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, 2019

 

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 December 10, 2019 the number of shares outstanding of the issuer’s sole class of common stock, $0.001 par value per share, is 25,952,125.

 

 

 

   
 

 

table of contents

 

PART I – FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statement of Stockholders’ Deficit 5
Consolidated Statement of Cash Flows 6

Notes to the Consolidated Financial Statements

7
Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk 15
Item 4. Controls and Procedures 15
PART II — OTHER INFORMATION 16
Item 1. Legal Proceedings 16
Item 1A. Risk Factors 16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Mine Safety Disclosures 16
Item 5. Other Information 16
Item 6. Exhibits 16
SIGNATURES 17

 

 2 
 

 

Part I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

HUBILU VENTURE CORPORATION

Consolidated Balance Sheets

 

   June 30, 2019   December 31, 2018 
    (unaudited)      
ASSETS          
Real Estate, at cost          
Land  $2,226,617   $2,226,617 
Building and Improvements   1,298,052    1,236,911 
    3,524,669    3,463,528 
Accumulated Depreciation   (111,912)   (88,867)
    3,412,757    3,374,661 
Cash   18,402    2,310 
Deposits   6,600    6,600 
Prepaid expenses   1,500    1,500 
           
TOTAL ASSETS  $3,439,259   $3,385,071 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
LIABILITIES          
Property indebtedness  $2,854,422   $2,716,957 
Accounts payable   904    82 
Security deposits   60,910    34,995 
           
Loan Payable   -    12,000 
Promissory notes payable   182,055    182,055 
Preferred shares   555,057    542,547 
Due to related party   494,145    485,300 
           
TOTAL LIABILITIES   4,147,493    3,973,936 
           
STOCKHOLDERS’ DEFICIT          
Common Stock Authorized 100,000,000 common shares, $0.001 par, 25,952,125 issued and outstanding on June 30, 2019 (December 31, 2018: 25,730,500)   25,953    25,731 
Additional paid-in capital   492,950    298,719 
Accumulated Deficit   (1,227,137)   (913,315)
TOTAL STOCKHOLDERS’ DEFICIT   (708,234)   (588,865)
TOTAL LIABILITIES & STOCKHOLDERS’ DEFICIT  $3,439,259   $3,385,071 

 

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

 

 3 
 

 

HUBILU VENTURE CORPORATION

Consolidated Statements of Operations

(unaudited)

 

   Three months ended
June 30, 2019
   Three months ended
June 30, 2018
  

Six months ended

June 30, 2019

  

Six months ended

June 30, 2018

 
                 
Rental Income  $108,749  $55,652  $191,499  $95,848
                     
Expenses                    
                     
General & administrative   13,621    6,875    32,344    14,922 
Consulting   50,267    25,763    246,867    303,948 
Depreciation   12,531    19,315    23,045    35,616 
Professional fees   10,218    15,459    16,293    15,858 
Property taxes   5,284    10,091    10,107    10,091 
Rent   7,200    6,900    14,100    13,800 
Repairs and maintenance   2,635    1,520    4,662    4,079 
Wages and benefits   32,200    -    32,200    - 
Transfer agent and filing fees   480    495    680    795 
Utilities   3,204    2,977    7,653    6,949 
Operating Expenses   137,640    89,395    387,951    406,058 
                     
Consulting Income   -    -    -     (2,500)
Dividends accrued for preferred shares   6,255    16,487    12,510    16,487 
Write-off of loan receivable   5,000    -    5,000    - 
Promissory note interest   19,730    4,335    23,695    8,819 
Mortgage interest   36,878    9,798    76,165    19,656 
   67,863   30,620   117,370   42,462 
Net loss for the period  $96,754   $64,363   $313,822   $352,672 
Basic and diluted loss per share  $(0.00)   $(0.00)  $(0.01)  $(0.01)
Weighted average shares outstanding   25,952,125    25,730,500    25,912,943    25,715,914 

 

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

 

 4 
 

 

HUBILU VENTURE CORPORATION

Consolidated Statement of Stockholders’ Deficit

(unaudited)

 

   Common Stock   Additional Paid-In   Accumulated   Stockholders’ 
   Shares   Amount   Capital   Deficit   Deficit 
Balance, December 31, 2017   25,526,500   $25,527   $102,123   $(542,842)  $(415,192)
Shares issued for services rendered   204,000    204    196,596    -    196,800 
Net loss   -    -    -    (370,473)   (370,473)
Balance, December 31, 2018   25,730,500    25,731    298,719    (913,315)   (588,865)
Shares issued for services rendered   221,625    222    177,078    -    177,300 
Imputed interest   

-

    

-

    

17,153

         

17,153

 
Net loss   -    -    -    (313,822)   (313,822)
Balance, June 30, 2019   25,952,125   $25,953   $492,950   $(1,227,137)  $(708,234)

 

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

 

 5 
 

 

HUBILU VENTURE CORPORATION

Consolidated Statements of Cash Flows

(unaudited)

 

   For the six
months ended
June 30, 2019
   For the six
months ended
June 30, 2018
 
OPERATING ACTIVITIES          
Net loss  $(313,822)  $(352,672)
Adjustments to reconcile net loss to net cash provided by (used for) operations:          
Depreciation   23,045    35,616 
Imputed interest   

17,153

    

-

 
Dividends accrued for preferred shares   12,510    12,874 
Stock-based compensation   177,300    260,160 
Changes in operating assets and liabilities:          
Accounts Payable   822    (29,700)
Security deposits   25,915    18,100 
Net cash used in operating activities   (57,077)   (55,622)
           
INVESTING ACTIVITIES:          
Building improvements   (61,141)   (31,374)
    (61,141)   (31,374)
           
FINANCING ACTIVITIES          
           
Advance from related party   8,845    58,000 
Issuance of preferred shares   -    40,000 
Promissory Notes Repayments   -    (20,000)
Loans payable   -   20,000 
Property indebtedness repayments   (11,081)   - 
Property indebtedness   136,546    (11,017)
           
Net cash provided by financing activities   134,310    86,983 
           
Change in cash   16,092    (13)
Cash, beginning of the period   2,310    11,988 
           
Cash, end of the period  $18,402   $11,975 
           
Supplemental cash flow information:        - 
Cash paid for interest  $

87,706

   $19,667 
Cash paid for income taxes  $-   $- 

 

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

 

 6 
 

 

HUBILU VENTURE CORPORATION

Notes to the Consolidated Financial Statements

June 30, 2019

(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 and is a publicly traded real estate consulting, asset management and business acquisition company, which specializes in acquiring student housing income properties and development/business opportunities located near the Los Angeles Metro/subway stations and within the Los Angeles area.

 

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

 

The accompanying consolidated financial statements include the accounts of the Company and each of its wholly owned subsidiaries: Akebia Investments LLC, Zinnia Investments, LLC, Sunza Investments, LLC, and Lantana Investments LLC. All intercompany transactions have been eliminated on consolidation.

 

The financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) on the basis that the Company will continue as a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for the next year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At June 30, 2019, the Company had not yet achieved profitable operations, had an accumulated deficit of $1,227,137 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

 

Basis of Preparation and Summary of Significant Accounting Policies

 

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with Securities and Exchange Commission rules and regulations and generally accepted accounting principles in the United States of America (“US GAAP”) and in the opinion of management contain all adjustments necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

 

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.

 

New Accounting Pronouncements

 

Adopted in the Current Year

 

In February 2016, the Financial Accounting Standards Board, or FASB, established Topic 842, Leases, by issuing Accounting Standards Update (“ASU”) No. 2016-02, which requires lessors to classify leases as a sales-type, direct financing, or operating lease and requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The Company adopted the new standard effective January 1, 2019 and elected the effective date method for the transition. The Company elected the following practical expedients:

 

  Transition method practical expedient – permits the Company to use the effective date as the date of initial application. Upon adoption, the Company did not have a cumulative-effect adjustment to the opening balance of retained earnings. Financial information and disclosures for periods before January 1, 2019 were not updated.
  Short-term lease practical expedient – permits the Company not to recognize leases with a term equal to or less than 12 months.

 

 7 
 

 

Lessor Accounting

 

The accounting for lessors under the new standard remained relatively unchanged with a few targeted updates impacting the Company, which included: (i) narrower definition of initial direct costs that requires certain costs to be expensed rather than capitalized, and (ii) provisions for uncollectible rents to be recorded as a reduction in revenue rather than as bad debt expense.

 

Lessee Accounting

 

The new standard requires lessees to recognize a right-of-use asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating at inception, with classification affecting the pattern and recording of expenses in the statement of operations. There was no impact on the Company’s financial statements on the adoption of Topic 842 given that its office lease does not exceed 12 months in duration.

 

NOTE 4- INVESTMENTS IN REAL ESTATE

 

The change in the real estate property investments for the six months ended June 30, 2019 and the year ended December 31, 2018 is as follows:

 

   Six months ended
June 30, 2019
   Year ended
December 31, 2018
 
         
Balance, beginning of the period  $3,463,528   $1,786,257 
Acquisitions:   -    1,645,225 
    3,463,528    3,431,482 
Capital improvements   61,141    32,046 
Balance, end of the period  $3,524,669   $3,463,528 

 

The change in the accumulated depreciation for the six months ended June 30, 2019 and 2018 is as follows:

 

    June 30, 2019    June 30, 2018 
Balance, beginning of the period  $

88,867

   $

49,555

 
Depreciation charge for the period   23,045    35,616  
Balance, end of the period  $

111,912

   $

85,171

 

 

The Company’s real estate investments as at June 30, 2019 is summarized as follows:

 

   Initial Cost to the Company   Capital   Accumulated       Security 
   Land   Building   Improvements   Depreciation   Encumbrances   Deposits 
3711 South Western Ave  $508,571   $383,716   $12,620   $50,391   $592,838   $9,560 
2909 South Catalina   565,839    344,856    4,749    44,352    480,110    14,200 
3910 Wisconsin Ave   337,500    137,500    65,472    5,292    627,974    11,000 
3910 Walton Ave   318,098    191,902    2,397    8,244    510,000    14,600 
1557 West 29th   496,609    146,891    7,949    3,633    643,500    11,550 
   $2,226,617   $1,204,865   $93,187   $111,912   $2,854,422   $60,910 

 

 8 
 

 

NOTE 5- PROPERTY INDEBTEDNESS

 

       Stated interest    
   Principal balance   rate as at    
   June 30, 2019   December 31, 2018   June 30, 2019   Maturity date
Akebia Property  $

592,838

   $585,935    3.95%  August 1, 2021
Zinnia Property   480,110    485,294    3.50%  July 25, 2021
Sunza Properties                  
- 3910 Walton Ave.   510,000     510,000    6.00%  April 30, 2020
- 3910 Wisconsin Street                  
- First Note   249,974    252,228    4.375%  October 1, 2036
- Second Note   200,000    200,000    9.00%  September 27, 2020
- Third Note   178,000    40,000    9.00%  April 30, 2022
Lantana Property                  
- First Note   443,500    443,500    6.85%  November 1, 2025
- Second Note   200,000    200,000    6.85%  October 30, 2022
   $2,854,422   $2,716,957         

 

During the six months ended June 30, 2019, the Company incurred charges of $76,175 (June 30, 2018: $19,656) in respect of interest on its property indebtedness.

 

 9 
 

 

NOTE 6 – PROMISSORY NOTES PAYABLE

 

June 30, 2019   December 31, 2018 
        
$182,055   $182,055 

 

Under the terms of the acquisition of the Akebia property at 3711 South Western Avenue, the Company’s consideration for the acquisition included a promissory note (“Akebia Note”). As at June 30, 2019, the Akebia Note had a principal balance of $92,462 and for the six months then ended, the Company paid interest of $3,041 in respect of the Akebia Note. Under the terms of the acquisition of the Zinnia property at 2909 South Catalina Street, the Company’s consideration for the acquisition included a promissory note (“Zinnia Note”). As at June 30, 2019, the Zinnia Note had a principal balance of $89,593 and for the six months then ended, the Company paid interest of $3,501 in respect of the Zinnia Note.

 

NOTE 7 – RELATED PARTY TRANSACTIONS

 

As at June 30, 2019, the Company’s majority shareholder, has provided advances totaling $494,145 (December 31, 2018: $485,300). These advances are unsecured and do not carry a contractual interest rate or repayment terms. In connection with these advances, the Company has recorded an imputed interest charge of $17,153 and which was credited to additional paid-in capital.

 

NOTE 8 – SERIES 1 CONVERTIBLE PREFERRED SHARES

 

The Company has authorized and designated 2,000,000 shares of Series 1 convertible preferred stock (the “Preferred Stock”). The Preferred Stock has the following rights and privileges:

 

Voting – The holders of the Preferred Stock shall be entitled to the number of votes equal to the number of shares of common stock into which such shares of Preferred Stock could be converted.

 

Conversion – Each share of Preferred Stock, is convertible at the option of the holder, into shares of common stock, at the lesser of $0.50 per share or a ten percent (10%) discount to the average closing bid price of the common stock 5 days prior to the notice of conversion. The Preferred Stock is also subject to certain adjustments for dilution, if any, resulting from future stock issuances, including for any subsequent issuance of common stock at a price per share less than that paid by the holders of the Preferred Stock.

 

Dividends – The holders of the Preferred Stock in preference to the holders of common stock, are entitled to receive, if and when declared by the Board of Directors, dividends at the rate of 5% per annum, in kind, which shall accrue quarterly. Such dividends are cumulative. No such dividends have been declared to date.

 

Liquidation – In the event of any liquidation, dissolution, winding-up or sale or merger of the Company, whether voluntarily or involuntarily, each holder of Preferred Stock is entitled to receive, in preference to the holders of common stock, a per-share amount equal to the original issue price of $1.00 (as adjusted, as defined), plus all declared but unpaid dividends.

 

The Preferred Stock matured on September 30, 2019.

 

   # of Shares   Amount   Dividend in Arrears   Total 
                 
Balance, December 31, 2017   460,400   $460,400   $17,395   $477,795 
Issuance of shares for cash   40,000    20,000    1,732    41,732 
Dividends for prior year shares   -    -    23,020    23,020 
                     
Balance, December 31, 2018   500,400    500,400    42,147    542,547 
Dividends accrued             12,510    12,510 
Balance, June 30, 2019   500,400   $500,400   $54,657   $555,057 

 

NOTE 9 – STOCKHOLDER’S EQUITY

 

During the six months ended June 30, 2019 the Company issued 221,625 common shares at a fair value of $0.80 per share based on their quoted market price for consulting services, including bookkeeping and accounting services, online marketing services and real estate analysis. The Company recognized consulting fees of $177,300 in connection with this share issuance. 

 

NOTE 10 – SUBSEQUENT EVENTS 

 

On July 12, 2019, the Company acquired 100% membership interest in Elata Investments, LLC., and its real property asset located at 1267 W. 38th Street, Los Angeles.

 

 10 
 

 

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.

 

 11 
 

 

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 and six months ended June 30, 2019 and 2018, respectively. You should refer to the Financial Statements and related Notes in conjunction with this discussion.

 

Results of Operations

 

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited financial statements for the three and six months ended June 30, 2019 and 2018, respectively, together with notes thereto, which are included in this Quarterly Report on Form 10-Q.

 

Three months ended June 30, 2019 compared to the three months ended June 30, 2018

 

Revenues. Our revenues increased to $108,749 for the three months ended June 30, 2019 compared to $55,652 for the comparable period in 2018. The increase is due to the acquisition of 4 new properties.

 

Operating expenses. In total, operating expenses increased $48,245 to $137,640 for the three months ended June 30, 2019 compared to $89,395 for the comparable period in 2018. The increase is primarily due to the Company commencing to pay salaries and wages.

 

General and administrative expenses increased $6,744 to $13,619 for the three months ended June 30, 2019 compared to $6,875 for the comparable period in 2018.

 

Consulting expenses increased $24,504 to $50,267 for the three months ended June 30, 2019 compared to $25,763 for the comparable period in 2018.

 

Depreciation expense decreased $6,784 to $12,531 for the three months ended June 30, 2019 compared to $19,315 for the comparable period in 2018.

 

Professional fees decreased $5,241 to $10,218 for the three months ended June 30, 2019 compared to $15,459 for the comparable period in 2018. The decrease is attributable to the timing of the invoices received by the Company’s professional service providers.

 

Property tax expense decreased $4,807 to $5,284 for the three months ended June 30, 2019 compared to $10,091 for the comparable period in 2018. The decrease is due to paying our taxes earlier in the first quarter.

 

Repairs and maintenance expense increased $1,115 to $2,635 for the three months ended June 30, 2019 compared to $1,520 for the comparable period in 2018. The increase is due to a new acquisition last quarter.

 

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The Company commenced paying wages and salaries during the three months ended June 30, 2019 and incurred $32,200 for the period compared to not having paid salaries and wages for the comparable period.

 

Promissory Note Interest expense increased $15,395 to $19,730 for the three months ended June 30, 2019 compared to $4,335 for the comparable period in 2018.

 

Mortgage Interest increased $27,080 to $36,878 for the three months ended June 30, 2019 compared to $9,798 for the comparable period in 2018. The increase is due to the acquisition of 4 new properties.

 

Net loss. Our net loss increased $32,392 to $96,754 for the three months ended June 30, 2019 compared to $64,363 for the comparable period in 2018. The decrease is attributable to the revenue and expenses discussed above.

 

Six months ended June 30, 2019 compared to the six months ended June 30, 2018 

 

Revenues. Our revenues increased to $191,499 for the six months ended June 30, 2019 compared to $95,848 for the comparable period in 2018. The increase is due to the acquisition of 4 new properties.

 

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 $18,107 to $387,951 for the six months ended June 30, 2019 compared to $406,058 for the comparable period in 2018. The decrease is due to less consulting services.

 

General and administrative expenses increased $17,420 to $32,342 for the six months ended June 30, 2019 compared to $14,922 for the comparable period in 2018.

 

Consulting expenses decreased $57,081 to $246,867 for the six months ended June 30, 2019 compared to $303,948 for the comparable period in 2018. The decrease is attributable to a lesser fair value attributable to common shares issued to consultants during the six months ended June 30, 2019 compared to the same period in the prior fiscal year.

 

Depreciation expense decreased $12,571 to $23,045 for the six months ended June 30, 2019 compared to $35,616 for the comparable period in 2018.

 

Professional fees increased $435 to $16,293 for the six months ended June 30, 2019 compared to $15,858 for the comparable period in 2018.

 

Property tax expense increased $16 to $10,107 for the six months ended June 30, 2019 compared to $10,091 for the comparable period in 2018. The increase is due to paying our taxes earlier in the first quarter.

 

Rent expense stayed near stable $14,100 for the six months ended June 30, 2019 which is a slight increase from $13,800 for the comparable period in 2018.

 

Repairs and maintenance expense increased $583 to $4,662 for the six months ended June 30, 2019 compared to $4,079 for the comparable period in 2018. The increase is due to a new acquisition last quarter.

 

Transfer Agent and Filing Fees decreased $115 to $680 for the six months ended June 30, 2019 compared to $795 for the comparable period in 2018. The decrease is due to less monthly fees paid.

 

Utilities expense increased $704 to $7,653 for the six months ended June 30, 2019 compared to $6,949 for the comparable period in 2018. The increase is due to additional property acquisitions.

 

Promissory Note Interest expense increased $14,876 to $23,695 for the six months ended June 30, 2019 compared to $8,819 for the comparable period in 2018.

 

Mortgage Interest increased $56,509 to $76,165 for the six months ended June 30, 2019 compared to $19,656 for the comparable period in 2018. The increase is due to the acquisition of 4 new properties.

 

Net loss. Our net loss decreased $38,850 to $313,822 for the six months ended June 30, 2019 compared to $352,672 for the comparable period in 2018. The decrease is attributable to the revenue and expenses discussed above.

 

Liquidity and Capital Resources. For the six months ended June 30, 2019, we borrowed $8,845 from our majority shareholder, which was 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.

 

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Our total assets are $3,439,259 as of June 30, 2019, consisting of $3,412,757 in net property assets, $18,402 in cash, $6,600 in deposits and $1,500 in prepaid expenses.

 

Our total liabilities are $4,147,493 as of June 30, 2019.

 

We used $57,077 in operating activities for the six months ended June 30, 2019 including $313,822 in net loss which was offset by non-cash charges of $23,045 for depreciation, $177,300 in stock-based compensation, $12,510 in dividends accrued in preferred shares, a net increase of $821 in accounts payable and $25,915 received for security deposits and imputed interest of $17,153.

 

We used $61,141 in investing activities for the six months ended June 30, 2019, which was used for building additions and improvements.

 

We had $134,310 provided by financing activities for the six months ended June 30, 2019 including additional mortgage funds of $136,546.

 

The Company had no formal long-term lines or credit or other bank financing arrangements as of June 30, 2019.

 

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 $61,141 on building improvements during the six months ended June 30, 2019.

 

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

 

For information on the impact of recent accounting pronouncements on our business, see note 3 of the Notes to the Consolidated Financial Statements.

 

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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, 2019, 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.

 

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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.

 

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SignatureS

 

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

 

  HUBILU VENTURE CORPORATION
   

December 10, 2019

/s/ David Behrend
  David Behrend
  Chairman and Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Accounting and Financial Officer)

 

 17 
 

 

 

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: December 10, 2019 /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: December 10, 2019 /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, 2019, 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: December 10, 2019 /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, 2019 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: December 10, 2019 /s/ David Behrend
  David Behrend
  Chief Financial Officer
  (Principal Financial Officer)