PRESIDENTIAL REALTY CORP/DE/ - Quarter Report: 2016 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended: September 30, 2016

Or

For the transition period from         to         

Commission File Number: 001-08594

PRESIDENTIAL REALTY CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

1430 Broadway, Suite 503

New York, NY 10018

(Address of Principal Executive Office)

Registrant’s Telephone Number, Including Area Code:  (914) 948-1300

N/A

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

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   x No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 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 definitions of “large accelerated filer,” “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   x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  As of November 3, 2016, there were 442,533 shares of Class A common stock and 3,846,147 shares of Class B common stock outstanding.  

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES 

Index to Form 10-Q

For the Quarterly Period Ended

September 30, 2016

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See notes to consolidated financial statements.

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

See notes to consolidated financial statements.

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

See notes to consolidated financial statements.

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Organization

Presidential Realty Corporation (“Presidential” or the “Company”) is operated as a self-administrated, self-managed Real Estate Investment Trust (“REIT”). The Company is engaged principally in the ownership of income producing real estate. Presidential operates in a single business segment, investments in real estate related assets.

Basis of Presentation and Going Concern Considerations

For the nine months ended September 30, 2016, the Company had a loss from operations. This combined with a history of operating losses and working capital deficiency, has been detrimental to our operations and could potentially affect our ability to meet our obligations and continue as a going concern. Our ability to continue as a going concern is dependent upon the successful execution of strategies to achieve profitability, and increase working capital by raising debt and/or equity. The accompanying financial statements do not include any adjustments that may result from this uncertainty.

The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the requirements of the Securities and Exchange Commission (“SEC”). The financial statements include all normal and recurring adjustments that are necessary for a fair presentation of the Company’s financial position and operating results.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the requirements of the Securities and Exchange Commission (“SEC”) for interim financial information. The financial statements include all normal and recurring adjustments that are necessary for a fair presentation of the Company’s financial position and operating results. The results for such interim periods are not necessarily indicative of the results to be expected for the year. In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the results for the respective periods have been reflected. These consolidated financial statements and accompanying notes should be read in conjunction with the Company’s Form 10-K for the year ended December 31, 2015 filed on April 12, 2016.

Real Estate

Real estate is stated at cost. Generally, depreciation is provided on the straight-line method over the assets estimated useful lives, which range from twenty to thirty-nine years for buildings and improvements and from three to ten years for furniture and equipment. Maintenance and repairs are charged to operations as incurred and renewals and replacements are capitalized. The Company reviews each of its property investments for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment of properties is determined to exist when estimated amounts recoverable through future operations on an undiscounted basis are below the properties carrying value. If a property is determined to be impaired, it is written down to its estimated fair value.

Sale of Real Estate

Presidential follows the guidance of the Property, Plant and Equipment Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) as it pertains to sales of real estate. Accordingly, the gains on certain transactions maybe deferred and recognized on the installment method until such transactions comply with the criteria for full profit recognition. At September 30, 2016 and 2015, the Company had no deferred gains.

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Principles of Consolidation

The consolidated financial statements include the accounts of Presidential Realty Corporation and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

Rental Revenue Recognition

The Company acts as lessor under operating leases. Rental revenue is recorded on the straight-line basis from the later of the date of the commencement of the lease or the date of acquisition of the property subject to existing leases, which averages minimum rents over the terms of the leases. Certain leases require the tenants to reimburse a pro rata share of real estate taxes, utilities and maintenance costs. Recognition of rental revenue is generally discontinued when the rental is delinquent for ninety days or more, or earlier if management determines that collection is doubtful.

Allowance for Doubtful Accounts

The Company assesses the collectability of amounts due from tenants and other receivables, using indicators such as past-due accounts, the nature and age of the receivable, the payment history and the ability of the tenant or debtor to meet its payment obligations. Management’s estimate of allowances for doubtful accounts is subject to revision as these factors change. Rental revenue is recorded on the straight-line basis and rental revenue recognition is generally discontinued when the tenant in occupancy is delinquent for ninety days or more. Bad debt expense is charged for vacated tenant accounts and subsequent receipts collected for those receivables will reduce bad debt expense. As of September 30, 2016 and December 31, 2015, the allowance relating to tenant obligations was $1,098 and $790, respectively.

Net Income (Loss) Per Share

Basic net loss per share data is computed by dividing net loss by the weighted average number of shares of Class A and Class B common stock outstanding (excluding non-vested shares) during each period. Diluted net income per share is computed by dividing net income by the weighted average shares outstanding, including the dilutive effect, if any, of non-vested shares. For the three and nine months ended September 30, 2016 and 2015, the weighted average shares outstanding as used in the calculation of diluted loss per share do not include 740,000, of outstanding stock options and 1,700,000 of outstanding warrants, as their inclusion would be antidilutive.

Cash

Cash includes cash on hand, cash in banks and cash in money market funds.

Management Estimates

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated balance sheets and the reported amounts of income and expense for the reporting period. Actual results could differ from those estimates.

Accounting for Stock Awards

The Company follows the guidance of ASC Topic 718 in accounting for stock-based compensation. Shares of Class B common stock granted are fully vested upon the grant date. The Company recorded the market value of any grants that were earned and vested in 2016 and 2015 to expense in each period.

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Accounting for Uncertainty in Income Taxes

The Company follows the guidance of the recognition of current and deferred income tax accounts, including accrued interest and penalties, in accordance with ASC 740-10-25. Under this guidance, if the Company’s tax positions in relation to certain transactions were examined and were not ultimately upheld, the Company would be required to pay an income tax assessment and related interest. Alternatively, the Company could elect to pay a deficiency dividend to its shareholders in order to continue to qualify as a REIT and the related interest assessment to the taxing authorities.

Recent Accounting Pronouncements

In April 2015, the FASB issued ASU 2015-3, to simplify the presentation of debt issuance costs. This update requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the associated debt liability, consistent with the required presentation for debt discounts. This update is effective for interim and annual periods beginning after December 15, 2015. The Company adopted ASU 2015-03 January 1, 2016. The adoption of this standard resulted in the reclassification of $150,438 of unamortized debt issuance costs related to the Company’s mortgage loan (see Note 4b) from other assets to Mortgage payable within its consolidated balance sheets as of September 30, 2016 and December 31, 2015. Other than this reclassification, the adoption of ASU 2015-03 did not have an impact on the Company’s consolidated financial statements.

Accumulated amortization as of September 30, 2016 and December 31, 2015 was $18,683 and $6,884, respectively.

Amortization expenses of mortgage costs was $3,933 and $14,171 for the three months ended September 30, 2016 and 2015, respectively and $11,799 and $17,010 for the nine months ended September 30, 2016 and 2015, respectively, which is included in interest expense.

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASU 2016-02 supersedes the previous leases standard, Leases (Topic 840). The standard is effective on January 1, 2019, with early adoption permitted. The Company is currently in the process of evaluating the impact the adoption of ASU 2016-02 will have on the Company’s financial position or results of operations.

In March 2016, FASB issued ASU No. 2016-09, “Improvements to Employee Share-based Payment Accounting” (“ASU 2016-09”).  ASU 2016-09 simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the standard and the impact on its consolidated financial statements and footnote disclosures.

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern” (ASU 2014-15), which provides guidance on management’s responsibility in evaluating whether there is substantial doubt an entity’s ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. The adoption of ASU 2014-15 is not expected to have a material impact on our financial position, results of operations or cash flows.

Real estate is comprised of the following:

Rental revenue from the Maple Tree property constituted all of the rental revenue for the Company for the three and nine months ended September 30, 2016 and 2015.

We received distributions from Broadway Partners Fund II in the amount of $0 and $2,750 during the nine months ended September 30, 2016 and 2015, respectively. This amount is reported as investment income on the statement of operations. This investment was previously written off. The Company recognizes income received on the cash basis. The Broadway Partners Fund II was closed at the end of 2014 and we do not expect any meaningful income from this investment in the future.

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Presidential has elected to qualify as a Real Estate Investment Trust under the Internal Revenue Code. A REIT which distributes at least 90% of its real estate investment trust taxable income to its shareholders each year by the end of the following year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders.

ASC 740 prescribes a more likely than not recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken. If the Company’s tax position in relation to a transaction was not likely to be upheld, the Company would be required to record the accrual for the tax and interest thereon. As of September 30, 2016, the tax years that remain open to examination by the federal, state and local taxing authorities are the 2012 – 2016 tax years and the Company was not required to accrue any liability for those tax years.

The Company has accumulated a net operating loss carry forward of approximately $20,450,000 expiring from 2028 through 2034.

For the nine months ended September 30, 2016, the Company had a tax loss of approximately $349,000 ($.08 per share), which was all ordinary loss.

For the nine months ended September 30, 2015, the Company had a tax loss of approximately $310,000 ($.07 per share), which was all ordinary loss.

Mr. Jekogian’s employment agreement, as amended, expired at December 31, 2015 but the board agreed to continue Mr. Jekogian’s employment on the same terms as the agreement until otherwise terminated by the board.

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Mr. Ludwig’s employment agreement, as amended, expired at December 31, 2015 but the board agreed to continue Mr. Ludwig’s employment on the same terms as the agreement until otherwise terminated by the board.

On November 8, 2011, the Company and Signature Community Management (“Signature”), (an entity owned by our CEO) entered into a Property Management Agreement pursuant to which the Company retained Signature as the exclusive, managing and leasing agent for the Company’s Mapletree Property. Signature receives compensation of 5% of monthly rental income actually received from tenants at the Mapletree Property. The property Management Agreement renewed for a one year term on November 8, 2015 and will automatically renew for one year terms until it is terminated by either party upon written notice. The Company incurred management fees of approximately $10,000 for the three months ended September 30, 2016 and 2015, respectively and approximately $30,000 for the nine months ended September 30, 2016 and 2015, respectively.

On November 8, 2011, the Company entered into an Asset Management Agreement with Signature pursuant to which the Company engaged Signature to oversee the Mapletree Property. Signature will receive an asset management fee of 1.5% of the monthly gross rental revenues collected for the Mapletree Property. The Asset Management Agreement renewed for a one year term on November 8, 2015 and will automatically renew for one year terms until it is terminated by either party upon written notice. The Company incurred asset management fees of approximately $3,000 for the three months ended September 30, 2016 and 2015 and approximately $9,000 for the nine months ended September 30, 2016 and 2015, respectively.

The Company subleases their executive office space under a month to month lease with Signature for a monthly rental payment of $1,100 or $13,200 per year. Either party may terminate the sublease upon 30 days prior written notice. The Company incurred $3,300 and $9,900 in rent expense the three and nine months ended September 30, 2016 and 2015, respectively.

On September 22, 2016 the Company signed a new sublease for their executive office space under a month to month lease with Nexelus for a monthly rental payment of $1,500 or $18,000 per year. Either party may terminate the sublease upon 30 days prior written notice.

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On July 28, 2015 the Company successfully refinanced the Mapletree Property and made payments of $50,000 each and issued the option agreements to each of three former officers. The options call for the issuance of a number of shares of restricted stock based on the value at the public offering price equal to the balance due of $413,750. The options vest upon the consummation of an underwritten registered public offering of the Company’s Class B Common Stock with gross proceeds of not less than $20,000,000. The options expire 5 years from the grant date. The underlying shares of the exercised options must be held for a period of 180 days, therefore a discount for lack of marketability was applied. The Company recorded an extinguishment of debt gain of $228,261 based on the carrying value of the deferred compensation of $413,750 and the fair value of the options issued of $185,489.

These options were valued using a monte carlo model valuation methodology. The model embodies relevant assumptions that address the features underlying these instruments. Significant assumption used in the monte carlo model to value these options were, the following: Exercises price - $1.00; Term - 5 years; Discount for lack of marketability - 29.19%; Volatility - 108.6%; Risk-free interest rate - 1.61%; Dividend rate - 0%.

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash.

The Company generally maintains its cash in money market funds with financial institutions. Although the Company may maintain balances at these institutions in excess of the FDIC insurance limit, the Company does not anticipate and has not experienced any losses.

The Class A and Class B common stock of Presidential have identical rights except that the holders of Class A common stock are entitled to elect two-thirds of the Board of Directors and the holders of the Class B common stock are entitled to elect one-third of the Board of Directors.

Other than as described in Note 9, no shares of common stock of Presidential are reserved.

PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On November 8, 2011, the Company issued 740,000 options at an exercise price of $1.25. A total of 148,000 shares vest six months after the grant date. The aggregate intrinsic value was $0.00. The remaining options vest upon the achievement of performance milestones. Options vesting on the achievement of performance milestones will not be recognized as compensation until such milestones are deemed probable of achievement. The Company has approximately $592,000 of unrecognized compensation expense respectively, related to unvested share-based compensation awards. For the three and nine months ended September 30, 2016 and 2015 compensation expense was $0. Approximately $592,000 will vest upon the achievement of performance milestones.

At September 30, 2016 and December 31, 2015, the carrying amounts of the Company’s financial instruments, which include cash, accounts receivable and accounts payable and accrued expenses, approximate their fair value due to their generally short maturities.

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

Forward-Looking Statements

This report contains statements that do not relate to historical facts, but are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to analyses and other information based on forecasts of future results and estimates of amounts not yet determinable. These statements may also relate to future events or trends, our future prospects and proposed development or business strategies, among other things. These statements can generally (although not always) be identified by their use of terms and phrases such as anticipate, appear, believe, continue, could, estimate, expect, indicate, intend, may, plan, possible, predict, project, pursue, will, would and other similar terms and phrases, as well as the use of the future tense. Forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the date hereof, and forward looking statements in documents incorporated by reference speak only as of the date of those documents. Unless otherwise required by law, we undertake no obligation to publicly update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

Examples of forward-looking statements in this report include, but are not limited to, the following categories of expectations about:

Overview

Presidential is a Delaware corporation organized in 1983 to succeed to the business of a company of the same name which was organized in 1961 to succeed to the business of a closely held real estate business founded in 1911. Since 1982, we have elected to be treated as a real estate investment trust (“REIT”) for Federal and State income tax purposes. We own, directly or indirectly, interests in real estate and interests in entities which own real estate.

We outsource the management of the Mapletree Industrial Center to Signature Community Management.

We obtain funds for working capital and investment from our available cash, operating activities and refinancing of mortgage loans on our real estate.

On July 28, 2015, Palmer-Mapletree LLC, a wholly-owned subsidiary of the Company entered into a Loan Agreement (the “Loan Agreement”) with Natixis Real Estate Capital LLC providing for a mortgage loan in the principal amount of $1,750,000 (the “Loan”) at an interest rate of 6.031%. $934,794 of the loan proceeds were used to repay the prior mortgage loan and line of credit on the Mapletree Property which was entered into on June 8, 2012 with Country Bank for Savings (see Note 4a). $123,757 of the Loan proceeds was set aside for capital improvements and reserves for the property. We received net proceeds of $585,125. The Loan matures on August 5, 2025 and requires monthly payments of $11,308. The outstanding balance of the loan and mortgage costs at September 30, 2016 and December 31, 2015 was $1,718,418 and $138,639, respectively and $1,740,462 and $150,438, respectively. The Company is required to maintain certain Financial Covenants. The Company was in compliance with the covenants at September 30, 2016.

Critical Accounting Policies

For the nine months ended September 30, 2016, the Company had a loss from operations. This combined with a history of operating losses and working capital deficiency, has been detrimental to our operations and could potentially affect our ability to meet our obligations and continue as a going concern. Our ability to continue as a going concern is dependent upon the successful execution of strategies to achieve profitability, and increase working capital by raising debt and/or equity. The accompanying financial statements do not include any adjustments that may result from this uncertainty.

In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”), management is required to make estimates and assumptions that affect the financial statements and disclosures. These estimates require difficult, complex and subjective judgments. Management has discussed with the Audit Committee the implementation of the critical accounting policies described below and the estimates required with respect to such policies.

Real Estate

Real estate is carried at cost, net of accumulated depreciation and amortization. Additions and improvements are capitalized and repairs and maintenance are charged to rental property operating expenses as incurred. Depreciation is generally provided on the straight-line method over the estimated useful life of the asset. The useful life of each property, as well as the allocation of the costs associated with a property to its various components, requires estimates by management. If management incorrectly estimates the allocation of those costs or incorrectly estimates the useful lives of its real estate, depreciation expense may be miscalculated.

The Company reviews each of its properties for impairment if events or changes in circumstances warrant. If impairment were to occur, the property would be written down to its estimated fair value. The Company assesses the recoverability of its investment in real estate based on undiscounted cash flow estimates. The future estimated cash flows of a property are based on current rental revenues and operating expenses, as well as the current local economic climate affecting the property. Considerable judgment is required in making these estimates and changes in these estimates could cause the estimated cash flows to change and impairment could occur. As of September 30, 2016, the Company’s net real estate was carried at $534,208.

Rental Revenue Recognition

The Company recognizes rental revenue on the straight-line basis from the later of the date of the commencement of the lease or the date of acquisition of the property subject to existing leases, which averages minimum rents over the terms of the leases. Certain leases require the tenants to reimburse a pro rata share of real estate taxes, utilities and maintenance costs.

Income Taxes

We operate in a manner intended to enable us to continue to qualify as a Real Estate Investment Trust under Sections 856 to 860 of the Code. Under those sections, a REIT which meets certain requirements is not subject to Federal income tax on that portion of its taxable income which is distributed to its shareholders, if at least 90% of its REIT taxable income (exclusive of capital gains) is so distributed. As a result of our ordinary tax loss for the nine months ended September 30, 2016, there is no requirement to make a distribution for the nine months ended September 30, 2016. In addition, no provision for income taxes was required at September 30, 2016.

Results of Operations

Results of operations for the three and nine months ended September 30, 2016 compared to the three and nine months ended September 30, 2015

Operations:

Three months ended September 30, 2016

Revenues decreased by $2,194 for the three months ended September 30, 2016, compared to the three months ended September 30, 2015, as a result of reduced rental revenue at the Mapletree Industrial Center.

Net loss for the three months ended September 30, 2016 was $185,211 compared to net income of $48,771 for the three months ended September 30, 2015, a decrease of $233,982. The decrease was comprised of: (i) higher general and administrative expenses of approximately $23,000 mainly consisting of increases in legal fees, (ii) a decrease in interest expense and amortization expense of approximately $7,500, and (iii) a decrease in other income of approximately $228,000 primarily from the gain on extinguishment of debt. Offset by a reduction in operating cost of approximately $8,600 on the Mapletree Industrial Center.

Nine months ended September 30, 2016

Revenues increased by $30,673 for the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015, as a result of increased rental revenue at the Mapletree Industrial Center.

Net loss for the nine months ended September 30, 2016 was $518,128 compared to $250,322 for the nine months ended September 30, 2015, an increase of $267,806. The increase was comprised of: (i) higher general and administrative expenses of approximately $52,000 mainly consisting of increases in legal fees, (ii) an increase in interest expense and amortization expense of approximately $29,000, and (iii) a decrease in other income of approximately $232,000. The increase was offset by higher rental income of approximately $31,000 due to improved occupancy at the Mapletree Industrial Center.

Balance Sheet

September 30, 2016 compared to December 31, 2015

Net real estate increased by $18,083 due to capital improvements of $51,114 recorded during the nine months ended September 30, 2016 offset by depreciation expense of $33,031 on the MapleTree Industrial Center.

Prepaid expenses decreased by $34,278 primarily due to the amortization of the directors and officers tail policy purchased in 2011 and current directors and officers insurance premiums.

Accounts payable and accrued liabilities increased by $245,880 primarily due to accrued salary for Nicholas W. Jekogian, CEO, as required by his employment contract and legal fees related to the company exploring various growth options and potential acquisitions.

Other liabilities increased $9,203 primarily due to increases in security deposits.

Mortgage escrow decreased $21,615 primarily due to payments received by the Company for capital improvements made during the period.

Liquidity and Capital Resources

We obtain funds for working capital and investment from our available cash.

For the nine months ended September 30, 2016, the Company had a loss from continuing operations. This combined with a history of operating losses and working capital deficiency, has been detrimental to our operations and could potentially affect our ability to meet our obligations and continue as a going concern. Our ability to continue as a going concern is dependent upon the successful execution of strategies to achieve profitability, and increase working capital by raising debt and/or equity. The accompanying financial statements do not include any adjustments that may result from this uncertainty.

At September 30, 2016, we had $216,770 in available cash, a decrease of $226,152 from $442,922 available at December 31, 2015. This decrease in cash and cash equivalents was due to cash used in operating activities of $152,994, cash used in investing activities of $51,114 and cash used in financing activities of $22,044.

Operating Activities

Cash from operating activities includes net cash received from rental property operations. For the nine months ended September 30, 2016, cash received from interest on cash balances was $1,382. Net cash received from rental property operations was approximately $740,000. Net cash received from rental property operations is before additions and improvements and mortgage amortization.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

None

Item 4. Controls and Procedures

The Company, under the supervision and with the participation of its management, including its principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, herein referred to as the Exchange Act) as of the end of the period covered by this report. The purpose of disclosure controls is to ensure that information required to be disclosed in our reports filed with or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Based on this evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC filings and ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms.

The principal executive officer and principal financial officer also conducted an evaluation of internal control over financial reporting, herein referred to as internal control, to determine whether any changes in internal control occurred during the three months ended September 30, 2016 that may have materially affected or which are reasonably likely to materially affect internal control. Based on that evaluation, there has been no change in the Company’s internal control during the three months ended September 30, 2016 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II   OTHER INFORMATION

Item 1.  Legal Proceedings

None

Item 6. Exhibits

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 on the 3rd day of November 2016