370 )   $ 511,630  
Member draws     -       -       (389,000 )     -       (389,000 )
Net loss for the year     -       -       -       (6,849 )     (6,849 )
Balance, December 31, 2015     1,000       519,000       (389,000 )     (15,219 )     115,781  
                                         
Member draws     -       -       (225,608 )             (225,608 )
Net income for the year     -       -       -       (14,170 )     (14,170 )
Balance, December 31, 2016   $ 1,000     $ 519,000     $ (614,608 )   $ (29,388 )   $ (123,996 )

 

The accompanying notes are an integral part of these financial statements

 

 
 

 

AKEBIA INVESTMENTS, LLC

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

    2016     2015  
             
CASH PROVIDED BY                
OPERATING ACTIVITIES                
                 

Net loss for the year

  $ (14,170 )   $ (6,849 )
Items not affecting cash:                
Depreciation     19,091       19,091  
Cash provided by operating activities     4,921       12,242  
                 
FINANCING ACTIVITIES                
Member draws     (225,608 )     (389,000 )
Proceeds from mortgage payable     612,000       -  
Principal payments on mortgage payable     (7,950 )     (7,500 )
Repayment of promissory note     (381,875 )        
Cash used in financing activities     (3,433 )     (396,500 )
                 
CHANGE IN CASH     1,488       (384,258 )
                 
CASH, BEGINNING OF YEAR     4,303       388,561  
                 
CASH, END OF YEAR   $ 5,791     $ 4,303  

 

The accompanying notes are an integral part of these financial statements

 

 
 

 

3. NATURE OF ORGANIZATION

 

Akebia Investments, LLC (“Akebia” or “the Company”) was formed on October 23, 2014 in accordance with the provisions of the Wyoming Limited Liability Company Act for the purpose of undertaking investments in real estate. On October 23, 2014, the Company executed an operating agreement with Esteban Coaloa (“the Member”) whereby in exchange for an initial capital contribution of $1,000, the Member obtained a 100% interest in the Company.

 

On November 19, 2014, the Company acquired a multi-residential property at Western 3711 S. Western Ave., Los Angeles, California (“the Western Property”).

 

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America.

 

Use of Estimates

 

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements. Actual results could differ from those estimates.

 

Rental Properties

 

Rental properties are carried at cost less accumulated depreciation. Costs incurred for the acquisition and development of the properties are capitalized. As at December 31, 2016, depreciation is computed using the straight-line method over the estimated useful lives of the Company’s real estate asset, which is estimated to be 27.5 years or 330 months. Tenant improvements, including allowances, are depreciated over the shorter of the base term of the lease or the estimated useful life. Expenditures for ordinary maintenance and repairs are charged to operations in the period incurred. Significant renovations and improvements, which improve or extend the useful life of the asset, are capitalized and depreciated over their estimated useful life.

 

Management reviews a property for impairment whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. The review of recoverability is based on an estimate of undiscounted future cash flows expected to result from its use and eventual disposition. If impairment exists due to the inability to recover the carrying value of the property, an impairment loss is recorded to the extent that the carrying value of the property exceeds its estimated fair value.

 

The Company evaluates each acquisition of real estate to determine if the acquired property meets the definition of a business and needs to be accounted for as a business combination. Under ASU 2017-1, the Company first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If this threshold is met, the acquired property does not meet the definition of a business and is accounted for as an asset acquisition. The Company expects that acquisitions of real estate properties will not meet the revised definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings, and related intangible assets).

 

Income taxes

 

No provision for federal, state or local taxes has been made in the accompanying financial statements as the Member is responsible for the reporting the Company’s taxable income.

 

 
 

 

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Recent Accounting Pronouncements

 

In January 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-1, “Business Combinations: Clarifying the Definition of a Business.” The pronouncement changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. The pronouncement requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company is evaluating the impact ASU 2017-1 will have on its financial statements.

 

In February 2016, the FASB issued ASU No. 2016-2, “Leases.” The pronouncement requires lessees to put most leases on their balance sheets but recognize expenses on their income statements. The guidance also eliminates real estate-specific provisions for all entities. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company plans to adopt the provisions of ASU No. 2016-2 effective January 1, 2019 using the modified retrospective approach. The ASU is expected to result in the recognition of a right-to-use asset and related liability to account for future obligations under ground lease agreements for which the Company is the lessee. The Company continues to evaluate the impact this pronouncement will have on the Company’s consolidated financial statements.

 

In April 2015, the FASB issued ASU No. 2015-3, “Interest – Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs.” The pronouncement requires reporting entities to present debt issuance costs related to a note as a direct deduction from the face amount of that note presented in the balance sheet. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. The Company adopted the provisions of ASU No. 2015-3 effective January 1, 2016. The adoption of ASU 2015-3 did not have a material impact on the Company’s financial statements.

 

In May 2014, the FASB issued ASU No. 2014-9, “Revenue from Contracts with Customers.” The pronouncement was issued to clarify the principles for recognizing revenue and to develop a common revenue standard and disclosure requirements for U.S. GAAP and International Financial Reporting Standards. The pronouncement is effective for reporting periods beginning after December 15, 2017. The Company plans to adopt the provisions of ASU No. 2014-9 effective January 1, 2018 using the modified retrospective approach. Leases are specifically excluded from this ASU and will be governed by the applicable lease codification; however, this update may have implications on certain variable payment terms included in lease agreements. The Company continues to evaluate the impact this pronouncement will have on the Company’s financial statements.

 

 
 

 

5. PROPERTY INDEBTEDNESS

 

Pacific Alliance Bank

 

On December 30, 2014, the Company issued a first trust deed in favor of Pacific Alliance Bank. In exchange, the Company received $393,750 by way of financing the acquisition of the Western Property and issued a promissory note payable to Pacific Alliance Bank having a principal balance of $393,750. The Company was required to make 59 monthly principal payments of $625 plus interest accruing at the rate of 3.25% per annum with a final balloon payment due in respect principal and interest in the amount of $358,064.58. This note was secured by the deed of trust on the Western Property.

 

Opus Bank

 

On July 27, 2016, the Company refinanced the Western Property by issuing a new first trust deed in favor of Opus Bank in exchange for a mortgage in the principal amount of $612,000.

 

The mortgage has an adjustable rate of interest that is currently set at 3.95% per annum with the first rate change date due on August 1, 2019 and is secured by the Western Property. The Company is required to make monthly payments in respect of principal and interest in the amount of $2,904.17 until August 1, 2021. The mortgage payable to the First Republic Bank is being amortized over a period of 30 years.

 

The aggregate of the principal payments due over the next five years and thereafter are as follows:

 

Year ended December 31,      
2017   $ 11,015  
2018     11,458  
2019     11,919  
2020     12,399  
2021     12,898  
Thereafter     548,735  
    $ 608,424  

 

The Company paid interest on the property indebtedness as follows:

 

    December 31, 2016     December 31, 2015  
             
Pacific Alliance Bank   $ 9,685     $ 15,523  
Opus Bank     8,040       -  
    $ 17,725     $ 15,523  

 

 
 

 

 

Exhibit 99.3

 

Hubilu Venture Corporation

Pro-Forma Consolidated Financial Statements

(unaudited)

 

The following unaudited pro forma consolidated financial statements are based on the historical financial statements of Hubilu Venture Corporation (“Hubilu”) and the historical financial statements of Akebia Investments LLC (“Akebia”) and Zinnia Investments LLC (“Zinnia”) (collectively “the LLCs”) as adjusted to give effect to the April 10, 2017 acquisition of Akebia and Zinnia. The unaudited pro forma consolidated statement of operations for the year ended December 31, 2016 gives effect to the acquisition of the LLCs as if it had occurred on January 1, 2016. The unaudited pro forma consolidated balance sheet as of December 31, 2016 gives effect to the acquisition of the LLCs as if it had occurred on December 31, 2016.

 

The pro forma consolidated financial statements do not necessarily reflect what the combined company’s financial condition or results of operations would have been had the acquisition occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

 

 
 

 

Hubilu Venture Corporation

Pro-Forma Balance Sheet

December 31, 2016

 

    Hubilu Venture
Corp. - Historical
    Akebia Investments LLC - Historical     Zinnia Investments LLC - Historical     Pro-forma adjustments     Notes   Pro-forma consolidated balance sheet  
                                   
Investment in Real Estate             485,227       471,661       858,112     (a)     1,815,000  
Cash     3,453       5,791       9,374                   18,618  
Deposit     6,600       -       -                   6,600  
Prepaids     2,498       -                           2,498  
      12,551       491,018       481,035       858,112           1,842,716  
                                             
Property indebtedness     -       608,424       506,560                   1,114,984  
Accounts payable     25,820       -       -                   25,820  
Rental deposits     -       6,590       6,750                   13,340  
Preferred Shares     10,400       -       -       450,000     (b)     460,400  
Due to related party     154,000       -       -                   154,000  
                                             
Deferred taxes                             264,520     (c)     264,520  
Note payable - Akebia members                             100,777     (d)     100,777  
Note payable - Zinnia members                             151,064     (d)     151,064  
Members’ Equity             (123,996 )     (32,275 )     156,271           -  
Common shares     25,527                                   25,527  
Preferred shares     -                                   -  
APIC     102,123                                   102,123  
Deficit     (305,319 )                     (264,520 )   (c)     (569,839 )
                              -           -  
      12,551       491,018       481,035       858,112           1,842,716  

 

 
 

 

Hubilu Venture Corporation

Pro-Forma Consolidated Statement of Operations

For the year ended December 31, 2016

 

    Hubilu Venture Corp.
- Historical
    Akebia Investments LLC - Historical     Zinnia Investments LLC - Historical     Pro-forma adjustments   Notes   Pro-forma consolidated Statement of Operations  
                                 
Revenue   $ 1,800     $ 72,602     $ 81,116               $ 155,518  
                                           
Operating expenses                                          
General and admin     151,847       7,455       9,844                 169,146  
Depreciation     -       19,091       18,618       28,291   (e)     66,000  
Insurance     -       1,792       1,145                 2,937  
Property taxes     -       9,167       7,533                 16,700  
Repairs and maintenance     -       11,240       5,245                 16,485  
Utilities     -       12,261       3,717                 15,978  
Professional fees     62,517       -       -                 62,517  
      214,364       61,006       46,102                 349,763  
Net loss before other items     (212,564 )     11,596       35,014                 (194,245 )
Other Items                                          
Finance fee     -       (11,115 )                       (11,115 )
Mortgage interest     -       (17,725 )     (25,520 )               (43,245 )
      -       (28,840 )     (25,520 )               (54,360 )
                                           
Net income (loss) before taxes     (212,564 )     (17,244 )     9,494                 (248,605 )
Income taxes                                          
Current     -       -       -                 -  
Deferred     -       -       -       (264,520 ) (c)     (264,520 )
      -       -       -       (264,520 )     (264,520 )
Net income (loss) for the year   $ (212,564 )   $ (17,244 )   $ 9,494               $ (513,125 )

 

 
 

 

Hubilu Venture Corporation

Notes to the Unaudited Pro-Forma Consolidated Financial Statements

 

Note 1 The unaudited pro forma consolidated statements are based on Hubilu Venture Corp.’s historical financial statements and the historical financial statements of Akebia Investments LLC (“Akebia”) and Zinnia Investments LLC (“Zinnia”) (collectively “the LLCs”) as adjusted to give effect to the acquisition of Akebia and Zinnia and the Series 1 Convertible Preferred Shares and promissory notes issued necessary to finance the acquisition. The unaudited pro forma consolidated statement of operations for the year ended December 31, 2016 gives effect to the acquisition of Akebia and Zinnia as if it had occurred on January 1, 2016. The unaudited pro forma consolidated balance sheet as of December 31, 2016 gives effect to the acquisition of Akebia and Zinnia as if it had occurred on December 31, 2016.
   
Note 2 On April 10, 2017, Hubilu acquired Akebia and Zinnia for total consideration of $701,841. The Company financed the acquisition through the issuance of a combination of notes payable and Series A Convertible Preferred Shares. The unaudited pro forma consolidated financial information includes various assumptions, including those related to the preliminary purchase price allocation of the assets acquired and liabilities assumed of Akebia and Zinnia based on management’s best estimates of fair value. The final purchase price allocation may vary based on final appraisals, valuations and analyses of the fair value of the acquired assets and assumed liabilities. Accordingly, the pro forma adjustments are preliminary and have been made solely for illustrative purposes.

 

    Akebia     Zinnia  
             
Consideration paid to members of the respective LLCs   $ 280,777     $ 421,064  
                 
Real Estate     890,000       925,000  
Cash     5,791       9,374  
Total identifiable assets     895,791       934,374  
Mortgage     (608,424 )     (506,560 )
Rental deposits     (6,590 )     (6,750 )
Total liabilities assumed     (615,014 )     (513,310 )
      280,777       421,064  
    $ -     $ -  
                 
Consideration paid:                
Series A Convertible Preferred Shares   $ 180,000     $ 270,000  
Note payable to members of the LLCs     100,777       151,064  
    $ 280,777     $ 421,064  

 

Note 3 The pro forma adjustments are based on preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma consolidated financial information:

 

  Adjustments to the pro-forma consolidated balance sheet

 

  (a) Reflects the preliminary fair value adjustment, based on their appraisals, of the real estate assets acquired from each of the LLCs as follows:

 

Akebia - 3711 S. Western Ave., Los Angeles, California     890,000  
Zinnia - 2909 S. Catalina Street, Los Angeles, California     925,000  
    $ 1,815,000  

 

  (b) Reflects the issuance of Series A convertible Preferred Shares that were issued as partial consideration for the acquisition of the LLCs as disclosed in Note 2.

 

 
 

 

  (c) Reflects the deferred tax liability arising on the difference between the accounting basis and tax basis of the properties acquired as follows:

 

Properties basis for accounting:      
       
Akebia - 3711 S. Western Ave., Los Angeles, California     890,000  
Zinnia - 2909 S. Catalina Street, Los Angeles, California     925,000  
    $ 1,815,000  

 

Properties basis for tax:      
       
Akebia - 3711 S. Western Ave., Los Angeles, California     525,000  
Zinnia - 2909 S. Catalina Street, Los Angeles, California     512,000  
      1,037,000  
         
Basis difference     778,000  
Assumed enacted tax rate     34 %
         
Deferred tax liability - December 31, 2016   $ 264,520  

 

  (d) Reflects the issuance of Notes payable to the members of the LLCs that were issued as partial consideration for the acquisition of the LLCs as disclosed in Note 2.

 

    Adjustment to the pro-forma consolidated Statement of Operations

 

  (e) Reflects the increase in the balance of depreciation to record in accordance with the fair value of the properties acquired as discussed in (a) above.

 

 
 

 

 

 

 

Real Estate Acquisition and Development Company Completes $1.8 Million Purchase of Two Real Estate Companies in Los Angeles. Seeks to Acquire More Positive Cash Flow Opportunities!

 

BEVERLY HILLS, CA— (MARKETWIRED- April 14, 2017) - Hubilu Venture Corporation (the “Company”) (OTC PINK: HBUV), a publicly traded real estate consulting, acquisition and development company, which specializes in student housing income properties and development/business opportunities located near USC and the Metro stations within the Los Angeles Metro/subway system, announced today that it has closed the acquisition of two companies, which own student housing properties valued at over $1.8 million. In addition, on March 31, 2017, the Company filed its Annual Report on Form 10-K for the year ended December 31, 2016.

 

 

 

Commenting the Company’s investment activity, David Behrend, Chief Executive Officer, stated, “HBUV has made a strong start to 2017, acquiring two turn-key student housing properties, bringing net asset value and positive cash flow to Hubilu. We feel confident that our investors will be pleased with our expansion efforts, as we continue to aggressively execute on our business plan.”

 

About Hubilu Venture Corporation:

 

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Based in Beverly Hills, California, Hubilu Venture Corporation, a real estate consulting, acquisition and development corporation is executing on its business plan, which besides consulting to real estate companies, is seeking to acquire student housing and real estate development/business opportunities in the niche markets of the USC campus area and the expanding urban transportation Metro stations facilitated by the development of the Los Angeles Metro/subway system. Hubilu, inspired by Strategic Growth Through Smart Ventures , focuses on acquiring high path of growth real estate and business opportunities that it believes are recession proof and have limited downside risk, while offering upside potential in equity appreciation and cash flow.

 

 
 

 

Forward-Looking Statements:

 

This press release contains forward-looking statements within the meaning of Federal securities laws, concerning the future performance of our business, its operations and its financial performance and condition and potential selected offerings presented without the context of accompanying financial results. The comments of Mr. Behrend, statements regarding the potential acquisition of property and the characteristics of its wholly owned property are examples of forward-looking statements. A number of factors could cause Hubilu Venture Corporation’s actual results, performance or achievement to differ materially from those anticipated. Among those risks, trends and uncertainties are the general economic climate; the supply of and demand for real properties; interest rate levels; the availability of financing; and other risks associated with the acquisition and ownership of properties, including risks that the tenants will not pay rent, or the costs may be greater than anticipated. These forward-looking statements include, among others, statements with respect to our objectives and strategies to achieve those objectives, as well as statements with respect to our beliefs, plans, expectations, anticipations, estimates or intentions. These forward-looking statements are based on our current expectations. We are under no obligation to (and expressly disclaim any such obligation to) update or alter our forward-looking statements, whether as a result of new information, future events or otherwise. For further information on factors that could impact Hubilu Venture Corporation, reference is made to our filings with the Securities and Exchange Commission.

 

www.hubilu.com

@hubiluventure

 

CONTACT INFORMATION

 

Tracy Black-Van Wier

Vice President - Investor Relations

Hubilu Venture Corporation

tracy@hubilu.com

310-420-9599