UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2018

 

or

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____________________________________ to ____________________________

 

Commission File Number: 000-25991

 

MANHATTAN BRIDGE CAPITAL, INC.

(Exact name of registrant as specified in its charter)

 

New York   11-3474831

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

60 Cutter Mill Road, Great Neck, New York 11021

(Address of principal executive offices)

 

(516) 444-3400

(Registrant’s telephone number, including area code)

 

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [  ] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [  ] No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer [  ]     Accelerated filer [  ]
             
  Non-accelerated filer [  ] (Do not check if a smaller reporting company)   Smaller reporting company [X]
             
  Emerging growth company [  ]        

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [  ] Yes [X] No

 

As of July 27, 2018, the Issuer had a total of 9,546,387 shares of Common Stock, $.001 par value per share, outstanding.

 

 

 

  
 

 

 

MANHATTAN BRIDGE CAPITAL, INC.

 
  TABLE OF CONTENTS  
     
   

Page

Number

Part I FINANCIAL INFORMATION  
     
Item 1.

Consolidated Financial Statements (unaudited)

 
     
 

Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017

2
     
 

Consolidated Statements of Operations for the Three and Six Month Periods Ended June 30, 2018 and 2017

3
     
 

Consolidated Statements of Cash Flows for the Six Month Periods Ended June 30, 2018 and 2017

4
     
 

Notes to Consolidated Financial Statements

5
     
Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

12
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk 17
     

Item 4.

Controls and Procedures 17
     
Part II

OTHER INFORMATION

 
     
Item 6. Exhibits 17
     
SIGNATURES 18
     
EXHIBITS  

 

  
 

 

Forward Looking Statements

 

This report contains forward-looking statements within the meaning of section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are typically identified by the words “believe,” “expect,” “intend,” “estimate” and similar expressions. Those statements appear in a number of places in this report and include statements regarding our intent, belief or current expectations or those of our directors or officers with respect to, among other things, trends affecting our financial condition and results of operations and our business and growth strategies. These forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those projected, expressed or implied in the forward-looking statements as a result of various factors (such factors are referred to herein as “Cautionary Statements”), including but not limited to the following: (i) our loan origination activities, revenues and profits are limited by available funds; (ii) we operate in a highly competitive market and competition may limit our ability to originate loans with favorable interest rates; (iii) our Chief Executive Officer is critical to our business and our future success may depend on our ability to retain him [and to periodically obtain bridge loans from him]; (iv) if we overestimate the yields on our loans or incorrectly value the collateral securing the loan, we may experience losses; (v) we may be subject to “lender liability” claims; (vi) our due diligence may not uncover all of a borrower’s liabilities or other risks to its business; (vii) borrower concentration could lead to significant losses; and (viii) we may choose to make distributions in our own stock, in which case you may be required to pay income taxes in excess of the cash dividends you receive. The accompanying information contained in this report, including the information set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, identifies important factors that could cause such differences. Further information on potential factors that could affect our business is described under the heading “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. These forward-looking statements speak only as of the date of this report, and we caution potential investors not to place undue reliance on such statements. We undertake no obligation to update or revise any forward-looking statements. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Cautionary Statements.

 

All references in this Form 10-Q to “Company,” “we,” “us,” or “our” refer to Manhattan Bridge Capital, Inc. and its wholly-owned subsidiary, MBC Funding II Corp., unless the context otherwise indicates.

 

  
 

 

PART I. FINANCIAL INFORMATION

 

Item 1. CONSOLIDATED FINANCIAL STATEMENTS

 

MANHATTAN BRIDGE CAPITAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

 

  

June 30, 2018

  

December 31, 2017

 
   (unaudited)   (audited) 
Assets        
Loans receivable  $51,846,500   $45,124,000 
Interest receivable on loans   570,805    535,045 
Cash and cash equivalents   129,490    136,441 
Deferred financing costs   31,361    45,269 
Other assets   142,064    55,941 
Total assets  $52,720,220   $45,896,696 
           
Liabilities and Stockholders’ Equity          
Liabilities:          
Line of credit  $20,000,000   $16,914,594 
Short term loans - related party   2,430,000     
Short term loan   1,000,000     
Senior secured notes (net of deferred financing costs of $585,041 and $622,584)   5,414,959    5,377,416 
Deferred origination fees   428,576    298,471 
Accounts payable and accrued expenses   187,511    167,559 
Dividends payable       891,983 
Total liabilities   29,461,046    23,650,023 
           
Commitments and contingencies          
Stockholders’ equity:          
Preferred shares - $.01 par value; 5,000,000 shares authorized; none issued        
Common shares - $.001 par value; 25,000,000 shares authorized; 8,327,917 and 8,319,036 issued, respectively; 8,117,815 and 8,108,934 outstanding, respectively   8,328    8,319 
Additional paid-in capital   23,222,769    23,167,511 
Treasury stock, at cost - 210,102 shares   (541,491)   (541,491)
Retained earnings (accumulated deficit)   569,568    (387,666)
Total stockholders’ equity   23,259,174    22,246,673 
           
Total liabilities and stockholders’ equity  $52,720,220   $45,896,696 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 2 
 

 

MANHATTAN BRIDGE CAPITAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

  

Three Months

Ended June 30,

  

Six Months

Ended June 30,

 
   2018   2017   2018   2017 
Interest income from loans  $1,423,352   $1,188,567   $2,852,600   $2,294,748 
Origination fees   244,348    212,334    479,574    435,759 
Total Revenue   1,667,700    1,400,901    3,332,174    2,730,507 
                     
Operating costs and expenses:                    
Interest and amortization of debt service costs   413,074    277,651    810,778    509,233 
Referral fees   83    841    416    2,201 
General and administrative expenses   305,155    270,471    590,674    575,986 
Total operating costs and expenses   718,312    548,963    1,401,868    1,087,420 
Income from operations   949,388    851,938    1,930,306    1,643,087 
Loss on write-down of investment in privately held company       (10,000)       (10,000)
Income before income tax expense   949,388    841,938    1,930,306    1,633,087 
Income tax expense       (1,872)       (1,872)
Net income  $949,388   $840,066   $1,930,306   $1,631,215 
                     
Basic and diluted net income per common share outstanding:                    
—Basic  $0.12   $0.10   $0.24   $0.20 
—Diluted  $0.12   $0.10   $0.24   $0.20 
                     
Weighted average number of common shares outstanding:                    
—Basic   8,111,276    8,119,052    8,110,112    8,127,000 
—Diluted   8,119,984    8,131,752    8,117,817    8,142,157 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 3 
 

 

MANHATTAN BRIDGE CAPITAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

  

Six Months

Ended June 30,

 
   2018   2017 
Cash flows from operating activities:          
Net Income  $1,930,306   $1,631,215 
Adjustments to reconcile net income to net cash provided by operating activities -          
Amortization of deferred financing costs   51,451    61,625 
Depreciation   2,274    2,186 
Non cash compensation expense   6,532    6,532 
Loss on write-down of investment in privately held company       10,000 
Changes in operating assets and liabilities:          
Interest receivable on loans   (35,760)   (110,599)
Other assets   (76,097)   (35,109)
Accounts payable and accrued expenses   19,952    (4,053)
Deferred origination fees   130,105    46,112 
Other liabilities       25,000 
Net cash provided by operating activities   2,028,763    1,632,909 
           
Cash flows from investing activities:          
Issuance of short term loans   (27,792,500)   (20,599,500)
Collections received from loans   21,070,000    14,113,000 
Purchase of fixed assets       (1,666)
Net cash used in investing activities   (6,722,500)   (6,488,166)
           
Cash flows from financing activities:          
Proceeds from line of credit, net   3,085,406    6,683,151 
Proceeds from short-term loans, net   3,430,000     
Dividend paid   (1,865,055)   (1,627,007)
Purchase of treasury shares       (172,156)
Capital raising costs   (12,300)    
Proceeds from exercise of warrants   48,735     
Net cash provided by financing activities   4,686,786    4,883,988 
           
Net (decrease) increase in cash and cash equivalents   (6,951)   28,731 
Cash and cash equivalents, beginning of year   136,441    96,299 
Cash and cash equivalents, end of period  $129,490   $125,030 
           
Supplemental Cash Flow Information:          
Taxes paid during the period  $   $1,872 
Interest paid during the period  $733,215   $415,273 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 4 
 

 

MANHATTAN BRIDGE CAPITAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018

1. THE COMPANY

 

The accompanying unaudited consolidated financial statements of Manhattan Bridge Capital, Inc. (“MBC”), a New York corporation founded in 1989, and its consolidated subsidiary, MBC Funding II Corp. (“MBC Funding II”), a New York corporation formed in December 2015 (collectively referred to herein as the “Company”) have been prepared by the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The accompanying unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2017 and the notes thereto included in the Company’s Annual Report on Form 10-K. Results of consolidated operations for the interim period are not necessarily indicative of the operating results to be attained in the entire fiscal year.

 

The preparation of consolidated 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 amount of revenues and expenses during the reporting period. Actual amounts could differ from those estimates.

 

The consolidated financial statements include the accounts of MBC and MBC Funding II. All significant intercompany balances and transactions have been eliminated in consolidation.

 

The Company offers short-term, secured, non–banking loans to real estate investors (also known as hard money) to fund their acquisition, renovation, rehabilitation or development of residential or commercial properties located around the New York metropolitan area.

 

Interest income from commercial loans is recognized, as earned, over the loan period.

 

Origination fee revenue on commercial loans is amortized over the term of the respective note.

 

The Company presents deferred financing costs, excluding those incurred in connection with its line of credit, in the balance sheet as a direct reduction from the related debt liability rather than an asset, in accordance with Accounting Standards Update (“ASU”) 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”. These costs, incurred in connection with the issuance of the Company’s senior secured notes, are being amortized over ten years, using the straight-line method, as the difference between use of the effective interest method is not material.

 

Deferred financing costs in connection with the Company’s Credit and Security Agreement with Webster Business Credit Corporation (“Webster”), as amended, as well as the Amended and Restated Credit and Security Agreement, as amended, with Webster and Flushing Bank (“Flushing”), as discussed in Note 6, are presented as an asset in the balance sheet, in accordance with ASU 2015-15, “Interest – Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated With Line of Credit Arrangements”. These costs are being amortized over the term of the respective agreement, using the straight-line method.

 

 5 
 

 

2. RECENT TECHNICAL ACCOUNTING PRONOUNCEMENTS

 

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers,” which is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2017. This ASU outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry specific guidance. Several ASUs expanding and clarifying the initial guidance issued in ASU 2014-09 have been released since May 2014. Exclusions from the scope of this guidance include revenue resulting from loans, investment securities (available-for-sale and trading), investments in unconsolidated entities and leases. The Company adopted the ASU effective January 1, 2018. The Company evaluated the applicability of this guidance, considering the scope exceptions, and concluded that the adoption does not have an effect on its consolidated financial statements, primarily due to the new guidance not applying to revenue resulting from loans and lease contracts.

 

In May 2017, the FASB issued ASU 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.” This ASU provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under Accounting Standards Codification (“ASC”) 718, “Compensation –Stock Compensation.” Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the change in terms or conditions. For all entities, the standard is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

 

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” This ASU expands the activities that qualify for hedge accounting and simplifies the rules for reporting hedging transactions. For public companies that file with the Securities Exchange Commission (“SEC”), the standard is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

 

In February 2018, the FASB issued ASU 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This ASU amends ASC 220, “Income Statement – Reporting Comprehensive Income,” to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. In addition, under this ASU, an entity will be required to provide certain disclosures regarding stranded tax effects. For all entities, the standard is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

 

In June 2018, the FASB issued ASU 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” This ASU supersedes ASC 505-50, “Equity Based Payment to Non-Employees,” (“ASC 505-50”) and expands the scope of ASC 718, “Compensation – Stock Compensation,” to include all share-based payment arrangements related to the acquisition of goods and services from both nonemployees and employees. For public companies that file with the SEC, the standard is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than an entity’s adoption date of ASC 606, “Revenue from Contracts with Customers.” The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

 

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the Company’s consolidated financial statements.

 

 6 
 

 

3. COMMERCIAL LOANS

 

Loans Receivable

 

The Company offers short-term secured non–banking loans to real estate investors (also known as hard money) to fund their acquisition and construction of properties located around the New York Metropolitan area. The loans are principally secured by collateral consisting of first mortgage positions on real estate and, generally, accompanied by personal guarantees from the principals of the borrowers. The loans are generally for a term of one year. The loans are initially recorded, and carried thereafter, in the financial statements at cost. Most of the loans provide for receipt of interest only during the term of the loan and a balloon payment at the end of the term.

 

At June 30, 2018, the Company was committed to $6,832,500 in construction loans that can be drawn by the borrowers when certain conditions are met.

 

At June 30, 2018, no one entity has loans outstanding representing more than 10% of the total balance of the loans outstanding.

 

The Company generally grants loans for a term of one year. When a performing loan reaches its maturity and the borrower requests an extension, the Company may extend the term of the loan beyond one year. Prior to granting an extension of any loan, the Company reevaluates the underlying collateral.

 

Credit Risk

 

Credit risk profile based on loan activity as of June 30, 2018 and December 31, 2017:

 

Performing loans 

Developers-

Residential

  

Developers-

Commercial

  

Developers-

Mixed Used

   Total outstanding loans 
June 30, 2018  $45,861,500   $3,160,000   $2,825,000   $51,846,500 
December 31, 2017  $41,739,000   $900,000   $2,485,000   $45,124,000 

 

At June 30, 2018, the Company’s loans receivable includes loans in the amount of $2,060,000 and $7,362,500 originally due in 2016 and 2017, respectively. In all instances the borrowers are currently paying their interest and, generally, the Company receives a fee in connection with the extension of the loans. Accordingly, at June 30, 2018, no loan impairments exist and there are no provisions for impairments of loans or recoveries thereof.

 

Subsequent to the balance sheet date, $1,725,000 of the loans receivable at June 30, 2018 were paid off.

 

4. EARNINGS PER SHARE OF COMMON STOCK

 

Basic and diluted earnings per share are calculated in accordance with ASC 260, “Earnings Per Share”. Under ASC 260, basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased to include the potential dilution from the exercise of stock options and warrants for common shares using the treasury stock method. The numerator in calculating both basic and diluted earnings per common share for each period is the reported net income.

 

The denominator is based on the following weighted average number of common shares:

 

  

Three Months

Ended June 30,

  

Six Months

Ended June 30,

 
   2018   2017   2018   2017 
Basic   8,111,276    8,119,052    8,110,112    8,127,000 
Incremental shares for assumed exercise of options   8,708    12,700    7,705    15,157 
Diluted   8,119,984    8,131,752    8,117,817    8,142,157 

 

 7 
 

 

For the three and six month periods ended June 30, 2018, 46,054 and 47,057, stock options and warrants were not included in the diluted earnings per share calculation, respectively, because their effect would have been anti-dilutive.

 

For the three and six month periods ended June 30, 2017, 31,331 and 28,874, stock options and warrants were not included in the diluted earnings per share calculation, respectively, because their effect would have been anti-dilutive.

 

5. STOCK – BASED COMPENSATION

 

The Company measures and recognizes compensation awards for all stock option grants made to employees and directors, based on their fair value in accordance with ASC 718, “Compensation - Stock Compensation”, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. A key provision of this statement is to measure the cost of employee services received in exchange for an award of equity instruments (including stock options) based on the grant-date fair value of the award. The cost will be recognized over the service period during which an employee is required to provide service in exchange for the award (i.e., the requisite service period or vesting period). The Company accounts for equity instruments issued to non-employees in accordance with the provisions of ASC 718 and ASC 505-50. All transactions with non-employees, in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more appropriately measurable.

 

The exercise price of options granted under the Company’s stock option plan (the “Plan”) may not be less than the fair market value on the date of grant. Stock options under the Plan may be awarded to officers, key employees, consultants and non-employee directors of the Company. Generally, options outstanding vest over periods not exceeding four years and are exercisable for up to five years from the grant date.

 

Share based compensation expense recognized under ASC 718 for each of the six month periods ended June 30, 2018 and 2017 of $6,532 represents the amortization of the fair value of 1,000,000 restricted shares granted to the Company’s Chief Executive Officer on September 9, 2011 of $195,968, after adjusting for the effect on the fair value of the stock options related to this transaction. The fair value will be amortized over 15 years.

 

The following summarizes stock option activity for the six month period ended June 30, 2018:

 

   Shares  

Weighted Average Exercise

Price

  

Weighted Average Remaining Contractual Term (in

years)

  

Aggregate Intrinsic

Value

 
Outstanding at December 31, 2017   14,000   $2.23           
Expired   (7,000)   1.53           
Outstanding at June 30, 2018
(all vested and exercisable)
   7,000   $2.92    1.00   $5,034 

 

On July 31, 2014, in connection with the Company’s public offering in July 2014, the Company issued warrants to purchase up to 87,719 common shares, with an exercise price of $3.5625 per common share, to the representative of the underwriters of the offering (the “July 2014 Representative Warrants”). These warrants are exercisable at any time, and from time to time, in whole or in part, commencing on July 28, 2015 and expire on July 28, 2019. The fair value of these warrants, using the Black-Scholes option pricing model, on the date of issuance was $42,224. At June 30, 2018, July 2014 Representative Warrants to purchase up to 4,000 common shares were outstanding.

 

 8 
 

 

On May 29, 2015, in connection with the Company’s public offering in May 2015, the Company issued warrants to purchase up to 50,750 common shares, with an exercise price of $5.4875 per common share, to the representative of the underwriters of the offering (the “May 2015 Representative Warrants”). These warrants are exercisable at any time, and from time to time, in whole or in part, commencing on May 22, 2016 and expire on May 22, 2020. The fair value of these warrants, using the Black-Scholes option pricing model, on the date of issuance was $54,928. At June 30, 2018, May 2015 Representative Warrants to purchase up to 10,150 common shares were outstanding.

 

On August 15, 2016, in connection with a public offering of the Company’s Common Stock, the Company issued warrants to purchase up to 33,612 common shares, with an exercise price of $7.4375 per common share, to the representative of the underwriters of the offering (the “August 2016 Representative Warrants”). The warrants are exercisable at any time, and from time to time, in whole or in part, commencing on August 9, 2017 and expire on August 9, 2021. The fair value of these warrants, using the Black-Scholes option pricing model, on the date of issuance was $47,020. At June 30, 2018, all of the August 2016 Representative Warrants were outstanding.

 

6. LINE OF CREDIT AND LOANS

 

Line of Credit

 

Currently, we have a $25 million credit line with Webster and Flushing. On February 27, 2015, the Company entered into a Credit and Security Agreement (the “Webster Credit Line”) with Webster pursuant to which it could borrow up to $14 million against assignments of mortgages and other collateral. The Webster Credit Line was initially in effect until February 27, 2018. The Webster Credit Line initially provided for an interest rate (until amended – as described below) of either LIBOR plus 4.75% or the base commercial lending rate of Webster plus 3.25% as chosen by the Company for each drawdown. The Webster Credit Line contains various covenants and restrictions including, among other covenants and restrictions, limiting the amount that the Company can borrow relative to the value of the underlying collateral, maintaining various financial ratios and limitations on the terms of loans the Company makes to its customers, limiting the Company’s ability to pay dividends under certain circumstances, and limiting the Company’s ability to repurchase its common shares, sell assets, engage in mergers or consolidations, grant liens, and enter into transactions with affiliates. In addition, the Webster Credit Line also contains a cross default provision which will deem any default under any indebtedness owed by us or our subsidiary, MBC Funding II, as a default under the credit line. Mr. Assaf Ran, the Company’s President and Chief Executive Officer, had personally guaranteed all of the Company’s obligations to Webster.

 

Effective July 7, 2017, the Company entered into an Amendment of the Webster Credit Line (the “Amendment”), with Webster. In conjunction with the execution of the Amendment, the Company also entered into an Amended and Restated Revolving Credit Note (the “Amended Note”), and Amendment No. 3 Fee Letter (the “Fee Letter”), each dated July 7, 2017, with Webster. Pursuant to the terms of the Amendment, the Webster Credit Line was increased by $1 million to $15 million in the aggregate, with an option, at the discretion of Webster, to increase the Webster Credit Line to $20 million in the aggregate. The term of the Webster Credit Line was extended to February 28, 2021, unless sooner terminated, and contains a provision that permits a Company option for a further extension of the Webster Credit Line until February 28, 2022, subject to Webster’s consent. Pursuant to the terms of the Amendment, the terms of the personal guaranty provided by Mr. Ran were amended such that the potential sums owed under Mr. Ran’s personal guaranty will not exceed the sum of $500,000 plus any costs relating to the enforcement of the personal guaranty.

 

In addition, the interest rates relating to the Webster Credit Line were amended such that the interest rates equaled (i) LIBOR plus 3.75% plus a 0.5% Agency Fee (as hereinafter defined) or (ii) a Base Rate (as defined in the Webster Credit Line) plus 2.25% plus a 0.5% Agency Fee, as chosen by the Company for each drawdown. Finally, the Amendment provided that the Company shall not permit mortgage loans that are outstanding more than 24 months after their origination date to comprise more than 17.5% of their total portfolio of mortgage loans at any time. Pursuant to the terms of the Fee Letter, the Company agreed to pay Webster an agency fee equal to 0.5% per annum (the “Agency Fee”) on the actual principal amount of advances outstanding during any month, as well as a $15,000 syndication fee.

 

 9 
 

 

On August 8, 2017, the Company entered into the Amended and Restated Credit Agreement (“Amended Credit Agreement”) with Webster and Flushing. In conjunction with the execution of the Amended Credit Agreement, the Company also entered into a Revolving Credit Note in the principal aggregate amount of $5 million with Flushing (the “Flushing Note”) and an Amended and Restated Fee Letter (the “Amended Fee Letter”) with Webster, each dated August 8, 2017. Pursuant to the terms of the Amended Credit Agreement, the Company’s existing Webster Credit Line was amended to include Flushing as an additional lender, as well as increased the funds available under the Webster Credit Line by $5 million, to $20 million in the aggregate. The Amended Credit Agreement also incorporated and restated previously reported amendments. In addition, Mr. Ran executed an Amended and Restated Guaranty, which was restated to include previously reported amendments. Finally, the Company executed the Amended Fee Letter which incorporated and restated previously reported amendments.

 

Total costs to establish the Webster Credit Line were approximately $144,000, and the total costs to amend the Webster Credit Line were approximately $43,000. These costs are being amortized over the term of the respective agreement, using the straight-line method. The amortization costs for the six months ended June 30, 2018 and 2017 were $13,908 and $24,083, respectively.

 

The Company was in compliance with all covenants of the Amended Credit Agreement as of June 30, 2018. At June 30, 2018, the outstanding amount under the Amended Credit Agreement was $20,000,000. The interest rate on the amount outstanding fluctuates daily. The rate, including a 0.5% Agency Fee, for June 30, 2018 was 6.3435%.

 

Effective July 11, 2018, the Company entered into a Waiver and Amendment No. 1 to the Amended Credit Agreement (“Amendment II”) with Webster, Flushing and Mr. Ran, as guarantor. In conjunction with the execution of Amendment II, the Company also entered into an Amended and Restated Revolving Credit Note in the principal aggregate amount of $10,000,000 with Flushing (the “Amended Flushing Note”) and a Second Amended and Restated Fee Letter with Webster and Flushing, each dated July 11, 2018.

 

Pursuant to the terms of Amendment II, the Company’s existing Webster Credit Line was further increased by $5,000,000 to $25,000,000 in the aggregate. In addition, the interest rates relating to the Webster Credit Line were amended such that the interest rates now equal (i) LIBOR plus a premium, which rate aggregated approximately 6% as of July 11, 2018, or (ii) a Base Rate (as defined in the Amended Credit Agreement) plus 2.25% plus a 0.5% agency fee, as chosen by the Company for each drawdown. The Amendment II also permits the Company to repurchase, redeem or otherwise retire its equity securities in an amount not to exceed ten percent of its annual net income from the prior fiscal year.

 

Short Term Loans

 

During the second quarter of 2018, Mr. Ran, the Chief Executive Officer of the Company, and entities he controls, made seven short term loans to the Company in the aggregate amount of $2,741,227, at an interest rate of 6% per annum. Two of the loans in the aggregate amount of $311,227 were repaid in full in May 2018. The remaining loans, in the aggregate amount of $2,430,000 were repaid in full as of July 11, 2018. The Company also received a short-term loan from a third party lender in the amount of $1,000,000 at the rate of 12% per annum, and such short term loan was repaid in full as of July 12, 2018. The aggregate interest expense for these loans was approximately $19,000, of which approximately $9,000 was paid to Mr. Ran and entities he controls.

 

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7. SENIOR SECURED NOTES

 

On April 25, 2016, in an initial public offering, MBC Funding issued 6% senior secured notes, due April 22, 2026 (the “Notes”) in the aggregate principal amount of $6,000,000 under the Indenture, dated April 25, 2016, among MBC Funding, as Issuer, the Company, as Guarantor, and Worldwide Stock Transfer LLC, as Indenture Trustee (the “Indenture”). The Notes, having a principal amount of $1,000 each, are listed on the NYSE American and trade under the symbol “LOAN/26”. Interest accrues on the Notes commencing on May 16, 2016. The accrued interest is payable monthly in cash, in arrears, on the 15th day of each calendar month commencing June 2016.

 

Under the terms of the Indenture, the aggregate outstanding principal balance of the mortgage loans held by MBC Funding, together with MBC Funding’s cash on hand, must always equal at least 120% of the aggregate outstanding principal amount of the Notes at all times. To the extent the aggregate principal amount of the mortgage loans owned by MBC Funding plus MBC Funding’s cash on hand is less than 120% of the aggregate outstanding principal balance of the Notes, MBC Funding is required to repay, on a monthly basis, the principal amount of the Notes equal to the amount necessary such that, after giving effect to such repayment, the aggregate principal amount of all mortgage loans owned by MBC Funding plus, MBC Funding’s cash on hand at such time is equal to or greater than 120% of the outstanding principal amount of the Notes. For this purpose, each mortgage loan is deemed to have a value equal to its outstanding principal balance, unless the borrower is in default of its obligations.

 

MBC Funding may redeem the Notes, in whole or in part, at any time after April 22, 2019 upon at least 30 days prior written notice to the Noteholders. The redemption price will be equal to the outstanding principal amount of the Notes redeemed plus the accrued but unpaid interest thereon up to, but not including, the date of redemption, without penalty or premium; provided that (i) if the Notes are redeemed on or after April 22, 2019 but prior to April 22, 2020, the redemption price will be 103% of the principal amount of the Notes redeemed and (ii) if the Notes are redeemed on or after April 22, 2020 but prior to April 22, 2021, the redemption price will be 101.5% of the principal amount of the Notes redeemed plus, in either case, the accrued but unpaid interest on the Notes redeemed up to, but not including, the date of redemption.

 

Each Noteholder has the right to cause MBC Funding to redeem his, her or its Notes on April 22, 2021. The redemption price will be equal to the outstanding principal amount of the Notes redeemed plus the accrued but unpaid interest up to, but not including, the date of redemption, without penalty or premium. In order to exercise this right, the Noteholder must notify MBC Funding, in writing, no earlier than November 22, 2020 and no later than January 22, 2021. All Notes that are subject to a properly and timely notice will be redeemed on April 22, 2021. Any Noteholder who fails to make a proper and timely election will be deemed to have waived his, her or its right to have his, her or its Notes redeemed prior to the maturity date.

 

MBC Funding is obligated to offer to redeem the Notes if there occurs a “change of control” with respect to MBC Funding or the Company or if MBC Funding or the Company sell any assets unless, in the case of an asset sale, the proceeds are reinvested in the business of the seller. The redemption price in connection with a “change of control” will be 101% of the principal amount of the Notes redeemed plus accrued but unpaid interest thereon up to, but not including, the date of redemption. The redemption price in connection with an asset sale will be the outstanding principal amount of the Notes redeemed plus accrued but unpaid interest thereon up to, but not including, the date of redemption.

 

8. COMMITMENTS AND CONTINGENCIES

 

Operating Lease

 

On July 21, 2016, the Company amended its existing lease (the “Lease Amendment”) for its corporate headquarters located at 60 Cutter Mill Road, Great Neck, New York, to extend the term of the lease for an additional five years, through September 30, 2021. Among other things, the Lease Amendment provides for gradual annual rent increases from approximately $3,500 per month during the first year to $3,900 per month during the fifth year of the extension term.

 

9. SUBSEQUENT EVENT

 

On July 24, 2018, the Company completed a public offering of 1,428,572 common shares at a public offering price of $7.00 per share (the “Offering”). The gross proceeds raised by the Company from the Offering were $10,000,004 before deducting underwriting discounts and commissions and other estimated offering expenses. The total net proceeds from the Offering were approximately $9,100,000. The Company has granted the underwriters a 45-day option to purchase up to 214,286 additional common shares to cover over-allotments, if any.

 

********

 

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q. The discussion and analysis contains forward-looking statements based on current expectations that involve risks and uncertainties. Actual results and the timing of certain events may differ significantly from those projected in such forward-looking statements.

 

We are a New York-based real estate finance company that specializes in originating, servicing and managing a portfolio of first mortgage loans. We offer short-term, secured, non-banking loans (sometimes referred to as “hard money” loans), which we may renew or extend on, before or after their initial term expires, to real estate investors to fund their acquisition, renovation, rehabilitation or development of residential or commercial properties located around the New York metropolitan area.

 

The properties securing the loans are generally classified as residential or commercial real estate and, typically, are not income producing. Each loan is secured by a first mortgage lien on real estate. In addition, each loan is personally guaranteed by the principal(s) of the borrower, which guarantee may be collaterally secured by a pledge of the guarantor’s interest in the borrower. The face amount of the loans we originated in the past seven years ranged from $30,000 to a maximum of $2 million. Our lending policy limits the maximum amount of any loan to the lower of (i) 9.9% of the aggregate amount of our loan portfolio (not including the loan under consideration) and (ii) $2 million. Our loans typically have a maximum initial term of 12 months and bear interest at a fixed rate of 10% to 14% per year. In addition, we usually receive origination fees or “points” ranging from 0% to 2% of the original principal amount of the loan as well as other fees relating to underwriting and funding the loan. Interest is always payable monthly, in arrears. In the case of acquisition financing, the principal amount of the loan usually does not exceed 75% of the value of the property (as determined by an independent appraiser) and in the case of construction financing, it is typically up to 80% of construction costs.

 

Since commencing this business in 2007, we have made over 660 loans valued at more than $210 million and never foreclosed on a property. We currently manage approximately 130 loans. In addition, none of our loans have ever gone into default, although sometimes we have renewed or extended our loans to enable the borrower to avoid premature sale or refinancing of the property. When we renew or extend a loan we receive additional “points” and other fees.

 

Our primary business objective is to grow our loan portfolio while protecting and preserving capital in a manner that provides for attractive risk-adjusted returns to our shareholders over the long term through dividends. We intend to achieve this objective by continuing to selectively originate and fund loans secured by first mortgages on residential real estate held for investment located around the New York metropolitan area and to carefully manage and service our portfolio in a manner designed to generate attractive risk-adjusted returns across a variety of market conditions and economic cycles. We believe that current market dynamics, specifically the demand/supply imbalance for relatively small real estate loans, presents significant opportunities for us to selectively originate high-quality first mortgage loans on attractive terms and we believe that these market conditions should persist for a number of years. We have built our business on a foundation of intimate knowledge of the New York metropolitan area real estate market combined with a disciplined credit and due diligence culture that is designed to protect and preserve capital. We believe that our flexibility and ability to structure loans that address the needs of our borrowers without compromising our standards on credit risk, our expertise, our intimate knowledge of the New York metropolitan area real estate market and our focus on newly originated first mortgage loans, has defined our success until now and should enable us to continue to achieve our objectives.

 

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A principal source of new transactions has been repeat business from prior customers and their referral of new business. We also receive leads for new business from banks, brokers and a limited amount of advertising. Finally, our Chief Executive Officer also spends a significant portion of his time on new business development. We rely on our own employees, independent legal counsel, and other independent professionals to verify titles and ownership, to file liens and to consummate the transactions. Outside appraisers are used to assist us in evaluating the worth of collateral, when deemed necessary by management. We also use construction inspectors.

 

For the six month periods ended June 30, 2018 and 2017, the total amounts of $27,792,500 and $20,599,500, respectively, have been lent, offset by collections received from borrowers, under our commercial loans of $21,070,000 and $14,113,000, respectively.

 

At June 30, 2018, we were committed to $6,832,500 in construction loans that can be drawn by the borrowers when certain conditions are met.

 

To date, we have not experienced any defaults and none of the loans previously made have been non-collectable, although no assurances can be given that existing or future loans may not go into default or prove to be non-collectible in the future.

 

We satisfied all of the requirements to be taxed as a REIT and elected to be taxed as a REIT commencing with our taxable year ended December 31, 2014. In order to maintain our qualification for taxation as a REIT and avoid any excise tax on our net taxable income, we are required to distribute each year at least 90% of our REIT taxable income. If we distribute less than 100% of our taxable income (but more than 90%), the undistributed portion will be taxed at the regular corporate income tax rates. As a REIT, we may also be subject to federal excise taxes and minimum state taxes.

 

Results of Operations

 

Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

 

Revenue

 

Total revenues for the three month period ended June 30, 2018 were approximately $1,668,000 compared to approximately $1,401,000 for the three month period ended June 30, 2017, an increase of $267,000, or 19.1%. The increase in revenue represents an increase in lending operations. For the three month periods ended June 30, 2018 and 2017, approximately $1,423,000 and $1,189,000, respectively, of our revenues were attributable to interest income on the secured commercial loans that we offer to small businesses, and approximately $244,000 and $212,000, respectively, of our revenues were attributable to origination fees on such loans. The loans are principally secured by collateral consisting of real estate and, generally, accompanied by personal guarantees from the principals of the borrowers.

 

Interest and amortization of debt service costs

 

Interest and amortization of debt service costs for the three month period ended June 30, 2018 were approximately $413,000 compared to approximately $278,000 for the three month period ended June 30, 2017, an increase of $135,000, or 48.6%. The increase is primarily attributable to the use of the Webster Credit Line (See Note 6 to the financial statements included elsewhere in this report) in order to increase our ability to make loans.

 

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General and administrative expenses

 

General and administrative expenses for the three month period ended June 30, 2018 were approximately $305,000 compared to approximately $270,000 for the three month period ended June 30, 2017, an increase of $35,000, or 13.0%. The increase is primarily attributable to increases in payroll, insurance and advertising expenses, and legal fees.

 

Net income

 

Net income for the three month period ended June 30, 2018 was approximately $949,000 compared to approximately $840,000 for the three month period ended June 30, 2017, an increase of $109,000, or 13.0%. The increase is primarily attributable to the increase in revenue, offset by the increase in interest expenses.

 

Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

 

Revenue

 

Total revenues for the six month period ended June 30, 2018 were approximately $3,332,000 compared to approximately $2,731,000 for the six month period ended June 30, 2017, an increase of $601,000, or 22.0%. The increase in revenue represents an increase in lending operations. For the six month periods ended June 30, 2018 and 2017, revenues of approximately $2,853,000 and $2,295,000, respectively, were attributable to interest income on secured commercial loans that we offer to small businesses, and approximately $480,000 and $436,000, respectively, were attributable to origination fees on such loans. The loans are principally secured by collateral consisting of real estate and, generally, accompanied by personal guarantees from the principals of the borrowers.

 

Interest and amortization of debt service costs

 

Interest and amortization of debt service costs for the six month period ended June 30, 2018 were approximately $811,000 compared to approximately $509,000 for the six month period ended June 30, 2017, an increase of $302,000, or 59.3%. The increase is primarily attributable to the use of the Webster Credit Line (See Note 6 to the financial statements included elsewhere in this report) in order to increase our ability to make loans.

 

General and administrative expenses

 

General and administrative expenses for the six month period ended June 30, 2018 were approximately $591,000 compared to approximately $576,000 for the six month period ended June 30, 2017, an increase of $15,000, or 2.6%. The increase is primarily attributable to increases in appraisal, advertising, insurance, travel and meals expenses as well as in legal and Nasdaq Capital Market fees, offset by a special bonus to officers in 2017, which was not repeated in 2018.

 

Net income

 

Net income for the six month period ended June 30, 2018 was approximately $1,930,000 compared to approximately $1,631,000 for the six month period ended June 30, 2017, an increase of $299,000, or 18.3%. The increase is primarily attributable to the increase in revenue, offset by the increase in interest expenses.

 

Liquidity and Capital Resources

 

At June 30, 2018, we had cash and cash equivalents of approximately $129,000 compared to cash and cash equivalents of approximately $136,000 at December 31, 2017.

 

For the six months ended June 30, 2018, net cash provided by operating activities was approximately $2,029,000, compared to approximately $1,633,000 for the six months ended June 30, 2017. The increase in net cash provided by operating activities primarily results from increases in net income and in deferred origination fees, offset by an increase in other assets, including prepaid insurance.

 

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For the six months ended June 30, 2018, net cash used in investing activities was approximately $6,723,000, compared to approximately $6,488,000 for the six months ended June 30, 2017. Net cash used in investing activities for the six months ended June 30, 2018 consisted of the issuance of commercial loans of approximately $27,793,000, offset by collection of our commercial loans of $21,070,000. In the period ended June 30, 2017, net cash used in investing activities consisted of the issuance of commercial loans of approximately $20,600,000, offset by collection of our commercial loans of $14,113,000.

 

For the six months ended June 30, 2018, net cash provided by financing activities was approximately $4,687,000, compared to approximately $4,884,000 for the six months ended June 30, 2017. Net cash provided by financing activities for the six months ended June 30, 2018 reflects the net proceeds from the Webster Credit Line of approximately $3,085,000, the net proceeds from short-term loans from our Chief Executive Officer and a third party of $3,430,000, and the proceeds from the exercise of warrants of approximately $49,000, offset by the dividend payment of approximately $1,865,000 and capital raising costs of approximately $12,000 relating to our public offering, as described below. Net cash provided by financing activities for the six months ended June 30, 2017 reflects the proceeds from the Webster Credit Line of approximately $6,683,000, offset by the dividend payment of approximately $1,627,000 and the purchase of treasury shares of approximately $172,000.

 

On February 27, 2015, we entered into the Webster Credit Line with Webster pursuant to which we could initially borrow up to $14,000,000 against assignments of mortgages and other collateral. The Webster Credit Line was initially in effect until February 27, 2018. Until July 7, 2017, the Webster Credit Line provided for an interest rate of either LIBOR plus 4.75% or the base commercial lending rate of Webster plus 3.25% as chosen by us for each drawdown. The Webster Credit Line contains various covenants and restrictions, including limiting the amount that we can borrow relative to the value of the underlying collateral, maintaining various financial ratios and limitations on the terms of loans we make to our customers. In addition, the Webster Credit Line also contains a cross default provision which will deem any default under any indebtedness owed by us or our subsidiary, MBC Funding II, as a default under the credit line. Mr. Assaf Ran, our Chief Executive Officer, had personally guaranteed all of our obligations to Webster.

 

Effective July 7, 2017, we entered into an amendment of the Webster Credit Line (the “Amendment”). In conjunction with the execution of the Amendment, we also entered into an Amended Note and Fee Letter, each dated July 7, 2017, with Webster. Pursuant to the terms of the Amendment, the Webster Credit Line was increased by $1 million to $15 million in the aggregate, with an option, at the discretion of Webster, to increase the Webster Credit Line to $20 million in the aggregate. The term of the Webster Credit Line was extended to February 28, 2021, unless sooner terminated, and contains a provision that permits a Company option for a further extension of the Webster Credit Line until February 28, 2022, subject to Webster’s consent. Pursuant to the terms of the Amendment, the terms of the personal guaranty provided by Mr. Ran were amended such that the potential sums owed under Mr. Ran’s personal guaranty will not exceed the sum of $500,000 plus any costs relating to the enforcement of the personal guaranty.

 

In addition, the interest rates relating to the Webster Credit Line were amended such that the interest rates equaled (i) LIBOR plus 3.75% plus a 0.5% agency fee or (ii) a Base Rate (as defined in the Webster Credit Line) plus 2.25% plus a 0.5% agency fee, as chosen by the Company for each drawdown. Finally, the Amendment provided that the Company shall not permit mortgage loans that are outstanding more than 24 months after their origination date to comprise more than 17.5% of their total portfolio of mortgage loans at any time. Pursuant to the terms of the Fee Letter, the Company agreed to pay Webster an agency fee equal to 0.5% per annum on the actual principal amount of advances outstanding during any month, as well as a $15,000 syndication fee.

 

On August 8, 2017, we entered into an amendment and restatement of the Webster Credit Line (the “Amended Credit Agreement”) with Webster and Flushing Bank (“Flushing”). In conjunction with the execution of the Amended Credit Agreement, we also entered into a note with Flushing (the “Flushing Note”) in the principal aggregate amount of $5 million and an amended fee letter with Webster, each dated August 8, 2017. Pursuant to the terms of the Amended Credit Agreement, the Company’s existing Webster Credit Line was amended to include Flushing as an additional lender, as well as increased the funds available under the original Webster Credit Line by $5 million, to $20 million in the aggregate. The Amended Credit Agreement also incorporated and restated previously reported amendments. In addition, Mr. Ran executed an Amended and Restated Guaranty, which was restated to include previously reported amendments. Finally, the Company executed the Amended Fee Letter which incorporated previously reported amendments.

 

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We were in compliance with all covenants of the Amended Credit Agreement as of June 30, 2018. At June 30, 2018, the outstanding amount under the Amended Credit Agreement was $20,000,000. The interest rate on the amount outstanding fluctuates daily. The rate, including a 0.5% Agency Fee, for June 30, 2018 was 6.3435%.

 

Effective July 11, 2018, we entered into a Waiver and Amendment No. 1 to the Amended Credit Agreement (“Amendment II”) with Webster, Flushing and Mr. Ran, as guarantor. In conjunction with the execution of Amendment II, we also entered into an Amended and Restated Revolving Credit Note in the principal aggregate amount of $10,000,000 with Flushing (the “Amended Flushing Note”) and a Second Amended and Restated Fee Letter with Webster and Flushing, each dated July 11, 2018.

 

Pursuant to the terms of Amendment II, the Company’s existing Webster Credit Line was further increased by $5 million to $25 million in the aggregate. In addition, the interest rates relating to Webster Credit Line were amended such that the interest rates now equal (i) LIBOR plus a premium, which rate aggregated approximately 6% as of July 11, 2018, or (ii) a Base Rate (as defined in the Amended Credit Agreement) plus 2.25% plus a 0.5% agency fee, as chosen by the Company for each drawdown. Amendment II also permits the Company to repurchase, redeem or otherwise retire its equity securities in an amount not to exceed ten percent of our annual net income from the prior fiscal year.

 

During the second quarter of 2018, Mr. Ran, and entities he controls, made several short term loans to the Company in the aggregate amount of approximately $2,700,000, at an interest rate of 6% per annum. Two of the loans in the aggregate amount of approximately $311,000 were repaid in full in May 2018. The remaining loans, in the aggregate amount of approximately $2,400,000 were repaid in full as of July 11, 2018. The Company also received a short-term loan from a third party lender in the amount of $1,000,000 at the rate of 12% per annum, and such short term loan was repaid in full as of July 12, 2018. The aggregate interest expense for these loans was approximately $19,000, of which approximately $9,000 was paid to Mr. Ran and entities he controls.

 

On July 24, 2018, the Company completed a public offering of 1,428,572 of its common shares at a public offering price of $7.00 per share (the “Offering”). The gross proceeds raised by the Company from the Offering were $10,000,004 before deducting underwriting discounts and commissions and other estimated offering expenses. The total net proceeds from the Offering were approximately $9,100,000. The Company has granted the underwriters a 45-day option to purchase up to 214,286 additional common shares to cover over-allotments, if any.

 

We anticipate that our current cash balances, the proceeds of the Offering, and the Amended Credit Agreement, as described above, together with our cash flows from operations will be sufficient to fund our operations for the next 12 months. In addition, from time to time, we receive short term unsecured loans from our executive officers, such as the loans we received from Mr. Ran during the first and second quarters of 2018, in order to provide us with the flexibility necessary to maintain a steady deployment of capital. However, we expect our working capital requirements to increase over the next 12 months as we continue to strive for growth.

 

Off-Balance Sheet Arrangements

 

We have not entered into any off-balance sheet transactions, arrangements or other relationships with unconsolidated entities or other persons that are likely to affect liquidity or the availability of our requirements for capital resources.

 

Changes to Critical Accounting Policies and Estimates

 

Our critical accounting policies and estimates are set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

 

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

Item 4. CONTROLS AND PROCEDURES

 

(a)Evaluation and Disclosure Controls and Procedures

 

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2018 (the “Evaluation Date”). Based upon that evaluation, the chief executive officer and the chief financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) are recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) are accumulated and communicated to our management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

(b)Changes in Internal Control Over Financial Reporting

 

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the fiscal quarter ended June 30, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II OTHER INFORMATION

 

Item 6. EXHIBITS

 

Exhibit No.   Description
10.1   Waiver and Amendment No. 1 to Amended and Restated Credit and Security Agreement, effective July 11, 2018, among Manhattan Bridge Capital, Inc., Webster Business Credit Corporation, Flushing Bank and Assaf Ran
     
10.2   Amended and Restated Revolving Credit Note, effective July 11, 2018, between Manhattan Bridge Capital, Inc. and Flushing Bank
     
31.1   Chief Executive Officer Certification under Rule 13a-14
     
31.2   Chief Financial Officer Certification under Rule 13a-14
     
32.1*   Chief Executive Officer Certification pursuant to 18 U.S.C. section 1350
     
32.2*   Chief Financial Officer Certification pursuant to 18 U.S.C. section 1350
     
101.INS   XBRL Instance Document
     
101.CAL   XBRL Taxonomy Extension Schema Document
     
101.SCH   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 Document

 

 

* Furnished, not filed, in accordance with item 601(32)(ii) of Regulation S-K.

 

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SIGNATURES

 

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.

 

  Manhattan Bridge Capital, Inc. (Registrant)
     
Date: July 27, 2018 By: /s/ Assaf Ran
    Assaf Ran, President and Chief Executive Officer
    (Principal Executive Officer)
     
Date: July 27, 2018 By: /s/ Vanessa Kao
    Vanessa Kao, Chief Financial Officer
    (Principal Financial and Accounting Officer)

 

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WAIVER AND AMENDMENT NO. 1

 

TO

 

AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

 

THIS WAIVER AND AMENDMENT NO. 1 (this “Amendment”) is entered into as of July 11, 2018, by and among MANHATTAN BRIDGE CAPITAL, INC., a New York corporation (“Borrower”; and collectively with any Person who is or hereafter becomes a party to the Credit Agreement (as defined below) as a borrower or a guarantor, each a “Loan Party” and collectively, the “Loan Parties”), the financial institutions who are or hereafter become parties to the Credit Agreement (as defined below) as lenders (collectively, the “Lenders” and each individually a “Lender”) and WEBSTER BUSINESS CREDIT CORPORATION (“WBCC”), individually, as a Lender hereunder and as agent for itself and each other Lender (WBCC, acting in such agency capacity, the “Agent”).

 

BACKGROUND

 

Loan Parties, Lenders and Agent are parties to an Amended and Restated Credit and Security Agreement dated as of August 8, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) pursuant to which Agent and Lenders provide Loan Parties with certain financial accommodations.

 

Loan Parties have requested that Agent and Lenders make certain amendments to the Credit Agreement and waive certain Events of Default that have occurred, and Agent and Lenders are willing to do so on the terms and conditions hereafter set forth.

 

NOW, THEREFORE, in consideration of any loan or advance or grant of credit heretofore or hereafter made to or for the account of each Loan Party by Agent and Lenders, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1. Definitions. All capitalized terms not otherwise defined herein shall have the meanings given to them in the Credit Agreement.

 

 1 

 

 

2. Amendment to Credit Agreement. Subject to satisfaction of the conditions precedent set forth in Section 4 below, the Credit Agreement is hereby amended as follows:

 

(a) Section 7.7 of the Credit Agreement is hereby amended and restated as follows:

 

“7.7 Dividends. Declare, pay or make any dividend or distribution on any shares of Equity Interests of any Loan Party (other than dividends or distributions payable in its Equity Interests, or split-ups or reclassifications of its Equity Interests) or apply any of its funds, property or assets to the purchase, redemption or other retirement of any Equity Interests, or of any options to purchase or acquire any Equity Interests of any Loan Party; provided, however, so long as there does not exist a Default or Event of Default, or a Default or Event of Default would not result therefrom, (a) any Subsidiary of a Borrower may pay dividends or make other distributions to such Borrower, (b) Borrower may make a one-time distribution in connection a Permitted Bond Subsidiary Transaction, (c) Borrower may make cash distributions to its equity holders on a quarterly basis, so long as (i) Borrower’s average Undrawn Availability for the immediately preceding ninety (90) days is not less than $500,000, and (ii) after giving effect to such distribution and any Revolving Loans funded in connection therewith, Borrower shall have a minimum pro forma Undrawn Availability as of the date of consummation of such distribution and on an average basis for the ninety (90) days immediately thereafter of not less than $500,000, and (d) in a given Fiscal Year, Borrower may apply funds in an amount not to exceed ten percent (10%) of its annual net income for the prior Fiscal Year to repurchase, redeem or otherwise retire its Equity Interests (“Permitted Equity Interests Repurchase”).

 

(b) Section 8.1 of the Credit Agreement is hereby amended by amending and restating the following definition in its entirety to read as follows:

 

Fixed Charge Coverage Ratio” shall mean and include, with respect to any applicable Test Period of Borrower on a consolidated basis, the ratio of (a) EBITDA for such Test Period, minus any Unfinanced Capital Expenditures made during such period, minus distributions, dividends and any Permitted Equity Interests Repurchase, minus all charges against income of Borrower on a consolidated basis for such period for federal, state and local income taxes actually paid during such period to (b) Fixed Charges for such Test Period.

 

(c) Annex One of the Credit Agreement is hereby amended by adding the following definitions in their appropriate order to read as follows:

 

Amendment No. 1” shall mean Waiver and Amendment No. 1, dated as of July 11, 2018, to this Agreement.

 

Amendment No. 1 Effective Date” shall have the meaning set forth in Section 4 of Amendment No. 1.

 

Permitted Equity Interests Repurchase” shall have the meaning given such term in Section 7.7.

 

(d) Annex One of the Credit Agreement is hereby amended by amending and restating the following definitions in their entirety to read as follows:

 

Applicable Margin” shall mean, from and after the Amendment No. 1 Effective Date, with respect to any type of Advance referenced below, the applicable percentage specified below:

 

Advances  Base
Rate Loans
  

Daily LIBOR Rate

Loans and LIBOR

Rate Loans

 
Revolving Advances   2.25%   3.50%

 

 2 

 

 

Maximum Revolving Amount” shall mean the maximum amount of Revolving Advances and Letters of Credit which may be outstanding at any one time, determined without regard to the Borrowing Base, which as of the Amendment No. 1 Effective Date, equals Twenty Five Million Dollars ($25,000,000.00).

 

(e) Schedule 1.1 of the Credit Agreement setting forth each Lender’s Revolving Commitment and Revolving Commitment Percentage is hereby deleted in its entirety and replaced by “Schedule 1.1” attached hereto. All references to “Schedule 1.1” in the Credit Agreement shall be deemed to mean the Credit Agreement as amended hereby and as may be further amended from time to time.

 

3. Waiver. Subject to satisfaction of the conditions precedent set forth in Section 4 below, Agent and Lenders hereby waive any Events of Default which have occurred as a result of Borrower’s repurchase, redemption or other retirement of its Equity Interests prior to the date of this Amendment in contravention of Section 7.7 of the Credit Agreement (as in effect prior to this Amendment).

 

4. Conditions of Effectiveness. This Amendment shall become effective (such date, the “Amendment No. 1 Effective Date”) when Agent shall have received (i) a copy of this Amendment executed by Agent, Required Lenders, each Loan Party and Personal Guarantor (defined below) with one original executed copy of this Amendment to be promptly delivered by Loan Parties to Agent; (ii) an executed copy of the Amended and Restated Revolving Credit Note, dated of even date herewith, in the principal amount of $10,000,000 issued by Borrower to the order of Flushing Bank, with one original executed copy to be promptly delivered by Borrower to Agent; (iii) an executed copy of the Second Amended and Restated Fee Letter, dated of even date herewith, with one original executed copy to be promptly delivered by Borrower to Agent; and (iv) a certificate of the Secretary (or Assistant Secretary) of each Loan Party, dated on or around the Amendment No. 1 Effective Date, in form and substance acceptable to Agent, certifying as to (a) the incumbency and signature of the officers (or other representatives) of each Loan Party executing this Amendment, (b) the authorizations by the board of directors (or other governing body) of such Loan Party to such officers or other representatives to enter into and carry out such transactions as are contemplated pursuant to this Amendment; and including therewith copies of the Organic Documents of such Loan Party as in effect on the Amendment No. 1 Effective Date and good standing certificates for each Loan Party dated not more than thirty (30) days prior to the Amendment No. 1 Effective Date, issued by the secretary of state or other appropriate official of each Loan Party’s jurisdiction of organization and each jurisdiction where the conduct of each Loan Party’s business activities or the ownership of its properties necessitates qualification.

 

 3 

 

 

5. Representations and Warranties. Each Loan Party hereby represents and warrants as follows:

 

(a) This Amendment and the Credit Agreement, as amended hereby, constitute legal, valid and binding obligations of each Loan Party and are enforceable against each Loan Party in accordance with their respective terms.

 

(b) Upon the effectiveness of this Amendment, each Loan Party hereby reaffirms all covenants, representations and warranties made in the Credit Agreement to the extent the same are not amended hereby and agree that all such covenants, representations and warranties shall be deemed to have been remade as of the effective date of this Amendment.

 

(c) Except as set forth in Section 3 hereof, no Event of Default or Default has occurred and is continuing or would exist after giving effect to this Amendment.

 

(d) No Loan Party has any defense, counterclaim or offset with respect to the Credit Agreement.

 

6. Effect on the Credit Agreement.

 

(a) Upon the effectiveness of Section 2 hereof, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of like import shall mean and be a reference to the Credit Agreement as amended hereby.

 

(b) Except as specifically amended herein, the Credit Agreement, and all other documents, instruments and agreements executed and/or delivered in connection therewith, shall remain in full force and effect, and are hereby ratified and confirmed.

 

(c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided in Section 3, operate as a waiver of any right, power or remedy of Agent or any Lender, nor constitute a waiver of any provision of the Credit Agreement, or any other documents, instruments or agreements executed and/or delivered under or in connection therewith.

 

 4 

 

 

7. Release. Each of the Loan Parties on behalf of itself and its successors, assigns, and other legal representatives, and Personal Guarantor on behalf of himself and his successors, assigns, and other legal representatives, hereby, (a) jointly and severally, absolutely, unconditionally and irrevocably releases, remises and forever discharges Agent and Lenders, and each of their present and former shareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees, agents and other representatives and their respective successors and assigns (Agent and Lenders and all such other parties being hereinafter referred to collectively as the “Releasees” and individually as a “Releasee”), of and from all demands, actions, causes of action, suits, covenants, contracts, controversies, agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other claims, counterclaims, defenses, rights of set-off, demands and liabilities whatsoever (individually, a “Claim” and collectively, “Claims”) of every name and nature, known or unknown, suspected or unsuspected, both at law and in equity, whether liquidated or unliquidated, matured or unmatured, asserted or unasserted, fixed or contingent, foreseen or unforeseen and anticipated or unanticipated, which each of the Loan Parties and Personal Guarantor, or any of their respective successors, assigns, or other legal representatives and their successors and assigns may now or hereafter own, hold, have or claim to have against the Releasees or any of them for, upon, or by reason of any nature, cause or thing whatsoever which arises at any time on or prior to the day and date of this Amendment, in relation to, or in any way in connection with the Credit Agreement, as amended and supplemented through the date hereof, the Personal Guaranty, this Amendment, the Other Documents; (b) understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release; (c) agrees that no fact, event, circumstance, evidence or transaction which could now be asserted or which may hereafter be discovered shall affect in any manner the final and unconditional nature of the release set forth above and nothing contained herein shall constitute an admission of liability with respect to any Claim on the part of any Releasee; and (d) jointly and severally, absolutely, unconditionally and irrevocably, covenants and agrees with each Releasee that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Releasee on the basis of any Claim released, remised and discharged by any of the Loan Parties or Personal Guarantor pursuant to this Paragraph 7. If any Loan Party or Personal Guarantor violates the foregoing covenant, Loan Parties and Personal Guarantor, jointly and severally, agree to pay, in addition to such other damages as any Releasee may sustain as a result of such violation, all attorneys’ fees and costs incurred by any Releasee as a result of such violation.

 

8. Governing Law. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and shall be governed by and construed in accordance with the laws of the State of New York.

 

9. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

 

10. Counterparts; Facsimile. This Amendment may be executed by the parties hereto in one or more counterparts, each of which shall be deemed an original and all of which when taken together shall constitute one and the same agreement. Any signature delivered by a party by .pdf or facsimile transmission shall be deemed to be an original signature hereto.

 

11. Personal Guarantor. Assaf Ran (the “Personal Guarantor”) hereby ratifies and confirms that all of the terms and conditions, representations and covenants contained in the Amended and Restated Guaranty Agreement (as amended, the “Guaranty”), dated as of August 8, 2017, made by Personal Guarantor in favor of Agent remain in full force and effect after giving effect to the execution and effectiveness of this Agreement and the increase of the Maximum Revolving Amount pursuant hereto, and Personal Guarantor hereby reaffirms that all of the Obligations of Loan Parties under the Credit Agreement as amended by this Agreement (including, without limitation, obligations relating to the increased Maximum Revolving Amount) are irrevocably guaranteed by such Personal Guarantor in accordance with the terms and conditions of the Guaranty.

 

 5 

 

 

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first written above.

 

  “BORROWER”
     
  MANHATTAN BRIDGE CAPITAL, INC.
     
  By: /s/ Assaf Ran
  Name:  
  Title:  
                    
  “PERSONAL GUARANTOR”
     
  /s/ Assaf Ran
  Assaf Ran

 

Signature Page to Waiver and Amendment No. 1

 

   

 

 


  WEBSTER BUSINESS CREDIT CORPORATION, as
  Agent and a Lender
                      
  By: /s/ Leo Goldstein
  Name: Leo Goldstein
  Title: Vice President
     
  FLUSHING BANK, as a Lender
     
  By: /s/ Lisa Archinow
  Name: Lisa Archinow
  Title: Vice President

 

Signature Page to Waiver and Amendment No. 1

 

   

 

 

Schedule 1.1

 

Lender Party  Revolving Commitment   Revolving Commitment Percentage 

WBCC
Address:
360 Lexington Avenue

New York, New York 10017

Attention: Account Executive –

Manhattan Bridge Capital, Inc.

  $15,000,000    60.0000%

Flushing Bank
Address:
Flushing Bank

220 RXR Plaza

Uniondale, NY 11556

Attn: Lisa Archinow, Vice President

  $10,000,000    40.0000%
Total:  $25,000,000    100%

 

Schedule 1.1 to Waiver and Amendment No. 1

 

   

 

 

 

AMENDED AND RESTATED

REVOLVING CREDIT NOTE

 

$10,000,000 July 11, 2018
  New York, New York

 

FOR VALUE RECEIVED, the undersigned (“Borrower”), promises to pay to the order of FLUSHING BANK, a New York corporation (“Payee”; Payee, together with any other holder hereof, sometimes referred to herein as the “Holder”), at the office of Agent (defined below) located at 360 Lexington Avenue, New York, New York 10017 or at such other place as Payee may from time to time designate to Borrower in writing, the principal sum of TEN MILLION AND 00/100 DOLLARS ($10,000,000), or such lesser amount as may be outstanding under Revolving Advances made pursuant to the Credit Agreement (defined below), at such time or times as are provided in the Credit Agreement (defined below) and, in any event, on the last day of the Term, subject to acceleration upon the occurrence of an Event of Default under the Credit Agreement or earlier termination of the Credit Agreement pursuant to the terms thereof, together with interest on the unpaid principal balance hereof from the date hereof until the payment in full of this Amended and Restated Revolving Credit Note (this “Note”) at the rate specified with respect to the Revolving Advances in the Credit Agreement, payable at the times and in the manner provided in the Credit Agreement.

 

It is contemplated that the principal sum evidenced hereby may be reduced from time to time as a result of the repayment of Revolving Advances and that additional Revolving Advances may be made from time to time but not to exceed the Maximum Revolving Amount, as provided in the Credit Agreement.

 

This Note is one of the “Revolving Credit Notes” issued to evidence the Revolving Advances being made available by Payee to Borrower pursuant to the provisions of the Amended and Restated Credit and Security Agreement, dated as August 8, 2017 (herein, as at any time amended, modified or supplemented, called the “Credit Agreement”; capitalized terms used herein and not defined herein having the meanings assigned to them in the Credit Agreement), among the Borrower, the other Loan Parties identified therein, the financial institutions identified therein (each a “Lender” and collectively, the “Lenders”) and Webster Business Credit Corporation (“WBCC”) as a Lender and agent for all other Lenders (WBCC, in such capacity, “Agent”) to which reference is hereby made for a statement of the terms, conditions and covenants under which the indebtedness evidenced hereby was made and is to be repaid, including, but not limited to, those related to voluntary or mandatory prepayment of the indebtedness represented hereby, to the maturity of the indebtedness represented hereby upon the termination of the Credit Agreement and to the interest rate payable hereunder. In no event, however, shall interest exceed the maximum interest rate permitted by law. Upon and after the occurrence of an Event of Default, and during the continuation thereof, interest shall be payable at the Default Rate.

 

Payment of this Note is secured by the Collateral and Holder is entitled to the benefit of the Credit Agreement and any Other Document at any time delivered in connection with the foregoing to secure the Obligations, and is subject to all of the agreements, terms and conditions therein contained.

 

   
 

 

If an Event of Default under Sections 11.7, 11.8 or 11.9 of the Credit Agreement shall occur, then this Note shall immediately become due and payable, without notice, together with reasonable attorneys’ fees if the collection hereof is placed in the hands of an attorney to obtain or enforce payment hereof. If any other Event of Default shall occur under the Credit Agreement or any of the Other Documents, which is not cured within any applicable grace period, then this Note may, as provided in the Credit Agreement, be declared to be immediately due and payable, without notice, together with reasonable attorneys’ fees, if the collection hereof is placed in the hands of an attorney to obtain or enforce payment hereof.

 

This Note amends and restates that certain Revolving Credit Note dated August 8, 2017, in the original principal amount of $5,000,000, made by Borrower in favor of Payee, and is given in substitution and replacement therefor (but not in satisfaction thereof).

 

PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.

 

Borrower hereby waives presentment, demand for payment, protest and notice of protest, notice of dishonor and all other notices in connection with this Note.

 

 2 
 

 

WITNESS THE DUE EXECUTION HEREOF BY THE DULY AUTHORIZED OFFICER OF THE UNDERSIGNED AS OF THE DATE FIRST ABOVE WRITTEN.

 

  “BORROWER”
     
  MANHATTAN BRIDGE CAPITAL, INC.
     
  By: /s/ Assaf Ran                            
  Name:  Assaf Ran
  Title: CEO

 

[Signature Page to A&R Revolving Credit Note]

 

 3 
 

 

 

 

EXHIBIT 31.1

 

CERTIFICATION

 

I, Assaf Ran, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Manhattan Bridge Capital, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of 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 evaluation; 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 of internal control over financial reporting, to the registrant’s auditors and the audit committee of the 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: July 27, 2018

 

  /s/ Assaf Ran
  Assaf Ran
  President and Chief Executive Officer
  (Principal Executive Officer)

 

 

 

 

EXHIBIT 31.2

 

CERTIFICATION

 

I, Vanessa Kao, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Manhattan Bridge Capital, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of 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 evaluation; 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 of internal control over financial reporting, to the registrant’s auditors and the audit committee of the 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: July 27, 2018

 

  /s/ Vanessa Kao
  Vanessa Kao
  Chief Financial Officer
  (Principal Financial and Accounting Officer)

 

 

 

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of Manhattan Bridge Capital, Inc. (the “Company”) for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Assaf Ran, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, that, to my knowledge:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: July 27, 2018

 

/s/ Assaf Ran  
Assaf Ran  
President and Chief Executive Officer  
(Principal Executive Officer)  

 

 

 

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of Manhattan Bridge Capital, Inc. (the “Company”) for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Vanessa Kao, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, that, to my knowledge:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: July 27, 2018

 

/s/ Vanessa Kao  
Vanessa Kao  
Chief Financial Officer  
(Principal Financial and Accounting Officer)  

 

 

 

v3.10.0.1
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2018
Jul. 27, 2018
Document And Entity Information    
Entity Registrant Name MANHATTAN BRIDGE CAPITAL, INC  
Entity Central Index Key 0001080340  
Document Type 10-Q  
Document Period End Date Jun. 30, 2018  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   9,546,387
Trading Symbol LOAN  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2018  
v3.10.0.1
Consolidated Balance Sheets - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Assets    
Loans receivable $ 51,846,500 $ 45,124,000
Interest receivable on loans 570,805 535,045
Cash and cash equivalents 129,490 136,441
Deferred financing costs 31,361 45,269
Other assets 142,064 55,941
Total assets 52,720,220 45,896,696
Liabilities:    
Line of credit 20,000,000 16,914,594
Short term loans - related party 2,430,000
Short term loan 1,000,000
Senior secured notes (net of deferred financing costs of $585,041 and $622,584) 5,414,959 5,377,416
Deferred origination fees 428,576 298,471
Accounts payable and accrued expenses 187,511 167,559
Dividends payable 891,983
Total liabilities 29,461,046 23,650,023
Commitments and contingencies
Stockholders' equity:    
Preferred shares - $.01 par value; 5,000,000 shares authorized; none issued
Common shares - $.001 par value; 25,000,000 shares authorized; 8,327,917 and 8,319,036 issued, respectively; 8,117,815 and 8,108,934 outstanding, respectively 8,328 8,319
Additional paid-in capital 23,222,769 23,167,511
Treasury stock, at cost - 210,102 shares (541,491) (541,491)
Retained earnings (accumulated deficit) 569,568 (387,666)
Total stockholders' equity 23,259,174 22,246,673
Total liabilities and stockholders' equity $ 52,720,220 $ 45,896,696
v3.10.0.1
Consolidated Balance Sheets (Parenthetical) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Statement of Financial Position [Abstract]    
Debt issuance costs, net (deferred financing costs) $ 585,041 $ 622,584
Preferred stock, par value $ .01 $ .01
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, shares issued
Common stock, par value $ .001 $ .001
Common stock, shares authorized 25,000,000 25,000,000
Common stock, shares issued 8,327,917 8,319,036
Common stock, shares outstanding 8,117,815 8,108,934
Treasury stock, shares 210,102 210,102
v3.10.0.1
Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Income Statement [Abstract]        
Interest income from loans $ 1,423,352 $ 1,188,567 $ 2,852,600 $ 2,294,748
Origination fees 244,348 212,334 479,574 435,759
Total Revenue 1,667,700 1,400,901 3,332,174 2,730,507
Operating costs and expenses:        
Interest and amortization of debt service costs 413,074 277,651 810,778 509,233
Referral fees 83 841 416 2,201
General and administrative expenses 305,155 270,471 590,674 575,986
Total operating costs and expenses 718,312 548,963 1,401,868 1,087,420
Income from operations 949,388 851,938 1,930,306 1,643,087
Loss on write-down of investment in privately held company (10,000) (10,000)
Income before income tax expense 949,388 841,938 1,930,306 1,633,087
Income tax expense (1,872) (1,872)
Net income $ 949,388 $ 840,066 $ 1,930,306 $ 1,631,215
Basic and diluted net income per common share outstanding:        
--Basic $ 0.12 $ 0.10 $ 0.24 $ 0.20
--Diluted $ 0.12 $ 0.10 $ 0.24 $ 0.20
Weighted average number of common shares outstanding:        
--Basic 8,111,276 8,119,052 8,110,112 8,127,000
--Diluted 8,119,984 8,131,752 8,117,817 8,142,157
v3.10.0.1
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Cash flows from operating activities:    
Net Income $ 1,930,306 $ 1,631,215
Adjustments to reconcile net income to net cash provided by operating activities -    
Amortization of deferred financing costs 51,451 61,625
Depreciation 2,274 2,186
Non cash compensation expense 6,532 6,532
Loss on write-down of investment in privately held company 10,000
Changes in operating assets and liabilities:    
Interest receivable on loans (35,760) (110,599)
Other assets (76,097) (35,109)
Accounts payable and accrued expenses 19,952 (4,053)
Deferred origination fees 130,105 46,112
Other liabilities 25,000
Net cash provided by operating activities 2,028,763 1,632,909
Cash flows from investing activities:    
Issuance of short term loans (27,792,500) (20,599,500)
Collections received from loans 21,070,000 14,113,000
Purchase of fixed assets (1,666)
Net cash used in investing activities (6,722,500) (6,488,166)
Cash flows from financing activities:    
Proceeds from line of credit, net 3,085,406 6,683,151
Proceeds from short-term loans, net 3,430,000
Dividend paid (1,865,055) (1,627,007)
Purchase of treasury shares (172,156)
Capital raising costs (12,300)
Proceeds from exercise of warrants 48,735
Net cash provided by financing activities 4,686,786 4,883,988
Net (decrease) increase in cash and cash equivalents (6,951) 28,731
Cash and cash equivalents, beginning of year 136,441 96,299
Cash and cash equivalents, end of period 129,490 125,030
Supplemental Cash Flow Information:    
Taxes paid during the period 1,872
Interest paid during the period $ 733,215 $ 415,273
v3.10.0.1
The Company
6 Months Ended
Jun. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
The Company

1. THE COMPANY

 

The accompanying unaudited consolidated financial statements of Manhattan Bridge Capital, Inc. (“MBC”), a New York corporation founded in 1989, and its consolidated subsidiary, MBC Funding II Corp. (“MBC Funding II”), a New York corporation formed in December 2015 (collectively referred to herein as the “Company”) have been prepared by the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The accompanying unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2017 and the notes thereto included in the Company’s Annual Report on Form 10-K. Results of consolidated operations for the interim period are not necessarily indicative of the operating results to be attained in the entire fiscal year.

 

The preparation of consolidated 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 amount of revenues and expenses during the reporting period. Actual amounts could differ from those estimates.

 

The consolidated financial statements include the accounts of MBC and MBC Funding II. All significant intercompany balances and transactions have been eliminated in consolidation.

 

The Company offers short-term, secured, non–banking loans to real estate investors (also known as hard money) to fund their acquisition, renovation, rehabilitation or development of residential or commercial properties located around the New York metropolitan area.

 

Interest income from commercial loans is recognized, as earned, over the loan period.

 

Origination fee revenue on commercial loans is amortized over the term of the respective note.

 

The Company presents deferred financing costs, excluding those incurred in connection with its line of credit, in the balance sheet as a direct reduction from the related debt liability rather than an asset, in accordance with Accounting Standards Update (“ASU”) 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”. These costs, incurred in connection with the issuance of the Company’s senior secured notes, are being amortized over ten years, using the straight-line method, as the difference between use of the effective interest method is not material.

 

Deferred financing costs in connection with the Company’s Credit and Security Agreement with Webster Business Credit Corporation (“Webster”), as amended, as well as the Amended and Restated Credit and Security Agreement, as amended, with Webster and Flushing Bank (“Flushing”), as discussed in Note 6, are presented as an asset in the balance sheet, in accordance with ASU 2015-15, “Interest – Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated With Line of Credit Arrangements”. These costs are being amortized over the term of the respective agreement, using the straight-line method.

v3.10.0.1
Recent Technical Accounting Pronouncements
6 Months Ended
Jun. 30, 2018
Accounting Changes and Error Corrections [Abstract]  
Recent Technical Accounting Pronouncements

2. RECENT TECHNICAL ACCOUNTING PRONOUNCEMENTS

 

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers,” which is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2017. This ASU outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry specific guidance. Several ASUs expanding and clarifying the initial guidance issued in ASU 2014-09 have been released since May 2014. Exclusions from the scope of this guidance include revenue resulting from loans, investment securities (available-for-sale and trading), investments in unconsolidated entities and leases. The Company adopted the ASU effective January 1, 2018. The Company evaluated the applicability of this guidance, considering the scope exceptions, and concluded that the adoption does not have an effect on its consolidated financial statements, primarily due to the new guidance not applying to revenue resulting from loans and lease contracts.

 

In May 2017, the FASB issued ASU 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.” This ASU provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under Accounting Standards Codification (“ASC”) 718, “Compensation –Stock Compensation.” Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the change in terms or conditions. For all entities, the standard is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

 

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” This ASU expands the activities that qualify for hedge accounting and simplifies the rules for reporting hedging transactions. For public companies that file with the Securities Exchange Commission (“SEC”), the standard is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

 

In February 2018, the FASB issued ASU 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This ASU amends ASC 220, “Income Statement – Reporting Comprehensive Income,” to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. In addition, under this ASU, an entity will be required to provide certain disclosures regarding stranded tax effects. For all entities, the standard is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

 

In June 2018, the FASB issued ASU 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” This ASU supersedes ASC 505-50, “Equity Based Payment to Non-Employees,” (“ASC 505-50”) and expands the scope of ASC 718, “Compensation – Stock Compensation,” to include all share-based payment arrangements related to the acquisition of goods and services from both nonemployees and employees. For public companies that file with the SEC, the standard is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than an entity’s adoption date of ASC 606, “Revenue from Contracts with Customers.” The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

 

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the Company’s consolidated financial statements.

v3.10.0.1
Commercial Loans
6 Months Ended
Jun. 30, 2018
Debt Disclosure [Abstract]  
Commercial Loans

3. COMMERCIAL LOANS

 

Loans Receivable

 

The Company offers short-term secured non–banking loans to real estate investors (also known as hard money) to fund their acquisition and construction of properties located around the New York Metropolitan area. The loans are principally secured by collateral consisting of first mortgage positions on real estate and, generally, accompanied by personal guarantees from the principals of the borrowers. The loans are generally for a term of one year. The loans are initially recorded, and carried thereafter, in the financial statements at cost. Most of the loans provide for receipt of interest only during the term of the loan and a balloon payment at the end of the term.

 

At June 30, 2018, the Company was committed to $6,832,500 in construction loans that can be drawn by the borrowers when certain conditions are met.

 

At June 30, 2018, no one entity has loans outstanding representing more than 10% of the total balance of the loans outstanding.

 

The Company generally grants loans for a term of one year. When a performing loan reaches its maturity and the borrower requests an extension, the Company may extend the term of the loan beyond one year. Prior to granting an extension of any loan, the Company reevaluates the underlying collateral.

 

Credit Risk

 

Credit risk profile based on loan activity as of June 30, 2018 and December 31, 2017:

 

Performing loans  

Developers-

Residential

   

Developers-

Commercial

   

Developers-

Mixed Used

    Total outstanding loans  
June 30, 2018   $ 45,861,500     $ 3,160,000     $ 2,825,000     $ 51,846,500  
December 31, 2017   $ 41,739,000     $ 900,000     $ 2,485,000     $ 45,124,000  

 

At June 30, 2018, the Company’s loans receivable includes loans in the amount of $2,060,000 and $7,362,500 originally due in 2016 and 2017, respectively. In all instances the borrowers are currently paying their interest and, generally, the Company receives a fee in connection with the extension of the loans. Accordingly, at June 30, 2018, no loan impairments exist and there are no provisions for impairments of loans or recoveries thereof.

 

Subsequent to the balance sheet date, $1,725,000 of the loans receivable at June 30, 2018 were paid off.

v3.10.0.1
Earnings Per Share of Common Stock
6 Months Ended
Jun. 30, 2018
Basic and diluted net income per common share outstanding:  
Earnings Per Share of Common Stock

4. EARNINGS PER SHARE OF COMMON STOCK

 

Basic and diluted earnings per share are calculated in accordance with ASC 260, “Earnings Per Share”. Under ASC 260, basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased to include the potential dilution from the exercise of stock options and warrants for common shares using the treasury stock method. The numerator in calculating both basic and diluted earnings per common share for each period is the reported net income.

 

The denominator is based on the following weighted average number of common shares:

 

   

Three Months

Ended June 30,

   

Six Months

Ended June 30,

 
    2018     2017     2018     2017  
Basic     8,111,276       8,119,052       8,110,112       8,127,000  
Incremental shares for assumed exercise of options     8,708       12,700       7,705       15,157  
Diluted     8,119,984       8,131,752       8,117,817       8,142,157  

 

For the three and six month periods ended June 30, 2018, 46,054 and 47,057, stock options and warrants were not included in the diluted earnings per share calculation, respectively, because their effect would have been anti-dilutive.

 

For the three and six month periods ended June 30, 2017, 31,331 and 28,874, stock options and warrants were not included in the diluted earnings per share calculation, respectively, because their effect would have been anti-dilutive.

v3.10.0.1
Stock - Based Compensation
6 Months Ended
Jun. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock - Based Compensation

5. STOCK – BASED COMPENSATION

 

The Company measures and recognizes compensation awards for all stock option grants made to employees and directors, based on their fair value in accordance with ASC 718, “Compensation - Stock Compensation”, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. A key provision of this statement is to measure the cost of employee services received in exchange for an award of equity instruments (including stock options) based on the grant-date fair value of the award. The cost will be recognized over the service period during which an employee is required to provide service in exchange for the award (i.e., the requisite service period or vesting period). The Company accounts for equity instruments issued to non-employees in accordance with the provisions of ASC 718 and ASC 505-50. All transactions with non-employees, in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more appropriately measurable.

 

The exercise price of options granted under the Company’s stock option plan (the “Plan”) may not be less than the fair market value on the date of grant. Stock options under the Plan may be awarded to officers, key employees, consultants and non-employee directors of the Company. Generally, options outstanding vest over periods not exceeding four years and are exercisable for up to five years from the grant date.

 

Share based compensation expense recognized under ASC 718 for each of the six month periods ended June 30, 2018 and 2017 of $6,532 represents the amortization of the fair value of 1,000,000 restricted shares granted to the Company’s Chief Executive Officer on September 9, 2011 of $195,968, after adjusting for the effect on the fair value of the stock options related to this transaction. The fair value will be amortized over 15 years.

 

The following summarizes stock option activity for the six month period ended June 30, 2018:

 

    Shares    

Weighted Average Exercise

Price

   

Weighted Average Remaining Contractual Term (in

years)

   

Aggregate Intrinsic

Value

 
Outstanding at December 31, 2017     14,000     $ 2.23                  
Expired     (7,000 )     1.53                  
Outstanding at June 30, 2018
(all vested and exercisable)
    7,000     $ 2.92       1.00     $ 5,034  

 

On July 31, 2014, in connection with the Company’s public offering in July 2014, the Company issued warrants to purchase up to 87,719 common shares, with an exercise price of $3.5625 per common share, to the representative of the underwriters of the offering (the “July 2014 Representative Warrants”). These warrants are exercisable at any time, and from time to time, in whole or in part, commencing on July 28, 2015 and expire on July 28, 2019. The fair value of these warrants, using the Black-Scholes option pricing model, on the date of issuance was $42,224. At June 30, 2018, July 2014 Representative Warrants to purchase up to 4,000 common shares were outstanding.

 

On May 29, 2015, in connection with the Company’s public offering in May 2015, the Company issued warrants to purchase up to 50,750 common shares, with an exercise price of $5.4875 per common share, to the representative of the underwriters of the offering (the “May 2015 Representative Warrants”). These warrants are exercisable at any time, and from time to time, in whole or in part, commencing on May 22, 2016 and expire on May 22, 2020. The fair value of these warrants, using the Black-Scholes option pricing model, on the date of issuance was $54,928. At June 30, 2018, May 2015 Representative Warrants to purchase up to 10,150 common shares were outstanding.

 

On August 15, 2016, in connection with a public offering of the Company’s Common Stock, the Company issued warrants to purchase up to 33,612 common shares, with an exercise price of $7.4375 per common share, to the representative of the underwriters of the offering (the “August 2016 Representative Warrants”). The warrants are exercisable at any time, and from time to time, in whole or in part, commencing on August 9, 2017 and expire on August 9, 2021. The fair value of these warrants, using the Black-Scholes option pricing model, on the date of issuance was $47,020. At June 30, 2018, all of the August 2016 Representative Warrants were outstanding.

v3.10.0.1
Line of Credit and Loans
6 Months Ended
Jun. 30, 2018
Debt Disclosure [Abstract]  
Line of Credit and Loans

6. LINE OF CREDIT AND LOANS

 

Line of Credit

 

Currently, we have a $25 million credit line with Webster and Flushing. On February 27, 2015, the Company entered into a Credit and Security Agreement (the “Webster Credit Line”) with Webster pursuant to which it could borrow up to $14 million against assignments of mortgages and other collateral. The Webster Credit Line was initially in effect until February 27, 2018. The Webster Credit Line initially provided for an interest rate (until amended – as described below) of either LIBOR plus 4.75% or the base commercial lending rate of Webster plus 3.25% as chosen by the Company for each drawdown. The Webster Credit Line contains various covenants and restrictions including, among other covenants and restrictions, limiting the amount that the Company can borrow relative to the value of the underlying collateral, maintaining various financial ratios and limitations on the terms of loans the Company makes to its customers, limiting the Company’s ability to pay dividends under certain circumstances, and limiting the Company’s ability to repurchase its common shares, sell assets, engage in mergers or consolidations, grant liens, and enter into transactions with affiliates. In addition, the Webster Credit Line also contains a cross default provision which will deem any default under any indebtedness owed by us or our subsidiary, MBC Funding II, as a default under the credit line. Mr. Assaf Ran, the Company’s President and Chief Executive Officer, had personally guaranteed all of the Company’s obligations to Webster.

 

Effective July 7, 2017, the Company entered into an Amendment of the Webster Credit Line (the “Amendment”), with Webster. In conjunction with the execution of the Amendment, the Company also entered into an Amended and Restated Revolving Credit Note (the “Amended Note”), and Amendment No. 3 Fee Letter (the “Fee Letter”), each dated July 7, 2017, with Webster. Pursuant to the terms of the Amendment, the Webster Credit Line was increased by $1 million to $15 million in the aggregate, with an option, at the discretion of Webster, to increase the Webster Credit Line to $20 million in the aggregate. The term of the Webster Credit Line was extended to February 28, 2021, unless sooner terminated, and contains a provision that permits a Company option for a further extension of the Webster Credit Line until February 28, 2022, subject to Webster’s consent. Pursuant to the terms of the Amendment, the terms of the personal guaranty provided by Mr. Ran were amended such that the potential sums owed under Mr. Ran’s personal guaranty will not exceed the sum of $500,000 plus any costs relating to the enforcement of the personal guaranty.

 

In addition, the interest rates relating to the Webster Credit Line were amended such that the interest rates equaled (i) LIBOR plus 3.75% plus a 0.5% Agency Fee (as hereinafter defined) or (ii) a Base Rate (as defined in the Webster Credit Line) plus 2.25% plus a 0.5% Agency Fee, as chosen by the Company for each drawdown. Finally, the Amendment provided that the Company shall not permit mortgage loans that are outstanding more than 24 months after their origination date to comprise more than 17.5% of their total portfolio of mortgage loans at any time. Pursuant to the terms of the Fee Letter, the Company agreed to pay Webster an agency fee equal to 0.5% per annum (the “Agency Fee”) on the actual principal amount of advances outstanding during any month, as well as a $15,000 syndication fee.

 

On August 8, 2017, the Company entered into the Amended and Restated Credit Agreement (“Amended Credit Agreement”) with Webster and Flushing. In conjunction with the execution of the Amended Credit Agreement, the Company also entered into a Revolving Credit Note in the principal aggregate amount of $5 million with Flushing (the “Flushing Note”) and an Amended and Restated Fee Letter (the “Amended Fee Letter”) with Webster, each dated August 8, 2017. Pursuant to the terms of the Amended Credit Agreement, the Company’s existing Webster Credit Line was amended to include Flushing as an additional lender, as well as increased the funds available under the Webster Credit Line by $5 million, to $20 million in the aggregate. The Amended Credit Agreement also incorporated and restated previously reported amendments. In addition, Mr. Ran executed an Amended and Restated Guaranty, which was restated to include previously reported amendments. Finally, the Company executed the Amended Fee Letter which incorporated and restated previously reported amendments.

 

Total costs to establish the Webster Credit Line were approximately $144,000, and the total costs to amend the Webster Credit Line were approximately $43,000. These costs are being amortized over the term of the respective agreement, using the straight-line method. The amortization costs for the six months ended June 30, 2018 and 2017 were $13,908 and $24,083, respectively.

 

The Company was in compliance with all covenants of the Amended Credit Agreement as of June 30, 2018. At June 30, 2018, the outstanding amount under the Amended Credit Agreement was $20,000,000. The interest rate on the amount outstanding fluctuates daily. The rate, including a 0.5% Agency Fee, for June 30, 2018 was 6.3435%.

 

Effective July 11, 2018, the Company entered into a Waiver and Amendment No. 1 to the Amended Credit Agreement (“Amendment II”) with Webster, Flushing and Mr. Ran, as guarantor. In conjunction with the execution of Amendment II, the Company also entered into an Amended and Restated Revolving Credit Note in the principal aggregate amount of $10,000,000 with Flushing (the “Amended Flushing Note”) and a Second Amended and Restated Fee Letter with Webster and Flushing, each dated July 11, 2018.

 

Pursuant to the terms of Amendment II, the Company’s existing Webster Credit Line was further increased by $5,000,000 to $25,000,000 in the aggregate. In addition, the interest rates relating to the Webster Credit Line were amended such that the interest rates now equal (i) LIBOR plus a premium, which rate aggregated approximately 6% as of July 11, 2018, or (ii) a Base Rate (as defined in the Amended Credit Agreement) plus 2.25% plus a 0.5% agency fee, as chosen by the Company for each drawdown. The Amendment II also permits the Company to repurchase, redeem or otherwise retire its equity securities in an amount not to exceed ten percent of its annual net income from the prior fiscal year.

 

Short Term Loans

 

During the second quarter of 2018, Mr. Ran, the Chief Executive Officer of the Company, and entities he controls, made seven short term loans to the Company in the aggregate amount of $2,741,227, at an interest rate of 6% per annum. Two of the loans in the aggregate amount of $311,227 were repaid in full in May 2018. The remaining loans, in the aggregate amount of $2,430,000 were repaid in full as of July 11, 2018. The Company also received a short-term loan from a third party lender in the amount of $1,000,000 at the rate of 12% per annum, and such short term loan was repaid in full as of July 12, 2018. The aggregate interest expense for these loans was approximately $19,000, of which approximately $9,000 was paid to Mr. Ran and entities he controls.

v3.10.0.1
Senior Secured Notes
6 Months Ended
Jun. 30, 2018
Debt Disclosure [Abstract]  
Senior Secured Notes

7. SENIOR SECURED NOTES

 

On April 25, 2016, in an initial public offering, MBC Funding issued 6% senior secured notes, due April 22, 2026 (the “Notes”) in the aggregate principal amount of $6,000,000 under the Indenture, dated April 25, 2016, among MBC Funding, as Issuer, the Company, as Guarantor, and Worldwide Stock Transfer LLC, as Indenture Trustee (the “Indenture”). The Notes, having a principal amount of $1,000 each, are listed on the NYSE American and trade under the symbol “LOAN/26”. Interest accrues on the Notes commencing on May 16, 2016. The accrued interest is payable monthly in cash, in arrears, on the 15th day of each calendar month commencing June 2016.

 

Under the terms of the Indenture, the aggregate outstanding principal balance of the mortgage loans held by MBC Funding, together with MBC Funding’s cash on hand, must always equal at least 120% of the aggregate outstanding principal amount of the Notes at all times. To the extent the aggregate principal amount of the mortgage loans owned by MBC Funding plus MBC Funding’s cash on hand is less than 120% of the aggregate outstanding principal balance of the Notes, MBC Funding is required to repay, on a monthly basis, the principal amount of the Notes equal to the amount necessary such that, after giving effect to such repayment, the aggregate principal amount of all mortgage loans owned by MBC Funding plus, MBC Funding’s cash on hand at such time is equal to or greater than 120% of the outstanding principal amount of the Notes. For this purpose, each mortgage loan is deemed to have a value equal to its outstanding principal balance, unless the borrower is in default of its obligations.

 

MBC Funding may redeem the Notes, in whole or in part, at any time after April 22, 2019 upon at least 30 days prior written notice to the Noteholders. The redemption price will be equal to the outstanding principal amount of the Notes redeemed plus the accrued but unpaid interest thereon up to, but not including, the date of redemption, without penalty or premium; provided that (i) if the Notes are redeemed on or after April 22, 2019 but prior to April 22, 2020, the redemption price will be 103% of the principal amount of the Notes redeemed and (ii) if the Notes are redeemed on or after April 22, 2020 but prior to April 22, 2021, the redemption price will be 101.5% of the principal amount of the Notes redeemed plus, in either case, the accrued but unpaid interest on the Notes redeemed up to, but not including, the date of redemption.

 

Each Noteholder has the right to cause MBC Funding to redeem his, her or its Notes on April 22, 2021. The redemption price will be equal to the outstanding principal amount of the Notes redeemed plus the accrued but unpaid interest up to, but not including, the date of redemption, without penalty or premium. In order to exercise this right, the Noteholder must notify MBC Funding, in writing, no earlier than November 22, 2020 and no later than January 22, 2021. All Notes that are subject to a properly and timely notice will be redeemed on April 22, 2021. Any Noteholder who fails to make a proper and timely election will be deemed to have waived his, her or its right to have his, her or its Notes redeemed prior to the maturity date.

 

MBC Funding is obligated to offer to redeem the Notes if there occurs a “change of control” with respect to MBC Funding or the Company or if MBC Funding or the Company sell any assets unless, in the case of an asset sale, the proceeds are reinvested in the business of the seller. The redemption price in connection with a “change of control” will be 101% of the principal amount of the Notes redeemed plus accrued but unpaid interest thereon up to, but not including, the date of redemption. The redemption price in connection with an asset sale will be the outstanding principal amount of the Notes redeemed plus accrued but unpaid interest thereon up to, but not including, the date of redemption. 

v3.10.0.1
Commitments and Contingencies
6 Months Ended
Jun. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

8. COMMITMENTS AND CONTINGENCIES

 

Operating Lease

 

On July 21, 2016, the Company amended its existing lease (the “Lease Amendment”) for its corporate headquarters located at 60 Cutter Mill Road, Great Neck, New York, to extend the term of the lease for an additional five years, through September 30, 2021. Among other things, the Lease Amendment provides for gradual annual rent increases from approximately $3,500 per month during the first year to $3,900 per month during the fifth year of the extension term.

v3.10.0.1
Subsequent Event
6 Months Ended
Jun. 30, 2018
Subsequent Events [Abstract]  
Subsequent Event

9. SUBSEQUENT EVENT

 

On July 24, 2018, the Company completed a public offering of 1,428,572 common shares at a public offering price of $7.00 per share (the “Offering”). The gross proceeds raised by the Company from the Offering were $10,000,004 before deducting underwriting discounts and commissions and other estimated offering expenses. The total net proceeds from the Offering were approximately $9,100,000. The Company has granted the underwriters a 45-day option to purchase up to 214,286 additional common shares to cover over-allotments, if any.

v3.10.0.1
Commercial Loans (Tables)
6 Months Ended
Jun. 30, 2018
Debt Disclosure [Abstract]  
Schedule of Credit Risk

Credit risk profile based on loan activity as of June 30, 2018 and December 31, 2017:

 

Performing loans  

Developers-

Residential

   

Developers-

Commercial

   

Developers-

Mixed Used

    Total outstanding loans  
June 30, 2018   $ 45,861,500     $ 3,160,000     $ 2,825,000     $ 51,846,500  
December 31, 2017   $ 41,739,000     $ 900,000     $ 2,485,000     $ 45,124,000  

v3.10.0.1
Earnings Per Share of Common Stock (Tables)
6 Months Ended
Jun. 30, 2018
Basic and diluted net income per common share outstanding:  
Schedule of Weighted Average Number of Common Shares

The denominator is based on the following weighted average number of common shares:

 

   

Three Months

Ended June 30,

   

Six Months

Ended June 30,

 
    2018     2017     2018     2017  
Basic     8,111,276       8,119,052       8,110,112       8,127,000  
Incremental shares for assumed exercise of options     8,708       12,700       7,705       15,157  
Diluted     8,119,984       8,131,752       8,117,817       8,142,157  

v3.10.0.1
Stock - Based Compensation (Tables)
6 Months Ended
Jun. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of Stock-based Compensation, Stock Options, Activity

The following summarizes stock option activity for the six month period ended June 30, 2018:

 

    Shares    

Weighted Average Exercise

Price

   

Weighted Average Remaining Contractual Term (in

years)

   

Aggregate Intrinsic

Value

 
Outstanding at December 31, 2017     14,000     $ 2.23                  
Expired     (7,000 )     1.53                  
Outstanding at June 30, 2018
(all vested and exercisable)
    7,000     $ 2.92       1.00     $ 5,034  

v3.10.0.1
Commercial Loans (Details Narrative) - USD ($)
6 Months Ended
Jun. 30, 2018
Dec. 31, 2017
Loan term 1 year  
Additional principal amount committed $ 1,000,000
Subsequent Balance Sheet Date [Member]    
Loans receivable paid off 1,725,000  
Originally Due in 2016 [Member]    
Loans receivable 2,060,000  
Originally Due in 2017 [Member]    
Loans receivable 7,362,500  
Construction Loans [Member]    
Additional principal amount committed $ 6,832,500  
v3.10.0.1
Commercial Loans - Schedule of Credit Risk (Details) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Performing loans $ 51,846,500 $ 45,124,000
Developers Residential [Member]    
Performing loans 45,861,500 41,739,000
Developers Commercial [Member]    
Performing loans 3,160,000 900,000
Developers Mixed Used [Member]    
Performing loans $ 2,825,000 $ 2,485,000
v3.10.0.1
Earnings Per Share of Common Stock (Details Narrative) - shares
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Basic and diluted net income per common share outstanding:        
Stock options and warrants antidilutive securities computation of earnings per share 46,054 31,331 47,057 28,874
v3.10.0.1
Earnings Per Share of Common Stock - Schedule of Weighted Average Number of Common Shares (Details) - shares
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Basic and diluted net income per common share outstanding:        
Basic 8,111,276 8,119,052 8,110,112 8,127,000
Incremental shares for assumed exercise of options 8,708 12,700 7,705 15,157
Diluted 8,119,984 8,131,752 8,117,817 8,142,157
v3.10.0.1
Stock - Based Compensation (Details Narrative) - USD ($)
6 Months Ended
Aug. 15, 2016
May 29, 2015
Jul. 31, 2014
Sep. 09, 2011
Jun. 30, 2018
Jun. 30, 2017
Share-based compensation expense         $ 6,532 $ 6,532
July 2014 Rep Warrants [Member]            
Warrants to purchase common shares     87,719      
Warrant exercise price     $ 3.5625      
Warrant expire date     Jul. 28, 2019      
Fair value of warrant issuance     $ 42,224      
May 2015 Rep Warrants [Member]            
Warrants to purchase common shares   50,750        
Warrant exercise price   $ 5.4875        
Warrant expire date   May 22, 2020        
Fair value of warrant issuance   $ 54,928        
Chief Executive Officer [Member]            
Share based compensation expense of restricted, shares       1,000,000    
Share based compensation expense of restricted, value       $ 195,968    
Fair value of restricted shares amortization period       15 years    
July 2014 Rep Warrants [Member]            
Maximum warrants to purchase common shares were outstanding         4,000  
May 2015 Rep Warrants [Member]            
Maximum warrants to purchase common shares were outstanding         10,150  
August 2016 Rep Warrants [Member]            
Warrant exercise price $ 7.4375          
Warrant expire date Aug. 09, 2021          
Fair value of warrant issuance $ 47,020          
Maximum warrants to purchase common shares were outstanding         33,612  
v3.10.0.1
Stock - Based Compensation - Schedule of Stock-based Compensation, Stock Options, Activity (Details)
6 Months Ended
Jun. 30, 2018
USD ($)
$ / shares
shares
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Number of Shares, Outstanding Beginning | shares 14,000
Weighted Average Exercise Price, Outstanding Beginning | $ / shares $ 2.23
Number of Shares, Expired | shares (7,000)
Weighted Average Exercise Price, Expired | $ / shares $ 1.53
Number of Shares, Outstanding Ending (all vested and exercisable) | shares 7,000
Weighted Average Exercise Price, Outstanding Ending (all vested and exercisable) | $ / shares $ 2.92
Weighted Average Remaining Contractual Term (in years), Outstanding (all vested and exercisable) 1 year
Aggregate Intrinsic Value, Outstanding (all vested and exercisable) | $ $ 5,034
v3.10.0.1
Line of Credit and Loans (Details Narrative) - USD ($)
1 Months Ended 6 Months Ended
Aug. 08, 2017
Jul. 07, 2017
Feb. 27, 2015
May 31, 2018
Jun. 30, 2018
Jun. 30, 2017
Credit line increased value   $ 1,000,000        
Amortization of financing costs         $ 51,451 $ 61,625
Amended Credit Agreement [Member]            
Line of credit facility, interest rate at period end         6.3435%  
Line of credit facility, interest rate description         The interest rate on the amount outstanding fluctuates daily. The rate, including a 0.5% Agency Fee, for June 30, 2018 was 6.3435%.  
Percentage of agency fee         0.50%  
Line of credit, current         $ 20,000,000  
Amended Credit Agreement [Member] | July 11, 2018 [Member]            
Line of credit facility, interest rate description         The interest rates now equal (i) LIBOR plus a premium, which rate aggregated approximately 6% as of July 11, 2018, or (ii) a Base Rate (as defined in the Amended Credit Agreement) plus 2.25% plus a 0.5% agency fee  
Subsequent Balance Sheet Date [Member] | July 11, 2018 [Member]            
Repayment of short term loan         $ 2,430,000  
LIBOR Plus [Member]            
Line of credit facility, interest rate at period end     4.75%      
Webster Plus [Member]            
Line of credit facility, interest rate at period end     3.25%      
Webster Credit Line [Member]            
Line of credit facility, interest rate description   The interest rates equaled (i) LIBOR plus 3.75% plus a 0.5% Agency Fee (as hereinafter defined) or (ii) a Base Rate (as defined in the Webster Credit Line) plus 2.25% plus a 0.5% Agency Fee        
Credit line increased value $ 5,000,000          
Line of credit facility, expiration date   Feb. 28, 2021        
Line of credit facility, extended expiration date   Feb. 28, 2022        
Line of credit facility, covenants and restrictions   The Company shall not permit mortgage loans that are outstanding more than 24 months after their origination date to comprise more than 17.5% of their total portfolio of mortgage loans at any time.        
Percentage of agency fee   0.50%        
Syndication fee   $ 15,000        
Line of credit, cost 43,000          
Webster Credit Line [Member] | Mr. Ran [Member]            
Personal guaranty   500,000        
Webster Credit Line [Member] | Maximum [Member]            
Maximum borrowing capacity 20,000,000 $ 15,000,000        
Webster Credit Line [Member] | LIBOR Plus [Member]            
Line of credit facility, interest rate at period end   3.75%        
Percentage of agency fee   0.50%        
Webster Credit Line [Member] | LIBOR Plus [Member] | July 11, 2018 [Member]            
Line of credit facility, interest rate at period end         2.25%  
Percentage of agency fee         0.50%  
Webster Credit Line [Member] | Base Rate Plus [Member]            
Line of credit facility, interest rate at period end   2.25%        
Percentage of agency fee   0.50%        
Revolving Credit Note [Member] | Flushing [Member]            
Debt instrument face amount $ 5,000,000          
Third Party Lender [Member]            
Debt instrument, interest rate         12.00%  
Proceeds from shot term loan - third party         $ 1,000,000  
Short term debt, periodic payment         Jul. 12, 2018  
Line of Credit [Member]            
Amortization of financing costs         $ 13,908 $ 24,083
Line of Credit [Member] | Webster [Member]            
Maximum borrowing capacity     $ 14,000,000      
Line of credit facility, interest rate description     The Webster Credit Line initially provided for an interest rate (until amended – as described below) of either LIBOR plus 4.75% or the base commercial lending rate of Webster plus 3.25%      
Line of credit, cost     $ 144,000      
Seven Short Term Loans [Member] | Mr. Ran and Entities [Member]            
Debt instrument face amount         $ 2,741,227  
Debt instrument, interest rate         6.00%  
Two Short Term Loans [Member]            
Repayment of short term loan       $ 311,227    
Short Term Loans [Member]            
Interest expense         $ 19,000  
Short Term Loans [Member] | Mr. Ran and Entities [Member]            
Interest expense         9,000  
Subsequent Balance Sheet Date [Member] | Amended Credit Agreement [Member] | July 11, 2018 [Member]            
Credit line increased value         $ 5,000,000  
Subsequent Balance Sheet Date [Member] | Revolving Credit Note [Member] | Flushing [Member]            
Percentage of agency fee         0.50%  
Debt instrument face amount         $ 10,000,000  
Subsequent Balance Sheet Date [Member] | Maximum [Member] | Amended Credit Agreement [Member] | July 11, 2018 [Member]            
Maximum borrowing capacity         25,000,000  
Webster and Flushing [Member] | Subsequent Balance Sheet Date [Member]            
Maximum borrowing capacity         $ 25,000,000  
v3.10.0.1
Senior Secured Notes (Details Narrative)
Apr. 25, 2016
USD ($)
Apr. 25, 2016
USD ($)
After April 22, 2019 But Prior to April 22, 2020 [Member]    
Debt instrument, redemption price, percentage   103.00%
After April 22, 2020 But Prior to April 22, 2021 [Member]    
Debt instrument, redemption price, percentage   101.50%
MBC Funding II Corp [Member]    
Debt instrument description   Under the terms of the Indenture, the aggregate outstanding principal balance of the mortgage loans held by MBC Funding, together with MBC Funding's cash on hand, must always equal at least 120% of the aggregate outstanding principal amount of the Notes at all times. To the extent the aggregate principal amount of the mortgage loans owned by MBC Funding plus MBC Funding's cash on hand is less than 120% of the aggregate outstanding principal balance of the Notes, MBC Funding is required to repay, on a monthly basis, the principal amount of the Notes equal to the amount necessary such that, after giving effect to such repayment, the aggregate principal amount of all mortgage loans owned by MBC Funding plus, MBC Funding's cash on hand at such time is equal to or greater than 120% of the outstanding principal amount of the Notes. For this purpose, each mortgage loan is deemed to have a value equal to its outstanding principal balance, unless the borrower is in default of its obligations.
MBC Funding II Corp [Member] | Change of Control [Member]    
Debt instrument, redemption price, percentage   101.00%
Senior Secured Notes [Member]    
Principal amount of each note $ 1,000 $ 1,000
Debt instrument collateral, percentage 120.00% 120.00%
Senior Secured Notes [Member] | Indenture [Member]    
Debt instrument interest rate 6.00% 6.00%
Debt instrument maturity date Apr. 22, 2026  
Debt instrument face amount $ 6,000,000 $ 6,000,000
v3.10.0.1
Commitments and Contingencies (Details Narrative)
Jul. 21, 2016
USD ($)
Operating lease term of lease Five years, through September 30, 2021
Operating lease rent, description The Lease Amendment provides for gradual annual rent increases from approximately $3,500 per month during the first year to $3,900 per month during the fifth year of the extension term.
Minimum [Member]  
Operating lease periodic rent expenses $ 3,500
Maximum [Member] | Fifth Year [Member]  
Operating lease periodic rent expenses $ 3,900
v3.10.0.1
Subsequent Event (Details Narrative) - Subsequent Event [Member]
Jul. 24, 2018
USD ($)
$ / shares
shares
Public offering, common shares | shares 1,428,572
Offering price, per share | $ / shares $ 7.00
Proceeds from public offering, gross | $ $ 10,000,004
Proceeds from public offering, net | $ $ 9,100,000
Number of share options granted | shares 214,286