Hubilu Venture Corp - Quarter Report: 2021 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: September 30, 2021

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)

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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ 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 ☒ 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.

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

Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

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 January 6, 2022, the number of shares outstanding of the issuer’s sole class of common stock, $0.001 par value per share, is 26,237,125.

table of contents

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements

HUBILU VENTURE CORPORATION

Consolidated Balance Sheets

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

HUBILU VENTURE CORPORATION

Consolidated Statements of Operations

(unaudited)

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

HUBILU VENTURE CORPORATION

Consolidated Statement of Stockholders’ Deficit

(unaudited)

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

HUBILU VENTURE CORPORATION

Consolidated Statements of Cash Flows

(unaudited)

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

HUBILU VENTURE CORPORATION

Notes to the Consolidated Financial Statements

June 30, 2021

(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, Lantana Investments LLC, Elata Investments, LLC, Trilosa Investments, LLC, Kapok Investements, LLC, and Boabab 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 September 30, 2021, the Company had not yet achieved profitable operations, had an accumulated deficit of $1,541,286 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, 2020.

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:

NOTE 4 - PROPERTY ACQUISITIONS - Related Party

On February 1, 2021 we completed our acquisition, through our subsidiary Trilosa Investments, LLC,, the real property located at 4009 Brighton Avenue in Los Angeles (“Brighton”). The property was vacant at time of purchase. The acquisition was for $601,000 (“Purchase Price”). Terms of the acquisition as follows:

(1) A first position note with payment on principal balance of $540,900 issued by the Property Owner, Trilosa, owing to lender, Center Street Lending VIII SPR, LLC, whose terms of payments due are principle and interest, on unpaid principal at the rate of 8.5% per annum. Principal and interest payable in monthly installments of $3,831.38 or more starting on March 1, 2021 and continuing until the January 1, 2022, at which time the entire principal balance together with interest due thereon, shall become due and payable.

(2) A $60,100 second position note owing by Trilosa, whose terms of payments due were interest only, payable on unpaid principal at the rate of 6.60% per annum. Interest only payable in monthly installments of $687.50 or more on the 18^th day of each month beginning on the 18^th day of January 2021 and continuing until the 17^th day of December 2026, at which time the entire principal balance together with interest due thereon, shall become due and payable.

On June 18, 2021, we completed our acquisition, through its subsidiary Zinnia Investments, LLC, the real property located at 3908 Denker Ave, Los Angeles (“Denker”). The property was vacant at the time of purchase. The acquisition was for $668,000 (“Purchase Price”). The terms of the acquisition as follows:

(1) A first position note with interest only for $655,000 owing by Zinnia to Belladonna, whose terms of payments due were interest only, payable on unpaid principal at the rate of 6.00% per annum. Interest only payable in monthly installments of $3,275 or more on the 1st day of each month beginning on the 1st day of July 2021 and continuing until the 1st day of June 2025, at which time the entire principal balance together with interest due thereon, shall become due and payable.

On July 22, 2021, we completed our acquisition, through its subsidiary Sunza Investments, LLC, the real property located 4021 Halldale Avenue in Los Angeles (“Halldale”). The property was vacant at the time of purchase. The acquisition was for $650,000 (“Purchase Price”). The terms of the acquisition as follows:

(1) A first position note with payment on principal balance of $585,000 issued by Sunza, owing to lender, Center Street Lending, VIII SPE, LLC, whose terms of payments due are interest only, payable on unpaid principal at the rate of 8.5% per annum. Principal and interest payable in monthly installments of $4,143.75 or more starting on September 1, 2021, and continuing until the 14th day of July 2022, at which time the entire principal balance together with interest due thereon, shall become due and payable. (2) A $145,312 second position note owing by Sunza to Belladonna Lily Investments, Inc. (“Belladonna”), whose terms of payments due were interest only, payable on unpaid principal at the rate of 3.00% per annum. Interest only payable in monthly installments of $363.28 or more on the 15^th day of each month beginning on the 15^th day of August 2021 and continuing until the 30th day of June 2029, at which time the entire principal balance together with interest due thereon, shall become due and payable.

On August 9, 2021, we completed our acquisition, through its subsidiary, Zinnia Investments, LLC, the real property located at 1284 W. 38^th Street in Los Angeles (“38th Street”). The property was vacant at the time of purchase. The acquisition was for $735,000 (“Purchase Price”). The terms of the acquisition as follows:

(1) A first position note with payment on principal balance of $661,500 issued by the Zinnia owing to lender, Center Street Lending, VII SPE, LLC, whose terms of payments due are interest only, payable on unpaid principal at the rate of 8.5% per annum. Principal and interest payable in monthly installments of $4,685.63 or more starting on October 1, 2021, and continuing until the 3^rd day of August 2022, at which time the entire principal balance together with interest due thereon, shall become due and payable. (2) A $110,000 second position note owing by Zinnia to Belladonna, whose terms of payments due were interest only, payable on unpaid principal at the rate of 5.25% per annum. Interest only payable in monthly installments of $481.25 or more on the 9th day of each month beginning on the 9th day of September 2021 and continuing until the 30th day of June 2029 at which time the entire principal balance together with interest due thereon, shall become due and payable.

September 30, 2021, we completed our acquisition, through its subsidiary Boabab Investments LLC, the real property located at 4505 Orchard Avenue in Los Angeles (“Orchard”). The property was vacant at the time of purchase. The acquisition was for $675,000 (“Purchase Price”). The terms of the acquisition as follows:

(1) A first position note with interest only for $675,000 owing by Boabab to Belladonna Lily Investments, Inc. (“Belladonna”), whose terms of payments due were interest only, payable on unpaid principal at the rate of 5.00% per annum. Interest only payable in monthly installments of $2,812.50 or more on the 22nd day of each month beginning on the 22nd day of October 2021 and continuing until the 1st day of October 2029, at which time the entire principal balance together with interest due thereon, shall become due and payable.

NOTE 5- INVESTMENTS IN REAL ESTATE- Related party

The change in the real estate property investments for the nine months ended September 30, 2021 and the year ended December 31, 2020 is as follows:

SCHEDULE OF REAL ESTATE INVESTMENT FINANCIAL STATEMENTS 

The change in the accumulated depreciation for the nine months ended September 30, 2021 and 2020 is as follows:

SCHEDULE OF CHANGES IN ACCUMULATED DEPRECIATION 

The Company’s real estate investments as of September 30, 2021 is summarized as follows:

 SCHEDULE OF REAL ESTATE PROPERTIES

NOTE 6- PROPERTY INDEBTEDNESS

The Company’s mortgages are summarized as follows:

SCHEDULE OF FINANCIAL INSTRUMENTS OWNED AND PLEDGED AS COLLATERAL 

NOTE 7 – PROMISSORY NOTES PAYABLE-Related Party

SCHEDULE OF DEBT 

As of September 30, 2021, the Company has two promissory notes payable to Esteban Coaloa, outstanding, the total amount owing of $182,056. The first is payable through its wholly owned subsidiary, Akebia Investments, LLC, in the amount of $92,463, bearing an interest rate of 3.95%, maturing on August 1, 2029, and the second with a balance of $89,593 is payable through its wholly owned subsidiary, Zinnia Investments, LLC, bearing an interest rate of 3.50%, maturing on April 20, 2023. The total balance is due on the maturity date of each note.

General loans that are considered due are not property specific and are considered due on demand.

NOTE 8–RELATED PARTY TRANSACTIONS

As of September 30, 2021, the Company’s majority shareholder, has provided advances totaling $474,271 (December 31, 2020: $492,500). 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 $24,831 which was credited to additional paid-in capital for the nine months ended September 30, 2021.

NOTE 9 – SERIES 1 CONVERTIBLE PREFERRED SHARES

On September 8, 2016, the Company authorized and designated 2,000,000 shares of Series 1 convertible preferred stock (the “Preferred Stock”).

Effective September 30, 2019, the 5% Voting, Cumulative Convertible Series 1 Preferred Stock date of conversion has been extended to the September 30, 2029.

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 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.

SCHEDULE OF ISSUANCE OF CONVERTIBLE PREFERRED SHARES SETTLEMENT OBLIGATION 

NOTE 10 – CONTINGENCY/LEGAL

As of September 30, 2021, and during the preceding ten years, no director, person nominated to become a director or executive officer, or promoter of the Company has been involved in any legal proceeding that would require disclosure hereunder.

From time to time, the Company may become subject to various legal proceedings and claims that arise in the ordinary course of our business activities. However, litigation is subject to inherent uncertainties for which the outcome cannot be predicted. Any adverse result in these or other legal matters could arise and cause harm to the Company’s business. The Company currently is not a party to any claim or litigation, the outcome of which, if determined adversely to the Company, would individually or in the aggregate be reasonably expected to have a material adverse effect on the Company’s business.

NOTE 11 – SUBSEQUENT EVENTS

On July 21, 2021, we entered into an agreement, through our subsidiary Lantana Investments, LLC, to acquire its real property asset located at 3777 Ruthelen Street in Los Angeles. We acquired the property on October 6, 2021.

On November 11, 2021, we entered into an agreement, through our subsidiary Boabab Investments, LLC, to acquire its real property asset located at 2029 W. 41^st Place in Los Angeles. We plan to close the acquisition in the fourth quarter.

On December 8, 2021, we entered into an agreement, through our subsidiary Boabab Investments, LLC, to acquire its real property asset located at 3791 S. Normandie Avenue in Los Angeles. We plan to close the acquisition in the fourth quarter.

In October 2021, we refinanced loans on three of our Hubilu properties, 4009 S. Brighton Avenue, 3408 S. Budlong Avenue and 3908 Denker Avenue, taking advantage of lower interest rates and lowering the rate on those loans by an average of 1%. Loans were refinanced rate and term only, no cash out. All loans were principal and interest fixed for 30 years, due in 30 years.

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:

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.

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 nine-months ended September 30, 2021 and 2020, 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 nine months ended September 30, 2021 and 2020, respectively, together with notes thereto, which are included in this Quarterly Report on Form 10-Q.

Three months ended September 30, 2021, compared to the three months ended September 30, 2020

Revenues. Our revenues decreased $90,545 to $167,043 for the three months ended September 30, 2021, compared to $257,588 for the comparable period in 2020. The decrease is due to less consulting income.

Operating expenses. In total, operating expenses increased $60,927 to $191,623 for the three months ended September 30, 2021, compared to $130,696 for the comparable period in 2020.

General and administrative expenses increased $35,205 to $75,699 for the three months ended September 30, 2021, compared to $40,494 for the comparable period in 2020.

Depreciation expense increased $10,298 to $34,477 for the three months ended September 30, 2021, compared to $24,179 for the comparable period in 2020.

Rent expense stayed equal at $3,900 for the three months ended September 30, 2021, which was the same amount of $3,900 for the comparable period in 2020.

Property tax expense increased $3,015 to $22,173 for the three months ended September 30, 2021, compared to $19,158 for the comparable period in 2020. The increase is due to the acquisition of five new properties.

Repairs and maintenance expense remained equal at $0 for the three months ended September 30, 2021, which was the same amount for the comparable period in 2020.

Taxes and licenses expense increased $159 to $159 for the three months ended September 30, 2021, compared to $0 for the comparable period in 2020. The increase is due timing of filing dates.

Wages and benefits expense increased $8,874 to $36,000 for the three months ended September 30, 2021, compared to $27,126 for the comparable period in 2020. The increase is due to salaries and wages being back to normal. Additional money was being paid to assist employees during Covid shutdown.

Transfer agent and filing fees expense decreased $300 to $0 for the three months ended September 30, 2021, compared to $300 for the comparable period in 2020. The increase is due to more filings during this period.

Promissory Note Interest expense decreased $36,776 to $0 for the three months ended September 30, 2021, compared to $36,776 for the comparable period in 2020.

Mortgage Interest increased $63,829 to $141,600 for the three months ended September 30, 2021, compared to $77,771, for the comparable period in 2020. The increase is due to the acquisition of five new properties.

Net loss. Our net loss decreased $98,691 to $96,138 of net income for the three months ended September 30, 2021, compared to $2,553 of net loss for the comparable period in 2020. The increase is attributable to the revenue and expenses discussed above.

Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020

Revenues. Our revenues increased $241,837 to $871,726 for the nine months ended September 30, 2021 compared to $629,889 for the comparable period in 2020. The increase is due to the acquisition of five new properties and consulting income.

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 $150,957 to $563,430 for the nine months ended September 30, 2021, compared to $412,473 for the comparable period in 2020. The increase is due to the acquisition of five new properties.

General and administrative expenses increased $96,932 to $237,741 for the nine months ended September 30, 2021, compared to $140,809 for the comparable period in 2020.

Depreciation expense increased $15,466 to $85,316 for the nine months ended September 30, 2021, compared to $69,850 for the comparable period in 2020.

Professional fees decreased $52 to $395 for the nine months ended September 30, 2021, compared to $447 for the comparable period in 2020.

Property tax expense increased $28,603 to $79,723 for the nine months ended September 30, 2021, compared to $51,120 for the comparable period in 2020. The increase is due to paying our taxes earlier in the first quarter.

Rent expense increased $450 to $11,700 for the nine months ended September 30, 2021, compared to $11,250 for the comparable period in 2020. The increase is due to downsizing our office space.

Repairs and maintenance expense decreased $123 to $1,999 for the nine months ended September 30, 2021, compared to $2,122 for the comparable period in 2020. The decrease is due to the properties being in good condition and require less maintenance.

Taxes and licenses expense increased $6,157 to $6,157 for the nine months ended September 30, 2021, compared to $0 for the comparable period in 2020. The increase is due timing of filing dates.

Wages and benefits expense decreased $10,903 to $88,500 for the nine months ended September 30, 2021, compared to $99,403 for the comparable period in 2020. The decrease is due to salaries and wages being adjusted since the Covid shutdown.

Transfer Agent and Filing Fees decreased $1,401 to $0 for the nine months ended September 2021 compared to $1,401 for the comparable period in 2020. The decrease is due to fewer monthly fees being paid.

Utilities expense increased $15,828 to $51,899 for the nine months ended September 30, 2021, compared to $36,071for the comparable period in 2020. The increase is due to four additional property acquisitions.

Promissory Note Interest expense decreased $89,285 to $0 for the nine months ended September 30, 2021, compared to $89,285 for the comparable period in 2020.

Mortgage Interest increased $198,370 to $413,844 for the nine months ended September 30, 2021, compared to $215,474 for the comparable period in 2020. The increase is due to the acquisition of five new properties.

Net loss. Our net loss decreased $290,006 to income $128,086 for the nine months ended September 30, 2021, compared to a loss of $131,920 for the comparable period in 2020. The decrease is attributable to the revenue and expenses discussed above.

Liquidity and Capital Resources. For the nine months ended September 30, 2021, we did not borrow any money from our majority shareholder. 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 $13,172,353 as of September 30, 2021, consisting of $13,104,915 in net property assets, $29,876 in cash, $9,212 in funds held in escrow, $6,600 in deposits and $21,750 in prepaid expenses.

Our total liabilities are $13,920,015 as of September 30, 2021.

We were provided $267,833 in operating activities for the nine months ended September 30, 2021, including $128,086 in net income, imputed interest and gain, which was offset by non-cash charges of $85,316 for depreciation and amortization, $24,985 in dividends accrued in preferred shares, a net decrease of $5,827 in accounts payable and $11,855 received for security deposits.

We used $361,612 in investing activities for the nine months ended September 30, 2021, which was used for building additions and improvements.

We had $21,009 used in financing activities for the nine months ended September 30, 2021.

The Company had no formal long-term lines or credit or other bank financing arrangements as of September 30, 2021.

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 $361,612 on building improvements during the nine months ended September 30, 2021.

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.

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 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 nine-month period ended September 30, 2021, 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.

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

* Filed herewith.

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.