NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years
Ended December 31, 2018 and 2017
(UNAUDITED)
Note
1 - Significant Accounting Policies
Nature
of Operations
Dream
Homes & Development Corporation is a regional builder and developer of new single-family homes and subdivisions, as well as
a market leader in coastal construction, elevation and mitigation. In the five years that have passed since Superstorm Sandy flooded
30,000 owner-occupied homes, Dream Homes has helped hundreds of homeowners to rebuild or raise their homes to comply with new
FEMA requirements.
In
addition to the coastal construction market, Dream Homes will continue to pursue opportunities in new single and multi-family
home construction, with 3 new developments totaling 119 units under contract and in development. Dream Homes’ operations
will include the development and sale of a variety of residential communities, including construction of semi-custom homes, entry-level
and first time move-up single-family and multi-family homes.
In
addition to the New Jersey market, the Company, through its Dream Building LLC subsidiary, has become licensed in Florida to pursue
recent opportunities for elevation, restoration, renovation and new construction brought about by the damage caused by recent
hurricanes. Initial markets to be targeted are located primarily in the southwest portion of the state, between Naples and Cape
Coral.
In
addition to the Company’s construction operations, the Company holds a bi-monthly “Dream Homes Nearly Famous Rebuilding
Seminar”, and publishes an informational blog known as the “Dream Homes Rebuilding Blog”. The Rebuilding Seminar
is an educational tool for homeowners who need rebuilding or renovations. This seminar has been presented steadily since early
2013, and is designed to educate and assist homeowners in deciphering the confusion about planning and executing complex residential
construction projects. A professional team attends each seminar and presents on a diverse variety of topics, including expert
advice from architects, engineers, finance people, attorneys, project managers, elevation professionals and builder/general contractors.
The “Dream Homes Rebuilding Blog” is an educational platform written by Vincent Simonelli, which offers comprehensive
advice on all aspects of construction, finance, development and real estate. The Blog is located at http://blog.dreamhomesltd.com.
History
Dream
Homes & Development Corporation was originally incorporated as The Virtual Learning Company, Inc. (“Virtual Learning”)
on January 6, 2009 as a Nevada corporation with 75,000,000 shares of capital stock authorized, of which 70,000,000 shares are
common shares ($.001 par value), and 5,000,000 shares are preferred shares ($.001 par value).
On
March 14, 2017, Virtual Learning changed its name to Dream Homes & Development Corporation (“DHDC”). DHDC maintains
a web site at
www.dreamhomesltd.com
as well as a blog, located at
http://blog.dreamhomesltd.com.
Principles
of Consolidation
The
consolidated financial statements include the accounts of DHDC and its wholly owned subsidiary DBL (collectively, the “Company”).
All intercompany balances and transactions have been eliminated in consolidation.
Property
and Equipment
Property
and equipment is stated at cost less accumulated depreciation. Depreciation is provided using the straight-line method over an
estimated useful life of five years. Repairs and maintenance costs are expensed as incurred, and renewals and betterments are
capitalized.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements
and the accompanying notes. Actual results could differ materially from these estimates.
Fair
Value of Financial Instruments
Fair
value is defined as the price that we would receive to sell an asset or pay to transfer a liability (an exit price) in an orderly
transaction between market participants on the measurement date. In determining fair value, GAAP establishes a three-level hierarchy
used in measuring fair value, as follows:
●
Level 1 inputs are quoted prices available for identical assets and liabilities in active markets.
●
Level 2 inputs are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets
and liabilities in active markets or other inputs that are observable or can be corroborated by observable market data.
●
Level 3 inputs are less observable and reflect our own assumptions.
Our
financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and loans
payable to related parties. The carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued
expenses, and loans payable to related parties approximates fair value because of their short maturities.
Construction
Contracts
Revenue
recognition:
The
Company recognizes construction contract revenue using the percentage-of-completion method, based primarily on contract cost incurred
to date compared to total estimated contract cost. Cost of revenue includes an allocation of depreciation, amortization and general
overhead cost. Changes to total estimated contract cost or losses, if any, are recognized in the period in which they are determined.
The
Company generally provides limited warranties for work performed under its construction contracts with periods typically extending
for a limited duration following substantial completion of the Company’s work on a project.
The
Company classifies construction-related receivables and payables that may be settled in periods exceeding one year from the balance
sheet date, if any, as current assets and liabilities consistent with the length of time of its project operating cycle. For example:
|
●
|
Costs
and estimated earnings in excess of billings represent the excess of contract costs and profits (or contract revenue) over
the amount of contract billings to date and are classified as a current asset.
|
|
●
|
Billings
in excess of costs and estimated earnings represent the excess of contract billings to date over the amount of contract costs
and profits (or contract revenue) recognized to date and are classified as a current liability.
|
Costs
and estimated earnings in excess of billings result when either: 1) costs are incurred related to certain claims and unapproved
change orders, or 2) the appropriate contract revenue amount has been recognized in accordance with the percentage-of-completion
accounting method, but a portion of the revenue recorded cannot be billed currently due to the billing terms defined in the contract.
Claims occur when there is a dispute regarding both a change in the scope of work and the price associated with that change. Unapproved
change orders occur when there is a dispute regarding only the price associated with a change in scope of work. For both claims
and unapproved change orders, the Company recognizes revenue, but not profit, when it is determined that recovery of incurred
cost is probable and the amounts can be reliably estimated.
Change
in Estimates:
The
Company’s estimates of contract revenue and cost are highly detailed and many factors change during a contract performance
period that result in a change to contract profitability. These factors include, but are not limited to, differing site conditions:
availability of skilled contract labor: performance of major material suppliers and subcontractors: on-going subcontractor negotiations
and buyout provisions: unusual weather conditions: changes in the timing of scheduled work: change orders: accuracy of the original
bid estimate: changes in estimated labor productivity and costs based on experience to date: achievement of incentive-based income
targets: and the expected, or actual, resolution terms for claims. The factors that cause changes in estimates vary depending
on the maturation of the project within its lifecycle. For example, in the ramp-up phase, these factors typically consist of revisions
in anticipated project costs and during the peak and close-out phases, these factors include the impact of change orders and claims
as well as additional revisions in remaining anticipated project costs. Generally, if the contract is at an early stage of completion,
the current period impact is smaller than if the same change in estimate is made to the contract at a later stage of completion.
Management focuses on evaluating the performance of contracts individually and uses the cumulative catch-up method to account
for revisions in estimates. Material changes in estimates are disclosed in the notes to the consolidated financial statements.
Income
Taxes
The
Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax reporting purposes. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the provision for income
tax in the statements of operations. The Company evaluates the probability of realizing the future benefits of its deferred tax
assets and provides a valuation allowance when realization of the assets is not reasonably assured.
The
Company recognizes in its financial statements the impact of tax positions that meet a “more likely than not” threshold,
based on the technical merits of the position. The tax benefits recognized from such a position are measured based on the largest
benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.
Net
Income (Loss) Per Common Share
Basic
net income (basic net loss) per common share is calculated by dividing net income (loss) by the weighted average number of common
shares outstanding during the period.
Diluted
net income (loss) per common share is computed using the weighted average number of common shares outstanding and potentially
dilutive securities outstanding during the period.
Recent
Accounting Pronouncements
In
May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2014-09, Revenue from Contracts with Customers (Accounting Standards Codification “ASC” Topic 606). The purpose
of this ASU is to converge revenue recognition requirements per GAAP and International Financial Reporting Standards (“IFRS”).
The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services. The amendments in this ASU were originally effective for interim and annual reporting periods beginning after December
15, 2016, with early adoption not permitted by the FASB; however, in August 2015, the FASB issued ASU 2015-14, Revenue from Contracts
with Customers (Topic 606): Deferral of the Effective Date after public comment respondents supported a proposal to delay the
effective date of this ASU to annual reporting periods beginning after December 15, 2017, including interim reporting periods
within that reporting period. We are currently evaluating the impact of this ASU on our financial position, results of operations
and cash flows.
Certain
other accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective
and therefore have not yet been adopted by the Company. The impact on the Company’s financial position and results of operations
from adoption of these standards is not expected to be material.
2
- Property and Equipment
Property
and equipment is summarized as follows:
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Office
equipment
|
|
$
|
4,115
|
|
|
$
|
4,115
|
|
Vehicles
|
|
|
31,065
|
|
|
|
24,565
|
|
Less:
Accumulated depreciation
|
|
|
(24,449
|
)
|
|
|
(19,536
|
)
|
|
|
|
|
|
|
|
|
|
Property
and Equipment- net
|
|
$
|
10,731
|
|
|
$
|
9,144
|
|
Depreciation
expense for the years ended December 31, 2018 and 2017 was $ 4,913 and $2,656, respectively.
3-Deposits
and Costs Coincident to Acquisition of Land for Development
Deposits
and costs coincident to acquisition of land for development are summarized as follows:
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Lacey
Township, New Jersey, Marina contract:
|
|
|
|
|
|
|
|
|
Deposit
|
|
|
25,000
|
|
|
|
25,000
|
|
Site
engineering, permits and other costs:
|
|
|
49,959
|
|
|
|
23,657
|
|
Total
Marina Contract
|
|
|
74,959
|
|
|
|
48,657
|
|
|
|
|
|
|
|
|
|
|
Other
Deposits:
|
|
|
|
|
|
|
|
|
Clayton-80
lots and 120 apartments
|
|
|
9,920
|
|
|
|
-
|
|
71
Sheridan Avenue
|
|
|
79,150
|
|
|
|
-
|
|
Bayville-20
units
|
|
|
2,674
|
|
|
|
-
|
|
Other
|
|
|
2,005
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Lacey
Township, New Jersey, Pines contract:
|
|
|
|
|
|
|
|
|
Deposit
|
|
|
-
|
|
|
|
10,000
|
|
Cost
to acquire contract
|
|
|
10,000
|
|
|
|
10,000
|
|
Site
engineering, permits, and other costs
|
|
|
109,265
|
|
|
|
111,215
|
|
Total
Pines contract
|
|
|
119,265
|
|
|
|
131,215
|
|
|
|
|
|
|
|
|
|
|
Berkeley
Township, New Jersey, Tallwoods contract:
|
|
|
|
|
|
|
|
|
Deposit
|
|
|
10,000
|
|
|
|
10,000
|
|
Site
engineering, permits, and other costs
|
|
|
62,994
|
|
|
|
20,257
|
|
Total
Tallwoods contract
|
|
|
72,994
|
|
|
|
30,257
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
360,967
|
|
|
$
|
210,129
|
|
Lacey
Township, New Jersey, “Dream Homes at the Pines”, Contract
On
December 15, 2016, the Company acquired from General Development Corp. (“GDC”) rights to a contract to purchase over
9 acres of undeveloped land without amenities in Lacey Township, New Jersey (the “Lacey Contract or Dream Homes at the Pines”)
for $15,000 cash (paid in December 2016) and 100,000 restricted shares of Company common stock (issued in April 2017) valued at
$5,000. GDC acquired the rights to the contract from DHL on December 14, 2016 for $10,000 cash. As discussed in Note 9, Commitments
and Contingencies under Line of Credit, the Company also has an available line of credit of $50,000 with GDC.
The
Lacey Contract between DHL and the seller of the land was dated March 18, 2016 and provides for a $1,000,000 purchase price with
closing on or about 60 days after memorialization of final Development Approvals has been obtained. DHL paid the seller a $10,000
refundable deposit in March 2016 pursuant to the Lacey Contract. In the event the transaction has not closed on at least a portion
of the property within 24 months of the completion of the Due Diligence Period (as may be extended by two 6- month extensions),
the seller has the option of terminating the contract. Notwithstanding this provision, the Company retains the right at all times
to waive any remaining contingencies and proceed to close on the property.
At
this time, the contract is in good standing and there is no risk of cancellation. As per the contract, the Company is required
to close on this property no later than March 18, 2019, which date is inclusive of the 24-month development period, and 2 additional
6-month extensions.
Due
diligence for the above property was completed as of May 17, 2016, and all costs were incurred by Dream Homes Ltd., which was
in the contract for the property at the time. No additional costs for due diligence have been incurred by the Company, nor are
any anticipated. The Company will incur all current costs associated with this property necessary to obtain all approvals, acquire
the land, install the infrastructure and prepare the property to commence construction.
In
order to obtain all developmental approvals and be prepared to begin installing infrastructure, various permits and engineering
work are required. These permits include but are not limited to township subdivision, county, municipal utility authority, CAFRA
(NJ Department of Environmental Protection) and NJ Department of Transportation. To date, design engineering has been completed
and a CAFRA application has been prepared and submitted to the environmental scientist, along with a check for $36,750 payable
to the NJ DEP. Application for this permit was made in April 2017. As of this date, the CAFRA application has been put on hold
pending a determination if the township will be approved by the State of New Jersey for a CAFRA Town Center designation. A permit
is expected to be issued in June or July of 2018. A Lacey Township Planning Board meeting was held on December 11, 2017. Additional
information was requested from the board and the next meeting will be scheduled upon receipt of outside agency permits and the
other requested information.
It
is anticipated that complete development approvals will cost approximately $50,000 more to complete. In addition to these approval
costs and acquisition costs, infrastructure costs are anticipated to cost approximately $1,000,000. The total amount of funding
required to acquire and make this property ready for home construction is approximately $2,090,000 as of December 31, 2017.
The
Company may need to seek loans from banks to finance this project. As part of their financing agreements, the banks typically
require Vincent Simonelli to personally guarantee these loans. If Mr. Simonelli cannot qualify as a guarantor and there is no
one other than him in the Corporation to provide those guarantees, the financing of the deal may be adversely affected. The exact
amount of funding required for this particular property is not clear at the present time but will be determined when full approvals
have been obtained and the Company is prepared to take title to the property.
Berkeley
Township, New Jersey, “Dream Homes at Tallwoods”, Contract
On
March 1, 2017, the Company acquired from DHL rights to a contract to purchase over 7 acres of land in Berkeley Township, NJ (the
“Tallwoods Contract or Dream Homes at Tallwoods”) for 71,429 restricted shares of Company common stock (issued in
April 2017). The Tallwoods Contract between DHL and the seller of the land was dated January 5, 2017 and provides for a $700,000
purchase price with closing on or about 60 days after final development approvals have been obtained and memorialized. DHL paid
the seller a refundable $10,000 deposit in January 2017 pursuant to the Tallwoods contract.
The
due diligence period associated with this property expired on March 4, 2017 and all costs associated with same were paid by Dream
Homes Ltd. prior to the expiration date. The Company will incur no further costs related to the due diligence aspect of this purchase.
The Company will incur all current and future costs associated with this property necessary to obtain all approvals, acquire the
land and prepare the property to commence construction.
The
land is currently improved with streets and all public utilities in place. As such, the necessary steps required to bring the
property through the approval process involve primarily design engineering. Since the property is on an improved street, a major
subdivision application will be filed with the township, which will create 13 conforming buildable lots from the existing single
7 acre parcel. Accordingly, the remaining costs will primarily involve engineering and approval costs, as opposed to costs associated
with the installation of infrastructure.
At
this time, the Company estimates that the total engineering and approval costs will be approximately $40,000. The amount of money
required to purchase the property is $700,000 of which $10,000 is currently on deposit. The Company has made application to the
Berkeley Township Zoning Board.
In
the event the transaction has not closed on at least a portion of the Property within 12 months of the completion of the Due Diligence
Period (as may be extended by two 6-month extensions), the seller has the option of terminating the contract. Notwithstanding
this provision, the Company retains the right at all times to waive any remaining contingencies and proceed to close on the property.
The
Company may need to seek loans from banks to finance this project. As part of their financing agreements, the banks typically
require Vincent Simonelli to personally guarantee these loans. If Mr. Simonelli cannot qualify as a guarantor and there is no
one other than him in the Corporation to provide those guarantees, the financing of the deal may be adversely affected. The exact
amount of funding required for this particular property is not clear at the present time but will be determined when full approvals
have been obtained and the Company is prepared to take title to the property.
Lacey
Township, New Jersey, “Dream Homes at Forked River”, Marina Contract
The
Company has acquired the rights to a purchase contract via contract assignment for 48 waterfront townhomes with boat slips in
Lacey, NJ. The project is currently in the approval process and significant engineering, environmental, traffic and architectural
work has been completed. The property is a waterfront property, and is partially improved with all boat slips currently installed,
the Department of Transportation permit received and the curb cut from Route 9 in place. The property when completely constructed
has a retail value of $21 million and is expected to begin site improvements in late 2018 or early 2019.
On
December 8, 2017, the Company acquired from DHL rights to a contract to purchase over +/- 7.5 acres of land in Lacey Township,
NJ (the “Marina Contract or Dream Homes at Forked River”) for 162,200 restricted shares of Company common stock (committed
but not issued as of April 16, 2018). The Contract between DHL and the seller of the land was dated February 24, 2016 and provides
for a $2,166,710 purchase price with closing on or about 60 days after final development approvals have been obtained and memorialized.
DHL paid the seller a refundable $25,000 deposit in February 2016 pursuant to the Marina contract.
The
due diligence period associated with this property expired on May 1, 2016 and all costs associated with same were paid by Dream
Homes Ltd. prior to the expiration date. The Company will incur no further costs related to the due diligence aspect of this purchase.
The Company will incur all current and future costs associated with this property necessary to obtain all approvals, acquire the
land and prepare the property to commence construction.
The
land is currently approved for a marina and it is the Company’s intention to modify the approvals to a townhome use, as
per the ordinance. The property is currently unimproved. As such, the necessary steps required to bring the property through the
approval process involve design engineering as well as environmental approvals. Accordingly, the remaining costs will primarily
involve engineering, legal and approval costs.
At
this time, the Company estimates that the total engineering and approval costs will be approximately $100,000. The amount of money
required to purchase the property is $2,430,000 of which $25,000 is currently on deposit.
The
Company may need to seek loans from banks to finance this project. As part of their financing agreements, the banks typically
require Vincent Simonelli to personally guarantee these loans. If Mr. Simonelli cannot qualify as a guarantor and there is no
one other than him in the Corporation to provide those guarantees, the financing of the deal may be adversely affected. The exact
amount of funding required for this particular property is not clear at the present time but will be determined when full approvals
have been obtained and the Company is prepared to take title to the property.
Little
Egg Harbor Township, New Jersey, “Dream Homes at Radio Road”, Contract
On
March 14, 2018, the Company signed a contract to purchase 4 improved lots in Little Egg Harbor Township, NJ (the “Dream
Homes at Radio Road”) for a total of $260,000. The Contract between the Company and the seller of the land provides for
a $65,000 per lot purchase price with closing occurring on a rolling basis, as each house is built and sold. In addition, the
Company has obtained a term sheet on April 5, 2018 and is waiting for a formal commitment from 1
st
Constitution Bank
for a funding facility comprised of acquisition and development funding.
The
Company intends to begin construction in the second quarter and the homes are projected to sell in the $350,000 - $375,000 range.
Glassboro
Township, New Jersey – Robin’s Nest Solar Farm
On
May 28, 2018, the Company signed a contract to purchase a 700 KW property to be developed as a solar farm in Glassboro, NJ. The
purchase price is $900,000 and the contract is subject to obtaining funding for the solar array as well as a portion of the purchase
price. There is also a PPA (power production agreement) in place with a nursing home adjacent to the property, to purchase the
entire electrical output for the next 20 years.
In
early August, a funding proposal was submitted to Republic Bank, which is a local lender, and discussions are ongoing. If funding
is approved, it is expected that this transaction will close in late 2018.
71
Sheridan Street, Waretown, NJ – Property purchased for renovation and sale
On
July 12, 2018, the Company purchased a single-family home property located at 71 Sheridan Street in Waretown, NJ. The home was
originally damaged by Storm Sandy, and requires elevation and renovation in order to be brought into compliance with the latest
FEMA flood zone requirements. The Company intends to complete a full height elevation, enclose the lower level, install 2 levels
of deck facing the water, renovate the house completely and sell the property.
Louis
Avenue – Bayville, NJ – Property being developed
In
October of 2018, the company entered into a contract to develop and acquire 20 townhouse lots in Bayville NJ. Engineering and
approvals are currently in process.
4-Loans
Payable to Related Parties
Loans
payable to related parties is summarized as follows:
|
|
December
31, 2018
|
|
|
December
31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Loans
payable to chief executive officer
|
|
$
|
29,025
|
|
|
$
|
11,525
|
|
Loans
payable to GPIL (see Note 6)
|
|
|
3,118
|
|
|
|
3,118
|
|
Loan
payable to DHL
|
|
|
20,100
|
|
|
|
100
|
|
Total
|
|
$
|
52,243
|
|
|
$
|
14,743
|
|
All
the loans above are non-interest bearing and due on demand.
5
- Common Stock Issuances
On
February 22, 2017, DHDC issued 56,000 restricted shares of common stock to Green Chip Investor Relations pursuant to an Investor
Relations and Consulting Services Agreement (see Note 9). The 56,000 restricted shares were valued at $2,800 (or $.05 per share),
which amount was expensed in the three months ended March 31, 2017.
On
March 1, 2017, DHDC committed to issue 71,429 restricted shares of common stock (issued April 24, 2017) to DHL valued at $10,000,
representing the amount of the refundable deposit on land made by DHL to the Seller in January 2017 for the Berkeley Township
New Jersey contract (see Note 4).
On
March 14, 2017, DHL assigned 275,000 restricted shares of Company common stock it held to the same minority stockholder of DHL
that it assigned 100,000 shares of Company common stock on October 13, 2016 (see sixth preceding paragraph).
On
April 26, 2017, DHDC issued 100,000 shares of restricted stock to General Development Corp. as payment of an assignment fee related
to the 58 unit townhouse development in Lacey Township, NJ (see Note 4).
On
July 12, 2017, DHDC issued 40,000 restricted shares of DHDC’s common stock to Dream Homes, Ltd. (“DHL”) in exchange
for vehicles owned by DHL. The transaction reflected $6,000 net carrying value of the assets on DHL’s books at July 12,
2017.
On
September 21, 2017, DHL assigned 25,000 restricted shares of Company common stock it held to the Secretary of both DHDC and DHL
for services rendered to DHL. Accordingly, no stock-based compensation was recognized by DHDC.
On
December 8, 2017, DHDC committed to issue 162,200 restricted shares of common stock to DHL valued at $48,658 (DHL’s historical
cost of the assets being assigned), for the assignment of a contract to purchase property from DHL for the Lacey Township New
Jersey contract (see Note 4).
On
December 11, 2017, DHL assigned 100,000 restricted shares of Company common stock it held to the Company Securities Counsel of
both DHDC and DHL in settlement of certain DHL accounts payable due him. Accordingly, no stock-based compensation was recognized
by DHDC.
On
December 27, 2017, DHDC committed to issue 12,500 restricted shares of DHDC’s common stock for cash proceeds of $ 5,000
at $.40 per share per the Subscription Agreement.
On
December 29, 2017, DHDC committed to issue 25,340 restricted shares (as restated -see Note 14) of DHDC’s common stock for
settlement of $ 10,138 accounts payable (As Restated-See Note 14) at $.40 per share.
On
January 31, 2018, DHDC committed to issue 16,000 restricted shares of DHDC’s common stock for cash proceeds of $11,400 at
$ .40 per share per the subscription agreement.
On
February 9, 2018, DHL assigned 40,000 restricted shares of Company common stock it held to a minority stockholder of DHL. This
minority stockholder of DHL had contributed $10,000 out of approximately $500,000 in a private placement of common stock of DHL
in 2010. In addition, this minority stockholder of DHL also received 30,000 restricted shares of DHL common stock in 2011 for
legal services. Accordingly, no stock-based compensation was recognized by DHDC for this assignment of 40,000 shares.
On
February 9, 2018, DHL assigned 25,000 restricted shares of Company common stock it held to the Secretary of both DHDC and DHL
for accounting and administrative services rendered to DHL. Accordingly, no stock-based compensation was recognized by DHDC for
this assignment of 25,000 shares.
On
February 9, 2018, DHL assigned 25,000 restricted shares of Company common stock it held to a director of DHDC and service provider
to DHL for legal services provided to DHL. Accordingly, no stock-based compensation was recognized by DHDC for this assignment
of 25,000 shares.
On
February 26, 2018 DHDC issued 12,500 restricted shares of DHDC’s common stock for cash proceeds of $ 5,000 at $.40 per share
per the Subscription Agreement.
6
– Income Taxes (As Restated-See Note 13)
The
provisions for (benefit from) income taxes differ from the amounts computed by applying the statutory United States Federal income
tax rate of 21% to income (loss) before income taxes.
The
sources of the differences follow:
|
|
Year
ended
December 31, 2018
|
|
|
Year
ended
December 31, 2017
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Expected
tax at 21% (State 9%)
|
|
$
|
42,284
|
|
|
$
|
(2,910
|
)
|
Non-deductible
entertainment expense
|
|
|
-
|
|
|
|
706
|
|
Non-deductible
stock-based compensation
|
|
|
-
|
|
|
|
23,402
|
|
Change
in valuation allowance/NOL used
|
|
|
(20,759
|
)
|
|
|
(21,198
|
)
|
Provision
for (benefit from) income taxes
|
|
$
|
21,525
|
|
|
$
|
-
|
|
(a)
As a result of the Tax Cuts and Jobs Act (Tax Legislation) enacted on December 22, 2017, the United States corporate income tax
rate is 21% effective January 1, 2018.
The
significant components of DHDC’s deferred tax asset as of December 31, 2018 and December 31, 2017 are as follows:
|
|
|
December
31, 2018
|
|
|
|
December
31, 2017
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
Net
operating loss carry forward
|
|
$
|
-
|
|
|
$
|
-
|
|
Valuation
allowance
|
|
|
-
|
|
|
|
-
|
|
Net
deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
As
of December 31, 2018, the Company has no available net operating loss carryforward.
Current
tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership
occurs. Therefore, the amount available to offset future taxable income may be limited.
7-
Business Segments
The
Company currently has one business segment which is residential construction, which is further divided into elevation/renovation,
demolition and new home construction and new single and multi-family home developments. The residential construction segment is
operated through DHDC’s wholly owned subsidiary Dream Building, LLC (since August 19, 2016).
Summarized
financial information by business segment for the years ended December 31, 2018 and 2017 follows:
|
|
Year
ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(Unaudited)
|
|
|
(As restated-
See
Note 13)
(Unaudited)
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Residential
construction (as restated for 2017)
|
|
$
|
2,574,953
|
|
|
$
|
2,970,246
|
|
Total
|
|
$
|
2,574,953
|
|
|
$
|
2,976,246
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations:
|
|
|
|
|
|
|
|
|
Residential
construction (as restated for 2017)
|
|
$
|
356,951
|
|
|
$
|
389,249
|
|
Corporate-
|
|
|
(216,002
|
)
|
|
|
(408,646
|
)
|
Total
|
|
$
|
140,949
|
|
|
$
|
(19,397
|
)
|
Identifiable
assets:
|
|
December
31,
|
|
|
|
2018
|
|
|
2017
|
|
Residential
construction (as restated for 2017)
|
|
$
|
606,499
|
|
|
$
|
656,318
|
|
Corporate
(as restated for 2017)
|
|
|
373,151
|
|
|
|
22,527
|
|
Total
|
|
$
|
979,650
|
|
|
$
|
678,845
|
|
All
revenue relating to the residential construction segment was derived from construction contracts involving homeowner
customers located in the State of New Jersey. These contracts involve specialized construction related to compromised home
foundations and related issues caused by damage from Super Storm Sandy, as well as new home construction.
8-
Commitments and Contingencies
Construction
Contracts
As
of December 31, 2018, Dream Building, LLC was committed under 18 construction contracts outstanding with home owners with contract
prices totaling $ 2,764,508, which are being fulfilled in the ordinary course of business. None of these construction projects
are expected to take significantly in excess of one year to complete from commencement of construction. The Company has no significant
commitments with material suppliers or subcontractors that involve any sums of substance or, of long term duration at the date
of issuance of these financial statements.
Employment
Agreements
On
May 8, 2017, DHDC executed an Employment Agreement with its newly appointed Sales Manager. The term of the agreement is from May
8, 2017 to May 8, 2019 and is renewable thereafter at 1 year intervals based on certain sales targets. The agreement provides
for compensation based on sales.
For
the year ended December 31, 2018, sales commissions expense pursuant to employment agreements were $56,164.
Lease
Agreements
On
June 20, 2017, DHDC executed a lease for office and storage space located at 2109 Bridge Avenue, Point Pleasant, New Jersey. The
term of the Lease is five years from June 20, 2017 to June 20, 2022 with two (2) five (5) year options to renew. The Lease provides
for monthly rent commencing August 20, 2017 at $1,200 per month until the earlier of completion of upstairs offices or November
20, 2017, at which time the monthly rent increases to $2,200 per month. In May of 2018, the monthly rent was reduced to $1,000
per month. Assuming DHDC is current in all rent and other charges, DHDC has the option to cancel the Lease with 90 days written
notice to Landlord.
In
October of 2018, DHDC entered into a lease agreement for a modular home showroom in Little Egg Harbor. The term is for 1 year,
with 3 one-year options to renew. The amount of the lease is $18,000 and is payable in monthly installments of $1500.
For
the year ended December 31, 2018, rent expense under these leases agreements was $36,400.
Investor
Relations Agreement
On
February 10, 2017, the Company entered into an Investor Relations and Consulting Services Agreement with an investor relations
firm. The agreement expired on August 31, 2017 and provided for issuance of 56,000 restricted shares of common stock valued at
$2,800 to the investor relations firm (stock issued on February 22, 2017) and $2,000 per month fees to be paid to the investor
relations firm commencing March 2017.
For
the years ended December 31, 2018 and 2017, consulting fees expense under this agreement was $2,000 and $4,800 respectively.
Line
of Credit
On
September 15, 2016, DHDC established a $50,000 line of credit with General Development Corp., a non-bank lender. Advances under
the line bear interest at a rate of 12% payable monthly and the outstanding principal is due and payable in 60 months. The line
is secured by the personal guarantee of the Company’s Chief Executive Officer. The agreement to fund automatically renews
on a yearly basis as long as interest payments are current. To date, the Company has not received any advances under the line
of credit.
Private
Placement
On
November 3, 2017, the Company released a Private Placement Memorandum, which consists of an equity and debt offering for up to
$5,000,000 in new capital. This capital will be utilized for acquisition and development of several of the properties the Company
has under contract, as well as expansion into the Florida market. The offering is comprised of Units for sale as well as convertible
debt. Each Unit is priced at $.40 per common share and includes 1 warrant to purchase an additional share of common stock for
$.60 within 3 years of the date of Unit purchase. The convertible debt is offered at an 8% coupon, paid quarterly, has a maturity
of 4 years and is convertible at $.75 per share. The offering was scheduled to close on January 2, 2018 and was extended unchanged
by the Company to September 2, 2018.
As
of May 21, 2018, the Company has sold a total of 68,810 units and received $16,400 in cash ($5,000 in December 2017 for 12,500
units, $6,400 in January 2018 for 16,000 units and $5000 in February 2018 for 12,500 units) and was granted a reduction in accounts
payable from a lumber vendor of 11,124 for 27,810 units issuable to the vendor as of December 31, 2017.
9.
Related Party Transactions
Dream
Homes Ltd. Allocated payroll
The
Company uses the services of Dream Homes Ltd. (DHL) personnel for its operations. For the twelve months ended December 30, 2018
and 2017, selling, general and administrative expenses include $ 606,702.90 and $607,305 respectively. These costs were incurred
for the Company’s estimated share of DHL’s gross payroll and payroll taxes for the year 2018 and include $65,888.31
salary paid to the Company’s Chief Executive Officer and $62,000.00 salary paid to the Company’s Secretary and VP
of Human Resources. At December 31, 2018, there was no money due DHL for unpaid payroll reimbursement or accrued expenses.
Office
Space
The
Company has occupied office space located in Forked River, New Jersey which is owned by an affiliated company. Commencing April
2017, the Company has paid DHL monthly rent of $2,000 ($6,000 total for the six months ended June 30, 2018) for this office space.
10-
Stock Warrants
On
July 12, 2017, DHDC issued 750,000 stock warrants to various members of Dream Homes & Development Corporation’s executive
team (including 500,000 to the Company’s Chief Executive Officer, 100,000 to the Company’s Secretary, and a total
of 60,000 to the Company’s two other directors and 50,000 to a non-executive DHL project manager employee). These Warrants
entitle the holder to purchase shares of Dream Homes & Development Corporation at $0.30 per share through July 20, 2020. These
warrants vest to the Holder on a semi-annual basis over a 36-month period contingent upon Holder’s continued association
with the Company. The $407,850 total fair value (calculated using the Black Scholes option pricing model and the following assumptions:
(1) stock price of $0.60, (2) exercise price of $0.30, (3) dividend yield of 0%, (4) risk-free interest rate of 1.53%, (5) expected
volatility of 171%, and (6) term of 3 years) of the 750,000 warrants is being expensed evenly over the 3 years requisite service
period of the individuals that were granted these warrants commencing in July 2017. For the period July 12, 2017 through December
31, 2017, stock-based compensation attributable to the warrants was $ 64,064 using the above Black Scholes option pricing model.
Included
within the 750,000 warrants described in the preceding paragraph are 20,000 warrants issued to the Company’s Sales Manager
that are not covered by the Employment Agreement dated May 8, 2017 described in Note 7.
Due
to the fact that the stock price has decreased below the warrant exercise price of $.30, no warrant expense has been recorded
for the year 2018.
11-
Subsequent Events
As
of this date, there were subsequent events of note.
12-
Receivable from Arbitration and settlement of in process customer construction contract in dispute and related losses recognized
and recorded by the Company
The
Company began work on a construction contract in the amount of $307,000 in August 2016. Through September 30, 2017 the Company
billed the customer a total of $219,565, collected a total of $130,247 from the customer, and accordingly had a balance due from
the customer of $89,318 at September 30, 2017. When the customer refused to pay the $89,318 balance, the Company ceased working
on the contract in July 2017, filed a request for arbitration on October 3, 2017 and filed a Construction Lien Claim in October
18, 2017. On March 6, 2018, the American Arbitration Association awarded the Company $75,000 in connection with its claim. On
July 10, 2018, the Superior Court of New Jersey confirmed the arbitration award and entered a judgement against the customer for
the $75,000 and prejudgment interest of $488. To date the Company has not yet collected the $75,000 owing to it under the arbitration
award. Based upon advice of Company Counsel it still has further legal actions available to it to ultimately facilitate payment
from the customer of the $75,000 in the contract dispute. Accordingly, at December 31, 2017 the Company has recognized a loss
of $14,318 on the write-down of accounts receivable from this customer which has been reflected as a reduction in revenue from
construction contracts and gross profit for the year ended December 31, 2017. The property continues to be unoccupied because
the contracted construction work has never been completed.
Company
counsel has also advised that the $75,000 judgment is a lien on any property that the customer owns at July 10, 2018. As of July
10, 2018, the property subject to the dispute has market value of approximately $850,000 and has a prior mortgage lien with a
balance of approximately $190,000. The Company expects to ultimately collect the $75,000 judgement in full.
At
December 31, 2017 there was a “Cost and estimated earnings in excess of billings” asset relating to the Arbitration
Award disputed contract of $48,419 representing the difference between the amount billed to the customer of $219,565 and costs
and estimated earnings of $267,984 through December 31, 2017. Accordingly, at December 31, 2017 the Company has also recognized
a loss of $48,419 on the write-down of the “Costs and estimated earnings in excess of billings” asset attributable
to this disputed customer contract, which has been reflected as a reduction in revenue from construction contracts and gross profit
for the year ended December 31, 2017. Over the life of this contract the Company recognized a cumulative gross profit of $17,658
through December 31, 2017, which is net of a negative gross profit of ($9,012) for the year ended December 31, 2017, based upon
the write-down of $14,318 described in the preceding paragraph and the $48,419 write-down described in this paragraph, which aggregate
to $62,737.
13-
Restatement of Previously Issued Financial Statements
The
Company has restated the consolidated financial statements at December 31, 2017 and for the year then ended (which were previously
included in the Company’s Form 10-K filed with the SEC on April 17, 2018) in order to correct errors principally relating
to the accounting for construction contracts under the “percentage of completion method.” These errors resulted primarily
from misinterpretation of facts and circumstances concerning 6 contracts at the date of issuance of the consolidated financial
statements by the Company.
As
discussed in detail above in Note 13, the Company settled a disputed customer contract in an arbitration proceeding in March of
2018 that resulted in losses aggregating $62,737 that are reflected in this restatement that should have been reflected in the
consolidated balance sheet at December 31, 2017 and the consolidated statement of operations for the year then ended as originally
issued.
In
beginning to prepare the Company’s consolidated financial statements to be filed in a Form 10-Q for the three month period
ended March 31, 2018 to be reviewed by the Company’s Independent Registered Public Accounting Firm, errors were discovered
in the accounting for 2 construction contracts reflected as 100% completed contracts rather than still in progress at December
31, 2017. In each of the two contracts, the Company incurred additional construction costs during the quarter ended March 31,
2018 with very minimal additional Company customer billings during the quarter then ended. Essentially, in retrospect, the Company’s
estimate of the cost to complete these jobs accounted for under the percentage of completion method were not up to date at December
31, 2017. Based on a re-review of the facts and circumstances at the date of issuance of the Company’s consolidated financial
statements at December 31, 2017 and for the year then ended, it has been determined that the jobs with Company billings to the
customers of $139,206 and $130,264 were approximately 89% and 98%, respectively, completed rather than 100% completed at December
31, 2017. As restated, the gross profit for these two jobs for the year ended December 31, 2017 was $52,110 (42%) and $46,347
(36%), respectively. As originally calculated as 100% complete, the gross profit for these two jobs for the year ended December
31, 2017 was calculated at $65,984 (48%) and $48,117 (37%), respectively.
The
remaining three construction jobs were jobs agreed to be completed by the Company pursuant to an Employment Agreement dated May
8, 2017 with its Sales Manager, as an accommodation to the new hire with limited commission linked Company loss protection provided
in the agreement to offset Company losses incurred in these jobs. As restated, the Company reported a total gross loss from these
three jobs of $41,720 during the year ended December 31, 2017 for which aggregate customer billings on these jobs to completion
will be $200,520. As originally calculated, the gross losses on these 3 jobs for the year ended December 31, 2017 was $31,521.
Commissions aggregating $35,494 earned and owing to the Sales Manager at December 31, 2017 have been offset pursuant to the agreement
and will not be paid by the Company to the Sales Manager.
The
5 construction jobs described in the preceding two paragraphs had an aggregate gross profit of $82,580 as previously reported
in the consolidated financial statements at December 31, 2017. As restated for the facts described above, the aggregate gross
profit that should have been recognized for the year ended December 31, 2017 should have been $56,737. The result was a restatement
reducing revenue from construction contracts by $30,836, reducing cost of construction contracts by $4,993 and reducing gross
profit by $25,483 in the consolidated statement of operations and decreasing accounts payable and accrued expenses by $4,993 and
increasing “Billings in excess of costs and estimated earnings” at December 31, 2017 by $25,843 over the amount as
previously reported at that date and for the year then ended.
In
reviewing the facts and circumstances concerning the three accommodation jobs to determine the extent of gross losses to be sustained
by the Company based on up to date cost estimates, the Company also reviewed the amount of commission expense due the new Vice
President of Development and the new Sales Manager pursuant to the agreements as of December 31, 2017. As restated, the consolidated
financial statements reflected an additional $50,873 due which is now corrected for and included in accounts payable and accrued
expenses at December 31, 2017, and a corresponding increase in selling, general and administrative expenses for the year then
ended. Accordingly, the restatement reflects a net increase in selling, general and administrative expenses for the year ended
December 31, 2017 and an increase in accounts payable and accrued expenses of $15,379 ($50,873 less $35,494).
Errors
were also identified in the review for certain vendor accounts payable balances at December 31, 2017, primarily for duplicated
bills or bills for uncompleted services for vendor invoices relating to completed contracts. Correction of these errors resulted
in a restatement adjustment decreasing cash by $3,372, decreasing accounts payable and accrued expenses by $16,649, decreasing
cost of construction contacts by $15,727, and increasing selling, general and administrative expenses by $2,450. In addition,
it was determined that the number of shares of common stock committed to be issued for a lumber credit per a subscription agreement
were nominally less than when originally accounted for, resulting in a $988 decrease in stockholders’ equity and a $985
increase in accounts payable and accrued expenses.
The
effect of the restatement adjustments on the Consolidated Balance Sheet at December 31, 2017 follows:
|
|
As
Previously
|
|
|
Restatement
|
|
|
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
As
Restated
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
248,056
|
|
|
$
|
(3,372
|
)
|
|
$
|
244,684
|
|
Accounts
receivable
|
|
|
230,345
|
|
|
|
(119,156
|
)
|
|
|
111,189
|
|
Costs
and estimated earnings in excess of billings
|
|
|
74,338
|
|
|
|
(4,839
|
)
|
|
|
69,499
|
|
Total
current assets
|
|
|
552,739
|
|
|
|
(127,367
|
)
|
|
|
425,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, net
|
|
|
9,144
|
|
|
|
-
|
|
|
|
9,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Account
Receivable
|
|
|
-
|
|
|
|
32,000
|
|
|
|
32,000
|
|
Security
deposit
|
|
|
2,200
|
|
|
|
-
|
|
|
|
2,200
|
|
Deposits
and costs coincident to acquisition of land for development
|
|
|
210,129
|
|
|
|
-
|
|
|
|
210,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
774,212
|
|
|
$
|
(95,367
|
|
|
$
|
678,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
396,278
|
|
|
$
|
(5,275
|
)
|
|
$
|
391,003
|
|
Billings
in excess of costs and estimated earnings
|
|
|
128,252
|
|
|
|
(49,769
|
)
|
|
|
78,483
|
|
Accrued
income taxes
|
|
|
7,166
|
|
|
|
(7,166
|
)
|
|
|
-
|
|
Loans
payable to related parties
|
|
|
14,743
|
|
|
|
-
|
|
|
|
14,743
|
|
Total
current liabilities
|
|
|
546,439
|
|
|
|
(62,210
|
)
|
|
|
484,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Common
stock
|
|
|
24,203
|
|
|
|
(2
|
)
|
|
|
24,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
1,555,130
|
|
|
|
(986
|
)
|
|
|
1,554,144
|
|
Accumulated
deficit
|
|
|
(1,351,560
|
)
|
|
|
(32,169
|
)
|
|
|
(1,383,729
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
227,773
|
|
|
|
(33,157
|
)
|
|
|
194,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
774,212
|
|
|
$
|
(95,367
|
)
|
|
$
|
678,845
|
|
The
effect of the restatement adjustments on the Consolidated Statement of Operations for the year ended December 31, 2017 follows:
|
|
As
Previously
|
|
|
Restatement
|
|
|
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
As
Restated
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
contracts
|
|
$
|
2,939,634
|
|
|
$
|
30,612
|
|
|
$
|
2,970,246
|
|
Educational
software and products
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
revenue
|
|
|
2,939,634
|
|
|
|
30,612
|
|
|
|
2,970,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of construction contracts
|
|
|
1,969,821
|
|
|
|
(20,720
|
)
|
|
|
1,949,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
969,813
|
|
|
|
51,332
|
|
|
|
1,021,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
947,219
|
|
|
|
90,667
|
|
|
|
1,037,886
|
|
Depreciation
expense
|
|
|
2,656
|
|
|
|
-
|
|
|
|
2,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
949,875
|
|
|
|
90,667
|
|
|
|
1,040,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
|
|
19,938
|
|
|
|
(39,335
|
)
|
|
|
(19,397
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expenses (income):
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other expenses-net
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) before income taxes
|
|
|
19,938
|
|
|
|
(39,335
|
)
|
|
|
(19,397
|
)
|
Provision
for income taxes
|
|
|
7,166
|
|
|
|
(7,166
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
12,772
|
|
|
$
|
(32,169
|
)
|
|
$
|
(19,397
|
)
|
Basic
and diluted income (loss) per common share
|
|
$
|
0.00
|
|
|
|
-
|
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding-basic and diluted
|
|
|
23,917,680
|
|
|
|
-
|
|
|
|
23,917,680
|
|
The effect of the restatement adjustments on the Consolidated Statement of Cash Flows for the year
ended December 31, 2017 follows:
|
|
As
Previously
|
|
|
Restatement
|
|
|
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
As
Restated
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
12,772
|
|
|
$
|
(32,169
|
)
|
|
$
|
(19,397
|
)
|
Adjustments
to reconcile net income (loss) to net cash provided (used) in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
expense
|
|
|
2,656
|
|
|
|
-
|
|
|
|
2,656
|
|
Stock-based
compensation
|
|
|
66,864
|
|
|
|
-
|
|
|
|
66,864
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(114,693
|
)
|
|
|
87,156
|
|
|
|
(27,537
|
)
|
Costs
and estimated earnings in excess of billings
|
|
|
(16,632
|
)
|
|
|
4,839
|
|
|
|
(11,793
|
)
|
Accounts
payable and accrued expenses
|
|
|
312,548
|
|
|
|
(6,083
|
)
|
|
|
306,465
|
|
Billings
in excess of costs and estimated earnings
|
|
|
(154,862
|
)
|
|
|
(49,769
|
)
|
|
|
(204,631
|
)
|
Accrued
income taxes
|
|
|
7,166
|
|
|
|
(7,166
|
)
|
|
|
-
|
|
Net
cash provided in operating activities
|
|
|
115,819
|
|
|
|
(3,192
|
)
|
|
|
112,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of office equipment and vehicles
|
|
|
(5,800
|
)
|
|
|
-
|
|
|
|
(5,800
|
)
|
Security
deposits
|
|
|
(2,200
|
)
|
|
|
-
|
|
|
|
(2,200
|
)
|
Deposits
and costs coincident to acquisition of land for development
|
|
|
(131,472
|
)
|
|
|
-
|
|
|
|
(131,472
|
)
|
Net
cash (used) in investing activities
|
|
|
(139,472
|
)
|
|
|
-
|
|
|
|
(139,472
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from sale of common stock
|
|
|
5,000
|
|
|
|
-
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
5,000
|
|
|
|
-
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH
|
|
|
(18,653
|
)
|
|
|
(3,192
|
)
|
|
|
(21,845
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
BALANCE, BEGINNING OF PERIOD
|
|
|
266,709
|
|
|
|
-
|
|
|
|
266,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
BALANCE, END OF PERIOD
|
|
$
|
248,056
|
|
|
|
(3192
|
)
|
|
$
|
244,864
|
|
Note
7 (Income Taxes) has been restated to reflect the amount of the net operating loss carryforward for years ended prior to December
31, 2017 of $55,004 (after utilization of $63,203 in 2016). In addition, the restated income tax note reflects a calculated deferred
tax asset of $0 at December 31, 2017 for which a full NOL carryforward has been used.