UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] quarterly REPORT under SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: June 30, 2018

 

or

 

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission File No. 000-55611

 

Hubilu Venture Corporation

(Exact Name of Registrant as Specified in its Charter)

 

Delaware   47-3342387
(State or other Jurisdiction of
Incorporation or Organization)
  (I.R.S. Employer
Identification No.)

 

     
205 South Beverly Drive, Suite 205    
Beverly Hills, CA   90212
(Address of Principal Executive Offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (310) 308-7887

 

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 preceding12 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.

 

Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§230.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated file,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] (Do not check if a smaller reporting company) Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes [  ] No [X]

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section l2, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

 

Yes [  ] No [  ]

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of August 20, 2018, the number of shares outstanding of the issuer’s sole class of common stock, $0.001 par value per share, is 25,730,500.

 

 

 

     
 

 

table of contents

 

PART I – FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Condensed Balance Sheets 3
Unaudited Condensed Statements of Operations 4
Unaudited Condensed Statement of Cash Flows 5
Notes to the Unaudited Condensed Financial Statements 6
Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk 16
Item 4. Controls and Procedures 16
PART II — OTHER INFORMATION 17
Item 1. Legal Proceedings 17
Item 1A. Risk Factors 17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Mine Safety Disclosures 17
Item 5. Other Information 17
Item 6. Exhibits 17
SIGNATURES 18

 

  2  
 

 

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements

 

HUBILU VENTURE CORPORATION

Condensed Interim Balance Sheets

 

    June 30, 2018     December 31, 2017  
      (unaudited)        
ASSETS                
Investment in real estate   $ 2,327,621     $ 1,786,257  
Accumulated depreciation     (85,171 )     (49,555 )
      2,242,460       1,736,702  
Cash     11,975       11,988  
Deposits     6,600       6,600  
Prepaid expenses     1,500       1,500  
                 
TOTAL ASSETS   $ 2,262,535     $ 1,756,790  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
LIABILITIES                
Property indebtedness   $ 1,592,415     $ 1,093,432  
Accounts payable     345       30,045  
Security deposits     33,355       15,255  
Advance payable     20,000          
Promissory notes payable     186,055       206,055  
Preferred shares     530,669       477,795  
Due to related party     407,400       349,400  
                 
TOTAL LIABILITIES     2,770,239       2,171,982  
                 
STOCKHOLDERS’ DEFICIT                
Common Stock Authorized 100,000,000 common shares, $0.001 par, 25,730,500 issued and outstanding on June 30, 2018 and December 31, 2017     25,731       25,527  
Additional paid-in capital     362,079       102,123  
Accumulated Deficit     (895,514 )     (542,842 )
TOTAL STOCKHOLDERS’ DEFICIT     (507,704 )     (415,192 )
TOTAL LIABILITIES & STOCKHOLDERS’ DEFICIT   $ 2,262,535     $ 1,756,790  

 

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

 

  3  
 

 

HUBILU VENTURE CORPORATION

Consolidated Interim Statements of Operations  

(unaudited)

 

    Three months ended
June 30, 2018
    Three months ended
June 30, 2017
    Six months ended
June 30, 2018
    Six months ended
June 30, 2017
 
                         
Rental Income   $ 55,652     $ 40,086     $ 95,848     $ 40,086  
Consulting Income     -               2,500       -    
Revenues     55,652       40,086       98,348       40,086  
                                 
Expenses                                
                                 
General & administrative expenses     6,875       7,820       14,922       19,027  
Consulting     25,763       32,800       303,948       60,100  
Depreciation     19,315       20,144       35,616       20,144  
Professional fees     15,459       11,050       15,858       27,550  
Property taxes     10,091       6,676       10,091       6,676  
Rent     6,900       6,600       13,800       13,300  
Repairs and maintenance     1,520       3,801       4,079       3,801  
Transfer agent and filing fees     495       -       795       -    
Utilities     2,977       3,110       6,949       3,110  
Operating Expenses     89,395       92,001       406,058       153,708  
                                 
Net Loss before other items     (33,743 )     (51,915 )     (307,710 )     (127,009 )
                                 
Other Items                                
Financing fee     16,487       -         16,487        
Promissory note interest     4,335       3,588       8,819       3,588  
Mortgage interest     9,798       9,799       19,656       9,799  
      30,620       13,387       44,962       13,387  
                                 
Net Loss for the period   $ (64,363 )   $ (65,302 )   $ (352,672 )   $ (127,009 )
                                 
Basic and diluted loss per common share   $ (0.00 )   $ (0.00 )   $ (0.01 )   $ (0.00 )
                                 
Weighted average number of common shares outstanding:                                
Basic     25,730,500       25,526,500       25,715,914       25,526,500  

 

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

 

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HUBILU VENTURE CORPORATION

Condensed Interim Statement of Cash Flows

(unaudited)

 

    For the six
months ended
June 30, 2018
    For the six
months ended
June 30, 2017
 
OPERATING ACTIVITIES                
Net loss   $ (352,672 )   $ (127,009 )
Adjustments to reconcile net loss to net cash provided by (used for) operations:                
Accrued interest on promissory notes payable             3,588  
Depreciation     35,616       20,144  
Financing fee     12,874       -  
Stock-based compensation     260,160       -  
Changes in operating assets and liabilities:                
Prepaid Expenses     -       (482 )
Accounts Payable     (29,700 )     (18,174 )
Security deposits     18,100       (1,300 )
Net cash used in Operating Activities     (55,622 )     (123,233 )
                 
INVESTING ACTIVITIES:                
Property Improvements     (31,374 )      
Cash acquired on the acquisition of Akebia Investments LLC and Zinnia Investments LLC     -         14,416  

Net cash provided by (used in) Investing Activities

    (31,374 )     14,416  
                 
FINANCING ACTIVITIES                
Property indebtedness repayments     (11,017 )       (17,248 )
Advance payable     20,000       -    
Promissory Notes Repayments     (20,000 )     -    
Related party advances     58,000       139.810  
Preferred Shares issued     40,000        
Principal payments on mortgages             (5,364 )
                 
Net cash provided by Financing Activities     86,983       117,198  
                 
Net cash increase (decrease) for period     ( 13 )     8,381  
Cash, beginning of the period     11,988       3,453  
                 
Cash, end of the period   $ 11,975     $ 11,834  
                 
Supplemental cash flow information:                
Cash paid for interest   $ 19,667     $ 9,799  
Cash paid for income taxes   $ -     $ -  

 

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

 

  5  
 

 

HUBILU VENTURE CORPORATION

Notes to the Condensed Interim Financial Statements

June 30, 2018

(unaudited)

 

NOTE 1 – NATURE OF BUSINESS

 

Hubilu Venture Corporation (“the Company”) was incorporated under the laws of the state of Delaware on March 2, 2015. The Company owns three rental properties located near the campus of the University of Southern California.

 

NOTE 2 – BASIS OF PRESENTATION AND ABILITY TO CONTINUE AS A GOING CONCERN

 

These unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States (“GAAP”) for interim reporting. Accordingly, certain information and footnote disclosures normally included in the annual financial statements in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the disclosures are adequate to make the information presented not misleading. These accompanying unaudited interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained herein.

 

The consolidated balance sheet as of December 31, 2017, was derived from the audited annual financial statements but does not include all disclosures required by GAAP. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K/A for the year ended December 31, 2017 filed with the SEC on June 7, 2018. The Company follows the same accounting policies in the preparation of interim reports.

 

At June 30, 2018, the Company had not yet achieved profitable operations, had an accumulated deficit of $895,514 and expects to incur further losses in the development of its business, all of which casts substantial doubt upon the Company’s ability to continue as a going concern and, therefore, that it may be unable to realize its assets and discharge its liabilities in the normal course of business. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. Management intends to focus on raising additional funds either by way of debt or equity issuances in order to continue operations. The Company cannot provide any assurance or guarantee that it will be able to obtain additional financing or generate revenues sufficient to maintain operations.

 

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

The preparation of financial statements in conformity with US GAAP which requires management to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using management’s best judgment, after considering past, current and expected events and economic conditions. Actual results could differ from these estimates.

 

Principles of Consolidation

 

These consolidated financial statements include the accounts of Hubilu Venture Corporation and its wholly-owned subsidiaries, Akebia Investments LLC, Zinnia Investments LLC and Sunza Investments, LLC. All inter-company transactions and balances have been eliminated on consolidation.

 

6  
 

 

Comparative Balances

 

Certain of the comparative balances have been reclassified to conform with the presentation in the current period financial statements.

 

Loss per Share

 

The Company’s basic earnings (loss) per share are calculated by dividing its net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. The Company’s dilutive earnings (loss) per share is calculated by dividing its net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.

 

Fair Value Measurements

 

The fair value hierarchy under GAAP is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

 

Level 1 quoted prices (unadjusted) in active markets for identical assets or liabilities;
   
Level 2 observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and
   
Level 3 assets and liabilities whose significant value drivers are unobservable by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

The book value of cash, property indebtedness, accounts payable, advance payable, promissory notes payable, preferred shares and due to related party approximate their fair values.

 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued ASU 2016-02, Leases, amending the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The guidance will be effective in the first quarter of 2019 and allows for early adoption. The new standard requires a modified retrospective transition approach for all leases existing at the date of initial application, with an option to use certain transition relief. ASU 2016-02 provides for transition relief, which includes not electing to (i) reassess whether any expired or existing contract is a lease or contains a lease, (ii) reassess the lease classification of any expired or existing leases and (iii) expense any capitalized initial direct costs for any existing leases. The Company will continue to assess the impact of the new standard.

 

7  
 

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers and in August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers-Deferral of the Effective Date, which defers the effective date of the new revenue recognition standard until the first quarter of 2018. Subsequently, the FASB has issued multiple ASUs clarifying ASU 2014-09 and ASU 2015-14. Under the new standard, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. Revenue is generally recognized net of allowances and any taxes collected from customers and subsequently remitted to governmental authorities. The majority of the Company’s revenue is derived from rental income, which is scoped out from this standard and will be accounted for under ASU 2016-02, Leases.

 

The Company’s other revenue streams, which are being evaluated under this ASU, include but are not limited to management fees, non-recurring rental and non-rental related income and gains and losses from real estate dispositions. The Company adopted the new standard as of January 1, 2018 with no material impact on the consolidated financial statements.

 

NOTE 4 – PROPERTY ACQUISITION

 

On May 31, 2018, the Company acquired a 100% membership interest in Sunza Investments, LLC, a Wyoming Limited Liability Company (“Sunza”) for $510,000 (“Purchase Price”). Sunza’s sole asset is the real property located at 3910 Walton Avenue, Los Angeles CA.

 

The terms of the Hubilu membership interest purchase for $510,000 was subject to two loans as follows:

 

 

A $325,500 first position note owing by Sunza, whose terms of payments due were interest only, payable from April 5, 2018 on unpaid principal at the rate of 6% per annum. Interest only payable in monthly installments of $1,627.50 or more on the 1st day of each month beginning on the 1st day of May 2018 and continuing until the 30th day of April 2020, at which time the entire principal balance together with interest due thereon, shall become due and payable.

     
 

A $184,500 second position note owing by Sunza,whose terms of payments due were interest only, payable from June 1, 2018 on unpaid principal at the rate of 6% per annum. Interest only payable in monthly installments of $922.50 or more on the 1st day of each month beginning on the 1st day of July 2018 and continuing until the 30th day of April 2020, at which time the entire principal balance together with interest due thereon, shall become due and payable.

 

NOTE 5–RELATED PARTY TRANSACTIONS

 

Jacaranda Investments, Inc., the Company’s majority shareholder, has advanced the Company 407,400. These advances are unsecured and do not carry an interest rate or repayment terms.

 

NOTE 6 – SHARE ISSUANCES  

 

On January 5, 2018, Hubilu signed a 1 year consulting agreement with Pacific Horizon Capital Inc. (“Pacific”), which was paid in one payment of 144,000 common shares valued at $1.39 per share. Pacific is contracted to research and present crypto currency opportunities to Hubilu for acquisition and investment. The Company recognized consulting fees of $200,016 in connection with this share issuance.

 

During the six months ended June 30, 2018, the Company issued 60,000 common shares valued at $1.00 per share for consulting services, including bookkeeping and accounting services, online marketing services and real estate analysis. The Company recognized consulting fees of $60,000 in connection with this share issuance.

 

During the six months ended June 30, 2018, the Company issued 40,000 shares of the company’s 5% Voting Cumulative Series 1 Convertible Preferred Stock for $40,000.

 

  8  
 

 

Forward Looking Statements

 

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this report include forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 (collectively, the “Reform Act”). The Reform Act provides a safe harbor for forward-looking statements to encourage companies to provide prospective information about themselves so long as they identify these statements as forward-looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. All statements, other than statements of historical fact that we make in this Quarterly Report on Form 10-Q are forward-looking. The words “anticipates,” “believes,” “expects,” “intends,” “will continue,” “estimates,” “plans,” “projects,” the negative of these terms and similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean the statement is not forward-looking.

 

Forward-looking statements involve risks, uncertainties or other factors which may cause actual results to differ materially from the future results, performance or achievements expressed or implied by the forward-looking statements. These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. Certain risks, uncertainties or other important factors are detailed in this Quarterly Report on Form 10-Q and may be detailed from time to time in other reports we file with the Securities and Exchange Commission, including on Forms 8-K and 10-K.

 

Examples of forward looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, our expectations regarding our ability to generate operating cash flows and to fund our working capital and capital expenditure requirements. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our future products, the timing and cost of capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Although we believe that the estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be incorrect. Important factors that could cause actual results to differ materially from the results and events anticipated or implied by such forward-looking statements include:

 

  the risks of a start-up company;
     
  management’s plans, objectives and budgets for its future operations and future economic performance;
     
  capital budget and future capital requirements;
     
  meeting future capital needs;
     
  our dependence on management and the need to recruit additional personnel;
     
  limited trading for our common stock, if listed or quoted 
     
  the level of future expenditures;
     
  impact of recent accounting pronouncements;
     
  the outcome of regulatory and litigation matters; and
     
  the assumptions described in this report underlying such forward-looking statements. Actual results and developments may materially differ from those expressed in or implied by such statements due to a number of factors, including:
     
  those described in the context of such forward-looking statements;
     
  the political, social and economic climate in which we conduct operations; and
     
  the risk factors described in other documents and reports filed with the Securities and Exchange Commission

 

We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statement. We believe these forward-looking statements are reasonable. However, you should not place undue reliance on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to update publicly any of them in light of new information or future events.

 

  9  
 

 

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

 

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

 

In this Quarterly Report on Form 10-Q, “Company,” “the Company,” “us,” and “our” refer to Hubilu Venture Corporation, a Delaware corporation, unless the context requires otherwise.

 

We intend the following discussion to assist in the understanding of our financial position and our results of operations for the three-months ended June 30, 2018 and 2017, respectively. You should refer to the Financial Statements and related Notes in conjunction with this discussion.

 

Results of Operations

 

General

 

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

 

  10  
 

  

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 was our Vice President until his death in 2017. Under the terms of the Zinnia Agreement, we acquired 100% of the membership interests of Zinnia for $910,695 (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 April 10, 2017, we closed the acquisition of Zinnia.

 

On September 26, 2016, we entered into a purchase contract (the Akebia Agreement”) with Akebia Investments, LLC (“Akebia”), a Wyoming limited liability company, which was 100% owned by Esteban Coaloa, our former Vice President. 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 $882,463 (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 10, 2017, we closed the acquisition of Akebia.

 

During the 6 months ended June 30, 2018, we installed Solar Panels at 3711 S. Western Ave, Los Angeles (“Western”). The cost was $28,300 of which we borrowed $26,500 at 6%. Western is a master metered property for utilities.

 

We expect to reduce our electric utility bill at Western by approximately $5,000 per year. After providing for the cost of the loan we expect to recover the money in approximately 7 to 8 years. The value of the property also increased by approximately $100,000 because of the increase to the bottom line.

 

  11  
 

  

Our mission statement is Strategic Growth through Smart Ventures, which is designed to focus us on real estate opportunities that we believe are recession proof and have limited downside risk, while offering high upside potential in equity appreciation and cash flow. We will also continue to assist investors and professionals in the early stage analysis of market opportunities and the evaluation of properties prior to them committing capital for the purchase or the leasing of real estate properties. For our consulting services, we are focusing our marketing efforts in the commercial markets; however, we are also looking at residential and income producing markets. We are using the Internet as well as the services of independent sales consultants to market our services to investors and professionals in Southern California with our primary efforts focused in Beverly Hills and Los Angeles near the University of Southern California campus. Our real estate acquisitions division will actively be pursuing real estate acquisitions near the University of Southern California campus. We have had limited consulting operations and have limited financial resources.

 

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

 

In September 2016, we appointed the following new officers to the company:

 

  Eric Klein, VP, Operations & Business Development, 20 years’ experience
     
  Tracy Black-Van Wier, VP, Investor Relations, 20 years’ experience
     
  Chille DeCastro, VP, Marketing, 20 years’ experience

 

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

 

As of June 30, 2018, we had $11,975 cash on hand and in the bank. Management does not believe this amount will satisfy our cash requirements for the next twelve months. We plan to satisfy our future cash requirements - primarily the working capital required for operations by loans from our shareholders or additional equity financing from related or third parties. The additional equity financings will likely be in the form of private placements of common stock. As of June 30, 2018, the Company has borrowed $407,400 from its majority shareholder.

 

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

 

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

 

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

 

We are encouraged by the effectiveness under which our properties are operating. Net Operating Incme on our properties is much greater than industry standards of competitive properties in similar locations. To continue to keep our costs low, management does not plan to hire additional employees at this time. Our officers and directors, as well as independent contractors, will be responsible for providing consulting services.

 

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited financial statements for the three months ended June 30, 2018 and 2017, respectively, together with notes thereto, which are included in this Quarterly Report on Form 10-Q.

 

Three months ended June 30, 2018 compared to the three months ended June 30, 2017  

 

Revenues . Our revenues increased to $55,652 for the three months ended June 30, 2018 compared to $40,086 for the comparable period in 2017. The increase is due to the acquisitions of our properties in April 2017 and the property acquisition in June 2018.

 

Operating expenses. Operating expenses include general and administrative expenses, consulting expense, depreciation, professional fees, property taxes, rent, repairs and maintenance, transfer agent and filing fees, and utilities. In total, operating expenses decreased $2,606, to $89,395 for the three months ended June 30, 2018 compared to $92,001 for the comparable period in 2017. The components of operating expenses are discussed below.

 

General and administrative expenses decreased $945, to $6,875 for the three months ended June 30, 2018 compared to $7,820 for the comparable period in 2017.

 

Consulting expenses decreased $7,037, or 21.45%, to $25,763 for the three months ended June 30, 2018 compared to $32,800 for the comparable period in 2017. The decrease is attributable to the Company replacing a marketing consultant.

 

Depreciation expense decreased $829 to $19,315 or 4.11% for the three months ended June 30, 2018 compared to $20,144 for the comparable period in 2017.

 

Professional fees increased $4,409, to $15,459 for the three months ended June 30, 2018 compared to $11,050 for the comparable period in 2017. The increase is primarily due to the timing of the invoices provided by our professional advisors.

 

Property tax expense increased $3,415 to $10,091 for the three months ended June 30, 2018 compared to $6,676 for the comparable period in 2017. The increase is due to the acquisition of a rental property.

 

Rent expense was $6,900 for the three months ended June 30, 2018 compared to $6,600 for the comparable period in 2017. The increase is due to a slight increase in our monthly lease rate.

 

Repairs and maintenance expense decreased $2,281 to $1,520 for the three months ended June 30, 2018 compared to $3,801 for the comparable period in 2017. Even though we acquired an additional property during the quarter, our aggressive management and excellent condition of the properties resulted in reductions of repairs and maintenance.

 

Transfer Agent and Filing Fees increased $495 to $495 for the three months ended June 30, 2018 compared to $0 for the comparable period in 2017. The increase is due to Stock Certificates issued.

 

Utilities expense decreased $133 to $2,977 for the three months ended June 30, 2018 compared to $3,110 for the comparable period in 2017. Even though we purchased an additional property during the period, the tenant pays all utilities.

 

Promissory Note Interest increased $747 to $4,335 for the three months ended June 30, 2018 compared to $3,588 for the comparable period in 2017.

 

Net loss. Our net loss decreased $939 to $64,363 for the three months ended June 30, 2018 compared to $65,302 for the comparable period in 2017. The decrease is attributable to the revenue and expenses discussed above.

 

13
 

 

Six months ended June 30, 2018 compared to the three months ended June 30, 2017  

 

Revenues . Our revenues increased to $95,848 for the six months ended June 30, 2018 compared to $40,086 for the comparable period in 2017. The increase is due to the acquisitions of our properties in April 2017 and the property acquisition in June 2018..

 

Operating expenses. Operating expenses include general and administrative expenses, consulting expense, depreciation, professional fees, property taxes, rent, repairs and maintenance, transfer agent and filing fees, and utilities. In total, operating expenses increased $252,350, to $406,058 for the six months ended June 30, 2018 compared to $153,708 for the comparable period in 2017. The components of operating expenses are discussed below.

 

General and administrative expenses decreased $4,105, to $14,922 for the six months ended June 30, 2018 compared to $19,027 for the comparable period in 2017.

 

Consulting expenses increased $243,848, or 405.73%, to $303,948 for the six months ended June 30, 2018 compared to $60,100 for the comparable period in 2017. The increase is attributable to the Company issuing stock to a consultant to research potential cryptocurrency opportunities and investments.

 

Depreciation expense increased $15,472 to $35,616 or 76.8% for the six months ended June 30, 2018 compared to $20,144 for the comparable period in 2017. The increase is attributable to our acquisitions of our 2 rental properties in 2017 and 1 rental property in 2018.

 

Professional fees decreased $11,692, to $15,858 for the six months ended June 30, 2018 compared to $27,550 for the comparable period in 2017. The decrease is primarily due to the timing of the invoices provided by our professional advisors.

 

Property tax expense increased $3,415 to $10,091 for the six months ended June 30, 2018 compared to $6,676 for the comparable period in 2017. The increase is due to the acquisition of our two rental properties.

 

Rent expense was $13,800 for the six months ended June 30, 2018 compared to $13,300 for the comparable period in 2017. The increase is due to a slight increase in our monthly lease rate.

 

Repairs and maintenance expense increased $278 to $4,079 for the six months ended June 30, 2018 compared to $3,801 for the comparable period in 2017. Even though we acquired an additional property during the quarter, our aggressive management and excellent condition of the properties, resulted in almost no increase of repairs and maintenance.

 

Transfer Agent and Filing Fees increased $795to $795 for the six months ended June 30, 2018 compared to $0 for the comparable period in 2017. The increase is due to issuing stock certificates and other stock certificate resolutions.

 

Utilities expense increased $3,839 to $6,949 for the six months ended June 30, 2018 compared to $3,110 for the comparable period in 2017. Increase reflects utilities for 6 months vs 3 months. . During the period we installed solar panels at 3711 S. Western Avenue, with the expectation that our utilities expense will be reduced in future periods.

 

Promissory Note Interest expense increased $5,231 to $8,819 for the six months ended June 30, 2018 compared to $3,588 for the comparable period in 2017.

 

Mortgage Interest increased $9,857 to $19,656 for the six months ended June 30, 2018 compared to $9,799 for the comparable period in 2017.

 

Net loss. Our net loss increased $225,663 to $352,672 for the six months ended June 30, 2018 compared to $127,009 for the comparable period in 2017. The decrease is attributable to the revenue and expenses discussed above.

 

Liquidity and Capital Resources . For the six months ended June 30, 2018, we borrowed $58,000 from our majority shareholder, which it advanced to us interest free. We intend to seek additional financing for our working capital, in the form of equity or debt, to provide us with the necessary capital to accomplish our plan of operation. There can be no assurance that we will be successful in our efforts to raise additional capital.

 

Our total assets are $2,262,535 as of June 30, 2018, consisting of $2,242,460 in net property assets, $11,975 in cash, $6,600 in deposits and $1,500 in prepaid expenses.

 

Our total liabilities are $2,770,239 as of June 30, 2018.

 

As of June 30, 2018, our total stockholders’ deficit was $507,704 and our accumulated deficit was $895,514.

 

We had $55,622 in net cash used in operating activities for the six months ended June 30, 2018, which included $352,672 in net loss, which amount was offset by non-cash charges of $35,616 for depreciation, $260,160 in stock based compensation, as well as a net reduction of $29,700 for accounts payable.

 

  14  
 

 

We used $31,374 in investing activities for the six months ended June 30, 2018, which was used for building improvements.

 

We had $86,983 in cash provided by financing activities for the six months ended June 30, 2018, which resulted from $58,000 provided by related party advances, $40,000 in Preferred Shares sold, a loan of $20,000 and principal payments on mortgages of $11,017 as well as principal repayments on the promissory notes of $20,000.

 

The Company had no formal long-term lines or credit or other bank financing arrangements as of June 30, 2018.

 

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

 

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

 

Impact of Inflation

 

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

 

Capital Expenditures

 

The Company spent $31,374 on building improvements during the six months ended June 30, 2018.

 

CRITICAL ACCOUNTING POLICIES

 

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

 

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

 

The following critical accounting policies affect our more significant estimates and assumptions used in preparing our consolidated financial statements.

 

Revenue Recognition

 

Management has determined that all of the Company’s leases with its various tenants are operating leases. Rental income is generally recognized based on the terms of leases entered into with tenants. In those instances, in which the Company funds tenant improvements and the improvements are deemed to be owned by the Company, revenue recognition will commence when the improvements are substantially completed, and possession or control of the space is turned over to the tenant.

 

  15  
 

  

Asset Impairment

 

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to aggregate future net cash flows (undiscounted and without interest) expected to be generated by the asset. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

As a “ smaller reporting company ” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.

 

Item 4. Controls and Procedures

 

(a) Evaluation of Disclosure Controls and Procedures

 

We conducted an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934 as amended (the “Exchange Act”)). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the fiscal quarter covered by this quarterly report on Form 10-Q were not effective at a reasonable assurance level to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

 

(b) Changes in Internal Controls over Financial Reporting

 

During the three-month period ended June 30, 2018, there has been no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

   

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PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings

 

None.

 

Item 1A. Risk Factors

 

As a “ smaller reporting company ” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

None.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

  (a) The following exhibits are filed with this quarterly report on Form 10-Q or are incorporated herein by reference:

 

Exhibit    
Number   Description
     
31.1   Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*.
     
31.2   Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*.
     
32.1   Certification of the Chief Executive Officer pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*.
     
32.2   Certification of the Chief Financial Officer pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*.
     
*   Filed herewith.

 

  17  
 

 

SignatureS

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  HUBILU VENTURE CORPORATION
   
August 20, 2018 /s/ David Behrend
  David Behrend
  Chairman and Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Accounting and Financial Officer)

 

  18  
 

 

 

 

Exhibit 31.1

 

CERTIFICATION PURSUANT TO SECTION 302 (a) OF THE SARBANES-OXLEY ACT OF 2002

 

I, David Behrend, Chairman and Chief Executive Officer, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Hubilu Venture Corporation (the “registrant”);

 

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 quarterly report;

 

3. Based on my knowledge, the financial statements and other financial information included in this quarterly report fairly presents 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 quarterly 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, is made known to us by others within the entity, 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 controls 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 controls over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal controls 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 controls 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 controls over financial reporting.

 

Dated: August 20, 2018 /s/ David Behrend
  David Behrend
  Chief Executive Officer
  (Principal Executive Officer)

 

 
 

 

 

Exhibit 31.2

 

CERTIFICATION PURSUANT TO SECTION 302 (a) OF THE SARBANES-OXLEY ACT OF 2002

 

I, David Behrend, Chief Financial Officer of Hubilu Venture Corporation, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Hubilu Venture Corporation (the “registrant”);

 

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 quarterly report;

 

3. Based on my knowledge, the financial statements and other financial information included in this quarterly report fairly presents 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 quarterly 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, is made known to us by others within the entity, 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 controls 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 controls over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal controls 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 controls 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 controls over financial reporting.

 

Dated: August 20, 2018 /s/ David Behrend
  David Behrend
  Chief Financial Officer
  (Principal Financial 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

 

In connection with the Quarterly Report on Form 10-Q of Hubilu Venture Corporation (the “Company”) for the period ending June 30, 2018, as filed with the Securities and Exchange Commission on or about the date hereof (“Report”), I, David Behrend, the Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

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

 

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

 

Dated: August 20, 2018 /s/ David Behrend
  David Behrend
  Chief Executive Officer
  (Principal Executive Officer)

 

 
 

 

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ENACTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of Hubilu Venture Corporation (the “Company”) for the period ending June 30, 2018, as filed with the Securities and Exchange Commission on or about the date hereof (“Report”), I, David Behrend, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

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

 

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

 

Dated: August 20, 2018 /s/ David Behrend
  David Behrend
  Chief Financial Officer
  (Principal Financial Officer)