This Management's Discussion and Analysis of Financial Condition and Results of
Operations is intended to provide a reader of our financial statements with a
narrative from the perspective of our management on our financial condition,
results of operations, liquidity, and certain other factors that may affect our
future results. The following discussion and analysis should be read in
conjunction with our audited consolidated financial statements and the
accompanying notes thereto included in "Item 8. Financial Statements and
Supplementary Data." In addition to historical financial information, the
following discussion and analysis contains forward-looking statements that
involve risks, uncertainties and assumptions. See "Forward-Looking
Statements." Our results and the timing of selected events may differ
materially from those anticipated in these forward-looking statements as a
result of many factors.
9
Results of Operations
General
We have recognized net losses from related parties of approximately $(12,002)
for the year ended December 31, 2020, compared to income of $90,115 for the year
ended December 31, 2019, resulting from the amortization of loan origination
fees received in the form of a notes receivable and cash, offset by the
amortization of loan costs incurred. As of December 31, 2020, the Company had an
accumulated deficit of approximately $5,130,000.
The following table provides selected balance sheet data as of December 31,
2020.
Consolidated Balance Sheet Data: 12/31/2020
Cash $ 11,624
Restricted cash $ -
Loans Receivable - related parties, net of discounts $ 737,389
Loans Receivable, net of discounts
$ 486,924
Total assets $ 1,353,312
Current liabilities $ 691,467
Total liabilities $ 712,394
Temporary equity $ 386,722
Stockholders' equity $ 254,196
Year ended December 31, 2020 as compared to year ended December 31, 2019
For the year ended December 31, 2020, we generated approximately $16,688 in net
investment income, compared to net investment income of $90,000 in 2019. Net
investment income in 2020 resulted from interest income of $46,000, the
amortization of loan origination fees of $96,000, offset by the amortization of
loan costs of $103,000. Net investment income in 2019 resulted from interest
income of $91,000, the amortization of loan origination fees of $127,000, offset
by the amortization of loan costs of $28,000. We incurred $1,081,095 in
operating expenses during the 2020 period, compared to $1,480,921 in 2019,
reflecting our decreased level of operations. In 2020, the Company recognized
approximately $44,000 of interest, primarily from the Partners South note
payable. Interest expense for year ended December 31, 2020 was $12,983,
approximately $9,000 resulting from the redemption of common stock presented in
temporary equity and the release of escrow, and $3,000 relate to the related
party note issued in October 2000. Interest expense for year ended December 31,
2019, was $623,000 resulted from the Jersey Walk Mortgage which was derecognized
upon the rescission of the Jersey Walk acquisition in June 2019, and a gain on
deconsolidation of $316,744 was recognized.
Liquidity and Capital Resources
During the year ended December 31, 2019, we sold an interest in a subsidiary for
$1,000,000, sold common stock for approximately $946,000, and Omega, the
principal stockholder of the Company, made additional capital contributions to
the Company of approximately $275,000.
During the year ended December 31, 2020, Omega, the principal stockholder of the
Company, made additional capital contributions to the Company of approximately
$437,000 and the Company received a Payroll Protection loan in the amount of
$20,800.
Related Party Transactions
Loans receivable
The Company has extended lines of credit and loans to related parties. See Note
3 to condensed financial statements.
Management fee and other expenses
During the year ended December 31, 2019, Omega Commercial Finance Corp was paid
$150,000 in management fees pursuant to a corporate governance management
agreement executed on June 1, 2017. Omega is to provide services related to
facilitating the introduction of potential investors for compensation of no less
than $150,000 per year, not to exceed $300,000 per year. The agreement remains
in effect until cancelled by Omega. During the year ended December 31, 2020,
Omega Commercial Finance Corp, the Company's principle stockholder, and Omega
Streets Capital, an affiliate entity, was paid a combined $295,750 in management
and consulting fees pursuant to a corporate governance management agreement
executed on June 1, 2017. Omega is to provide services related to facilitating
the introduction of potential investors for compensation of no less than
$150,000 per year, not to exceed $300,000 per year. The fee paid in 2020 is for
services that were rendered throughout 2020.
10
Critical Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods presented. The Company is required to make
judgments and estimates about the effect of matters that are inherently
uncertain. The Company regularly evaluates estimates and assumptions related to
the valuation of the allowance for loan losses, loss contingencies, useful life
and recoverability of long-lived assets, deferred income tax asset valuations
and loss contingencies. The Company bases its estimates and assumptions on
current facts, historical experience and various other factors that it believes
to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying value of assets and liabilities and the
accrual of costs and expenses that are not readily apparent from other sources.
Although, we believe our judgments and estimates are appropriate, actual future
results may be different; if different assumptions or conditions were to
prevail, the results could be materially different from our reported results.
Loans Receivable, net and Allowance for Losses
The Company records its investments in loans receivable at cost less unamortized
costs of issuance and deferred origination fees. Origination fees collected at
the time of investment are recorded against the loans receivable and amortized
into net interest income over the lives of the related loans. Issuance costs
incurred are capitalized along with the initial investment and amortized against
net interest income over the lives of the related loans.
When a loan receivable is placed on non-accrual status, the related interest
receivable is reversed against interest income of the current period. If a
non-accrual loan is returned to accrual status, the accrued interest existing at
the date the residential loan is placed on non-accrual status and interest
during the non-accrual period are recorded as interest income as of the date the
loan no longer meets the non-accrual criteria.
The Company maintains an allowance for loan losses on its investments in real
estate loans receivable for estimated credit impairment. Management's estimate
of losses is based on a number of factors including the types and dollar amounts
of loans in the portfolio, adverse situations that may affect the borrower's
ability to repay, prevailing economic conditions and the underlying collateral
securing the loan. Additions to the allowance are provided through a charge to
earnings and are based on an assessment of certain factors, which may indicate
estimated losses on the loans. Actual losses on loans are recorded first as a
reduction to the allowance for loan losses. Generally, subsequent recoveries of
amounts previously charged off are recognized as income.
Estimating allowances for loan losses requires significant judgment about the
underlying collateral, including liquidation value, condition of the collateral,
competency and cooperation of the related borrower and specific legal issues
that affect loan collections or taking possession of the property on an
individual loan receivable basis.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely
to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
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