DREM 10-Q
Dream Homes & Development Corp. (DREM)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
For
the Quarterly Period Ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission
File No.
(Exact Name of Registrant As Specified In Its Charter)
(State Or Other Jurisdiction Of Incorporation Or Organization) |
(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices and Zip Code)
Registrant’s Telephone Number, Including Area Code:
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 ☐
Indicate
by check mark whether the registrant has submitted every Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes ☐
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 definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large
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Emerging
Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
☐
The number of shares outstanding of the registrant’s common stock, as of November 21, 2022 was
DREAM HOMES & DEVELOPMENT CORPORATION
TABLE OF CONTENTS
| 2 |
DREAM HOMES & DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
| September 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowance for doubtful accounts ($ | ||||||||
| Employee advances | ||||||||
| Contract assets | ||||||||
| Total current assets | ||||||||
| PROPERTY AND EQUIPMENT, net | ||||||||
| OTHER ASSETS | ||||||||
| Accounts receivable, net of allowance for doubtful accounts ($ | ||||||||
| Security deposit | ||||||||
| Deposits and costs coincident to acquisition of land for development | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued interest | ||||||||
| Deposits held | ||||||||
| Contract liabilities | ||||||||
| Note payable-line of credit | ||||||||
| Mortgages payable, current portion | ||||||||
| Note payable-bank | ||||||||
| Loans payable-related party | ||||||||
| Total current liabilities | ||||||||
| Long-Term Mortgages payable | ||||||||
| Total liabilities | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock; shares authorized, $ par value, as of September 30, 2022 and December 31, 2021, there are shares outstanding | ||||||||
| Common stock; shares authorized, $ par value, as of September 30, 2022 and December 31, 2021, there are shares outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| F-1 |
DREAM HOMES & DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 30, 2022 and 2021 (Unaudited)
| September 30, 2022 | September 30, 2021 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue: | ||||||||
| Construction contracts | $ | $ | ||||||
| Sale of property held for development | ||||||||
| Total revenue | ||||||||
| Cost of property held for development | ||||||||
| Cost of construction contracts | ||||||||
| Total cost of contract revenue/property held for development | ||||||||
| Gross profit | ||||||||
| Operating Expenses: | ||||||||
| Selling, general and administrative, including stock based compensation of $ and $, respectively | ||||||||
| Depreciation expense | ||||||||
| Total operating expenses | ||||||||
| Income (loss) from operations | ( | ) | ||||||
| Other income (expenses): | ||||||||
| Forgiveness of PPP loan | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other income (expenses) | ( | ) | ||||||
| Net income before income taxes | ( | ) | ||||||
| Provision for income taxes | ||||||||
| Net income | $ | $ | ( | ) | ||||
| Basic and diluted income per common share | $ | $ | ||||||
| Weighted average common shares outstanding-basic and diluted | ||||||||
The accompanying notes are an integral part of these financial statement.
| F-2 |
DREAM HOMES & DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 2022 and 2021 (Unaudited)
| September 30, 2022 | September 30, 2021 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue: | ||||||||
| Construction contracts | $ | $ | ||||||
| Sale of property held for development | ||||||||
| Total revenue | ||||||||
| Cost of property held for development | ||||||||
| Cost of construction contracts | ||||||||
| Total cost of contract revenue/property held for development | ||||||||
| Gross profit | ||||||||
| Operating Expenses: | ||||||||
| Selling, general and administrative, including stock based compensation of $ and $, respectively | ||||||||
| Depreciation expense | ||||||||
| Total operating expenses | ||||||||
| Income (loss) from operations | ( | ) | ||||||
| Other income (expenses): | ||||||||
| Forgiveness of PPP loan | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other income (expenses) | ( | ) | ( | ) | ||||
| Net income (loss) before income taxes | ( | ) | ||||||
| Provision for income taxes | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Basic and diluted income (loss) per common share | $ | $ | ( | ) | ||||
| Weighted average common shares outstanding-basic and diluted | ||||||||
The accompanying notes are an integral part of these financial statement
| F-3 |
DREAM HOMES & DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For nine months ended September 30, 2022 and 2021
(Unaudited)
| Common stock issued and to be issued | Additional Paid in | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| For the nine months ended September 30, 2022: | ||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net income for the three months March 31, 2022 | - | |||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net income for the three months ended June 30, 2022 | ||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net income for the three months months ended September 30, 2022 | ||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| For the nine months ended September 30, 2021: | ||||||||||||||||||||
| Balance at December 31, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Issuance of restricted common shares for stock-based compensation at $ per share | ||||||||||||||||||||
| Net loss for the three months ended March 31, 2021 | - | ( | ) | ( | ) | |||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net income for the three months ended June 30, 2021 | ||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Issuance of restricted common stock at $ per share | ||||||||||||||||||||
| Net loss for the three months months ended September 30, 2021 | ( | ) | ( | ) | ||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes are an integral part of these financial statements.
| F-4 |
DREAM HOMES & DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2022 and 2021
(Unaudited)
| September 30, 2022 | September 30, 2021 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net loss to net cash provided (used) in operating activities: | ||||||||
| Depreciation expense | ||||||||
| Sale of property held for development | ||||||||
| Stock-based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Employee advances | ||||||||
| Mortgage receivable | ( | ) | ||||||
| Loan receivable, related party | ||||||||
| Contract assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued liabilities | ||||||||
| Accrued interest | ||||||||
| Contract liabilities | ( | ) | ||||||
| Net cash provided in operating activities | ||||||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of vehicle | ( | ) | ||||||
| Deposits and costs coincident to acquisition of land for development | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds (payments) from notes payable-line of credit | ( | ) | ||||||
| Payments on acquisition of property held for development | ( | ) | ||||||
| Proceeds from loans payable-other | ||||||||
| Proceeds from note payable-bank | ||||||||
| Loan forgiveness | ( | ) | ( | ) | ||||
| Proceeds from loans-related party | ||||||||
| Net cash provided (used) in financing activities | ( | ) | ||||||
| NET INCREASE (DECREASE) IN CASH | ||||||||
| CASH BALANCE, BEGINNING OF PERIOD | ||||||||
| CASH BALANCE, END OF PERIOD | $ | $ | ||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| Non-Cash Investing and Financing Activities: | ||||||||
| Issuance of restricted common stock for compensation | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| F-5 |
DREAM HOMES & DEVELOPMENT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2022 and 2021
(Unaudited)
Note 1 - Significant Accounting Policies
Nature of Operations
Dream Homes & Development Corporation is a regional builder and developer of new single-family homes and subdivisions, as well as a market leader in coastal construction, elevation and mitigation. In the years since Superstorm Sandy flooded 40,000 owner-occupied homes, Dream Homes has helped hundreds of homeowners to rebuild or raise their homes to comply with new FEMA requirements.
In addition to the coastal construction market, Dream Homes will continue to pursue opportunities in new single and multi-family home construction, with new developments totaling 218 units in title, or under contract and in development. Dream Homes’ operations will include the development and sale of a variety of residential communities, including construction of semi-custom homes, entry-level and first time move-up single-family and multi-family homes.
A new trend in the real estate market which has experienced significant growth in the last year is the emerging Build To Lease trend. This focus and concentration on building both single and multi-family developments with the intention to lease them immediately upon completion is being made in response to several factors. One factor is the extreme shortage of rental properties on the market, not only for first time homemakers, but for retirees, and young professionals who are unclear as to the intentions of settling in one location. The second factor is the overall lender and funding source preference to lend to Build To Lease developments, as opposed to more traditional Build To Sell developments due to the perception of Build To Lease as a safer investment over the long term. Finally, the extraordinary amount of interest from non-traditional sources such as pension and hedge funds, insurance companies and venture capital firms to purchase completed new For Lease developments at attractive metrics based on capitalization rates has spurred a large growth in this market segment.
The Company has made the decision to change focus in their new home developments to better accommodate this growing trend. Currently all new multi-family developments located in Ocean and Gloucester counties, which represent a total count of 218 units, will be changed from Build For Sale to Build for Lease. The Company now intends to hold these properties upon completion and lease-up for an indeterminate period of time, and realize the rental income from ownership. This strategy will become a very significant revenue stream for the Company and will become a third division of the Company, behind custom new homes and renovation/elevation projects.
History
Dream
Homes & Development Corporation was originally incorporated as The Virtual Learning Company, Inc. (“Virtual Learning”)
on January 6, 2009 as a Nevada corporation with
On March 14, 2017, Virtual Learning changed its name to Dream Homes & Development Corporation (“DHDC”). DHDC maintains a web site at www.dreamhomesltd.com as well as a blog, located at http://blog.dreamhomesltd.com.
Principles of Consolidation
The consolidated financial statements include the accounts of DHDC and its wholly owned subsidiaries (collectively, the “Company”). All intercompany balances and transactions have been eliminated in consolidation.
| F-6 |
Property and Equipment
Property
and equipment is stated at cost less accumulated depreciation. Depreciation is provided using the straight-line method over an estimated
useful life of
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates.
Fair Value of Financial Instruments
Fair value is defined as the price that we would receive to sell an asset or pay to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. In determining fair value, GAAP establishes a three-level hierarchy used in measuring fair value, as follows:
● Level 1 inputs are quoted prices available for identical assets and liabilities in active markets.
● Level 2 inputs are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets and liabilities in active markets or other inputs that are observable or can be corroborated by observable market data.
● Level 3 inputs are less observable and reflect our own assumptions.
Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and loans payable to related parties. The carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, and loans payable to related parties approximates fair value because of their short maturities.
Construction Contracts
Revenue recognition:
The Company recognizes construction contract revenue using the percentage-of-completion method, based primarily on contract cost incurred to date compared to total estimated contract cost. Cost of revenue includes an allocation of depreciation, amortization and general overhead cost. Changes to total estimated contract cost or losses, if any, are recognized in the period in which they are determined.
The Company generally provides limited warranties for work performed under its construction contracts with periods typically extending for a limited duration following substantial completion of the Company’s work on a project.
The Company classifies construction-related receivables and payables that may be settled in periods exceeding one year from the balance sheet date, if any, as current assets and liabilities consistent with the length of time of its project operating cycle. For example:
| ● | Costs and estimated earnings in excess of billings represent the excess of contract costs and profits (or contract revenue) over the amount of contract billings to date and are classified as a current asset. | |
| ● | Billings in excess of costs and estimated earnings represent the excess of contract billings to date over the amount of contract costs and profits (or contract revenue) recognized to date and are classified as a current liability. |
| F-7 |
Costs and estimated earnings in excess of billings result when either: 1) costs are incurred related to certain claims and unapproved change orders, or 2) the appropriate contract revenue amount has been recognized in accordance with the percentage-of-completion accounting method, but a portion of the revenue recorded cannot be billed currently due to the billing terms defined in the contract. Claims occur when there is a dispute regarding both a change in the scope of work and the price associated with that change. Unapproved change orders occur when there is a dispute regarding only the price associated with a change in scope of work. For both claims and unapproved change orders, the Company recognizes revenue, but not profit, when it is determined that recovery of incurred cost is probable and the amounts can be reliably estimated.
Change in Estimates:
The Company’s estimates of contract revenue and cost are highly detailed and many factors change during a contract performance period that result in a change to contract profitability. These factors include, but are not limited to, differing site conditions: availability of skilled contract labor: performance of major material suppliers and subcontractors: on-going subcontractor negotiations and buyout provisions: unusual weather conditions: changes in the timing of scheduled work: change orders: accuracy of the original bid estimate: changes in estimated labor productivity and costs based on experience to date: achievement of incentive-based income targets: and the expected, or actual, resolution terms for claims. The factors that cause changes in estimates vary depending on the maturation of the project within its lifecycle. For example, in the ramp-up phase, these factors typically consist of revisions in anticipated project costs and during the peak and close-out phases, these factors include the impact of change orders and claims as well as additional revisions in remaining anticipated project costs. Generally, if the contract is at an early stage of completion, the current period impact is smaller than if the same change in estimate is made to the contract at a later stage of completion. Management focuses on evaluating the performance of contracts individually and uses the cumulative catch-up method to account for revisions in estimates. Material changes in estimates are disclosed in the notes to the consolidated financial statements.
| F-8 |
Income Taxes
The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the provision for income tax in the statements of operations. The Company evaluates the probability of realizing the future benefits of its deferred tax assets and provides a valuation allowance when realization of the assets is not reasonably assured.
The Company recognizes in its financial statements the impact of tax positions that meet a “more likely than not” threshold, based on the technical merits of the position. The tax benefits recognized from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.
Basic net income (basic net loss) per common share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period.
Diluted net income (loss) per common share is computed using the weighted average number of common shares outstanding and potentially dilutive securities outstanding during the period.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Accounting Standards Codification “ASC” Topic 606). The purpose of this ASU is to converge revenue recognition requirements per GAAP and International Financial Reporting Standards (“IFRS”). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this ASU were originally effective for interim and annual reporting periods beginning after December 15, 2016, with early adoption not permitted by the FASB; however, in August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date after public comment respondents supported a proposal to delay the effective date of this ASU to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. We adopted this ASU on January 1, 2018 and adoption of this ASU did not have a material impact on our financial position, results of operations and cash flows.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” and subsequent amendments to the initial guidance: ASU 2017-13, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively, “Topic 842”), which provides guidance for accounting for leases. Topic 842 requires lessees to classify leases as either finance or operating leases and to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of the lease classification. The lease classification will determine whether the lease expense is recognized based on an effective interest rate method or on a straight line basis over the term of the lease. We adopted this ASU on January 1, 2019 and adoption of this ASU did not have a material impact on our financial position, results of operations and cash flows.
Certain other accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and therefore have not yet been adopted by the Company. The impact on the Company’s financial position and results of operations from adoption of these standards is not expected to be material.
2 - Property and Equipment
Property and equipment is summarized as follows:
| September 30, 2022 | December 31, 2021 | |||||||
| Office equipment | $ | $ | ||||||
| Vehicles/Modular homes | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and Equipment- net | $ | $ | ||||||
Depreciation
expense for the nine months ended September 30, 2022 and 2021 was $
| F-9 |
3- Deposits and Costs Coincident to Acquisition of Land for Development
Deposits and costs coincident to acquisition of land for development are summarized as follows:
| September 30, 2022 | December 31, 2021 | |||||||
| Deposits and acquisition costs | $ | $ | ||||||
| Construction and other costs for development | ||||||||
| Total | $ | $ | ||||||
Properties currently owned and in the development stage
Berkeley Terrace – Bayville, NJ – 70 approved townhome units
The Company is in title to this property and is actively working with several permanent lenders to finalize an infrastructure and construction finance facility.
The Company is preparing to begin heavy infrastructure work on the property, and clearing has been completed and the site stabilized for soils erosion control. Infrastructure work should begin in the last quarter of 2022 or early 2023.
Lacey Township, New Jersey, “Dream Homes at the Pines”
Dream Homes currently owns a parcel approved for 68 new townhomes in Ocean County NJ, of which 54 are market rate and 14 are affordable housing. The acquisition was made in June of 2021. This property has received final approvals, Department of Transportation approval, CAFRA approval, MUA, County, Fire and other outside agency approvals. This development is scheduled to begin construction in 2023.
Preliminary approval was granted in 2021 and Final approval was granted in fall of 2022.
It
is anticipated that costs for the balance of the development approvals will be approximately +/- $
The Company may need to seek loans from funding sources to finance infrastructure and vertical construction for this project.
The Company acquired this property occurred on June 29, 2021 and is currently in title.
Clayton NJ – 112 Apartments
On February 26, 2021, the Company took title to the property via an assemblage of 3 parcels.
The Company successfully obtained Redevelopment Approval from the Borough in July 2021 and Preliminary and Final Site Plan approval in December of 2021.
| F-10 |
Subsequent event: The Company sold this property on 8/15/22.
Louis Avenue – Bayville, NJ – In title
The Company was heard before the Berkeley Township Planning Board on October 3, 2020 and the planning board awarded preliminary approvals for 17 townhome units.
The Company acquired this property on August 4, 2021.
The Company received Final approvals on August 8, 2021.
Properties Under Contract to Purchase and in the Approval Stage
Autumn Run – Gloucester County
On December 7, 2018, the Company signed a contract to purchase a property in Gloucester County, NJ, which will be approved for +/- 63 units of age-restricted manufactured housing. The property is currently in the approval stage. An application was made to the DEP for a wetlands letter of interpretation, which was approved as proposed. Further action before the planning board is pending due to delays caused by township closures due to Covid-19. The Company had a virtual workshop meeting on September 15, 2020 and an additional virtual meeting was conducted on November 17, 2020.
The application for a use variance was heard on May 24, 2021 and the variance was approved.
The Company is in the process of applying for preliminary and final site plan approval and should be heard at the January 2023 planning board meeting.
Mortgages on Properties Held for Development:
| September 30, 2022 | December 31, 2021 | |||||||
| Edisto Loan Fund, LLC | $ | $ | ||||||
| Lynx Asset Services, LLC | ||||||||
| AC Development, LLC | ||||||||
| AVB Development | ||||||||
| Total mortgages payable | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Long-term portion | $ | $ | ||||||
| F-11 |
4-Loans Payable to Related Parties
Loans payable to related parties is summarized as follows:
| September 30, 2022 | December 31, 2021 | |||||||
| Loans payable to GPIL | $ | $ | ||||||
Advances
from the loans bear interest at a rate of
5 - Common Stock Issuances
On September 25, 2020, the Company issued restricted shares for debt reduction value at $.
On September 30, 2020, the Company issued restricted shares for compensation valued at $ .
On October 28, 2020, the Company issued restricted shares for compensation valued at $ .
On November 10, 2020, the Company issued restricted shares for compensation valued at $ .
On February 11, 2021, the Company issued restricted shares for compensation valued at $ .
On July 13, 2021, the Company issued restricted shares for legal services valued at $ .
On October 22, 2021, the Company issued restricted shares for compensation valued at $ .
On October 28, 2021, the Company issued restricted shares for compensation valued at $ ..
6 – Income Taxes
As
a result of the Tax Cuts and Jobs Act (Tax Legislation) enacted on December 22, 2017, the United States corporate income tax rate is
As of September 30, 2022 the Company has available for federal and state income tax purposes a net operating loss carry forward that may be used to offset future taxable income.
7- Commitments and Contingencies
Construction Contracts
As
of September 30, 2022, the Company was committed under
| F-12 |
Employment Agreements
DHDC currently has an Employment Agreement in force with a Sales Manager. The original agreement expired on May 8, 2019 and has been renewed on a yearly basis since that time and is currently in force. The agreement provides for compensation based on sales.
Lease Agreements
The
Company has occupied office space located in Forked River, New Jersey. Commencing April 2017, the Company originally paid monthly rent
of $
On
February 28, 2020 the Company executed a lease for an office space located at 800 Riverview Drive in Brielle, which the Company feels
will better serve the southern Monmouth clientele. The lease term is
Line of Credit
On
September 15, 2016, DHDC established a $
8. Related Party Transactions
Dream Homes Ltd. Allocated payroll
The
Company uses the services of Dream Homes Ltd. (DHL) personnel for its operations. For the nine months ended September 30, 2022 and 2021,
the Company’s estimated share of DHL’s gross payroll and payroll taxes and include $
9 - Stock Warrant
Effective April 1, 2019, any previous warrants issued by the Company were cancelled.
10 – Subsequent Events
The Company has evaluated subsequent events through the date the financial statements were available to be issued. The Company had no subsequent events that require disclosure
| F-13 |
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This Quarterly Report on Form 10-Q and other written reports and oral statements made from time to time by the Company may contain so-called “forward-looking statements,” all of which are subject to risks and uncertainties. One can identify these forward-looking statements by their use of words such as “expect,” “plan,” “will,” “may,” “anticipate,” “believe,” “estimate,” “should,” “intend,” “forecast,” “project” the negative or plural of these words, and other comparable terminology. One can identify them by the fact that they do not relate strictly to historical or current facts. statements are likely to address the Company’s growth strategy, financial results and product and development programs. One must carefully consider any such statement and should understand that many factors could cause actual results to differ from the Company’s forward-looking statements. These factors include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially. The Company does not assume the obligation to update any forward-looking statement. One should carefully evaluate such statements in light of factors described in the Company’s filings with the SEC, especially the Company’s Annual Report on Form 10-K and the Company’s Quarterly Reports on Form 10-Q. In various filings the Company has identified important factors that could cause actual results to differ from expected or historic results. One should understand that it is not possible to predict or identify all such factors. Consequently, the reader should not consider any such list to be a complete list of all potential risks or uncertainties.
Use of Terms
The following discussion analyzes our financial condition and results of operations for the three months ended September 30, 2022 and 2021. Unless the context indicates or suggests otherwise, reference to “we”, “our”, “us” and the “Company” in this section refers to the operations of Dream Homes & Development Corporation (DHDC),
PLAN OF OPERATION
Building on a history of over 2,400 new homes built with over 400 elevation/renovation/addition projects since 1993, the management of Dream Homes & Development Corporation has positioned the company to emerge as a rapidly growing regional developer of new single-family subdivisions as well as a leader in coastal new home and modular construction, elevation and mitigation. Since Superstorm Sandy flooded 40,000 owner-occupied homes, Dream Homes has helped hundreds of homeowners to build new homes or raise their homes to comply with new FEMA requirements. While other involved with coastal construction in Flood Hazard Areas, Dream Homes has excelled. As many of our competitors have failed, Dream Homes has developed a reputation as the region’s most trusted builder and has even become known as the “rescue builders have struggled to adapt to the changing market and complex Federal, State and local regulations” builder for homeowners whose projects have been abandoned by others. Due to the damage caused by the storm, as well as the material changes in the FEMA flood maps which now require over 40,000 homeowners along the New Jersey coastline to elevate their homes, Dream Homes is positioned to capitalize on this opportunity for substantial revenue growth.
A new trend in the real estate market which has experienced significant growth in the last year is the emerging Build To Lease trend. This focus and concentration on building both single and multi-family developments with the intention to lease them immediately upon completion is being made in response to several factors. One factor is the extreme shortage of rental properties on the market, not only for first time homemakers, but for retirees, and young professionals who are unclear as to the intentions of settling in one location. The second factor is the overall lender and funding source preference to lend to Build To Lease developments, as opposed to more traditional Build To Sell developments due to the perception of Build To Lease as a safer investment over the long term. Finally, the extraordinary amount of interest from non-traditional sources such as pension and hedge funds, insurance companies and venture capital firms to purchase completed new For Lease developments at attractive metrics based on capitalization rates has spurred a large growth in this market segment.
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The Company has made the decision to change focus in their new home developments to better accommodate this growing trend. Currently all new multi-family developments located in Ocean County, which represent a total count of 155 units, will be changed from Build For Sale to Build for Lease. The Company now intends to hold these properties upon completion and lease-up for an indeterminate period of time, and realize the rental income from ownership. This strategy will become a very significant revenue stream for the Company and will become a third division of the Company, behind custom new homes and renovation/elevation projects. The Company is also in contract for a 63 unit age=restricted property located in Gloucester County which will also be held for rental.
Dream Homes and Development Corporation will continue to pursue opportunities in the real estate field, specifically in new home construction and renovations. The amount of these projects currently under contract as of September 30, 2022 is $7,093,273.
In addition to the above projects, which are in process, the Company has also estimated an additional $6,500,000 worth of residential construction projects and added over 200 active prospects to its data base. All these prospects are prime candidates for rebuilding and new home projects.
Properties currently owned and in the development stage
Berkeley Terrace – Bayville, NJ – 70 approved townhome units
The Company is in title to this property and is actively working with several permanent lenders to finalize an infrastructure and construction finance facility.
The Company is preparing to begin heavy infrastructure work on the property, and clearing has been completed and the site stabilized for soils erosion control. Infrastructure work should begin in the last quarter of 2022 or early 2023.
Lacey Township, New Jersey, “Dream Homes at the Pines”
Dream Homes currently owns a parcel approved for 68 new townhomes in Ocean County NJ, of which 54 are market rate and 14 are affordable housing. The acquisition was made in June of 2021. This property has received final approvals, Department of Transportation approval, CAFRA approval, MUA, County, Fire and other outside agency approvals. This development is scheduled to begin construction in 2023.
Preliminary approval was granted in 2021 and Final approval was granted in fall of 2022.
It is anticipated that costs for the balance of the development approvals will be approximately +/- $20,000.
The Company may need to seek loans from funding sources to finance infrastructure and vertical construction for this project.
The Company acquired this property on June 29, 2021 and is currently in title.
Clayton NJ – 112 Apartments
On February 26, 2021, the Company took title to the property via an assemblage of 3 parcels.
The Company successfully obtained Redevelopment Approval from the Borough in July 2021 and Preliminary and Final Site Plan approval in December of 2021.
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Subsequent event: The Company sold this property on 8/15/22.
Louis Avenue – Bayville, NJ – In title
The Company was heard before the Berkeley Township Planning Board on October 3, 2020 and the planning board awarded preliminary approvals for 17 townhome units.
The Company acquired this property on August 4, 2021.
The Company received Final approvals on August 8, 2021.
Properties Under Contract to Purchase and in the Approval Stage
Autumn Run – Gloucester County
On December 7, 2018, the Company signed a contract to purchase a property in Gloucester County, NJ, which will be approved for +/- 63 units of age-restricted manufactured housing. The property is currently in the approval stage. An application was made to the DEP for a wetlands letter of interpretation, which was approved as proposed. Further action before the planning board is pending due to delays caused by township closures due to Covid-19. The Company had a virtual workshop meeting on September 15, 2020 and an additional virtual meeting was conducted on November 17, 2020.
The application for a use variance was heard on May 24, 2021 and the variance was approved.
The Company is in the process of applying for preliminary and final site plan approval and should be heard at the January 2023 planning board meeting.
Additional comments
Dream Homes has experienced solid growth in both the new home and elevation divisions, as well as strong additions to our personnel infrastructure, which are just now beginning to bear fruit.
The Company was awarded the Ocean County Best of the Best Awards for 2017, 2018, 2019 & 2020 in two categories (Best Custom Modular Builder and Best Home Improvement Contractor), which has caused significant new awareness and interest from the public. This has led to more showroom traffic, completed estimates and signed contracts. Referrals about Dream Homes are also being generated from many industry professionals, such as architects, engineers and attorneys, who’ve either had clients with abandoned projects or simply want to retain Dream Homes due to its superior performance and reliability.
The phrase ‘The Region’s Most Trusted Builder’ accurately describes the company and is becoming increasingly well known to homeowners in need of new homes, elevation & renovation work. The management team has never failed to complete a project in over 28 years in the industry.
The Company’s business model over the last year has been focused on increasing the new home and new development portion of our business, until it represents 50% - 70% of our entire revenue stream, from the current level of 20%. New home development has a much greater scalability and growth potential than elevation/renovation work. Though the Company has enjoyed steady growth in the renovation/elevation portion of the company the new homes division continues to represent a greater percentage of total revenue.
Management hopes for steady growth in all segments of the company, since the rebuilding process will continue for the foreseeable future, and the Build to Lease category is very strong and growing. The combined total number of homes affected by Storm Sandy that will need to be raised or demolished and rebuilt is in excess of 30,000 homes, of which less than 15,000 have been rebuilt. This remaining combined market for new construction and elevation projects in the Company’s market area is estimated to be in the range of $3.4 billion dollars. The company anticipates being able to efficiently address a good portion of this market. Dream Homes’ potential operations include the development and sale of a variety of residential communities, including construction of semi-custom homes, entry-level and first time move-up single-family and multi-family homes.
Due to the opportunities afforded by the market conditions, Dream Homes and Development Corporation will continue to pursue opportunities in the construction and real estate field, specifically in new home construction, home elevations and renovations and Build to Lease developments.
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RESULTS OF OPERATIONS – DREAM HOMES & DEVELOPMENT CORPORATION
The summary below should be referenced in connection with a review of the following discussion of our results of operations for the nine months ended September 30, 2022 and 2021.
Results of Operations - Comparison for the nine months ended September 30, 2022 and 2021.
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 2022 and 2021 (Unaudited)
| September 30, 2022 | September 30, 2021 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue: | ||||||||
| Construction contracts | $ | 3,069,681 | $ | 3,069,905 | ||||
| Sale of property held for development | 3,200,000 | - | ||||||
| Total revenue | 6,269,681 | 3,069,905 | ||||||
| Cost of property held for development | 2,021,700 | - | ||||||
| Cost of construction contracts | 2,455,787 | 2,498,350 | ||||||
| Total cost of contract revenue/property held for development | 4,477,487 | 2-498,350 | ||||||
| Gross profit | 1,792,194 | 571,555 | ||||||
| Operating Expenses: | ||||||||
| Selling, general and administrative, including stock based compensation of $0 and $127,200, respectively | 767,659 | 743,687 | ||||||
| Depreciation expense | 3,648 | 5,067 | ||||||
| Total operating expenses | 771,307 | 748,754 | ||||||
| Income (loss) from operations | 1,020,887 | (177,199 | ) | |||||
| Other income (expenses): | ||||||||
| Forgiveness of PPP loan | 51,356 | - | ||||||
| Interest expense | (86,012 | ) | (62,114 | ) | ||||
| Total other income (expenses) | (34,656 | ) | (62,114 | ) | ||||
| Net income (loss) before income taxes | 986,231 | (239,313 | ) | |||||
| Provision for income taxes | - | - | ||||||
| Net income (loss) | $ | 986,231 | $ | (239,313 | ) | |||
| Basic and diluted income (loss) per common share | $ | .03 | $ | (.00 | ) | |||
| Weighted average common shares outstanding-basic and diluted | 35,824,493 | 34,136,759 | ||||||
Revenues
For the nine months ended September 30, 2022 and 2021, revenues were $6,269,681 and $3,069,905 respectively.
The increase is due to the sale of property held for development in the amount of $ 3,200,000.
Cost of Sales
For the nine months ended September 30, 2022 and 2021, cost of construction contracts were $2,455,787 and $2,498,350, respectively. The cost of property held for development which was sold was $ 2,021,700 for the nine months ended September 30, 2022 and $ 0 for the nine months ended September 30, 2021.
,
Operating Expenses,
Operating expenses increased from $748,754 in 2021 to $771,307 in 2022.
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Liquidity and Capital Resources
As of September 30, 2022 and December 31, 2021, our cash balance was $427,767 and $191,439, respectively, total assets were $7,990,518 and $8,130,754, respectively, and total liabilities amounted to $6,519,533 and $7,646,000, respectively, including loans payable to related parties of $254,895 and $192,439, respectively. As of September 30, 2022 and December 31, 2021, the total stockholders’ equity was $1,470,985 and $484,754, respectively. We may seek additional capital to fund potential costs associated with expansion and/or acquisitions.
Inflation
The impact of inflation on the costs of our company, and the ability to pass on cost increases to its subscribers over time is dependent upon market conditions. We are not aware of any inflationary pressures that have had any significant impact on our operations since inception, and we do not anticipate that inflationary factors will have a significant impact on future operations.
OFF-BALANCE SHEET ARRANGEMENTS
We do not maintain off-balance sheet arrangements nor do we participate in non-exchange traded contracts requiring fair value accounting treatment.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
The Company has adopted and maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this Form 10-Q, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the Securities and Exchange Commission. The Company’s disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. As required under Exchange Act Rule 13a-15, the Company’s management, including the Principal Executive Officer and Principal Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Company’s President concluded that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s President, as appropriate, to allow timely decisions regarding required disclosure.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There are no legal proceedings which management considers to be material.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosure
Not Applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
The following exhibits are included with this filing:
3.1* Articles of Incorporation (Form S-1 Registration No. 333-174674 filed June 2, 2011).
3.2* By-laws (Form S-1 Registration No. 333-174674 filed June 2, 2011).
4.1* Specimen Stock Certificate (Form S-1 Registration No. 333-174674 filed June 2, 2011).
31 Sarbanes-Oxley Section 302 certification by Vincent Simonelli
32 Sarbanes-Oxley Section 906 certification by Vincent Simonelli
101.INS Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Previously filed and Incorporated by reference.
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SIGNATURES
Pursuant to the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on behalf by the undersigned; duly authorized.
| Date: | Dream Homes & Development Corporation | |
| November 21, 2022 | ||
| By: | /s/ Vincent Simonelli | |
| Vincent Simonelli | ||
| Chief Executive Officer and Chief Financial Officer | ||
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