Hubilu Venture Corp - Quarter Report: 2023 June (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: June 30, 2023

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 August 10, 2023 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

CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes to financial statements.

HUBILU VENTURE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See accompanying notes to financial statements.

HUBILU VENTURE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

See accompanying notes to financial statements.

HUBILU VENTURE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying notes to financial statements.

HUBILU VENTURE CORPORATION

Notes to the Consolidated Financial Statements

June 30, 2023

(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, Boabab Investments, LLC and Mopane 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, 2023, the Company had not yet achieved profitable operations, had an accumulated deficit of $1,742,883 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, 2022.

Reclassification

Certain reclassifications have been made to the prior years’ financial statements to conform to current year presentation. These reclassifications had no effect on previously reported results of operations or retained earnings.

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:

Recent Accounting Standards

From time to time, new accounting pronouncements are issued by the FASB that are adopted by the Company as of the specified effective date.

Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.

NOTE 4 - PROPERTY ACQUISITIONS - Related Party

As of June 30, 2023, we have not acquired any additional properties since the year ended December 31, 2022.

On January 1, 2023 we refinanced 2029 W. 41^st Place in Los Angeles. Terms of the refinance are as follows: (1) A first position note with payment on principal balance of $820,000 issued by the Property Owner, Boabab Investments, LLC, owing to lender, Belladonna Lily Investments, Inc., whose terms of payments due are interest only, on unpaid principal at the rate of 6% per annum. Interest only is payable in monthly installments of $4,100 or more starting on February 1, 2023 and continuing until the 31^st day of December 2029, at which time the entire principal balance together with interest due thereon, shall become due and payable.

In February 2023, we entered a three-month loan extension with Center Street Lending on 1733 W. 37^th Place with a due date of June 22, 2023. In June, we extended our loan again to September 22, 2023.

NOTE 5 - INVESTMENTS IN REAL ESTATE- Related party

The change in the real estate property investments for the six months ended June 30, 2023 and the year ended December 31, 2022 is as follows:

SUMMARY OF CHANGES IN REAL ESTATE PROPERTY INVESTMENTS

The change in the accumulated depreciation for the six months ended June 30, 2023 and 2022 is as follows:

SCHEDULE OF CHANGES IN ACCUMULATED DEPRECIATION

The Company’s real estate investments as of June 30, 2023 is summarized as follows:

SCHEDULE OF REAL ESTATE INVESTMENT

NOTE 6 – ADVANCED RENTS RECEIVED

The Company received $14,375 of rents in advance as of June 30, 2023. There was no rental income received in advance as of December 31, 2022.

NOTE 7 - PROPERTY INDEBTEDNESS

The Company’s mortgages are summarized as follows:

SCHEDULE OF MORTGAGES PAYABLE

NOTE 8 – PROMISSORY NOTES PAYABLE-Related Party

Esteban Coaloa, who was owed $89,593 as part of the purchase of 2909 S. Catalina Street, Los Angeles, CA, passed away in 2017. Effectively, Mr. Coaloa is no longer an officer of the Company, therefore the loan is now payable to his family trust and is no longer a related party transaction. The promissory notes, related parties balance as of December 31, 2022 was $89,593, which was reclassified and added to the mortgages payable amount during the first quarter of 2023. As of June 30, 2023, there were no other promissory notes held by related parties.

NOTE 9 –RELATED PARTY TRANSACTIONS

As of June 30, 2023, Jacaranda Investments, Inc., has provided advances totaling $474,271 (December 31, 2022: $474,271). 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 $26,009 and which was credited to additional paid-in capital for the six months ended June 30, 2023. See additional related party transactions in Note 4 and 5.

NOTE 10 – 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 11 – CONTINGENCY/LEGAL

As of June 30, 2023, 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 12 - SUBSEQUENT EVENTS

We have evaluated subsequent events from the balance sheet date through June 30, 2023, the date at which the financial statements were issued, and determined that there were no items that require adjustment to or disclosure in the financial statements.

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 six months ended June 30, 2023 and 2022, 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, 2023 and 2022, respectively, together with notes thereto, which are included in this Quarterly Report on Form 10-Q.

Three months ended June 30, 2023, compared to the three months ended June 30, 2022

Revenues. Our revenues increased $32,295 to $426,098 for the three months ended June 30, 2023, compared to $393,803 for the comparable period in 2022. The increase is due to additional property acquisitions.

Operating expenses. In total, operating expenses decreased $9,938 to $188,462 for the three months ended June 30, 2023, compared to $198,400 for the comparable period in 2022.

General and administrative expenses decreased $16,633 to $131,480 for the three months ended June 30, 2023, compared to $148,113 for the comparable period in 2022.

Depreciation expense increased $6,695 to $56,982 for the three months ended June 30, 2023, compared to $50,287 for the comparable period in 2022.

Property tax expense increased $5,856 to $49,815 for the three months ended June 30, 2023, compared to $43,959 for the comparable period in 2022.

Salaries and benefits expense increased $3,200 to $15,700 for the three months ended June 30, 2023, compared to $12,500 for the comparable period in 2022.

Utilities expense decreased $9,674 to $8,485 for the three months ended June 30, 2023, compared to $18,159 for the comparable period in 2022.

Professional fees expense decreased $6,241 to $35,756 for the three months ended June 30, 2023, compared to $41,997 for the comparable period in 2022.

Interest expense increased $8,552 to $235,997 for the three months ended June 30, 2023, compared to $227,445 for the comparable period in 2022. The increase is due to the acquisition of more properties.

Net Loss. Our net loss increased $33,681 to $1,639 of net income for the three months ended June 30, 2023, compared to $32,042 of net loss for the comparable period in 2022. The decrease is attributable to the revenue and expenses discussed above.

Six months ended June 30, 2023 compared to the six months ended June 30, 2022

Revenues. Our revenues increased $51,196 to $834,936 for the six months ended June 30, 2023, compared to $783,740 for the comparable period in 2022. The increase is due to additional property acquisitions.

Operating expenses. In total, operating expenses decreased $79,948 to $365,825 for the six months ended June 30, 2023, compared to $445,773 for the comparable period in 2022.

General and administrative expenses decreased $93,438 to $252,821 for the six months ended June 30, 2023, compared to $346,259 for the comparable period in 2022.

Depreciation expense increased $13,490 to $113,004 for the six months ended June 30, 2023, compared to $99,514 for the comparable period in 2022.

Property tax expense decreased $13,830 to $91,361 for the six months ended June 30, 2023, compared to $105,191 for the comparable period in 2022. The decrease is due to the timing of payments.

Salaries and benefits expense decreased $17,775 to $31,600 for the six months ended June 30, compared to $49,375 for the comparable period in 2022.

Utilities expense decreased $6,700 to $25,885 for the six months ended June 30, 2023, compared to $32,585 for the comparable period in 2022.

Professional fees expense increased $12,309 to $54,556 for the six months ended June 30, 2023, compared to $42,247 for the comparable period in 2022.

Mortgage Interest expense increased $23,564 to $471,199 for the three months ended June 30, 2023, compared to $447,635, for the comparable period in 2022. The increase is due to the acquisition of more properties.

Net Loss. Our net loss decreased $77,780 to $2,088 of net loss for the six months ended June 30, 2023, compared to $79,868 of net loss for the comparable period in 2022. The decrease is attributable to the revenue and expenses discussed above.

Liquidity and Capital Resources. For the six months ended June 30, 2023, we did not borrow any money from our majority shareholder. Since 2015, Jacaranda Investments, Inc., provided us with $492,500 in related party advances. We have not been advanced any more money since 2018. Jacaranda Investments, Inc. has agreed not to seek repayment of its advances until we are financially able to repay them. In 2021, $18,229 was repaid to Jacaranda Investments, Inc. leaving the balance at $474,271. 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 $17,138,620, as of June 30, 2023, consisting of $11,800,304 in real estate, building and capital improvements of $5,678,888, $298,704 in property acquisition and financing, net of $677,651 in depreciation, $31,592 in cash and $6,783 in security deposits.

Our total liabilities are $18,007,276 as of June 30, 2023.

Our total stockholders’ deficit is $868,656 as of June 30, 2023.

Our net cash provided by operations was $194,724 for the six months ended June 30, 2023.

Our investing activities used a total of $222,434 for the six months ended June 30, 2023.

We had $32,766 in cash used in financing activities for the six months ended June 30, 2023.

We do not now have funds sufficient for pursuing our plan of operation, but we are in the process of trying to increase rents to finance our operations through rental cash flow. If operating difficulties or other factors (many of which are beyond our control) delay our realization of revenues or cash flows from rental income, we may be limited in our ability to pursue our business plan. Moreover, if unexpected expenses arise due to unanticipated pressures or if we decide to expand our business plan beyond its currently anticipated level or otherwise, we will require additional financing to fund our operations, in addition to anticipated cash generated from our operations. Additional financing might not be available on terms favorable to us, or at all. If adequate funds were not available or were not available on acceptable terms, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our business or otherwise respond to competitive pressures would be significantly limited. In a worst-case scenario, we might not be able to fund our operations or to remain in business, which could result in a total loss of our stockholders’ investment. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders would be reduced, and these newly issued securities might have rights, preferences or privileges senior to those of existing stockholders.

Belladonna Lily Investments, Inc., a Wyoming Corporation is not, and has never been a related party to Hubilu Venture Corporation. Neither Hubilu, nor David Behrend has, nor ever had any ownership interest, nor controlling interest in Belladonna, and David Behrend was not an officer of Belladonna during, or after the reporting period.

The Company had no formal long-term lines or credit or other bank financing arrangements as of June 30, 2023.

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 expended $222,434 in capital and building improvements during the six months ended June 30, 2023.

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 six-month period ended June 30, 2023, 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

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.