DREM 10-Q
Dream Homes & Development Corp. (DREM)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
For
the Quarterly Period Ended
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 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,” “smaller reporting company”, or “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large
Accelerated Filer ☐ Accelerated Filer ☐
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
☐ No
The number of shares outstanding of the registrant’s common stock, as of October 31, 2024 was .
DREAM HOMES & DEVELOPMENT CORPORATION
TABLE OF CONTENTS
| PART I. FINANCIAL INFORMATION | |
| ITEM 1. FINANCIAL STATEMENTS | |
| Consolidated Balance Sheets (Unaudited) | F-1 |
| Consolidated Statements of Changes in Stockholders’ Equity (Deficit( (Unaudited) | F-3 |
| Consolidated Statements of Cash Flow (Unaudited) | F-4 |
| Notes to Consolidated Financial Statements (Unaudited) | F-5 |
| ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 3 |
| ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS | 7 |
| ITEM 4. CONTROLS AND PROCEDURES | 7 |
| PART II. OTHER INFORMATION | 7 |
| ITEM 1. LEGAL PROCEEDINGS | 7 |
| ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 7 |
| ITEM 3. DEFAULTS UPON SENIOR SECURITIES AND CONVERTIBLE NOTES | 7 |
| ITEM 4. MINE SAFETY DISCLOSURES | 7 |
| ITEM 5. OTHER INFORMATION | 7 |
| ITEM 6. EXHIBITS | 8 |
| SIGNATURES | 9 |
| 2 |
DREAM HOMES AND DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 2024 (Unaudited) | December 31, 2023 (Audited) | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Prepaid contract interest | ||||||||
| Contract assets | ||||||||
| Total current assets | ||||||||
| PROPERTY AND EQUIPMENT, net | ||||||||
| OTHER ASSETS | ||||||||
| Security deposit | ||||||||
| Deposits and costs coincident to acquisition of land for development | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued interest | ||||||||
| Deposits held | ||||||||
| Contract liabilities | ||||||||
| Loans payable-others | ||||||||
| Note payable-line of credit | ||||||||
| Loans payable to related parties | ||||||||
| Total current liabilities | ||||||||
| Long-term mortgages payable | ||||||||
| Total liabilities | ||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Preferred stock; shares authorized, $ par value, as of June 30, 2024 and December 31, 2023, there are shares outstanding | ||||||||
| Common stock; shares authorized, $ par value, as of June 30, 2024 and December 31, 2023, there are and shares outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| Total liabilities and stockholders’ equity (deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| F-1 |
DREAM HOMES AND DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023
(UNAUDITED)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30 | June 30 | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue: | ||||||||||||||||
| Construction contracts | $ | $ | $ | $ | ||||||||||||
| Cost of construction contracts | ||||||||||||||||
| 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): | ||||||||||||||||
| 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 statements.
| F-2 |
DREAM HOMES AND DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023
(UNAUDITED)
| Common stock issued | Additional | |||||||||||||||||||
| and to be issued | Paid-in | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance at March 31, 2023 | ( | ) | ||||||||||||||||||
| Issuance of common shares | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Shares issued for related party debt conversion | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at March 31, 2024 | ( | ) | ||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of these financial statements.
| F-3 |
DREAM HOMES AND DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023
(UNAUDITED)
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income to net cash provided (used) in operating activities: | ||||||||
| Depreciation expense | ||||||||
| Stock based compensation | ||||||||
| Gain on debt settlement | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid fees-property held for development | ( | ) | ||||||
| Contract assets | ( | ) | ||||||
| Other assets | ( | ) | ||||||
| Accounts payable and accrued liabilities | ||||||||
| Deposits held | ||||||||
| Contract liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ||||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of office equipment and vehicles | ( | ) | ||||||
| Deposits and costs coincident to acquisition of land for development | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds (payments) on note payable-line of credit | ||||||||
| Proceeds from mortgages | ||||||||
| Proceeds from loans payable-others | ||||||||
| Payments on mortgages | ( | ) | ( | ) | ||||
| Proceeds from loans payable to related parties | ||||||||
| Proceeds from bank note | ||||||||
| Payments on bank note | ( | ) | ||||||
| Repayments of loans payable-others | ( | ) | ||||||
| Repayments of loans payable to related parties | ( | ) | ||||||
| Net cash provided (used) by financing activities | ( | ) | ||||||
| NET INCREASE IN CASH | ( | ) | ( | ) | ||||
| CASH BALANCE, BEGINNING OF PERIOD | ||||||||
| CASH BALANCE, END OF PERIOD | $ | $ | ||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Interest paid | $ | $ | ||||||
| Taxes paid | $ | $ | ||||||
| Shares issued for related party debt conversion | $ | $ | ||||||
| Issuance of restricted common stock for compensation | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| F-4 |
DREAM HOMES & DEVELOPMENT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2024 and 2023
(Unaudited)
Note 1 - Significant Accounting Policies
Nature of Operations
Building on a history of over 2,000 new homes built and 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 and multi-family subdivisions as well as a leader in coastal new home and modular construction, elevation, Build to Lease and Improved Lots for Sale.
In addition to the coastal construction market, Dream Homes continues to pursue opportunities in new single and multi-family home construction, with 5 developments totaling 367 units in title, or under contract and in development. Dream Homes’ operations include the development and sale of residential communities, construction of single-family and multi-family homes, Build to Lease and the development and improvement of Finished Lots for Sale to national builders.
New trends in the real estate market that the Company is actively exploring include Build To Lease properties, as well as developing and improving building lots and developments to sell finished lots to national home builders. This focus and concentration on building both single and multi-family developments with the intention to lease or sell 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 and Improved Lots for sale developments, due to the perception that these 2 avenues are 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, as well as the virtually unlimited demand for improved lots from national builders has spurred a large growth in these market segments.
The Company has made the decision to change focus to better accommodate these growing trends. Currently most of the Company’s new multi-family developments, have been or will be changed from Build For Sale to Build for Lease or Improved Lots for Sale. The Company may hold finished properties upon completion and lease-up for an indeterminate period of time, and realize the rental income from ownership, or sell improved lots to 3rd party purchasers. This strategy will become a very significant revenue stream for the Company and these avenues have become third & fourth divisions of the Company, behind new custom single family 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-5 |
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-6 |
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.
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.
| F-7 |
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.
Basis of Presentation
The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.
Recent Accounting Pronouncements
The Company assesses new accounting standards on an ongoing basis. The Company does not believe any future standards will have a material impact on the Company’s present or future consolidated financial statements.
2 - Property and Equipment
Property and equipment is summarized as follows:
| June 30, 2024 | December 31, 2023 | |||||||
| Office equipment | $ | $ | ||||||
| Vehicles | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and Equipment- net | $ | $ | ||||||
Depreciation
expense for the six months ended June 30, 2024 and 2023 was $ and $
| F-8 |
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:
| June 30, 2024 | December 31, 2023 | |||||||
| Lacey Township, New Jersey, Pines property: | ||||||||
| Cost to acquire property | ||||||||
| Site engineering, permits, and other costs | ||||||||
| Total Pines property | ||||||||
| Other deposits: | ||||||||
| Louis Avenue, Bayville, New Jersey-17 units | ||||||||
| Berkeley Terrace – Bayville, New Jersey 70 units | ||||||||
| Autumn Run – Clayton – New Jersey – 62 units | ||||||||
| Other | ||||||||
| Total other deposits | ||||||||
| Total | $ | $ | ||||||
Properties currently owned and in the development stage
Berkeley Terrace – Bayville, NJ – 70 approved townhome units
The
Company has been in title to this property and finalized an infrastructure and construction finance facility which closed on 3/31/23.
This facility included refinancing the land debt, securing funding for a large portion of the site construction, as well as funding the
first building of
The Company began infrastructure work on the property in June of 2023, with land clearing completed and the site stabilized for soils erosion control. Sanitary sewer, water and drainage has been installed in the majority of the property.
The first 5 building pads have been compacted and completed.
Base paving has been completed and the entire site has been improved.
The vertical construction of Building 8 began in December of 2023. The vertical construction of Building 1 is scheduled to began in July of 2024.
The Company has entered into an agreement with a national builder to deliver improved building sites for this project. It is in the Company’s opinion that the financial advantages inherent in the sale of a portion of the improved lots in this development outweigh the advantages of building and selling or leasing the entire development.
As of 6/30/24, 10 improved building pads have been sold to a national builder. An additional 10 improved building pads are scheduled to close within days of 6/30/24. See Note 10 “Subsequent Events” for additional information.
Lacey Township, New Jersey, “Lacey Pines”
Dream
Homes currently owns a parcel approved for
This property has received final approvals, Department of Transportation approval, CAFRA approval, MUA, County, Fire and other outside agency approvals.
The site and infrastructure work for this development began in 2023 and will be completed in the 4th quarter of 2024.
Preliminary approval was granted in 2021 and final approval in 2023.
The Company has secured permanent funding to install infrastructure and vertical construction for this project in October of 2023 and has retired the previous land lender.
Site bonds, escrows and fees have been posted, with clearing having started in the 4th quarter of 2023.
As of this date, the property has been cleared, top soil removed, earth balance completed and sanitary sewer in process.
The Company has entered into an agreement with a national builder to deliver improved building sites for this project. It is in the Company’s opinion that the financial advantages inherent in the sale of a portion of the improved lots in this development outweigh the advantages of building and selling or leasing the entire development.
Louis Avenue – Bayville, NJ – 17 townhome units
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, 2022.
As of this date the Company is pursuing various options for the development of this property, including Build to Lease, sale of the approved parcel to another builder/developer, or sale of the improved parcel to another builder.
| F-9 |
Autumn Run – Gloucester County
On December 7, 2018, the Company signed a contract to purchase a property in Gloucester County, NJ, which has been approved for 62 units of age-restricted manufactured housing. The property is currently in the final 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 applied for preliminary and final site plan approval and was heard at the April 2023 planning board meeting. Preliminary approval was granted, and the Company submitted for finals in the 4th quarter of 2023. The Company is scheduled to be heard for final approvals in December of 2024.
The Company took title to this property in early September of 2023. It is the Company’s intention to develop this property, sell the individual manufactured homes and continue to own and operate the development as a land lease rental property.
Properties under Contract to Purchase and in Development
Summary
These new developments which the Company owns or is in contract to purchase represent a significant value in new construction or forward contracts that have been sold. This work will occur over the next 3-4 years and is in addition to the custom spot lot & elevation/renovation division of the business. Management is very positive about these new developments.
Mortgages on Properties Held for Development:
| June 30, 2024 | December 31, 2023 | |||||||
| Edisto Loan Fund, LLC | $ | $ | ||||||
| Lynx Asset Services, LLC | ||||||||
| Karbar, LLC | ||||||||
| Briney Ave LLC | ||||||||
| Anchor Loans, LP | ||||||||
| AC Development, LLC | ||||||||
| AVB Development | ||||||||
| Total mortgages payable | ||||||||
| Less current portion | ||||||||
| Long-term portion | $ | $ | ||||||
During the six months ended June 30, 2024, a Company controlled by the CEO of the Company settled the mortgage loan with Karbar LLC.
4 - Notes Payable-Others/Loans Payable to Related Parties
Loans payable to related parties is summarized as follows:
| June 30, 2024 | December 31, 2023 | |||||||
| Loan payable-Rich Pezzullo | $ | $ | ||||||
| Loan payable-Dream Homes, LTD | ||||||||
| Loans payable to GPIL | ||||||||
| Other related party loans | ||||||||
| Total | $ | $ | ||||||
Advances
from the loans bear interest at a rate of
Notes payable - others is summarized as follows:
| June 30, 2024 | December 31, 2023 | |||||||
| Note payable-Chipman Trust | $ | $ | ||||||
| Note payable-LG Funding | ||||||||
| Note payable-Channel Partners | ||||||||
| Total | $ | $ | ||||||
The
above notes bear interest ranging from
| F-10 |
5 - Common Stock Issuances
In
January 2024,, the Company issued restricted shares for the forgiveness of loans to Dream Homes Ltd., a related party, for
$
On
April 24, 2023, the Company issued restricted common 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
The sources of the differences follow:
| Six months ended | ||||||||
| 6/30/24 | 6/30/23 | |||||||
| Expected tax at | $ | ( | ) | $ | ||||
| State income taxes, net of federal income tax benefit | ||||||||
| Non-deductible stock-based compensation | ||||||||
| Non-taxable loan forgiveness income | ||||||||
| Change in valuation allowance/NOL carryforward | ( | ) | ||||||
| Provision for (benefit from) income taxes | $ | $ | ||||||
7 - Commitments and Contingencies
Construction Contracts
As
of June 30, 2024, the Company was committed under construction contracts outstanding with homeowners and investors with contract prices
totaling $
Employment Agreements
The Company currently has no outstanding employment agreements.
Lease Agreements
The
Company has occupied office space located in Forked River, New Jersey for a significant period of time. In May of 2020, the rent was
increased to $
| F-11 |
Line of Credit
On
September 15, 2016, DHDC established a $
8 - Related Party Transactions
Dream Homes Ltd. Allocated payroll
The Company formerly used the services of Dream Homes Ltd. for its personnel operations.
For
the three months ended June 30, 2023, the Company’s estimated share of DHL’s gross payroll and payroll taxes were $
Beginning in 2024, Shore Custom Homes Corp. (SCHC), a subsidiary of the Company, commenced providing payroll services.
9 - Stock Warrants
The Company has no outstanding warrants.
10 - Subsequent Events
The Company has evaluated subsequent events through the date the financial statements are scheduled to be filed and have the following notes and comments.
The
mortgage outstanding with Briney Avenue LLC in the amount of $
On July 1, 2024, the Company sold 10 improved building lots in its Berkeley Terrace project to a national builder.
| F-12 |
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 June 30, 2024 and 2023. 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
Overview
Building on a history of over 2,000 new homes built and 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 and multi-family subdivisions as well as a leader in coastal new home and modular construction, elevation, Build to Lease and Improved Lots for Sale.
In addition to the coastal construction market, Dream Homes continues to pursue opportunities in new single and multi-family home construction, with 5 developments totaling 367 units in title, or under contract and in development. Dream Homes’ operations include the development and sale of residential communities, construction of single-family and multi-family homes, Build to Lease and the development and improvement of Finished Lots for Sale to national builders.
New trends in the real estate market that the Company is actively exploring include Build To Lease properties, as well as developing and improving building lots and developments to sell finished lots to national home builders. This focus and concentration on building both single and multi-family developments with the intention to lease or sell 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 and Improved Lots for sale developments, due to the perception that these 2 avenues are 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, as well as the virtually unlimited demand for improved lots from national builders has spurred a large growth in these market segments.
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The Company has made the decision to change focus to better accommodate these growing trends. Currently 2 new multi-family developments, which represent a total count of 79 units (of the 367 total units in title or under contract), will be changed from Build For Sale to Build for Lease. The Company 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 fourth division of the Company, behind Finished Lots for Sale, custom new homes and renovation/elevation projects.
In addition to the projects which the Company currently has under contract for development, improvement, Build to Lease, and Improved Lots for Sale, there are a number of properties which the Company has the ability to secure, whether through land contract or other types of options. These parcels represent significant additional opportunities for development, improvement, Build to Lease, and Improved Lots for Sale.
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 a greater portion of the revenue. New home development, whether Build to Lease or Finished Lots for Sale has a much greater scalability and growth potential than custom homes or elevation/renovation work. Though the Company has enjoyed stable revenue in the renovation/elevation portion of the company, the new homes division continues to represent a greater percentage of total revenue.
Dream Homes’ operations include the development and sale of a variety of residential communities, including construction of semi-custom homes, single and multi-family homes and new home Build to Lease and Improved Lots for Sale.
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 Build to Lease and Improved Lots for Sale.
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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 three and six months ended June 30, 2024 and 2023.
STATEMENTS OF OPERATIONS
For the three months ended June 30, 2024 and 2023
(Unaudited)
| Revenue: | 2024 | 2023 | ||||||
| Construction contracts | $ | 657,714 | $ | 706,669 | ||||
| Cost of construction contracts | 1,139,498 | 475,304 | ||||||
| Gross profit | (481,784 | ) | 231,365 | |||||
| Operating Expenses: | ||||||||
| Selling, general and administrative, including stock based compensation of $91,800 and $0, respectively | 193,693 | 242,598 | ||||||
| Depreciation expense | - | 1,575 | ||||||
| Total operating expenses | 193,693 | 244,173 | ||||||
| Income (loss) from operations | (675,477 | ) | (12,808 | ) | ||||
| Other income (expenses): | ||||||||
| Interest expense | (68,370 | ) | (25,450 | ) | ||||
| Total other income (expenses) | (68,370 | ) | (25,450 | ) | ||||
| Net income (loss) before income taxes | (743,847 | ) | (38,258 | ) | ||||
| Provision for income taxes | - | - | ||||||
| Net income (loss) | $ | (743,847 | ) | $ | (38,258 | ) |
Revenues
For the three months ended June 30, 2024 and 2023, revenues were $657,714 and $706,669 respectively.
The decrease in revenue was due to the timing ongoing property development.
Cost of Sales
For the three months ended June 30, 2024 and 2023,, cost of construction contracts were $1,139,498 and $475,304, respectively. The increase is due to the sale of property held for development, and its associated cost in 2024.
Operating Expenses
Operating expenses decreased $50,480 from $244,173 in 2023 to $193,693 in 2024, primarily due to stock based compensation of $91,800 in 2023.
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STATEMENTS OF OPERATIONS
For the six months ended June 30, 2024 and 2023
(Unaudited)
| Revenue: | 2024 | 2023 | ||||||
| Construction contracts | $ | 2,131,449 | $ | 1,811,135 | ||||
| Cost of construction contracts | 2,379,818 | 1,126,748 | ||||||
| Gross profit | (248,369 | ) | 684,387 | |||||
| Operating Expenses: | ||||||||
| Selling, general and administrative, including stock based compensation of $91,800 and $0, respectively | 525,410 | 538,032 | ||||||
| Depreciation expense | - | 3,150 | ||||||
| Total operating expenses | 525,410 | 541,182 | ||||||
| Income (loss) from operations | (773,779 | ) | 143,205 | |||||
| Other income (expenses): | ||||||||
| Interest expense | (87,420 | ) | (81,047 | ) | ||||
| Total other income (expenses) | (87,420 | ) | (81,047 | ) | ||||
| Net income (loss) before income taxes | (861,199 | ) | 62,158 | |||||
| Provision for income taxes | (5,266 | ) | - | |||||
| Net income (loss) | $ | (866,465 | ) | $ | 62,158 |
Revenues
For the six months ended June 30, 2024 and 2023, revenues were $2,131,449 and $1,811,135 respectively.
The increase in revenue was due to the timing of ongoing property development.
Cost of Sales
For the six months ended June 30, 2024 and 2023,, cost of construction contracts were $2,379,818 and $1,126,748, respectively. The increase is due to the sale of property held for development, and its associated cost in 2024.
Operating Expenses
Operating expenses decreased $15,772 from $541,182 in 2023 to $525,410 in 2024, primarily due to stock based compensation of $91,800 in 2023.
Liquidity and Capital Resources
As of June 30, 2024 and December 31, 2023, our cash balance was $1,868,077 and $2,712,503, respectively, total current assets were $2,452,228 and $3,300,377, respectively, and total current liabilities amounted to $3,433,476 and $3,317,179, respectively, including loans payable to related parties of $447,395 and $523,219, respectively. As of June 30, 2024 and December 31, 2023, the total stockholders’ equity (deficit) was ($128,200) and $633,265, respectively. We may seek additional capital to fund potential costs associated with expansion and/or acquisitions.
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Inflation
The impact of inflation on the costs of our company, and the ability to pass on cost increases to clients over time may be limited and is always dependent upon market conditions. At times, inflationary pressures have had a significant impact on our operations, and we anticipate that inflationary factors may have an 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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company, through its Shore Custom Homes Corp. subsidiary, is involved in several minor lawsuits in which it expects to prevail, The Company considers the substance of these claims to be of no merit.
Though the Company considers these lawsuits to be frivolous and without merit, it has chosen to disclose their existence in the interest of full transparency. In demonstration of its opposition to these awards, the Company is vigorously defending all cases and believes it shall prevail in court.
In the opinion of the Company and of its professional advisors, none of the lawsuits which the Company is currently involved in have any substantive validity or potential for material consequence to the Company.
All other normal operations of the Company and its subsidiaries are continuing with no negative effect from these lawsuits.
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.
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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 4, 2024 | ||
| By: | /s/ Vincent Simonelli | |
| Vincent Simonelli | ||
| Chief Executive Officer and Chief Financial Officer | ||
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