U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2016
| ¨ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 000-55205
T.A.G. Acquisitions Ltd.
(Exact name of registrant as specified in its charter)
| Delaware | 47-1363493 | |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
130 East Route 59 Suite #6 |
||
| Spring Valley, NY | 10977 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: 845-517-3673
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
| Large accelerated filer | ¨ | Accelerated filer | ¨ |
| Non-accelerated filer | ¨ | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of May 12, 2016, the issuer had 6,300,000 shares of its common stock issued and outstanding.
TABLE OF CONTENTS
| Page | ||
| PART I | ||
| Item 1. | Financial Statements | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 17 |
| Item 4. | Controls and Procedures | 17 |
| PART II | ||
| Item 1. | Legal Proceedings | 17 |
| Item 1A. | Risk Factors | 17 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 17 |
| Item 3. | Defaults Upon Senior Securities | 17 |
| Item 4. | Mine Safety Disclosures | 17 |
| Item 5. | Other Information | 17 |
| Item 6. | Exhibits | 18 |
| Signatures | 18 |
| 2 |
PART I - FINANCIAL INFORMATION
T.A.G. Acquisitions Ltd.
Financial Statements
Contents
| 3 |
Condensed Consolidated Balance Sheet
| March 31, | December 31, | |||||||
| 2016 | 2015 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 74,633 | $ | 553,427 | ||||
| Prepaid Interest | 880,000 | 1,210,000 | ||||||
| Total current assets | 954,633 | 1,763,427 | ||||||
| Investments in real estate | 4,479,913 | 3,293,840 | ||||||
| Deposits | 242,500 | 73,250 | ||||||
| TOTAL ASSETS | $ | 5,677,046 | $ | 5,130,517 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 195,257 | $ | 26,629 | ||||
| Accrued expenses | 25,870 | 15,184 | ||||||
| Accrued payroll to stockholder | 121,133 | 121,383 | ||||||
| Notes payable, net of discount of $142,766 and $196,011 | 6,198,724 | 5,252,979 | ||||||
| Advances from stockholder | 142,671 | 260,190 | ||||||
| Total current liabilities | 6,683,655 | 5,676,365 | ||||||
| Notes payable, net of current portion | 18,500 | 20,000 | ||||||
| TOTAL LIABILITIES | 6,702,155 | 5,696,365 | ||||||
| STOCKHOLDERS' DEFICIT: | ||||||||
| Preferred stock, $0.0001 par value, 20,000,000 shares authorized, 0 shares issued and outstanding | - | - | ||||||
| Common stock, $0.0001 par value, 100,000,000 shares authorized, 6,300,000 and 6,300,000 shares issued and outstanding | 630 | 630 | ||||||
| Additional paid-in capital | 230,460 | 230.460 | ||||||
| Accumulated deficit | (1,256,199 | ) | (796,938 | ) | ||||
| Total stockholders' deficit | (1,025,109 | ) | (565,848 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 5,677,046 | $ | 5,130,517 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| Revenue | $ | 74,195 | $ | — | ||||
| Operating expenses: | ||||||||
| General and administrative expenses | 284,778 | 224,873 | ||||||
| Loss from operations | (210,583 | ) | (224,873 | ) | ||||
| Other expense | ||||||||
| Interest expense | (248,678 | ) | — | |||||
| Loss before income taxes | (459,261 | ) | (224,873 | ) | ||||
| Income taxes | — | — | ||||||
| Net loss | $ | (459,261 | ) | $ | (224,873 | ) | ||
| Weighted average shares outstanding : | ||||||||
| Basic | 6,300,000 | 3,500,000 | ||||||
| Diluted | 6,300,000 | 3,500,000 | ||||||
| Loss per share | ||||||||
| Basic | $ | (0.07 | ) | $ | (0.06 | ) | ||
| Diluted | $ | (0.07 | ) | $ | (0.06 | ) | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (459,261 | ) | $ | (224,873 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Amortization of debt issuance costs | 53,245 | - | ||||||
| Change in current assets and liabilities: | ||||||||
| Prepaid interest | 330,000 | - | ||||||
| Accounts payable | 168,628 | 5,537 | ||||||
| Accrued expenses | 10,686 | 2,842 | ||||||
| Accrued payroll to stockholder | (250 | ) | 52,063 | |||||
| Net cash provided by (used in) operating activities | 103,048 | (164,431 | ) | |||||
| INVESTING ACTIVITIES: | ||||||||
| Payments for investments in real estate | (1,186,073 | ) | - | |||||
| Increase in cash overdraft | - | 1,047 | ||||||
| Payments for deposits | (169,250 | ) | (5,000 | ) | ||||
| Net cash used in investing activities | (1,355,323 | ) | (3,953 | ) | ||||
| FINANCING ACTIVITIES: | ||||||||
| Advances from (repayments to) stockholder | (117,519 | ) | 102,800 | |||||
| Proceeds from issuance of notes payable | 950,000 | - | ||||||
| Payments on notes payable | (59,000 | ) | - | |||||
| Capital contribution by stockholder | - | 65,584 | ||||||
| Net cash provided by financing activities | 773,481 | 168,384 | ||||||
| NET DECREASE IN CASH | (478,794 | ) | - | |||||
| CASH, BEGINNING BALANCE | 553,427 | - | ||||||
| CASH, ENDING BALANCE | $ | 74,633 | $ | - | ||||
| CASH PAID FOR: | ||||||||
| Interest | $ | - | $ | - | ||||
| Income taxes | $ | - | $ | - | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
Notes to Condensed Consolidated Financial Statements
March 31, 2016 and 2015
(Unaudited)
Note 1 – Organization and Basis of Presentation
The unaudited condensed consolidated financial statements were prepared by T.A.G. Acquisitions Ltd. (the “Company”), pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) were omitted pursuant to such rules and regulations. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and footnotes included in the Company’s Annual Report on Form 10-K filed with the SEC on April 11, 2016. The results for the three months ended March 31, 2016, are not necessarily indicative of the results to be expected for the year ending December 31, 2016.
Description of Business
T.A.G. Acquisitions Ltd. (the “Company”) (formerly Surprise Valley Acquisition Corporation) was incorporated on May 20, 2014 under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. On November 17, 2014, the Company changed its name to T.A.G. Acquisitions, Ltd. and filed the amendment with the State of Delaware.
The Company is in the business of seeking out exceptional conversion opportunities, large multi-family and commercial office properties (as opposed to hospitality, retail, or industrial investment properties), for which significant value and profitability can be realized through the carefully managed aesthetic improvements, strategic marketing, and restructured management. The Company calls this “repositioning.” The Company’s sales and marketing strategies are also focusing on ways in which “pricing concepts are marketed” to its customers. Perks, privileges, tie-ins to strategic marketing partners, packages, discounts, and loyalty rewards for longer-term lessees are all under consideration as techniques to acquire new lessees and drive revenue.
Note 2 - Summary of Significant Accounting Policies
Basis of presentation
The summary of significant accounting policies presented below is designed to assist in understanding the Company's unaudited condensed consolidated financial statements. Such unaudited condensed consolidated financial statements and accompanying notes are the representations of the Company's management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America ("GAAP") in all material respects, and have been consistently applied in preparing the accompanying unaudited condensed consolidated financial statements.
Principles of Consolidation
The accompanying consolidated financial statements represent the consolidated financial position and results of operations of the Company and include the accounts and results of operations of the Company, Waydell 32-38 LLC (“Waydell”), Creekside by TAG LLC (“Creekside”) and Tall Pines by TAG LLC (“Tall Pines”). The results of operations for Waydell have only been included since the date of acquisition of August 13, 2015 and for Creekside and Tall Pines have only been included since their inception on October 22, 2015. All intercompany transactions and balances have been eliminated in consolidation.
| 7 |
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Cash
Cash and cash equivalents include cash on hand and on deposit at banking institutions as well as all highly liquid short-term investments with original maturities of 90 days or less. The Company did not have cash equivalents as of March 31, 2016 and December 31, 2015.
Concentration of risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high quality banking institutions As of March 31, 2016 and December 31, 2015, the Company had cash balances in excess of the Federal Deposit Insurance Corporation limit of $0 and $384,234, respectively.
Earnings (loss) per share
Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per common share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if potentially dilutive securities had been issued. There were no potentially dilutive securities outstanding during the periods presented.
Income taxes
The Company records income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and attributable to operating loss and tax credit carry forwards. Accounting standards regarding income taxes requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed at each reporting period based on a more-likely-than-not realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry forward periods, the Company’s experience with operating loss and tax credit carry forwards not expiring unused, and tax planning alternatives.
The Company recorded valuation allowances on the net deferred tax assets. Management will reassess the realization of deferred tax assets based on the accounting standards for income taxes each reporting period. To the extent that the financial results of operations improve and it becomes more likely than not that the deferred tax assets are realizable, the Company will be able to reduce the valuation allowance.
Significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. Accounting standards regarding uncertainty in income taxes provides a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely, based solely on the technical merits, of being sustained on examinations. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes.
| 8 |
Fair value of financial instruments
The Company follows guidance for accounting for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Additionally, the Company adopted guidance for fair value measurement related to nonfinancial items that are recognized and disclosed at fair value in the financial statements on a nonrecurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
| · | Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. |
| · | Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. |
| · | Level 3 inputs are unobservable inputs for the asset or liability. The carrying amounts of financial assets such as cash approximate their fair values because of the short maturity of these instruments. |
The Company had no such financial instruments outstanding as of March 31, 2016 and December 31, 2015.
Recent accounting pronouncements
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09) , which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). Early adoption is not permitted. The Company is currently evaluating the impact of the pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which it will adopt the standard beginning January 1, 2017.
In August, 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods with that reporting period.
In February, 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. ASU 2015-02 provides guidance on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). ASU 2015-02 is effective for periods beginning December 15, 2015. The adoption of ASU 2015-02 is not expected to have a material effect on the Company’s consolidated financial statements. Early adoption is permitted.
| 9 |
In September, 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805). Topic 805 requires that an acquirer retrospectively adjust provisional amounts recognized in a business combination, during the measurement period. To simplify the accounting for adjustments made to provisional amounts, the amendments in the Update require that the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition an entity is required to present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for fiscal years beginning December 15, 2015. The adoption of ASU 2015-016 is not expected to have a material effect on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of ASU 2016-02 on the Company’s financial statements and disclosures.
In March 2016, the FASB issued an ASU amending the accounting for stock-based compensation and requiring excess tax benefits and deficiencies to be recognized as a component of income tax expense rather than equity. This guidance also requires excess tax benefits to be presented as an operating activity on the statement of cash flows and allows an entity to make an accounting policy election to either estimate expected forfeitures or to account for them as they occur. The ASU is effective for reporting periods beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating the impact of the ASU; however, it does not expect the ASU will have a material impact on our consolidated financial statements.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.
Note 3 – Going Concern
The Company has generated minimal revenue since inception and has sustained operating losses during the three months ended March 31, 2016 and the year ended December 31, 2015 of $459,261 and $796,231, respectively. As of March 31, 2016 and December 31, 2015, the Company had an accumulated deficit of $1,256,199 and $796,938, respectively and a working capital deficit of $5,729,002 and $3,912,938, respectively. The Company's continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations and/or obtaining additional financing from its majority stockholder or other sources, as may be required.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern; however, the above condition raises substantial doubt about the Company's ability to do so. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
In order to maintain its current level of operations, the Company will require additional working capital from either cash flow from operations, from the sale of its equity or from long-term debt financing. The Company has recently purchased two properties in Georgia and have obtained $11 million in short-term financing (which includes line of credit of $5,680,000) to purchase and renovate the two properties. The Company is currently seeking to raise capital through the sale of its equity securities. However, there can be no assurances that the Company will be successful raising capital through the sale of its equity securities. If the Company is unable to acquire additional working capital, it will be required to significantly reduce its current level of operations.
| 10 |
Note 4 – Investments in Real Estate
On August 13, 2015, the Company entered into a securities purchase agreement with Waydell whereby the Company purchased a 100% interest in Waydell for 300,000 shares of the Company’s common stock. Waydell is a real estate holding company that owns and manages the real estate property located at 32-38 Waydell Street, Newark, New Jersey. On June 25, 2015, Waydell purchased the property in Newark, New Jersey for $150,000. The 300,000 shares issued to Moses Schwartz in connection with this acquisition were valued at $150,000 which is the amount paid for the only asset owned by Waydell that was recently purchased on June 25, 2015 — real property located at 32-38 Waydell Street, Newark, New Jersey. Waydell had no liabilities. In addition to the acquisition of this property, the Company also incurred $18,325 in connection with the development of this property. The carrying value of this property at March 31, 2016 and December 31, 2015 is $168,325 and $165,325, respectively. The increase was due to additional development costs incurred during the quarter.
On November 20, 2015, through its newly created subsidiaries, Creekside and Tall Pines, the Company purchased properties in Decatur, GA and Atlanta, GA respectively. Both of these properties are in need of significant renovations and did not have any significant operating activities prior to the acquisition and as a result no pro forma financial disclosures have been provided. The initial purchase price for the Creekside and Tall Pines properties was $1,820,000 and $480,000, respectively. The purchases were financed from the issuance of notes payable (See Note 5). Both of these properties are being renovated and the cost to renovate the properties is being capitalized. In addition, the Company has issued notes payable to financing the initial purchase of the properties and the renovations; and therefore has capitalized interest on these properties. Total capitalized interest included in Investments in Real Estate at March 31, 2016 and December 31, 2015 was $181,576 and $45,153. Cheskel Meisels, the CEO for the Company, personally guaranteed repayment of the loans. The Company estimates the cost of the renovations to the properties to range between $6,000,000 and $7,500,000.
A summary of the Company’s real estate holdings at March 31, 2016 and December 31, 2015 is below:
| March 31, | December 31, | |||||||
| 2016 | 2015 | |||||||
| 32-38 Waydell Street | ||||||||
| Newark, NJ | $ | 168,325 | $ | 165,325 | ||||
| 3000 Ember Drive | ||||||||
| Decatur, GA | 3,799,292 | 2,633,766 | ||||||
| 3200 Cushman Circle | ||||||||
| Atlanta, GA | 512,296 | 494,749 | ||||||
| $ | 4,479,913 | $ | 3,293,840 | |||||
| 11 |
Note 5 – Notes Payable
Notes payable at March 31, 2016 and December 31, 2015 consist of the following:
| March 31, | December 31, | |||||||
| 2016 | 2015 | |||||||
| Note payable dated June 5, 2015; unsecured; interest at 0% per annum; due June 5, 2016 | $ | 20,000 | $ | 20,000 | ||||
| Note payable dated April 15, 2015; unsecured; interest at 0% per annum; monthly payments of $500; due April 15,2020 | 24,500 | 26,000 | ||||||
| Note payable dated July 15, 2015; unsecured; interest at 10% per annum; due July 1, 2016 | 28,600 | 28,600 | ||||||
| Note payable dated October 1, 2015; unsecured; interest at 10% per annum; due October 1, 2016 | 16,890 | 74,390 | ||||||
| Notes payable to Sharestates Investing, LLC, an unrelated party, dated November 20, 2015; secured by Creekside and Tall Pines properties and guaranteed by the Company's CEO; interest at 12% per annum; due November 30, 2016 | 6,270,000 | 5,320,000 | ||||||
| Total | 6,359,990 | 5,468,990 | ||||||
| Note discount | (142,766 | ) | (196,011 | ) | ||||
| Net amount | 6,217,224 | 5,272,979 | ||||||
| Less current portion | (6,198,724 | ) | (5,252,979 | ) | ||||
| Long-term portion | $ | 18,500 | $ | 20,000 | ||||
The Company issued four commercial promissory notes and four commercial non-revolving line of credit promissory notes to Sharestates Investing, LLC for an aggregate of $11,000,000 in connection with the purchase of the Creekside and Tall Pines properties. The interest rate for all the notes is 12% and all the notes are due on November 30, 2016. The four commercial promissory notes were issued at closing and totaled $5,320,000. The aggregate of the four commercial non-revolving line of credit promissory notes of $5,680,000 is available for the Company to draw down for the renovations of the Creekside and Tall Pines properties. During the three months ended March 31, 2016, the Company drew down $950,000 on the commercial non-revolving line of credit promissory notes.
In connection with the issuances of these notes totaling $11,000,000, the Company was required to pay debt issuance costs of 2% of the total balance or $220,000. These debt issuance costs are shown as a note discount and amortized over the term of the notes. During the three months ended March 31, 2016, the Company amortized $53,245 of the debt issuance costs which is included in interest expense.
Also, the Company was required to prepay interest for one year or $1,320,000 on the entire $11,000,000 credit facilities. During the three months ended March 31, 2016, the Company amortized $330,000 of the prepaid interest to interest expense. As of March 31, 2016 and December 31, 2015, the prepaid interest balance was $880,000 and $1,210,000, respectively.
| 12 |
Aggregate future maturities of notes payable at March 31, 2016 are as follows:
| Year ending March 31, | ||||
| 2017 | $ | 6,198,724 | ||
| 2018 | 6,000 | |||
| 2019 | 6,000 | |||
| 2020 | 6,000 | |||
| 2021 | 500 | |||
| $ | 6,217,224 | |||
Note 6 – Advances from stockholder
At March 31, 2016 and December 31, 2015 the Company had advances from its majority stockholder of $121,133 and $121,383. These advances are non-interest bearing and payable upon demand.
Note 7 – Agreements to Purchase Real Estate
On December 15, 2015, the Company entered into an agreement to purchase property located at 81 Clay Street, Newark, New Jersey for $4,000,000, and paid a deposit of $50,000 prior to December 31, 2015. The Company is currently negotiating an extension on the expected closing date in order to secure additional financing for the purchase. The parties have tentatively agreed to a closing date of June 30, 2016. In the event a formal agreement is not reached, $25,000 of the deposit will be returned to the Company.
On February 23, 2016, the Company entered into an Agreement of Assignment Bid that gives the Company the right to purchase a property in Holliswood, New York for $999,500, plus finders’ fees of $200,500, for an aggregate purchase price of $1,200,000.
Note 8 – Subsequent Events
On April 8, 2016, the Company, through its newly created subsidiary Santiago Acquisitions LLC, completed its closing in connection with the purchase of the property known as 87-48 Santiago Street, Holliswood, NY, pursuant to an Agreement of Assignment of Bid, dated February 23, 2016, between Nison Badalov and the Company. The purchase price was $999,500, plus fees and costs related to the closing of $91,436, for an aggregate purchase price of $1,090,936.
The Company secured a loan in the principal amount of $840,000 at a twelve (12%) percent interest rate, due on April 30, 2017, from SHARESTATES LLC to cover the aggregate purchase price. Cheskel Meisels, the CEO for the Company, personally guaranteed repayment of the loan.
| 13 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This quarterly report on Form 10-Q and other reports filed the Company from time to time with the SEC contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates. This discussion and analysis should be read in conjunction with the Company’s financial statements and accompanying notes to the financial statements for the year ended December 31, 2015 included in Form 10-K filed with the Securities and Exchange Commission on April 11, 2016.
Overview and Highlights
Company Background
T.A.G Acquisitions Ltd. (formerly Surprise Valley Acquisition Corporation) was incorporated on May 20, 2014 under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. On November 17, 2014, we changed our name to T.A.G. Acquisitions, Ltd. and filed the amendment with the State of Delaware.
We are in the business of seeking out exceptional conversion opportunities, large multi-family and commercial office properties (as opposed to hospitality, retail, or industrial investment properties), for which significant value and profitability can be realized through the carefully managed aesthetic improvements, strategic marketing, and restructured management. We call this “repositioning.” Our sales and marketing strategies are also focusing on ways in which “pricing concepts are marketed” to our customers. Perks, privileges, tie-ins to strategic marketing partners, packages, discounts, and loyalty rewards for longer-term lessees are all under consideration as techniques to acquire new lessees and drive revenue.
We intend to continue seeking multiple real estate investment opportunities throughout the United States, but we are initially focusing on areas in and around New York City, New Jersey, Georgia and Maryland.
| 14 |
On August 13, 2015, we entered into a securities purchase agreement with Waydell 32-38, LLC whereby we purchased a 100% interest in Waydell for 300,000 shares of our common stock. Waydell is a real estate holding company formed on June 15, 2015 to own and manage the real estate property located at 32-38 Waydell Street, Newark, New Jersey. On June 25, 2015, Waydell purchased the property in Newark, New Jersey for $150,000. Waydell currently has no results of operations and as a result no pro forma financial disclosures are required. The 300,000 shares issued to Moses Schwartz in connection with this acquisition were valued at $150,000 which is the amount paid for the only asset owned by Waydell that was recently purchased on June 25, 2015 — real property located at 32-38 Waydell Street, Newark, New Jersey. Waydell had no liabilities. Our plan is to develop eleven "upscale" 2-bedroom apartments on this property.
On November 20, 2015, through our newly created subsidiaries, Creekside and Tall Pines, we purchased properties in Decatur, GA and Atlanta, GA respectively. Both of these properties are in need of significant renovations and did not have any significant operating activities prior to the acquisition and as a result no pro forma financial disclosures have been provided. The initial purchase price for the Creekside and Tall Pines properties was $1,820,000 and $480,000, respectively The Company secured loans in the aggregate principal amount of $11,000,000 at a 12% interest rate from various lenders to cover the purchase prices, as well as the construction costs for the properties. The loans are due on November 30, 2016. Both of these properties are being renovated and the cost to renovate the properties is being capitalized. In addition, the Company has issued notes payable to financing the initial purchase of the properties and the renovations; and therefore has capitalized interest on these properties. Cheskel Meisels, the CEO for the Company, personally guaranteed repayment of the loans. The Company estimates the cost of the renovations to the properties to range between $6,000,000 and $7,500,000.
On December 15, 2015, the Company entered into an agreement to purchase property located at 81 Clay Street, Newark, New Jersey for $4,000,000, and paid a deposit of $50,000 prior to December 31, 2015. The Company is currently negotiating an extension on the expected closing date in order to secure additional financing for the purchase. The parties have tentatively agreed to a closing date of June 30, 2016. In the event a formal agreement is not reached, $25,000 of the deposit will be returned to the Company.
Recent Developments
On April 8, 2016, the Company, through its newly created subsidiary Santiago Acquisitions LLC, completed its closing in connection with the purchase of the property known as 87-48 Santiago Street, Holliswood, NY, pursuant to an Agreement of Assignment of Bid, dated February 23, 2016, between Nison Badalov and the Company. The purchase price was $999,500, plus fees and costs related to the closing of $91,436, for an aggregate purchase price of $1,090,936.
The Company secured a loan in the principal amount of $840,000 at a twelve (12%) percent interest rate, due on April 30, 2017, from SHARESTATES LLC to cover the aggregate purchase price. Cheskel Meisels, the CEO for the Company, personally guaranteed repayment of the loan.
Going Concern
We generated minimal revenue since inception and has sustained operating losses during the three months ended March 31, 2016 and the year ended December 31, 2015 of $459,261 and $796,231, respectively. As of March 31, 2016 and December 31, 2015, we had an accumulated deficit of $1,256,199 and $796,938, respectively and a working capital deficit of $5,729,002 and $3,912,938, respectively. Our continuation as a going concern is dependent on our ability to generate sufficient cash flows from operations to meet our obligations and/or obtaining additional financing from our majority stockholder or other sources, as may be required.
The accompanying financial statements have been prepared assuming that we will continue as a going concern; however, the above condition raises substantial doubt about our ability to do so. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern.
In order to maintain our current level of operations, we will require additional working capital from either cash flow from operations, from the sale of our equity or from long-term debt financing. We have recently purchased two properties in Georgia and have obtained $11 million in short-term financing (which includes line of credit of $5,680,000) to purchase and renovate the two properties. We are currently seeking to raise capital through the sale of our equity securities. However, there can be no assurances that we will be successful raising capital through the sale of our equity securities. If we are unable to acquire additional working capital, we will be required to significantly reduce our current level of operations.
| 15 |
Results of Operations
For the Three Months Ended March 31, 2016, Compared to the Three Months Ended March 31, 2015
Revenue
Our revenue for the three months ended March 31, 2016 was $74,195 compared to $0 for the three months ended March 31, 2015. The increase in revenue is due to the purchase of the two apartment complexes in Georgia during the 4th quarter of 2015. We are collecting minimal rent from tenants while the properties are being renovated.
Operating Expenses
Operating expenses for the three months ended March 31, 2016 were $284,778 compared to $224,873 for the three months ended March 31, 2015. The increase of $59,905 or 26.6% is due to us expanding our operations through the acquisition of properties. We expect our operating cost to increase as we expand our operations through future acquisitions. Our principal general and administrative expenses are payroll related costs, professional fees and rent.
Interest Expense
Interest expense for the three months ended March 31, 2016 was $248,678 compared to $0 for the three months ended March 31, 2015, an increase of $248,678, attributable to notes payable obtained in 2015, principally the notes for the acquisition and renovation of the Georgia properties.
Net Loss
For the three months ended March 31, 2016, we sustained a net loss of $459,261 compared to a net loss of $224,873 for the three months ended March 31, 2015. The increase in net loss is attributed to the factors described above.
Liquidity and Capital Resources
We have financed our operations since inception from capital contributions and advances from our majority stockholder and proceeds from notes payable. Since inception, we received an advance and a capital contribution from our majority stockholder of $142,671 and $230,090, respectively. In addition we have also received proceeds from issuing notes payable for aggregate proceeds of $5,101,990.
The following table summarizes working capital at March 31, 2016 compared to December 31, 2015:
| March 31, | December 31, | Increase/ | ||||||||||
| 2016 | 2015 | (Decrease) | ||||||||||
| Current Assets | $ | 954,633 | 1,763,427 | (808,794 | ) | |||||||
| Current Liabilities | 6,686,655 | 5,676,365 | 1,010,290 | |||||||||
| Working Capital (Deficit) | $ | (5,732,022 | ) | (3,912,938 | ) | (1,819,084 | ) | |||||
Off-Balance Sheet Arrangements
At March 31, 2016, we had no off-balance sheet arrangements.
| 16 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for Smaller Reporting Companies
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report, March 31, 2016. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.
Based upon that evaluation, the principal executive officer and the principal financial officer believe that the Company’s disclosure controls and procedures are effective in gathering, analyzing and disclosing information needed to ensure that the information required to be disclosed by the Company in its periodic reports is recorded, summarized and processed timely.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended March 31, 2016, that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
There are not presently any material pending legal proceedings to which the Company is a party or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.
Not required for Smaller Reporting Companies
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Mining Safety Disclosures
Not applicable
None
| 17 |
| 3.1 | Certificate of Incorporation of the Company (conformed copy) ) (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-K, filed with the SEC on April 11, 2016) |
| 3.2 | Certificate of Amendment to Certificate of Incorporation of the Company (conformed copy) (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-K, filed with the SEC on April 11, 2016) |
| 3.3 | By-laws of the Company (conformed copy) (incorporated by reference to Exhibit 3.3 to the Company’s Form 10, filed with the SEC on June 18, 2014) |
| 4.1 | Specimen stock certificate (incorporated by reference to Exhibit 3.3 to the Company’s Form 10, filed with the SEC on June 18, 2014) |
| 10.1 | Agreement of Assignment of Bid, dated February 23, 2016, between Nison Badalov and T.A.G. Acquisitions Ltd. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed with the SEC on April 12, 2016) |
| 10.2 | Loan Agreement and Commercial Promissory Note, dated April 8, 2016, between SHARESTATES, LLC and Santiago Acquisitions LLC (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed with the SEC on April 12, 2016) |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32 | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.INS | XBRL Instance Document |
| 101.SCH | XBRL Taxonomy Extension Schema Document |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Definition |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| T.A.G. ACQUISITIONS LTD. | ||
| Dated: May 16, 2016 | By: | /s/ Cheskel Meisels |
|
Cheskel Meisels Chief Executive Officer | ||
| 18 |
EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302
I, Cheskel Meisels, certify that:
1. I have reviewed this annual report on Form 10-K of T.A.G. Acquisitions Ltd.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: May 16, 2016 | |
| /s/ Cheskel Meisels | |
| Cheskel Meisels | |
| Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302
I, Etel Halpert, certify that:
1. I have reviewed this annual report on Form 10-K of T.A.G. Acquisitions Ltd.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: May 16, 2016 | |
| /s/ Etel Halpert | |
| Etel Halpert | |
| Chief Financial Officer |
EXHIBIT 32
CERTIFICATION PURSUANT TO SECTION 906
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officers of T.A.G. Acquisitions Ltd. (the “Company”), hereby certifies that:
The Report on Form 10-K for the year ended December 31, 2015 of the Company (the “Report”), fully complies, with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
| /s/ Cheskel Meisels | |
| Cheskel Meisels | |
| Chief Executive Officer | |
| /s/ Etel Halpert | |
| Etel Halpert | |
| Chief Financial Officer |
Date: May 16, 2016
Document and Entity Information - shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2016 |
May. 12, 2016 |
|
| Document And Entity Information | ||
| Entity Registrant Name | T.A.G. Acquisitions Ltd. | |
| Entity Central Index Key | 0001610785 | |
| Document Type | 10-Q | |
| Document Period End Date | Mar. 31, 2016 | |
| Amendment Flag | false | |
| Current Fiscal Year End Date | --12-31 | |
| Entity a Well-known Seasoned Issuer | No | |
| Entity a Voluntary Filer | No | |
| Entity's Reporting Status Current | Yes | |
| Entity Filer Category | Smaller Reporting Company | |
| Entity Common Stock, Shares Outstanding | 6,300,000 | |
| Document Fiscal Period Focus | Q1 | |
| Document Fiscal Year Focus | 2016 |
Condensed Consolidated Balance Sheet (unaudited) (Parenthetical) - USD ($) |
Mar. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Unamortized debt discount | $ 142,766 | $ 196,011 |
| Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
| Preferred stock, authorized | 20,000,000 | 20,000,000 |
| Preferred stock, issued | 0 | 0 |
| Preferred stock, outstanding | 0 | 0 |
| Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
| Common stock, authorized | 100,000,000 | 100,000,000 |
| Common stock, issued | 6,300,000 | 6,300,000 |
| Common stock, outstanding | 6,300,000 | 6,300,000 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
| Income Statement [Abstract] | ||
| Revenue | $ 74,195 | |
| Operating expenses: | ||
| General and administrative expenses | 284,778 | $ 224,873 |
| Loss from operations | (210,583) | $ (224,873) |
| Other expense | ||
| Interest expense | (248,678) | |
| Loss before income taxes | $ (459,261) | $ (224,873) |
| Income taxes | ||
| Net loss | $ (459,261) | $ (224,873) |
| Weighted average shares outstanding : | ||
| Basic (in shares) | 6,300,000 | 3,500,000 |
| Diluted (in shares) | 6,300,000 | 3,500,000 |
| Loss per share | ||
| Basic (in dollars per share) | $ (0.07) | $ (0.06) |
| Diluted (in dollars per share) | $ (0.07) | $ (0.06) |
Organization and Basis of Presentation |
3 Months Ended |
|---|---|
Mar. 31, 2016 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Organization and Basis of Presentation | Note 1 – Organization and Basis of Presentation
The unaudited condensed consolidated financial statements were prepared by T.A.G. Acquisitions Ltd. (the “Company”), pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) were omitted pursuant to such rules and regulations. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and footnotes included in the Company’s Annual Report on Form 10-K filed with the SEC on April 11, 2016. The results for the three months ended March 31, 2016, are not necessarily indicative of the results to be expected for the year ending December 31, 2016.
Description of Business
T.A.G. Acquisitions Ltd. (the “Company”) (formerly Surprise Valley Acquisition Corporation) was incorporated on May 20, 2014 under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. On November 17, 2014, the Company changed its name to T.A.G. Acquisitions, Ltd. and filed the amendment with the State of Delaware.
The Company is in the business of seeking out exceptional conversion opportunities, large multi-family and commercial office properties (as opposed to hospitality, retail, or industrial investment properties), for which significant value and profitability can be realized through the carefully managed aesthetic improvements, strategic marketing, and restructured management. The Company calls this “repositioning.” The Company’s sales and marketing strategies are also focusing on ways in which “pricing concepts are marketed” to its customers. Perks, privileges, tie-ins to strategic marketing partners, packages, discounts, and loyalty rewards for longer-term lessees are all under consideration as techniques to acquire new lessees and drive revenue. |
Summary of Significant Accounting Policies |
3 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2016 | ||||||||||
| Accounting Policies [Abstract] | ||||||||||
| Summary of Significant Accounting Policies | Note 2 - Summary of Significant Accounting Policies
Basis of presentation
The summary of significant accounting policies presented below is designed to assist in understanding the Company's unaudited condensed consolidated financial statements. Such unaudited condensed consolidated financial statements and accompanying notes are the representations of the Company's management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America ("GAAP") in all material respects, and have been consistently applied in preparing the accompanying unaudited condensed consolidated financial statements.
Principles of Consolidation
The accompanying consolidated financial statements represent the consolidated financial position and results of operations of the Company and include the accounts and results of operations of the Company, Waydell 32-38 LLC (“Waydell”), Creekside by TAG LLC (“Creekside”) and Tall Pines by TAG LLC (“Tall Pines”). The results of operations for Waydell have only been included since the date of acquisition of August 13, 2015 and for Creekside and Tall Pines have only been included since their inception on October 22, 2015. All intercompany transactions and balances have been eliminated in consolidation.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Cash
Cash and cash equivalents include cash on hand and on deposit at banking institutions as well as all highly liquid short-term investments with original maturities of 90 days or less. The Company did not have cash equivalents as of March 31, 2016 and December 31, 2015.
Concentration of risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high quality banking institutions As of March 31, 2016 and December 31, 2015, the Company had cash balances in excess of the Federal Deposit Insurance Corporation limit of $0 and $384,234, respectively.
Earnings (loss) per share
Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per common share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if potentially dilutive securities had been issued. There were no potentially dilutive securities outstanding during the periods presented.
Income taxes
The Company records income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and attributable to operating loss and tax credit carry forwards. Accounting standards regarding income taxes requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed at each reporting period based on a more-likely-than-not realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry forward periods, the Company’s experience with operating loss and tax credit carry forwards not expiring unused, and tax planning alternatives.
The Company recorded valuation allowances on the net deferred tax assets. Management will reassess the realization of deferred tax assets based on the accounting standards for income taxes each reporting period. To the extent that the financial results of operations improve and it becomes more likely than not that the deferred tax assets are realizable, the Company will be able to reduce the valuation allowance.
Significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. Accounting standards regarding uncertainty in income taxes provides a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely, based solely on the technical merits, of being sustained on examinations. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes.
Fair value of financial instruments
The Company follows guidance for accounting for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Additionally, the Company adopted guidance for fair value measurement related to nonfinancial items that are recognized and disclosed at fair value in the financial statements on a nonrecurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
The Company had no such financial instruments outstanding as of March 31, 2016 and December 31, 2015.
Recent accounting pronouncements
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09) , which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). Early adoption is not permitted. The Company is currently evaluating the impact of the pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which it will adopt the standard beginning January 1, 2017.
In August, 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods with that reporting period.
In February, 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. ASU 2015-02 provides guidance on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). ASU 2015-02 is effective for periods beginning December 15, 2015. The adoption of ASU 2015-02 is not expected to have a material effect on the Company’s consolidated financial statements. Early adoption is permitted.
In September, 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805). Topic 805 requires that an acquirer retrospectively adjust provisional amounts recognized in a business combination, during the measurement period. To simplify the accounting for adjustments made to provisional amounts, the amendments in the Update require that the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition an entity is required to present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for fiscal years beginning December 15, 2015. The adoption of ASU 2015-016 is not expected to have a material effect on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of ASU 2016-02 on the Company’s financial statements and disclosures.
In March 2016, the FASB issued an ASU amending the accounting for stock-based compensation and requiring excess tax benefits and deficiencies to be recognized as a component of income tax expense rather than equity. This guidance also requires excess tax benefits to be presented as an operating activity on the statement of cash flows and allows an entity to make an accounting policy election to either estimate expected forfeitures or to account for them as they occur. The ASU is effective for reporting periods beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating the impact of the ASU; however, it does not expect the ASU will have a material impact on our consolidated financial statements.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements. |
Going Concern |
3 Months Ended |
|---|---|
Mar. 31, 2016 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Going Concern | Note 3 – Going Concern
The Company has generated minimal revenue since inception and has sustained operating losses during the three months ended March 31, 2016 and the year ended December 31, 2015 of $459,261 and $796,231, respectively. As of March 31, 2016 and December 31, 2015, the Company had an accumulated deficit of $1,256,199 and $796,938, respectively and a working capital deficit of $5,729,002 and $3,912,938, respectively. The Company's continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations and/or obtaining additional financing from its majority stockholder or other sources, as may be required.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern; however, the above condition raises substantial doubt about the Company's ability to do so. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
In order to maintain its current level of operations, the Company will require additional working capital from either cash flow from operations, from the sale of its equity or from long-term debt financing. The Company has recently purchased two properties in Georgia and have obtained $11 million in short-term financing (which includes line of credit of $5,680,000) to purchase and renovate the two properties. The Company is currently seeking to raise capital through the sale of its equity securities. However, there can be no assurances that the Company will be successful raising capital through the sale of its equity securities. If the Company is unable to acquire additional working capital, it will be required to significantly reduce its current level of operations. |
Investments in Real Estate |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments In Real Estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments in Real Estate | Note 4 – Investments in Real Estate
On August 13, 2015, the Company entered into a securities purchase agreement with Waydell whereby the Company purchased a 100% interest in Waydell for 300,000 shares of the Company’s common stock. Waydell is a real estate holding company that owns and manages the real estate property located at 32-38 Waydell Street, Newark, New Jersey. On June 25, 2015, Waydell purchased the property in Newark, New Jersey for $150,000. The 300,000 shares issued to Moses Schwartz in connection with this acquisition were valued at $150,000 which is the amount paid for the only asset owned by Waydell that was recently purchased on June 25, 2015 — real property located at 32-38 Waydell Street, Newark, New Jersey. Waydell had no liabilities. In addition to the acquisition of this property, the Company also incurred $18,325 in connection with the development of this property. The carrying value of this property at March 31, 2016 and December 31, 2015 is $168,325 and $165,325, respectively. The increase was due to additional development costs incurred during the quarter.
On November 20, 2015, through its newly created subsidiaries, Creekside and Tall Pines, the Company purchased properties in Decatur, GA and Atlanta, GA respectively. Both of these properties are in need of significant renovations and did not have any significant operating activities prior to the acquisition and as a result no pro forma financial disclosures have been provided. The initial purchase price for the Creekside and Tall Pines properties was $1,820,000 and $480,000, respectively. The purchases were financed from the issuance of notes payable (See Note 5). Both of these properties are being renovated and the cost to renovate the properties is being capitalized. In addition, the Company has issued notes payable to financing the initial purchase of the properties and the renovations; and therefore has capitalized interest on these properties. Total capitalized interest included in Investments in Real Estate at March 31, 2016 and December 31, 2015 was $181,576 and $45,153. Cheskel Meisels, the CEO for the Company, personally guaranteed repayment of the loans. The Company estimates the cost of the renovations to the properties to range between $6,000,000 and $7,500,000.
A summary of the Company’s real estate holdings at March 31, 2016 and December 31, 2015 is below:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Payable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Payable | Note 5 – Notes Payable
Notes payable at March 31, 2016 and December 31, 2015 consist of the following:
The Company issued four commercial promissory notes and four commercial non-revolving line of credit promissory notes to Sharestates Investing, LLC for an aggregate of $11,000,000 in connection with the purchase of the Creekside and Tall Pines properties. The interest rate for all the notes is 12% and all the notes are due on November 30, 2016. The four commercial promissory notes were issued at closing and totaled $5,320,000. The aggregate of the four commercial non-revolving line of credit promissory notes of $5,680,000 is available for the Company to draw down for the renovations of the Creekside and Tall Pines properties. During the three months ended March 31, 2016, the Company drew down $950,000 on the commercial non-revolving line of credit promissory notes.
In connection with the issuances of these notes totaling $11,000,000, the Company was required to pay debt issuance costs of 2% of the total balance or $220,000. These debt issuance costs are shown as a note discount and amortized over the term of the notes. During the three months ended March 31, 2016, the Company amortized $53,245 of the debt issuance costs which is included in interest expense.
Also, the Company was required to prepay interest for one year or $1,320,000 on the entire $11,000,000 credit facilities. During the three months ended March 31, 2016, the Company amortized $330,000 of the prepaid interest to interest expense. As of March 31, 2016 and December 31, 2015, the prepaid interest balance was $880,000 and $1,210,000, respectively.
Aggregate future maturities of notes payable at March 31, 2016 are as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Advances from stockholder |
3 Months Ended |
|---|---|
Mar. 31, 2016 | |
| Related Party Transactions [Abstract] | |
| Advances from stockholder | Note 6 – Advances from stockholder
At March 31, 2016 and December 31, 2015 the Company had advances from its majority stockholder of $121,133 and $121,383. These advances are non-interest bearing and payable upon demand. |
Agreements to Purchase Real Estate |
3 Months Ended |
|---|---|
Mar. 31, 2016 | |
| Agreements To Purchase Real Estate | |
| Agreements to Purchase Real Estate | Note 7 – Agreements to Purchase Real Estate
On December 15, 2015, the Company entered into an agreement to purchase property located at 81 Clay Street, Newark, New Jersey for $4,000,000, and paid a deposit of $50,000 prior to December 31, 2015. The Company is currently negotiating an extension on the expected closing date in order to secure additional financing for the purchase. The parties have tentatively agreed to a closing date of June 30, 2016. In the event a formal agreement is not reached, $25,000 of the deposit will be returned to the Company.
On February 23, 2016, the Company entered into an Agreement of Assignment Bid that gives the Company the right to purchase a property in Holliswood, New York for $999,500, plus finders’ fees of $200,500, for an aggregate purchase price of $1,200,000. |
Subsequent Events |
3 Months Ended |
|---|---|
Mar. 31, 2016 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | Note 8 – Subsequent Events
On April 8, 2016, the Company, through its newly created subsidiary Santiago Acquisitions LLC, completed its closing in connection with the purchase of the property known as 87-48 Santiago Street, Holliswood, NY, pursuant to an Agreement of Assignment of Bid, dated February 23, 2016, between Nison Badalov and the Company. The purchase price was $999,500, plus fees and costs related to the closing of $91,436, for an aggregate purchase price of $1,090,936.
The Company secured a loan in the principal amount of $840,000 at a twelve (12%) percent interest rate, due on April 30, 2017, from SHARESTATES LLC to cover the aggregate purchase price. Cheskel Meisels, the CEO for the Company, personally guaranteed repayment of the loan. |
Summary of Significant Accounting Policies (Policies) |
3 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2016 | ||||||||||
| Accounting Policies [Abstract] | ||||||||||
| Basis of presentation | Basis of presentation
The summary of significant accounting policies presented below is designed to assist in understanding the Company's unaudited condensed consolidated financial statements. Such unaudited condensed consolidated financial statements and accompanying notes are the representations of the Company's management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America ("GAAP") in all material respects, and have been consistently applied in preparing the accompanying unaudited condensed consolidated financial statements. |
|||||||||
| Principles of Consolidation | Principles of Consolidation
The accompanying consolidated financial statements represent the consolidated financial position and results of operations of the Company and include the accounts and results of operations of the Company, Waydell 32-38 LLC (“Waydell”), Creekside by TAG LLC (“Creekside”) and Tall Pines by TAG LLC (“Tall Pines”). The results of operations for Waydell have only been included since the date of acquisition of August 13, 2015 and for Creekside and Tall Pines have only been included since their inception on October 22, 2015. All intercompany transactions and balances have been eliminated in consolidation. |
|||||||||
| Use of estimates | Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. |
|||||||||
| Cash | Cash
Cash and cash equivalents include cash on hand and on deposit at banking institutions as well as all highly liquid short-term investments with original maturities of 90 days or less. The Company did not have cash equivalents as of March 31, 2016 and December 31, 2015. |
|||||||||
| Concentration of risk | Concentration of risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high quality banking institutions As of March 31, 2016 and December 31, 2015, the Company had cash balances in excess of the Federal Deposit Insurance Corporation limit of $0 and $384,234, respectively. |
|||||||||
| Earnings (loss) per share | Earnings (loss) per share
Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per common share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if potentially dilutive securities had been issued. There were no potentially dilutive securities outstanding during the periods presented. |
|||||||||
| Income taxes | Income taxes
The Company records income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and attributable to operating loss and tax credit carry forwards. Accounting standards regarding income taxes requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed at each reporting period based on a more-likely-than-not realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry forward periods, the Company’s experience with operating loss and tax credit carry forwards not expiring unused, and tax planning alternatives.
The Company recorded valuation allowances on the net deferred tax assets. Management will reassess the realization of deferred tax assets based on the accounting standards for income taxes each reporting period. To the extent that the financial results of operations improve and it becomes more likely than not that the deferred tax assets are realizable, the Company will be able to reduce the valuation allowance.
Significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. Accounting standards regarding uncertainty in income taxes provides a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely, based solely on the technical merits, of being sustained on examinations. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. |
|||||||||
| Fair value of financial instruments | Fair value of financial instruments
The Company follows guidance for accounting for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Additionally, the Company adopted guidance for fair value measurement related to nonfinancial items that are recognized and disclosed at fair value in the financial statements on a nonrecurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
The Company had no such financial instruments outstanding as of March 31, 2016 and December 31, 2015. |
|||||||||
| Recent accounting pronouncements | Recent accounting pronouncements
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09) , which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). Early adoption is not permitted. The Company is currently evaluating the impact of the pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which it will adopt the standard beginning January 1, 2017.
In August, 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods with that reporting period.
In February, 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. ASU 2015-02 provides guidance on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). ASU 2015-02 is effective for periods beginning December 15, 2015. The adoption of ASU 2015-02 is not expected to have a material effect on the Company’s consolidated financial statements. Early adoption is permitted.
In September, 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805). Topic 805 requires that an acquirer retrospectively adjust provisional amounts recognized in a business combination, during the measurement period. To simplify the accounting for adjustments made to provisional amounts, the amendments in the Update require that the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition an entity is required to present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for fiscal years beginning December 15, 2015. The adoption of ASU 2015-016 is not expected to have a material effect on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of ASU 2016-02 on the Company’s financial statements and disclosures.
In March 2016, the FASB issued an ASU amending the accounting for stock-based compensation and requiring excess tax benefits and deficiencies to be recognized as a component of income tax expense rather than equity. This guidance also requires excess tax benefits to be presented as an operating activity on the statement of cash flows and allows an entity to make an accounting policy election to either estimate expected forfeitures or to account for them as they occur. The ASU is effective for reporting periods beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating the impact of the ASU; however, it does not expect the ASU will have a material impact on our consolidated financial statements.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements. |
Investments in Real Estate (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments In Real Estate Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of company's real estate holdings | A summary of the Company’s real estate holdings at March 31, 2016 and December 31, 2015 is below:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Payable [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of notes payable | Notes payable at March 31, 2016 and December 31, 2015 consist of the following:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of aggregate future maturities | Aggregate future maturities of notes payable at March 31, 2016 are as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies (Details Narrative) - USD ($) |
Mar. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Accounting Policies [Abstract] | ||
| FDIC cash insured amount | $ 0 | $ 384,234 |
Going Concern (Details Narrative) |
3 Months Ended | 12 Months Ended | |
|---|---|---|---|
|
Mar. 31, 2016
USD ($)
Number
|
Mar. 31, 2015
USD ($)
|
Dec. 31, 2015
USD ($)
|
|
| Operating losses | $ (459,261) | $ (224,873) | $ (796,231) |
| Accumulated deficit | (1,256,199) | (796,938) | |
| Working capital deficit | $ 5,729,002 | $ 3,912,938 | |
| Number of property | Number | 2 | ||
| Commercial Non-Revolving Line Of Credit Promissory Notes [Member] | |||
| Aggregate face amount | $ 950,000 | ||
| Commercial Non-Revolving Line Of Credit Promissory Notes [Member] | Creekside and Tall Pines [Member] | |||
| Aggregate face amount | 5,680,000 | ||
| Commercial Promissory Notes And Commercial Non-Revolving Line Of Credit Promissory Notes [Member] | Creekside and Tall Pines [Member] | |||
| Aggregate face amount | $ 11,000,000 | ||
Investments in Real Estate (Details) - USD ($) |
Mar. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Investments in real estate | $ 4,479,913 | $ 3,293,840 |
| Waydell 32-38 LLC [Member] | Real Property in Newark New Jersey [Member] | ||
| Investments in real estate | 168,325 | 165,325 |
| 3000 Ember Drive [Member] | Real Property in Decatur Georgia [Member] | ||
| Investments in real estate | 3,799,292 | 2,633,766 |
| 3200 Cushman Circle [Member] | Real Property in Atlanta Georgia [Member] | ||
| Investments in real estate | $ 512,296 | $ 494,749 |
Notes Payable (Details 1) - USD ($) |
Mar. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Notes Payable [Abstract] | ||
| 2017 | $ 6,198,724 | |
| 2018 | 6,000 | |
| 2019 | 6,000 | |
| 2020 | 6,000 | |
| 2021 | 500 | |
| Total | $ 6,217,224 | $ 5,272,979 |
Advances from stockholder (Details Narrative) - USD ($) |
Mar. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Advances from majority stockholder | $ 142,671 | $ 260,190 |
| Majority Shareholder [Member] | ||
| Advances from majority stockholder | $ 121,133 | $ 121,383 |
Agreements to Purchase Real Estate (Details Narrative) - USD ($) |
Feb. 23, 2016 |
Dec. 15, 2015 |
Mar. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|---|---|
| Purchase of parcel of land and improvements | $ 1,200,000 | |||
| 81 Clay Street, Newark, New Jersey [Member] | ||||
| Purchase of parcel of land and improvements | $ 4,000,000 | |||
| Deposit | $ 50,000 | |||
| Deposit returned | $ 25,000 | |||
| Holliswood, New York [Member] | ||||
| Purchase of parcel of land and improvements | 999,500 | |||
| Finders fees | $ 200,500 |
+KNR=#?_A85F=J*OV]V.ET R8)TV,UAQ;JFPU @4&QXDZ9+
M=JN)=!H3LY";?IK;64 OH\<%^3H&)*25ZZ*6 )(%.^#1O,'H3\&QQJ7R-Q3M
M+BP"=7Z6!>IG@F0OUXGU[ DZ2IX\)T4>I-$<'B %1GJ+(M829C:(F9$0OB6]
M7+!.G&:Q\%QY1# .WO4J69V=*>#J8S^8['43QII%#9?Z<.H&.L],-8,<=S-
MH30+8K6_^'FEBBN]GIQM<+1!FDK!;"MC6^'#TL6HR3917''3*(KYU:Q_VLNQ
M .;1;M7; ^O]^RO3RRY_S#CU];WU! E&""Y_S;^7/F,X/A FO.C>HIONK>(W
MTP=6W/O%ZT'>K,!$@(C;!3XP.&)YV@$+RK/#FS267@'#0T%<-9F"A6$UV^2=
MZ$I';IBN-[^ -3.Q[%6SD>GH:DIG_6A3&YQ,_;'V=E:C!8T3="S7%[I"YTY:PW-,$VI,T<5T%RS%SN3"