UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
x |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31,
2013
or
¨ |
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 000-54165
Reven Housing REIT, Inc.
(Name of registrant as specified in its charter)
Colorado |
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84-1306078 |
(State or Other Jurisdiction of |
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(I.R.S. Employer Identification |
Incorporation) |
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Number) |
7911 Herschel Avenue, Suite 201
La Jolla, CA 92037
(Address of principal executive offices)
(858) 459-4000
(Registrant’s telephone number, including
area code)
Securities registered pursuant to Section 12(b) of
the Act:
None
Securities registered pursuant to Section 12(g) of
the Act:
Common Stock
Indicate by check mark if the registrant is
a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ¨
No x
Indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.
Yes ¨
No x
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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes x 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). Yes x
No o
Indicate by check mark if disclosure of delinquent
filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2
of the Act):
Large accelerated filer ¨ |
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Accelerated filer ¨ |
Non-accelerated filer ¨ |
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Smaller reporting company x |
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ¨
No x
State the aggregate market value of voting
and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold,
or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed
second fiscal quarter: $1,261,295.
State the number of shares outstanding of each
of the registrant’s classes of common stock, as of the latest practicable date: 87,860,880 shares as of March 25, 2014.
TABLE OF CONTENTS
EXPLANATORY NOTE—RESTATEMENT OF FINANCIAL INFORMATION
This Amendment No. 1 on Form 10-K/A
(“Amendment No. 1”) is being filed to effect a restatement of the previously issued consolidated financial statements
of Reven Housing REIT, Inc. (either the “Company,” “we” or “our”) as of and for the year ended
December 31, 2013 filed as part of the Company’s Annual Report on Form 10-K filed with the SEC on March 25, 2014 (“Original
Form 10-K”).
The Company is restating its previously issued
fiscal 2013 consolidated financial statements to correct an error that resulted from the inadvertent failure to properly account
for our portfolio acquisitions of leased single family homes as asset acquisitions instead of business acquisitions. In addition,
a portion of the purchase price relating to 2013 acquisitions should have been allocated on our balance sheet to lease origination
costs instead of building values.
This Amendment No.1 amends and restates Items
1, 2, 7, 8 and 9A of Part II of the Original Form 10-K to reflect the effects of the restatements. In addition, in accordance
with Rule 12b-15 promulgated under the Securities and Exchange Act of 1934, as amended, this Amendment also includes updated
certifications from our Chief Executive Officer and Chief Financial Officer as Exhibits 31.1, 31.2 and 32.1. The remaining Items
contained within this Amendment No. 1 consist of all other Items originally contained in Original Form 10-K. This Amendment
No. 1 does not reflect events occurring after the filing of the Original Form 10-K or modify or update those disclosures in
any way other than as required to reflect the effects of the restatements.
CAUTIONARY NOTICE
This annual report on Form 10-K
contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Those forward-looking statements include our
expectations, beliefs, intentions and strategies regarding the future. Such forward-looking statements relate to, among other things,
our market, strategy, competition, development plans, financing, revenues, operations and compliance with applicable laws. These
and other factors that may affect our financial results are discussed more fully in “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” included in this report. Market data used throughout this report is based
on published third party reports or the good faith estimates of management, which estimates are based upon their review of internal
surveys, independent industry publications and other publicly available information. Although we believe that such sources are
reliable, we do not guarantee the accuracy or completeness of this information, and we have not independently verified such information.
We caution readers not to place undue reliance on any forward-looking statements. We do not undertake, and specifically disclaim
any obligation, to update or revise such statements to reflect new circumstances or unanticipated events as they occur, and we
urge readers to review and consider disclosures we make in this and other reports that discuss factors germane to our business.
See in particular our reports on Forms 10-K, 10-Q, and 8-K subsequently filed from time to time with the Securities and Exchange
Commission.
PART I
Overview
Reven Housing REIT, Inc.
(the “Company”) is engaged in the acquisition, ownership and operation of portfolios of leased single-family homes
in the United States. We operate our portfolio properties as single-family rentals, or SFRs, and we generate most of our revenue
from rental income of the existing tenants of the SFRs we have acquired. Our business plan involves (i) acquiring portfolios of
rented houses from investors who have bought them low, fixed and rented them; and (ii) receiving current income from profits from
rentals and appreciation of houses. For our acquisitions, we employ strict underwriting procedures for operating costs, re-leasing
costs and capital improvement costs and obtain third-party reports for physical condition and valuation due diligence.
As of March 25, 2014, we
have invested an aggregate of approximately $13.8 million and own 168 homes in the Houston, Texas, metropolitan area and 9 homes
in Atlanta, Georgia, metropolitan area. We intend to expand our acquisitions throughout the United States as we continue to evaluate
new investment opportunities in different markets. Our portfolio properties are 95% leased, of which 134 are subject to one year
leases, 34 are subject to month-to-month leases and 9 are vacant and being marketed for leasing. All of our portfolio properties
to date have been acquired from available cash on hand and are not subject to any liens or security interests.
We intend to take all necessary
steps to qualify as a real estate investment trust (“REIT”) under the Internal Revenue Code, as amended (the “Code”).
However, no assurance can be given that we will qualify or remain qualified as a REIT.
Our History
The Company was originally
incorporated on April 26, 1995, in the State of Colorado under the name “Colorado Security Patrol Inc.” to provide
a variety of security services on both a residential and commercial basis although the Company was not successful in generating
sufficient revenues from this business. On March 12, 2007, the Company filed an amendment to its Articles of Incorporation changing
its name to “Bureau of Fugitive Recovery, Inc.” and expanded its operations to include the tracking and apprehension
of offenders who had failed to appear in court or had otherwise had their bond revoked.
Since the change in control
transaction in which Chad M. Carpenter, our current Chairman of the Board, President and Chief Executive Officer, acquired a majority
of the issued and outstanding shares of our common stock on July 2, 2012, the Company has been engaged in its current real estate
business. In connection with the change in our business direction, on July 5, 2012, our shareholders, on the recommendation of
the Company’s board of directors, approved an amendment of the Company’s Restated Articles of Incorporation to change
the Company’s name to “Reven Housing REIT, Inc.” from “Bureau of Fugitive Recovery, Inc.” The Company
filed the Articles of Amendment with the Colorado Secretary of State effectively changing its name to “Reven Housing REIT,
Inc.” on August 9, 2012.
In this report, unless
expressly provided otherwise, “Reven,” the “Company,” “we,” “us,” and “our”
refer to Reven Housing REIT, Inc., a Colorado corporation, and its wholly-owned subsidiaries.
Our Business
We are engaged in the acquisition
of portfolios of tenant occupied single-family homes throughout the United States. We operate our portfolio properties as single-family
rentals, or SFRs, and we generate most of our revenue from rental income of the existing tenants of the SFRs we have acquired.
Our investment objective is to provide current cash flow yield therefore all SFR portfolios must be fixed, leased and occupied.
Acquisition Criteria
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Portfolio Size Sought: |
25-500 rented homes per transaction |
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Gross Rental Yield: |
Class A Gross Rental Yield = 12% + |
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Class B Gross Rental Yield = 14%+ |
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Expenses: |
50 percent or less (including property management, maintenance, tax, insurance, vacancy, homeowner’s association fees, and credit loss) |
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Tenants: |
Tenants must not be in default or late on rent payments |
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Maintenance: |
All deferred maintenance must be fixed or will be deducted from the purchase price |
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Management: |
Preference for hiring existing property management |
Target Markets
We invest in markets that we believe have more
upside value through the potential for rent increases and appreciation of the homes due to the dislocation caused by the Great
Recession and the current positive economic drivers in these markets. We are currently targeting the following markets:
Houston, TX |
Phoenix, AZ |
Las Vegas, NV |
Dallas, TX |
Atlanta, GA |
San Jose, CA |
Fort Lauderdale, FL |
Los Angeles, CA |
Anaheim, CA |
Denver, CO |
San Francisco, CA |
Tucson, AZ |
Austin, TX |
San Antonio, TX |
Fort Worth-Arlington, TX |
Salt Lake City, UT |
Raleigh, NC |
Miami, FL |
Louisville, KY |
Oklahoma City, OK |
Virginia Beach, NC |
Tampa, FL |
Richmond, VA |
Charlotte, NC |
Nashville, TN |
Indianapolis, IN |
Tulsa, OK |
San Diego, CA |
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The UPREIT Option
As part of our business
plan, we may structure future portfolio acquisitions using an UPREIT structure. An owner selling a portfolio of homes in a single
transaction may be able to qualify for capital gains tax treatment. Specifically, an acquisition of a portfolio that is structured
as a contribution to the REIT’s operating partnership (the “UPREIT OP”) in exchange for the UPREIT OP’s
limited partnership units (in lieu of cash) can be a tax-free transaction. The limited partnership units would be able to participate
in any distributions from rentals and in any stock appreciation if the REIT grows net operating income and the homes appreciate
over time. The diagram below illustrates an example of the UPREIT structure.
If and when we qualify
as a REIT, we intend to implement the UPREIT structure at an appropriate time. However, no assurance can be given that we will
qualify or remain qualified as a REIT, and furthermore, there can be no assurances that we will implement the UPREIT structure
and be successful in executing our business plan utilizing the UPREIT structure.
Competition
We face competition from
many entities engaged in real estate investment activities, including individuals, other real estate investment companies including
newly formed REITs, and real estate limited partnerships. Our competitors may enjoy significant competitive advantages that result
from, among other things, having substantially more available capital, a lower cost of capital and enhanced operating efficiencies.
Further, the market for the rental of properties is highly competitive. We also face competition from new home builders, investors
and speculators, as well as homeowners renting their properties.
Employees
As of March 25, 2014, we
employed 2 employees, who are not represented by labor unions. We believe that our relationship with our employees is satisfactory.
Available Information
Our website is located
at www.revenhousingreit.com. The information on or accessible through our website is not part of this annual report on Form 10-K.
A copy of this annual report on Form 10-K is located at the SEC’s Public Reference Room at 100 F Street, NE, Washington,
D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The
SEC also maintains an internet site that contains reports and other information regarding our filings at www.sec.gov.
As a "smaller reporting
company" defined in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore
are not required to provide the information requested by this item.
Item 1B. |
Unresolved Staff Comments |
We have no unresolved staff comments.
Since we commenced our
real estate investment activities in October 2012, we have acquired portfolios in Georgia and Texas. As of March 25, 2014, we own
168 homes in the Houston, Texas metropolitan area and 9 in the Atlanta, Georgia, metropolitan area. Our portfolio properties are
95% leased, of which 134 are subject to one year leases, 34 are subject to month-to-month leases and 9 are vacant and being marketed
for leasing.
The following table presents
summary statistics of our single-family homes by MSA and metro division. The table includes our entire portfolio of single-family
homes.
Total Portfolio of Single-Family Homes—Summary
Statistics
(as of March 25, 2014)
MSA / Metro Division | |
Number of Homes | | |
Aggregate Investment | | |
Average Investment Per Home | | |
Percent Leased | | |
Average Age (years) | | |
Average Size (square feet) | |
Atlanta, GA | |
| 9 | | |
$ | 606,838 | | |
$ | 67,426 | | |
| 66 | % | |
| 21 | | |
| 1,516 | |
Houston, TX | |
| 168 | | |
$ | 13,148,797 | | |
$ | 78,267 | | |
| 95 | % | |
| 45 | | |
| 1,435 | |
Total / Weighted Average | |
| 177 | | |
$ | 13,755,635 | | |
$ | 77,715 | | |
| 95 | % | |
| 44 | | |
| 1,439 | |
Item 3. |
Legal Proceedings |
As of the date of this
report, there are no pending legal proceedings to which we or our properties are subject.
Item 4. |
Mine Safety Disclosures |
Not applicable.
PART II
Item 5. |
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Repurchases of Equity Securities |
Market Information
Our common stock has been
quoted on the OTC Bulletin Board (“OTCBB”) since December 2010. From December 2010 to August 2012, our common stock
was quoted on the OTCBB under the symbol BRFG. Since August 2012, our common stock has been quoted under the symbol RVEN. There
had been no trading of our common stock until December 2012. However, we consider our common stock to be “thinly traded”
and any reported sale prices may not be a true market-based valuation of the common stock.
The following table sets
forth the quarterly high and low sales prices of our common shares as reported on the OTCBB for the periods indicated.
2013: | |
High | | |
Low | |
First Quarter | |
$ | 1.00 | | |
$ | 1.00 | |
Second Quarter | |
$ | 1.00 | | |
$ | 0.35 | |
Third Quarter | |
$ | 0.40 | | |
$ | 0.35 | |
Fourth Quarter | |
$ | 0.47 | | |
$ | 0.38 | |
2012: | |
| | | |
| | |
First Quarter | |
| N/A | | |
| N/A | |
Second Quarter | |
| N/A | | |
| N/A | |
Third Quarter | |
| N/A | | |
| N/A | |
Fourth Quarter | |
$ | 1.02 | | |
$ | 1.02 | |
Holders of Record
As of March 19, 2014, there
were approximately 78 holders of record of our common stock.
Dividend Policy
We have never declared
or paid cash dividends on our common stock. We presently intend to retain earnings to finance the operation and expansion of our
business. In the event we qualify and elect to be taxed as a REIT, as defined under the Internal Revenue Code, we will be required
to make cash dividends to our stockholders consistent with applicable rules under the Code. However, no assurance can be given
that we will qualify or remain qualified as a REIT.
Equity Compensation Plan Information
In December 2013, we adopted,
and our stockholders approved, our Amended and Restated 2012 Incentive Compensation Plan (the “2012 Plan”), pursuant
to which 33,000,000 shares of our common stock are reserved for issuance to employees, directors, consultants, and other service
providers. The 2012 Plan allows for incentive awards to eligible recipients consisting of:
| · | options to purchase shares of common stock, that qualify as incentive stock options within the meaning of the Internal Revenue
Code; |
| · | non-statutory stock options that do not qualify as incentive options; |
| · | restricted stock awards; and |
| · | stock appreciation rights. |
As of the date of this
report, we have not granted any options under our 2012 Plan nor have we granted any non-Plan options. All 33,000,000 shares of
our common stock initially reserved for issuance under our 2012 Plan remain available for future issuance to employees, directors,
consultants, and other service providers. The following table sets forth certain information as of December 31, 2013 about our
2012 Plan and the non-Plan options.
Plan Category | |
(a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | | |
(b) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | | |
(c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected In Column (a)) | |
Equity compensation plan approved by security holders | |
| -0- | | |
$ | N/A | | |
| 33,000,000 | |
Equity compensation plan not approved by security holders | |
| -0- | | |
$ | N/A | | |
| -0- | |
Total | |
| -0- | | |
$ | N/A | | |
| 33,000,000 | |
Recent Sales of Unregistered Securities
On January 3, 2013, we
issued convertible promissory notes to certain accredited investors in the aggregate principal amount of $500,000 (the “January
Notes”). The maturity date of the January Notes was the earlier of December 31, 2013 or the date on which we consummated
an equity financing in which we sold shares of our capital stock with an aggregate sales price of $5,000,000 or more (a “Qualified
Equity Financing”). The January Notes bore interest at a rate of 10 percent per annum payable in full on the maturity date.
In connection with the issuance of the January Notes, we also issued to the investors five-year warrants exercisable for
shares of our capital stock issued in the Qualified Equity Financing (the “January Warrants”). The exercise price of
the January Warrants was the same as the price per share of the equity securities sold to investors in the Qualified Equity Financing,
and each Warrant provided for 100% warrant coverage on the principal amount of the related January Note. Because we consummated
a Qualified Equity Financing prior to December 31, 2013, the holders of the January Notes at their option could convert the outstanding
principal and accrued interest under the January Notes into shares of our capital stock issued in the Qualified Equity Financing
at the same price and on the same terms as the investors in such financing, and the January Warrants could be exercised for such
shares of capital stock at the same price and on the same terms as the investors in the Qualified Equity Financing. We relied on
an exemption from the registration requirements of the Securities Act for the offer and sale of the January Notes, the January
Warrants and the underlying securities pursuant to Section 4(2) of the Securities Act and Rule 505 of Regulation D promulgated
thereunder.
On September 27, 2013,
we entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with certain accredited investors in connection
with a proposed private placement of up to 125,000,000 shares of our common stock at a price of $0.20 per share, for aggregate
proceeds of up to $25 million. There have been three closings pursuant to the Stock Purchase Agreement, described below.
In connection with this private placement, we entered into a Convertible Promissory Note Conversion Agreement (the “Note
Conversion Agreement”) on September 27, 2013 with certain holders of our outstanding 10% Convertible Promissory Notes (the
“Bridge Notes”).
First Closing.
On September 27, 2013, we issued an aggregate of 55,000,000 shares of our common stock to the investors in the Stock Purchase Agreement
for gross proceeds of $11,000,000. Also on September 27, 2013, we issued an aggregate of 4,510,880 shares of our common stock
to the investors in the Note Conversion Agreement in exchange for cancellation of Bridge Notes in the aggregate principal amount
of $902,176. These shares were issued in reliance on an exemption from registration provided by Section 4(a)(2) of the Securities
Act, and Rule 506 promulgated thereunder.
Second Closing.
On October 30, 2013, we issued an aggregate of 11,500,000 shares of our common stock to the investors in the Stock Purchase Agreement
for gross proceeds of $2,300,000. These shares were issued in reliance on an exemption from registration provided by Section
4(a)(2) of the Securities Act, and Rule 506 promulgated thereunder.
Third Closing.
On November 22, 2013, we issued an aggregate of 8,500,000 shares of our common stock to the investors in the Stock Purchase Agreement
for gross proceeds of $1,700,000. These shares were issued in reliance on an exemption from registration provided by Section
4(a)(2) of the Securities Act, and Rule 506 promulgated thereunder.
Item 6. |
Selected Financial Data |
As a "smaller reporting
company" defined in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore
are not required to provide the information requested by this item.
Item 7. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The information contained
in this report contains forward-looking statements that relate to expectations, beliefs, projections, future plans and strategies,
anticipated events and similar expressions. Forward-looking statements may be identified by use of words such as “may,”
“will,” “should,” “expects,” “intends,” “plans,” “anticipates,”
“believes,” “estimates,” or “potential” or similar words or phrases which are predictions of
or indicate future events or trends. Statements such as those concerning potential acquisition activity, investment objectives,
strategies, opportunities, other plans and objectives for future operations or economic performance are based on the Company’s
current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties, including the Company’s
ability to successfully (i) acquire real estate investment properties in the future, (ii) to execute future agreements or understandings
concerning the Company’s acquisition of real estate investment properties and (iii) be able to raise the capital required
to acquire any such properties. Any of these statements could prove to be inaccurate and actual events or investments and results
of operations could differ materially from those expressed or implied. To the extent that the Company’s assumptions differ
from actual results, the Company’s ability to meet such forward-looking statements, including its ability to invest in a
diversified portfolio of quality real estate investments, may be significantly and negatively impacted. You are cautioned not to
place undue reliance on any forward-looking statements and the Company disclaims any obligation to publicly update or revise any
forward-looking statement to reflect changes in underlying assumptions or factors, new information, future events or other changes.
Restatement of Consolidated Financial Statements
In connection with preparing
the annual financial information for the year ending December 31, 2014, prior period errors were identified which affected the
annual period ended December 31, 2013. These errors occurred in the Company’s accounting for the acquisition of certain
real property portfolios and involve acquisition costs that were improperly capitalized and the reallocation of acquisition values
from Building and Improvements to Lease Origination Costs. These errors require the Company to restate previously reported financial
results contained in this report. The effects of these prior period errors in the consolidated financial statements are as follows:
| |
December 31, 2013 | |
| |
As | | |
As previously | | |
| |
| |
Restated | | |
Reported | | |
Adjustment | |
Consolidated Balance Sheet | |
| | | |
| | | |
| | |
Buildings and improvements | |
$ | 9,685,361 | | |
$ | 10,064,626 | | |
$ | (379,265 | ) |
Accumulated depreciation | |
$ | (73,950 | ) | |
$ | (76,200 | ) | |
$ | 2,250 | |
Investment in real estate, net | |
$ | 12,125,420 | | |
$ | 12,502,435 | | |
$ | (377,015 | ) |
Lease origination costs | |
$ | 75,038 | | |
$ | - | | |
$ | 75,038 | |
Total Assets | |
$ | 14,531,149 | | |
$ | 14,833,126 | | |
$ | (301,977 | ) |
Accumulated deficit | |
$ | (2,014,056 | ) | |
$ | (1,712,079 | ) | |
$ | (301,977 | ) |
Total Stockholders' Equity | |
$ | 14,026,985 | | |
$ | 14,328,962 | | |
$ | (301,977 | ) |
Total Liabilities and Stockholders' Equity | |
$ | 14,531,149 | | |
$ | 14,833,126 | | |
$ | (301,977 | ) |
| |
| | | |
| | | |
| | |
Consolidated Statement of Operations | |
| | | |
| | | |
| | |
Real estate acquisition costs | |
$ | 279,965 | | |
$ | - | | |
$ | 279,965 | |
Depreciation and amortization | |
$ | 96,812 | | |
$ | 74,800 | | |
$ | 22,012 | |
Total operating expenses | |
$ | 1,714,940 | | |
$ | 1,412,963 | | |
$ | 301,977 | |
Net loss | |
$ | (1,372,697 | ) | |
$ | (1,070,720 | ) | |
$ | (301,977 | ) |
Net loss per share | |
$ | (0.05 | ) | |
$ | (0.04 | ) | |
$ | (0.01 | ) |
| |
| | | |
| | | |
| | |
Consolidated Statement of Cash Flows | |
| | | |
| | | |
| | |
Net loss | |
$ | (1,372,697 | ) | |
$ | (1,070,720 | ) | |
$ | (301,977 | ) |
Depreciation and amortization | |
$ | 96,812 | | |
$ | 74,800 | | |
$ | 22,012 | |
Net cash used in operating activities | |
$ | (767,899 | ) | |
$ | (336,806 | ) | |
$ | (431,093 | ) |
Acquisitions of investments in real estate | |
$ | (11,855,960 | ) | |
$ | (12,235,225 | ) | |
$ | 379,265 | |
Lease origination costs | |
$ | (99,300 | ) | |
$ | - | | |
$ | (99,300 | ) |
Net cash used in investing activities | |
$ | (11,955,260 | ) | |
$ | (12,386,353 | ) | |
$ | 431,093 | |
Overview
We are an internally-managed
real estate investment company focused on the acquisition, leasing, and management of recently renovated and stabilized single-family
properties in select markets in the United States. Our objective is to generate attractive risk-adjusted returns for our stockholders
over the long term through dividends and capital appreciation. We generate virtually all of our revenue by leasing our portfolio
of single-family properties. As of December 31, 2013, we owned 159 single-family properties, of which 150 are in the Houston, Texas
metropolitan area and 9 are in the Atlanta, Georgia metropolitan area.
The Company was formerly
known as the Bureau of Fugitive Recovery Inc. On July 2, 2012, Chad M. Carpenter purchased an aggregate of 5,999,300 shares of
the outstanding common stock of the Company from certain of the Company’s stockholders in a private transaction. In connection
with the transaction, an aggregate of 1,650,000 shares of the Company’s outstanding common stock were returned to treasury
for cancellation. Immediately upon the closing of the transaction, Mr. Carpenter became the majority shareholder of the Company
and beneficially owned stock representing 71.8% of the outstanding voting shares of the Company.
As a result of the above
change in control and management, the Company entered into the business of acquiring portfolios of occupied and rented single-family
houses throughout the United States. This business plan involves (i) acquiring portfolios of rented houses from investors; (ii)
receiving income from rental property activity; and (iii) future profits from sale of rental property at appreciated values. The
Company also changed its name to Reven Housing REIT, Inc. In November 2012, the Company made its first acquisition of 5 rental
homes. In 2013, the Company completed the purchase of an additional 154 homes.
The Company intends
to convert to a Maryland corporation and to take all necessary steps to qualify, and elect to be taxed as, a real estate investment
trust (“REIT”) under the Internal Revenue Code, as soon as practicable. However, no assurance can be given that we
will qualify or remain qualified as a REIT.
Recent Highlights
On September 27, 2013,
the Company entered into a stock purchase agreement with King APEX Group II, Ltd. and King APEX Group III, Ltd., which are funds
managed by Allied Fortune (“HK”) Management Limited, a Hong Kong based funds management company, in connection with
a private placement of up to 125,000,000 shares of its common stock at a price of $0.20 per share, for aggregate gross proceeds
of up to $25 million. Under the terms of the stock purchase agreement, a total of 75,000,000 shares at a gross price of $15,000,000
were completed through December 31, 2013. Cash proceeds after offering expenses were $14,539,082, plus an additional non-cash expense
of $50,000 representing additional deferred costs relating to the private placement resulting in net proceeds of $14,489,082.
As a result of the issuance
of the 75,000,000 shares to King APEX Group II, Ltd. and King Apex Group III, Ltd., the two funds under common control collectively
own approximately 85.4% of the Company’s outstanding voting shares and Mr. Carpenter now owns approximately 9.5% of the Company’s
outstanding voting shares.
Reven Housing Georgia,
LLC (a wholly owned subsidiary of Reven Housing REIT, Inc.) completed the acquisition of nine residential homes. The nine homes
are located in various cities in Georgia. Five of these homes were purchased in 2012 and the remaining four homes were purchased
on January 10, 2013.
On October 4, 2013, Reven
Housing Texas, LLC (a wholly owned subsidiary of Reven Housing REIT, Inc.) entered into a purchase and sale agreement for the purchase
of a portfolio of 170 single family homes located in the Houston, Texas metropolitan area. On October 31, 2013, the Company closed
and completed the purchase of 150 of the homes at a total cost of $11,592,532 excluding closing expenses.
The following table represents
the Company’s net investment in the homes:
| |
| | |
| | |
| | |
| | |
| | |
Investment | |
| |
Number | | |
| | |
Residential | | |
Total | | |
Accumulated | | |
In Real Estate | |
Purchased during 2012: | |
of Homes | | |
Land | | |
Homes | | |
Investment | | |
Depreciation | | |
Net | |
Georgia | |
| 5 | | |
$ | 67,019 | | |
$ | 276,391 | | |
$ | 343,410 | | |
$ | (1,400 | ) | |
$ | 342,010 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total at December 31, 2012 | |
| 5 | | |
| 67,019 | | |
| 276,391 | | |
| 343,410 | | |
| (1,400 | ) | |
| 342,010 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Purchased during 2013: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Georgia | |
| 4 | | |
| 52,631 | | |
| 210,797 | | |
| 263,428 | | |
| (16,800 | ) | |
| 246,628 | |
Texas | |
| 150 | | |
| 2,394,359 | | |
| 9,198,173 | | |
| 11,592,532 | | |
| (55,750 | ) | |
| 11,536,782 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total at December 31, 2013 | |
| 159 | | |
$ | 2,514,009 | | |
$ | 9,685,361 | | |
$ | 12,199,370 | | |
$ | (73,950 | ) | |
$ | 12,125,420 | |
Net investment in homes, as shown above, consists
of the following as of December 31:
| |
2012 | | |
2013 | |
| |
Number | | |
Investment | | |
Number | | |
Investment | |
| |
of Homes | | |
Net | | |
of Homes | | |
Net | |
Leased | |
| 5 | | |
$ | 342,010 | | |
| 146 | | |
$ | 11,228,018 | |
Vacant | |
| - | | |
| - | | |
| 13 | | |
| 897,402 | |
| |
| | | |
| | | |
| | | |
| | |
| |
| 5 | | |
$ | 342,010 | | |
| 159 | | |
$ | 12,125,420 | |
The Company plans to continue
to acquire and manage single family homes with a focus on long term earnings growth and appreciation in asset value. As the Company’s
first significant portfolio acquisition was completed on October 31, 2013, we anticipate that our revenue will increase significantly
in 2014 as it will be our first full year of meaningful operations under our new business plan.
Our Company’s ability
to identify and acquire single-family properties that meet our investment criteria will be affected by home prices in our markets,
the inventory of properties available through our acquisition channels, competition for our target assets, our capital available
for investment, and the cost of that capital. The housing market environment in our markets remains attractive for single-family
property acquisitions and rentals. Pricing for housing in certain markets remains attractive and demand for housing is growing.
At the same time, we continue to face relatively steady competition for new properties and residents from local operators and institutional
managers. Housing prices across all of our core markets have appreciated over the past year. Despite these gains, we believe housing
in certain of our markets continues to provide attractive acquisition opportunities and remains inexpensive relative to replacement
cost and affordability metrics.
We anticipate continued
strong rental demand for single-family homes. While new building activity has begun to increase, it remains below historical averages
and we believe substantial under-investment in residential housing over the past years will create upward pressure on home prices
and rents as demand exceeds supply.
Our results of operations
and financial condition will be affected by numerous factors, many of which are beyond our control. The key factors we expect to
impact our results of operations and financial condition include our pace and costs of acquisitions, rental rates, the varying
costs of external property management, occupancy levels, rates of resident turnover, turnover costs, changes in homeownership rates,
changes in homeowners’ association fees, insurance costs, real estate taxes, our expense ratios, and our capital structure.
Results of Operations
Comparisons of 2013 results
of operation to 2012 presented in our consolidated financial statements are not generally meaningful as we did not have substantial
rental operations in 2012. Operations and activity did not increase significantly until the fourth quarter of 2013 when we purchased
an additional 150 homes, and raised equity through our private placement activities as mentioned above.
For the year ended December
31, 2013, the Company had total rental income of $342,243 and rental expenses of $136,679, resulting in net operating income from
rentals of $205,564. General and administrative expenses totaled $366,071. Legal and accounting totaled $195,156. Real estate acquisition
costs totaled $279,965. Interest expense on the retirement of our convertible notes payable was $77,004. Depreciation and amortization
totaled $96,812. Amortization of discount on notes payable was $563,253. This resulted in a net loss of $1,372,697. As the convertible
notes were paid off or converted on September 27, 2013, we do not expect to incur future amortization charges relating to note
discounts in 2014.
For the year ended December
31, 2012, the Company had total rental income of $6,750. Rental expenses were $1,006, resulting in net operating income
from rentals of $5,744. Legal and accounting expenses totaled $396,797, general and administrative expenses were $132,261. Legal
and accounting expenses were paid primarily for services necessary for the Company’s change of operations and for developing
documents necessary to pursue future acquisitions and capital activities. Interest, depreciation and amortization of discount on
notes payable totaled $71,188. Income from discontinued operations was $334. As a result, the Company had a net loss
of $594,168 for the year ended December 31, 2012.
Liquidity and Capital Resources
Our liquidity and capital
resources as of December 31, 2013 consisted of cash of $2,134,510. As of December 31, 2012, the cash balance was $5,763. The
liquidity position at December 31, 2013 resulted primarily from the excess of funds raised from the Company’s private placement
over funds invested in the purchase of home inventory. The Company used $767,899 for operating activities in 2013. This resulted
from a net loss of $1,372,697, after adding back the amortization of debt discount of $563,253, depreciation and amortization of
$96,812, and subtracting the net change in operating assets and liabilities of $55,267. The Company used $140,778 in operations
in 2012.
In 2013, the Company invested
$11,855,960 in new homes and $99,300 in lease origination costs totaling $11,955,260 of cash used for investing activities. For
the year ended December 31, 2012, the Company used $343,410 of cash in investing activities to acquire homes. Note that subsequent
to year end, on January 31, 2014, the Company purchased an additional 18 homes in Houston, Texas and used $1,541,371 of cash.
The Company had net cash
provided by financing activities of $14,851,906 in 2013 derived from $14,539,082 of net proceeds from the issuance of common stock,
$500,000 from the issuance of convertible notes payable, less payments of convertible notes payable of $152,176, and deferred stock
issuance costs of $35,000. For the year ended December 31, 2012, the Company received $554,352 of proceeds from convertible notes
payable, paid $15,000 of convertible notes payable, and had $50,000 of deferred stock issuance costs resulting in $489,352 of net
cash provided by financing activities. Thus 2012 operating and investing activities were financed primarily from the issuance of
convertible notes payable.
The Company’s future
acquisition activity relies primarily on its ability to raise funds from the further issuance of common shares combined with new
loan transactions secured by its current and future home inventories. The Company remains focused on acquiring new capital. The
Company believes its current cash balance combined with its estimated future net rental revenue is sufficient to fund its operating
activities in 2014.
Critical Accounting Policies and Estimates
The discussion and analysis
of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated
financial statements requires us to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical
experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions. The following represents a summary of
our critical accounting policies, defined as those policies that we believe are the most important to the portrayal of our financial
condition and results of operations and that require management’s most difficult, subjective or complex judgments, often
as a result of the need to make estimates about the effects of matters that are inherently uncertain.
Revenue Recognition
Property is leased under
rental agreements of generally one year and revenue is recognized over the lease term on a straight-line basis.
Investments in Real Estate
The Company accounts for its investments in
real estate as business combinations under the guidance of FASB ASC Topic
805, Business Combinations (“ASC 805”) and these acquisitions are recorded at fair value, allocated to land,
building and the existing leases based upon their fair values at the date of acquisition, with acquisition costs expensed as incurred.
In making estimates of fair values for purposes of allocating purchase price, the Company utilizes its own market knowledge and
published market data. The estimated fair value of acquired in-place leases represents the expected costs the Company would have
incurred to lease the property at the date of acquisition. Each portfolio of acquired property is recorded as a separate
business combination.
Land, buildings and improvements are recorded
at cost. Buildings and improvements are depreciated over estimated useful lives of approximately 27.5 years using the straight-line
method. Lease origination costs are amortized over the average remaining term of the in-place leases which is generally less than
one year. Maintenance and repair costs are charged to expenses as incurred.
The Company assesses the impairment of investments
in real estate, whenever events or changes in business circumstances indicate that carrying amounts of the assets may not be fully
recoverable. When such events occur, management determines whether there has been impairment by comparing the asset’s carrying
value with its fair value. Should impairment exist, the asset is written down to its estimated fair value. The Company has not
recognized any impairment losses for the years ended December 31, 2012 and 2013.
Warrant Issuance and Note Conversion Feature
The Company accounts for
the proceeds from the issuance of convertible notes payable with detachable stock purchase warrants and embedded conversion features
in accordance with FASB ASC 470-20, Debt with Conversion and Other Options. Under FASB ASC 470-20, the proceeds from the
issuance of a debt instrument with detachable stock purchase warrants shall be allocated to the two elements based on the relative
fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance. The portion of
the proceeds allocated to the warrants is accounted for as additional paid-in capital and the remaining proceeds are allocated
to the debt instrument which resulted in a discount to debt which is amortized and charged as interest expense over the term of
the note agreement. Additionally, pursuant to FASB ASC 470-20, the intrinsic value of the embedded conversion feature of the convertible
notes payable is included in the discount to debt and amortized and charged to interest expense over the life of the note agreement.
Income Taxes
We intend to elect
to be taxed as a REIT, as defined in the Internal Revenue Code, once we meet all the necessary requirements. However, no assurance
can be given that we will qualify or remain qualified as a REIT. In the event we qualify and elect to be taxed as a REIT, we will
not be subject to federal income tax provided that our distributions to our stockholders equal or exceed our REIT taxable income
and satisfy all other requirements under the Internal Revenue Code.
However, qualification
and taxation as a REIT depend upon our ability to meet the various qualification tests imposed under the Internal Revenue Code
related to the percentage of income that we earn from specified sources, the percentage of our assets that fall within specified
categories, the diversity of our capital stock ownership, and the percentage of our earnings that we distribute. Accordingly, no
assurance can be given that we will be organized or be able to operate in a manner so as to qualify or remain qualified as a REIT.
If we fail to qualify as a REIT in any taxable year, we will be subject to federal and state income tax (including any applicable
alternative minimum tax) on our taxable income at regular corporate tax rates, and we may be ineligible to qualify as a REIT for
four subsequent tax years. Even if we qualify as a REIT, we may be subject to certain state or local income taxes.
The tax benefit
of uncertain tax positions is recognized only if it is “more likely than not” that the tax position will be sustained,
based solely on its technical merits, with the taxing authority having full knowledge of relevant information. The measurement
of a tax benefit for an uncertain tax position that meets the “more likely than not” threshold is based on a cumulative
probability model under which the largest amount of tax benefit recognized is the amount with a greater than 50% likelihood of
being realized upon ultimate settlement with the taxing authority, having full knowledge of all the relevant information. As of
December 31, 2012 and 2013, we had no unrecognized tax benefits. We do not anticipate a significant change in the total amount
of unrecognized tax benefits during 2014.
Off-Balance Sheet Arrangements
The registrant had no material
off-balance sheet arrangements as of December 31, 2013.
New Accounting Pronouncements
The registrant has adopted
all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet
effective, is not anticipated to have a material effect on the financial position or results of operations of the registrant.
Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk |
As
a "smaller reporting company" defined in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting
obligations and therefore are not required to provide the information requested by this item.
Item 8. |
Consolidated Financial Statements and Supplementary Data |
Index To Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and
Stockholders of Reven Housing REIT, Inc.
We have audited the accompanying consolidated
balance sheets of Reven Housing REIT, Inc. and Subsidiaries (the “Company”) as of December 31, 2013 and 2012, and the
related consolidated statements of operations, changes in stockholders’ (deficit) equity, and cash flows for each of the
years in the two-year period then ended. The Company’s management is responsible for these consolidated financial statements.
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of Reven Housing REIT, Inc. as of
December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the years in the two-year period then
ended in conformity with accounting principles generally accepted in the United States of America.
San Diego, California |
|
/s/ PKF |
March 25, 2014 (Except for Restatement of |
|
Certified Public Accountants |
Consolidated Financial Statements under Note 1, |
|
A Professional Corporation |
as to which the date is March 10, 2015) |
|
|
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2012 and 2013
| |
| | |
(Restated, Note 1) | |
| |
2012 | | |
2013 | |
ASSETS | |
| | | |
| | |
| |
| | | |
| | |
Investment in real estate: | |
| | | |
| | |
Land | |
$ | 67,019 | | |
$ | 2,514,009 | |
Buildings and improvements | |
| 276,391 | | |
| 9,685,361 | |
| |
| 343,410 | | |
| 12,199,370 | |
Accumulated depreciation | |
| (1,400 | ) | |
| (73,950 | ) |
Investment in real estate, net | |
| 342,010 | | |
| 12,125,420 | |
| |
| | | |
| | |
Cash | |
| 5,763 | | |
| 2,134,510 | |
Rents and other receivables | |
| 3,375 | | |
| 10,053 | |
Escrow deposits and prepaid expenses | |
| - | | |
| 151,128 | |
Lease origination costs, net | |
| - | | |
| 75,038 | |
Deferred stock issuance costs | |
| 50,000 | | |
| 35,000 | |
| |
| | | |
| | |
Total Assets | |
$ | 401,148 | | |
$ | 14,531,149 | |
| |
| | | |
| | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY | |
| | | |
| | |
| |
| | | |
| | |
Convertible notes payable - officer, net of debt discount of $123,430 in 2012, and $0 in 2013 | |
$ | 128,746 | | |
$ | - | |
Convertible notes payable, net of debt discount of $122,364 in 2012, and $0 in 2013 | |
| 127,635 | | |
| - | |
Convertible notes payable - shareholders, net of debt discount of $25,539 in 2012, and $0 in 2013 | |
| 26,638 | | |
| - | |
Accounts payable and accrued expenses | |
| 119,978 | | |
| 347,179 | |
Accrued interest and security deposits | |
| 14,770 | | |
| 156,985 | |
Related party advance | |
| 266,877 | | |
| - | |
| |
| | | |
| | |
Total Liabilities | |
| 684,644 | | |
| 504,164 | |
| |
| | | |
| | |
Commitments (Note 9) | |
| | | |
| | |
| |
| | | |
| | |
Stockholders' (Deficit) Equity | |
| | | |
| | |
Preferred stock, $.001 par value; 25,000,000 shares authorized; No shares issued & outstanding | |
| - | | |
| - | |
Common stock, $.001 par value; 600,000,000 shares authorized; 8,350,000 shares issued & outstanding at December 31, 2012 and 87,860,880 at December 31, 2013 | |
| 8,350 | | |
| 87,861 | |
Additional paid-in capital | |
| 349,513 | | |
| 15,953,180 | |
Accumulated deficit | |
| (641,359 | ) | |
| (2,014,056 | ) |
Total Stockholders' (Deficit) Equity | |
| (283,496 | ) | |
| 14,026,985 | |
| |
| | | |
| | |
Total Liabilities and Stockholders' (Deficit) Equity | |
$ | 401,148 | | |
$ | 14,531,149 | |
The accompanying notes are an integral part
of the consolidated financial statements.
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2012 and
2013
| |
| | |
(Restated, Note 1) | |
| |
2012 | | |
2013 | |
| |
| | |
| |
Rental income | |
$ | 6,750 | | |
$ | 342,243 | |
| |
| | | |
| | |
Operating expenses: | |
| | | |
| | |
Rental expenses | |
| 1,006 | | |
| 136,679 | |
General and administrative | |
| 132,261 | | |
| 366,071 | |
Legal and accounting | |
| 396,797 | | |
| 195,156 | |
Real estate acquisition costs | |
| - | | |
| 279,965 | |
Interest expense | |
| 13,258 | | |
| 77,004 | |
Amortization of discount on notes payable | |
| 56,530 | | |
| 563,253 | |
Depreciation and amortization expense | |
| 1,400 | | |
| 96,812 | |
| |
| | | |
| | |
Total operating expenses | |
| 601,252 | | |
| 1,714,940 | |
| |
| | | |
| | |
Loss from continuing operations | |
| (594,502 | ) | |
| (1,372,697 | ) |
| |
| | | |
| | |
Income from discontinued operations, net of taxes | |
| 334 | | |
| - | |
| |
| | | |
| | |
Net loss | |
$ | (594,168 | ) | |
$ | (1,372,697 | ) |
| |
| | | |
| | |
Net loss per share from continuing operations | |
| | | |
| | |
(Basic and fully diluted) | |
$ | (0.06 | ) | |
$ | (0.05 | ) |
| |
| | | |
| | |
Net loss per share from discontinued operations | |
| | | |
| | |
(Basic and fully diluted) | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Weighted average number of | |
| | | |
| | |
common shares outstanding | |
| 9,170,492 | | |
| 26,732,284 | |
The accompanying notes are an integral part
of the consolidated financial statements.
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
(DEFICIT) EQUITY
For the Years Ended December 31, 2012 and
2013
| |
Common Stock | | |
| | |
| | |
| |
| |
| | |
| | |
Additional | | |
Accumulated | | |
| |
| |
Shares | | |
Amount | | |
Paid-in Capital | | |
Deficit | | |
Total | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at December 31, 2011 | |
| 10,000,000 | | |
$ | 10,000 | | |
$ | 20,000 | | |
$ | (47,191 | ) | |
$ | (17,191 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Shares returned to treasury | |
| (1,650,000 | ) | |
| (1,650 | ) | |
| 1,650 | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Fair value of note conversion | |
| - | | |
| - | | |
| 327,863 | | |
| - | | |
| 327,863 | |
feature and warrants issued | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| - | | |
| - | | |
| - | | |
| (594,168 | ) | |
| (594,168 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at December 31, 2012 | |
| 8,350,000 | | |
| 8,350 | | |
| 349,513 | | |
| (641,359 | ) | |
| (283,496 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Fair value of note conversion | |
| - | | |
| - | | |
| 291,920 | | |
| - | | |
| 291,920 | |
feature and warrants issued | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued on conversion of notes | |
| 4,510,880 | | |
| 4,511 | | |
| 897,665 | | |
| - | | |
| 902,176 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuances of shares | |
| 75,000,000 | | |
| 75,000 | | |
| 14,414,082 | | |
| - | | |
| 14,489,082 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss (restated, Note 1) | |
| - | | |
| - | | |
| - | | |
| (1,372,697 | ) | |
| (1,372,697 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at December 31, 2013 (restated, Note 1) | |
| 87,860,880 | | |
$ | 87,861 | | |
$ | 15,953,180 | | |
$ | (2,014,056 | ) | |
$ | 14,026,985 | |
The accompanying notes are an integral part
of the consolidated financial statements.
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2012 and 2013
| |
| | |
(Restated, Note 1) | |
| |
| 2012 | | |
| 2013 | |
Cash Flows From Operating Activities: | |
| | | |
| | |
Net loss | |
$ | (594,168 | ) | |
$ | (1,372,697 | ) |
Net income from discontinued operations | |
| (334 | ) | |
| - | |
Adjustments to reconcile net loss to net cash used for operating activities: | |
| | | |
| | |
Amortization of debt discount | |
| 56,530 | | |
| 563,253 | |
Depreciation and amortization | |
| 1,400 | | |
| 96,812 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Rents and other receivables | |
| (3,375 | ) | |
| (6,678 | ) |
Escrow deposits and prepaid expenses | |
| - | | |
| (151,128 | ) |
Accounts payable, accrued expenses, accrued interest and security deposits | |
| 131,958 | | |
| 369,416 | |
Related party advances | |
| 266,877 | | |
| (266,877 | ) |
Net cash used for operating activities - continuing operations | |
| (141,112 | ) | |
| (767,899 | ) |
Net cash provided for operating activities - discontinued operations | |
| 334 | | |
| - | |
Net cash used for operating activities | |
| (140,778 | ) | |
| (767,899 | ) |
| |
| | | |
| | |
Cash Flows From Investing Activities: | |
| | | |
| | |
Acquisition of residential homes | |
| (343,410 | ) | |
| (11,855,960 | ) |
Lease origination costs | |
| - | | |
| (99,300 | ) |
Net cash used for investing activities | |
| (343,410 | ) | |
| (11,955,260 | ) |
| |
| | | |
| | |
Cash Flows From Financing Activities: | |
| | | |
| | |
Proceeds from convertible notes payable | |
| 554,352 | | |
| 500,000 | |
Payment of convertible notes payable | |
| (15,000 | ) | |
| (152,176 | ) |
Deferred stock issuance costs | |
| (50,000 | ) | |
| (35,000 | ) |
Net proceeds from common stock issuance | |
| - | | |
| 14,539,082 | |
Net cash provided by financing activities | |
| 489,352 | | |
| 14,851,906 | |
| |
| | | |
| | |
Net Increase In Cash | |
| 5,164 | | |
| 2,128,747 | |
Cash at the Beginning of the Year | |
| 599 | | |
| 5,763 | |
| |
| | | |
| | |
Cash at the End of the Year | |
$ | 5,763 | | |
$ | 2,134,510 | |
| |
| | | |
| | |
Supplemental Disclosure of Non-Cash Investing and Financing Activities: | |
| | | |
| | |
| |
| | | |
| | |
Debt discount for allocation of proceeds to warrants and beneficial | |
| | | |
| | |
conversion feaure of debt | |
$ | 327,863 | | |
$ | 291,920 | |
Conversion of debt to common shares | |
$ | - | | |
$ | 902,176 | |
Deferred costs of common stock issuance | |
$ | - | | |
$ | 50,000 | |
| |
| | | |
| | |
Supplemental Disclosure: | |
| | | |
| | |
| |
| | | |
| | |
Cash paid for interest | |
$ | 2,790 | | |
$ | 88,821 | |
The accompanying notes are an integral part
of the consolidated financial statements.
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2013
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Reven Housing REIT, Inc. and Subsidiaries (the
“Company”) (formerly known as Bureau of Fugitive Recovery, Inc.) was incorporated in the State of Colorado on April
26, 1995. The Company previously provided bounty hunting services for bail bond businesses through July 2, 2012.
On July 2, 2012 Chad M. Carpenter purchased
an aggregate of 5,999,300 shares of the outstanding common stock of the Company from certain of the Company’s stockholders
in a private transaction. In connection with the transaction, an aggregate of 1,650,000 shares of the Company’s outstanding
common stock were returned to treasury for cancellation. Immediately upon the closing of the transaction, Mr. Carpenter became
the majority shareholder and Chief Executive Officer of the Company and beneficially owned stock representing 71.8 percent of the
outstanding voting shares of the Company.
The Company formally changed its name from
Bureau of Fugitive Recovery, Inc. to “Reven Housing REIT, Inc.” and commenced activities to acquire portfolios of occupied
and rented single-family houses throughout the United States in accordance with its new business plan. The Company’s business
plan involves (i) acquiring portfolios of rented houses from investors; and (ii) receiving income from rental property activity
and future profits from sale of rental property at appreciated values.
Restatement of Consolidated Financial Statements
In connection with preparing the annual financial
information for the year ending December 31, 2014, prior period errors were identified which affected the annual period ended December 31,
2013. These errors occurred in the Company’s accounting for the acquisition of certain real property portfolios of single
family homes included in investment in real estate and involve acquisition costs that were improperly capitalized, and the reallocation
of acquisition values from building and improvements to lease origination costs. These errors require the Company to restate previously
reported financial results contained in this report. The effects of these prior period errors in the consolidated financial statements
are as follows:
| |
December 31, 2013 | |
| |
As | | |
As previously | | |
| |
| |
Restated | | |
Reported | | |
Adjustment | |
Consolidated Balance Sheet | |
| | | |
| | | |
| | |
Buildings and improvements | |
$ | 9,685,361 | | |
$ | 10,064,626 | | |
$ | (379,265 | ) |
Accumulated depreciation | |
$ | (73,950 | ) | |
$ | (76,200 | ) | |
$ | 2,250 | |
Investment in real estate, net | |
$ | 12,125,420 | | |
$ | 12,502,435 | | |
$ | (377,015 | ) |
Lease origination costs | |
$ | 75,038 | | |
$ | - | | |
$ | 75,038 | |
Total Assets | |
$ | 14,531,149 | | |
$ | 14,833,126 | | |
$ | (301,977 | ) |
Accumulated deficit | |
$ | (2,014,056 | ) | |
$ | (1,712,079 | ) | |
$ | (301,977 | ) |
Total Stockholders' Equity | |
$ | 14,026,985 | | |
$ | 14,328,962 | | |
$ | (301,977 | ) |
Total Liabilities and Stockholders' Equity | |
$ | 14,531,149 | | |
$ | 14,833,126 | | |
$ | (301,977 | ) |
| |
| | | |
| | | |
| | |
Consolidated Statement of Operations | |
| | | |
| | | |
| | |
Real estate acquisition costs | |
$ | 279,965 | | |
$ | - | | |
$ | 279,965 | |
Depreciation and amortization | |
$ | 96,812 | | |
$ | 74,800 | | |
$ | 22,012 | |
Total operating expenses | |
$ | 1,714,940 | | |
$ | 1,412,963 | | |
$ | 301,977 | |
Net loss | |
$ | (1,372,697 | ) | |
$ | (1,070,720 | ) | |
$ | (301,977 | ) |
Net loss per share | |
$ | (0.05 | ) | |
$ | (0.04 | ) | |
$ | (0.01 | ) |
| |
| | | |
| | | |
| | |
Consolidated Statement of Cash Flows | |
| | | |
| | | |
| | |
Net loss | |
$ | (1,372,697 | ) | |
$ | (1,070,720 | ) | |
$ | (301,977 | ) |
Depreciation and amortization | |
$ | 96,812 | | |
$ | 74,800 | | |
$ | 22,012 | |
Net cash used in operating activities | |
$ | (767,899 | ) | |
$ | (336,806 | ) | |
$ | (431,093 | ) |
Acquisitions of investments in real estate | |
$ | (11,855,960 | ) | |
$ | (12,235,225 | ) | |
$ | 379,265 | |
Lease origination costs | |
$ | (99,300 | ) | |
$ | - | | |
$ | (99,300 | ) |
Net cash used in investing activities | |
$ | (11,955,260 | ) | |
$ | (12,386,353 | ) | |
$ | 431,093 | |
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2013
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Discontinued Operations
On July 2, 2012, the Company discontinued operations
related to the Bureau of Fugitive Recovery, Inc. upon Chad M. Carpenter becoming the majority shareholder of the Company. Accordingly,
the former operations are classified as discontinued operations in the accompanying consolidated statements of operations.
Basis of Accounting
The accompanying consolidated financial statements
are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
Principles of Consolidation
The accompanying financial statements consolidate
the accounts of the Company and its wholly-owned subsidiaries, Reven Housing Georgia, LLC and Reven Housing Texas, LLC. All significant
inter-company transactions have been eliminated in consolidation.
New Accounting Pronouncements
The Company has adopted all recently issued
accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated
to have a material effect on the financial position or results of operations of the Company.
Cash and Cash Equivalents
The Company considers all highly liquid investments
with an original maturity of three months or less as cash equivalents.
Rents and Other Receivables
Rents and other receivables represent the amount
of rent receivables, security deposits and net rental funds which are held by the property manager on behalf of the Company, net
of any allowance for amounts deemed uncollectible.
Deferred Stock Issuance Costs
Deferred stock issuance costs represent amounts
paid for consulting services and other offering expenses in conjunction with the future raising of additional capital to be performed
within one year. These costs are charged against additional paid-in capital as a cost of the stock issuance upon closing of the
respective stock placement.
Concentration of Risk
Financial instruments, which potentially subject
the Company to concentrations of credit risk, consist of cash. The Company’s cash in excess of the Federal Deposit Insurance
Corporation insured limits at December 31, 2013, were approximately $1,911,000. The Company does not believe it is exposed to any
significant credit risk due to the quality nature of the financial instruments in which the money is held.
Warrant Issuance and Note Conversion Feature
The Company accounts for the proceeds from
the issuance of convertible notes payable with detachable stock purchase warrants and embedded conversion features in accordance
with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 470-20, Debt
with Conversion and Other Options. Under FASB ASC 470-20, the proceeds from the issuance of a debt instrument with detachable
stock purchase warrants shall be allocated to the two elements based on the relative fair values of the debt instrument without
the warrants and of the warrants themselves at the time of issuance. The portion of the proceeds allocated to the warrants is accounted
for as additional paid-in capital and the remaining proceeds are allocated to the debt instrument which resulted in a discount
to debt which is amortized and charged as interest expense over the term of the note agreement. Additionally, pursuant to FASB
ASC 470-20, the intrinsic value of the embedded conversion feature of the convertible notes payable is included in the discount
to debt and amortized and charged to interest expense over the life of the note agreement.
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2013
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition
Property is leased under rental agreements of generally one year
and revenue is recognized over the lease term on a straight-line basis.
Income Taxes
The Company intends to elect to be
taxed as a REIT, as defined in the Internal Revenue Code, upon meeting the necessary requirements. Management believes that the
Company will be able to satisfy the requirements for qualification as a REIT. Accordingly, the Company is not expecting to be subject
to federal income tax, provided that it qualifies as a REIT and distributions to the stockholders equal or exceed REIT taxable
income.
However, qualification and taxation
as a REIT depend upon the Company’s ability to meet the various qualification tests imposed under the Internal Revenue Code
related to the percentage of income that are earned from specified sources, the percentage of assets that fall within specified
categories, the diversity of capital stock ownership, and the percentage of earnings that are distributed. Accordingly, no assurance
can be given that the Company will be organized or be able to operate in a manner so as to qualify or remain qualified as a REIT.
If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal and state income tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate tax rates, and the Company may be ineligible to
qualify as a REIT for four subsequent tax years. Even if the Company qualifies as a REIT, it may be subject to certain state or
local income taxes.
The tax benefit of uncertain tax
positions is recognized only if it is “more likely than not” that the tax position will be sustained, based solely
on its technical merits, with the taxing authority having full knowledge of relevant information. The measurement of a tax benefit
for an uncertain tax position that meets the “more likely than not” threshold is based on a cumulative probability
model under which the largest amount of tax benefit recognized is the amount with a greater than 50% likelihood of being realized
upon ultimate settlement with the taxing authority, having full knowledge of all the relevant information. As of December 31, 2012
and 2013, the Company had no unrecognized tax benefits. The Company does not anticipate a significant change in the total amount
of unrecognized tax benefits during 2014.
Incentive Compensation Plan
During 2012, the Company established the 2012
Incentive Compensation Plan, which was subsequently amended and restated in December 2013 (“2012 Plan”). The 2012 Plan
allows for the grant of options and other awards representing up to 33,000,000 shares of the Company’s common stock. Such
awards may be granted to officers, directors, employees, consultants and other persons who provide services to the Company or any
related entity. Under the 2012 Plan, options may be granted at an exercise price greater than or equal to the market value at the
date of the grant, for owners of 10% or more of the voting shares, at an exercise price of not less than 110% of the market value.
Awards are exercisable over a period of time as determined by a committee designated by the Board of Directors, but in no event
longer than ten years. No awards have been granted as of December 31, 2013.
Net Loss Per Share
Net loss per share is computed by dividing
the net loss by the weighted average number of shares of common stock outstanding. Warrants, stock options, and common stock issuable
upon the conversion of the Company's preferred stock (if any), are not included in the computation if the effect would be anti-dilutive
and would increase the earnings or decrease loss per share. For the year ended December 31, 2012 there were no shares that were
potentially dilutive. For the year ended December 31, 2013, potentially dilutive securities excluded from the calculations were
5,271,760 shares issuable upon exercise of outstanding warrants granted in conjunction with the convertible notes.
Financial Instruments
The carrying value of the Company’s financial
instruments, as reported in the accompanying consolidated balance sheets, approximates fair value.
Security Deposits
Security deposits represent amounts deposited
by tenants at the inception of the lease.
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2013
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of Estimates
The preparation of the 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 balance sheet dates and reported amounts of expenses
for the periods presented. Accordingly, actual results could differ from those estimates. Significant estimates include assumptions
used to value warrants and conversion features associated with convertible notes payable (Note 3). Further, significant estimates
include assumptions used to determine the allocation of purchase prices of property acquisitions (Note 1).
Investments in Real Estate
The Company accounts for its investments in
real estate as business combinations under the guidance of FASB ASC Topic 805, Business Combinations (“ASC 805”)
and these acquisitions are recorded at fair value, allocated to land, building and the existing leases based upon their fair values
at the date of acquisition, with acquisition costs expensed as incurred. In making estimates of fair values for purposes of allocating
purchase price, the Company utilizes its own market knowledge and published market data. The estimated fair value of acquired in-place
leases represents the expected costs the Company would have incurred to lease the property at the date of acquisition. Each portfolio
of acquired property is recorded as a separate business combination.
Land, buildings and improvements are recorded
at cost. Buildings and improvements are depreciated over estimated useful lives of approximately 27.5 years using the straight-line
method. Lease origination costs are amortized over the average remaining term of the in-place leases which is generally less than
one year. Maintenance and repair costs are charged to expenses as incurred.
The Company assesses the impairment of investments
in real estate, whenever events or changes in business circumstances indicate that carrying amounts of the assets may not be fully
recoverable. When such events occur, management determines whether there has been impairment by comparing the asset’s carrying
value with its fair value. Should impairment exist, the asset is written down to its estimated fair value. The Company has not
recognized any impairment losses for the years ended December 31, 2012 and 2013.
Reclassifications
Certain amounts for 2012 have been reclassified
to conform to the current year’s presentation.
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2013
NOTE 2. RESIDENTIAL HOMES, NET
Reven Housing Georgia, LLC (a wholly owned
subsidiary of Reven Housing REIT, Inc.) completed the acquisition of nine residential homes. The nine homes are located in various
cities in Georgia. Five of these homes were purchased in 2012 and the remaining four homes were purchased on January 10, 2013.
On October 4, 2013, Reven Housing Texas, LLC
(a wholly owned subsidiary of Reven Housing REIT, Inc.) entered into a purchase and sale agreement for the purchase of a portfolio
of 170 single family homes located in the Houston, Texas metropolitan area. On October 31, 2013, the Company closed and completed
the purchase of 150 of the homes at a total cost of $11,592,532 excluding closing expenses (Note 10).
Residential homes purchased by the Company
are recorded at cost. The Homes are depreciated over the estimated useful lives using the straight-line method for financial reporting
purposes. The estimated useful life for the residential homes is estimated to be 27.5 years. The Homes are leased on short-term
leases expiring on various dates over the coming year.
The following table represents the Company’s net investment
in the homes and allocates purchase price in accordance with ASC 805:
| |
| | |
| | |
| | |
| | |
| | |
Investment | |
| |
Number | | |
| | |
Residential | | |
Total | | |
Accumulated | | |
In Real Estate | |
Purchased during 2012: | |
of Homes | | |
Land | | |
Homes | | |
Investment | | |
Depreciation | | |
Net | |
Georgia | |
| 5 | | |
$ | 67,019 | | |
$ | 276,391 | | |
$ | 343,410 | | |
$ | (1,400 | ) | |
$ | 342,010 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total at December 31, 2012 | |
| 5 | | |
| 67,019 | | |
| 276,391 | | |
| 343,410 | | |
| (1,400 | ) | |
| 342,010 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Purchased during 2013: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Georgia | |
| 4 | | |
| 52,631 | | |
| 210,797 | | |
| 263,428 | | |
| (16,800 | ) | |
| 246,628 | |
Texas | |
| 150 | | |
| 2,394,359 | | |
| 9,198,173 | | |
| 11,592,532 | | |
| (55,750 | ) | |
| 11,536,782 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total at December 31, 2013 | |
| 159 | | |
$ | 2,514,009 | | |
$ | 9,685,361 | | |
$ | 12,199,370 | | |
$ | (73,950 | ) | |
$ | 12,125,420 | |
Net investment in homes, as shown above, consists of the following
as of December 31:
| |
2012 | | |
2013 | |
| |
Number | | |
Investment | | |
Number | | |
Investment | |
| |
of Homes | | |
Net | | |
of Homes | | |
Net | |
Leased | |
| 5 | | |
$ | 342,010 | | |
| 146 | | |
$ | 11,228,018 | |
Vacant | |
| - | | |
| - | | |
| 13 | | |
| 897,402 | |
| |
| | | |
| | | |
| | | |
| | |
| |
| 5 | | |
$ | 342,010 | | |
| 159 | | |
$ | 12,125,420 | |
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2013
NOTE 3. CONVERTIBLE NOTES PAYABLE
The Company issued convertible promissory notes
(the “Notes”) to certain accredited investors, shareholders, and officers in the aggregate principal amount of $1,054,352.
Of this total, $500,000 was issued on January 3, 2013 in order to fund the four residential homes purchased in January 2013 and
to pay operating expenses. The maturity date for the Notes was the earlier of December 31, 2013, or upon the Company raising $5
million or more of equity capital. The Notes bore interest at a rate of 10 percent per annum payable in full on the maturity date
and were unsecured. Upon the Company successfully raising additional capital, the Notes could be exchanged by the holders for such
securities of the Company at the same price and on the same terms and conditions being offered to the other investors in such financing,
and the principal and accrued interest under the Notes could be applied towards the purchase price of such security. The Notes
could be prepaid in whole or in part at the Company’s option without penalty.
Of the total Notes, $652,176 were issued to
an officer, $350,000 were issued to accredited investors, and $52,176 to shareholders.
On September 27, 2013, in connection with the
Company’s sale of common stock through a private placement (Note 5), convertible notes with a principal balance of $902,176
were exchanged for 4,510,880 shares of common stock at a conversion price of $0.20 per share and retired. Also in connection with
the private placement, notes with a principal balance of $152,176 were paid in full with cash payments. Additionally, the Company
paid accrued interest of $82,071 on all the convertible notes with cash payments.
Warrant Issuance and Note Conversion Feature
In connection with the issuance of the above
Notes, the Company also issued to the investors 5-year detachable warrants exercisable for shares of the Company’s common
stock (the “Warrants”). The exercise price of the Warrants is at the same price per share as the price of the equity
securities sold to investors in the qualified equity financing, and each Warrant provides for 100% warrant coverage on the principal
amount of the related Note.
The fair value of the Warrants and debt beneficial
conversion feature were determined using the Monte-Carlo simulation valuation model that uses assumptions for expected volatility,
expected dividends, and the risk-free interest rate. Expected volatilities were based on weighted averages of the selected peer
group of thirteen companies as the Company has limited trading history and were estimated over the expected term of the Warrants.
The risk-free rate was based on the U.S. Treasury yield curve at the date of issuance for the period of the expected term.
Accordingly, the fair value of the proceeds
attributable to Warrants of $309,892 and the debt beneficial conversion feature of $309,891 totaling $619,783, was recorded as
an increase in additional paid-in capital and as a corresponding discount to the convertible notes payable. Of the total debt discount
of $619,783, $327,863 and $291,920 was recorded to additional paid-in capital and debt discount during 2012 and 2013, respectively.
The discount was amortized over the term of the convertible notes payable using the interest method. In connection with the Company’s
private placement of common stock and the corresponding conversion and retirement of the Notes, all remaining discount was recognized
as an expense as of September 27, 2013. Amortization of the discount amounted to $56,530 and $563,253 and is included as a separate
expense on the Consolidated Statements of Operations for the years ended December 31, 2012 and 2013, respectively.
A summary of the assumptions used to value
the warrants and the beneficial conversion feature are as follows:
| |
2012 | | |
2013 | |
Risk -free interest rate | |
| 0.79 | % | |
| 1.40 | % |
Expected stock volatility | |
| 48 | % | |
| 47 | % |
Time to expiration (years) | |
| 5 | | |
| 5 | |
Fair value of common stock | |
$ | 1.00 | | |
$ | 0.20 | |
Expected dividends | |
$ | 0.00 | | |
$ | 0.00 | |
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2013
NOTE 4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
At December 31, 2012 and 2013, accounts payable
and accrued expenses consisted of the following:
| |
2012 | | |
2013 | |
| |
| | |
| |
Accounts payable | |
$ | - | | |
$ | 89,666 | |
Accrued property taxes | |
| - | | |
| 196,141 | |
Accrued legal fees | |
| 119,978 | | |
| 61,372 | |
| |
| | | |
| | |
| |
$ | 119,978 | | |
$ | 347,179 | |
NOTE 5. STOCKHOLDERS’ EQUITY
On September 27, 2013, the Company entered
into a stock purchase agreement with King APEX Group II, Ltd. and King APEX Group III, Ltd., which are funds managed by Allied
Fortune (“HK”) Management Limited, a Hong Kong based funds management company, in connection with a private placement
of up to 125,000,000 shares of its common stock at a price of $0.20 per share, for aggregate gross proceeds of up to $25 million.
Under the terms of this agreement, a total of 75,000,000 shares at a gross price of $15,000,000 were purchased through December
31, 2013. Cash proceeds after offering expenses were $14,539,082, plus an additional non-cash expense of $50,000 representing additional
deferred costs relating to the private placement resulting in net proceeds of $14,489,082.
In connection with the private placement of
the Company’s common stock pursuant to the stock purchase agreement mentioned above, the Company also entered into a convertible
promissory note conversion agreement on September 27, 2013 with certain holders of its outstanding 10% convertible promissory notes.
Pursuant to the note conversion agreement, the Company agreed to issue shares of its common stock to those holders of the notes
desiring to convert their convertible notes at the conversion price of $0.20 per share for the cancellation of the outstanding
principal amounts under those notes. Certain holders elected to receive, and the Company agreed to make, cash payments on the outstanding
principal amounts on their notes in lieu of shares of common stock. In addition, the Company agreed to make cash payments on all
the accrued interest due under the notes. As a result of the above, the Company issued 4,510,880 shares and closed on the conversion
of $902,176 of aggregate principal of the Company’s outstanding notes. The remaining $152,176 of outstanding principal and
all of the accrued interest under the notes of $82,071 have been repaid in full. Additionally in connection with the Company’s
private placement, the number of Warrants issued and outstanding to the note holders was set at 5,271,760 shares at an exercise
price of $0.20 per share. The warrants will expire on September 27, 2018, if not exercised prior to that date.
As a result of the issuance of the 75,000,000
shares to King APEX Group II, Ltd. and King Apex Group III, Ltd., the two funds under common control collectively own approximately
85.4% of the Company’s outstanding voting shares and Mr. Carpenter now owns approximately 9.5% of the Company’s outstanding
voting shares.
On October 30, 2013, the Company amended its
Articles of Incorporation to increase the number of authorized shares to 600,000,000 from 100,000,000.
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2013
NOTE 6. INCOME TAXES
The Company plans to elect REIT status when
it meets all requirements allowing it to do so. At that time, the Company would generally not be subject to income taxes assuming
it complied with the specific distribution rules applicable to REITs.
Realization of deferred tax assets is dependent
upon sufficient future taxable income during the period that deductible temporary differences and expected carry-forwards are available
to reduce taxable income. The Company records a valuation allowance when, in the opinion of management, it is more likely than
not, that the Company will not realize some or all deferred tax assets. As the achievement of required future taxable income is
uncertain, the Company required a valuation allowance at December 31, 2012 and 2013. The valuation allowance increased by $226,000
and $192,000 during 2012 and 2013, respectively. At December 31, 2013 the Company had federal and state net operating loss carry-forwards
of approximately $675,000 and $673,000, respectively. The federal and state tax loss carry-forwards will begin to expire in 2032,
unless previously utilized.
Significant components of the Company’s
deferred tax assets are as follows:
| |
2012 | | |
2013 | |
| |
| | |
| |
Deferred tax assets: | |
| | | |
| | |
Start-up and acquisition costs | |
$ | 20,000 | | |
$ | 180,000 | |
Net operating losses | |
| 210,000 | | |
| 256,000 | |
| |
| 230,000 | | |
| 436,000 | |
| |
| | | |
| | |
Deferred tax liabilities: | |
| | | |
| | |
Depreciation and amortization | |
| - | | |
| (14,000 | ) |
| |
| | | |
| | |
Total | |
| 230,000 | | |
| 422,000 | |
Valuation allowance | |
| (230,000 | ) | |
| (422,000 | ) |
| |
| | | |
| | |
Net deferred tax assets | |
$ | - | | |
$ | - | |
Pursuant to Internal Revenue Code Section 382,
use of the Company’s net operating loss carry-forwards may be limited if a cumulative change in ownership of more than 50%
occurs within a three year period. Management believes that such an ownership change had occurred but has not performed a study
of the limitations on the net operating losses.
Expected income tax by applying the statutory
income tax rate to net loss differs from the actual tax provision as follows:
| |
2012 | | |
2013 | |
| |
| | |
| |
Tax computed at the federal statutory rate | |
$ | (210,000 | ) | |
$ | (364,000 | ) |
State taxes | |
| (16,000 | ) | |
| (62,000 | ) |
Permanent differences | |
| - | | |
| 225,000 | |
Other | |
| - | | |
| 9,000 | |
Valuation allowance | |
| 226,000 | | |
| 192,000 | |
| |
| | | |
| | |
Total provision | |
$ | - | | |
$ | - | |
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2013
NOTE 7. RELATED PARTY TRANSACTIONS
At December 31, 2012, the Company had convertible
notes payable outstanding to Chad M. Carpenter of $252,176. At September 27, 2013, the Company had convertible notes payable outstanding
to Chad M. Carpenter and Reven Capital, LLC, an entity wholly owned by Mr. Carpenter, in the amount of $652,176, that were converted
to Company common stock as described more fully in Notes 3 and 5.
At December 31, 2012, the Company had convertible
notes payable outstanding to certain other shareholders of the Company in the amount of $52,176. These notes were paid off or converted
to Company common stock on September 27, 2013 as described more fully in Notes 3 and 5.
At December 31, 2012, the Company owed Reven
Capital, LLC $266,877, for advances made for operating expenses. Reven Capital, LLC is wholly-owned by Chad M. Carpenter. The Company
sub-leases office space on a month-to-month basis from Reven Capital, LLC and reimburses Reven Capital for Company expenses paid
and previously advanced by Reven Capital, LLC. The advances are due on demand, unsecured and are non-interest bearing. During the
year ended December 31, 2013, the Company incurred an additional $148,438 of expenses that were paid by Reven Capital, LLC. All
of these advances were paid off in full during the year ending December 31, 2013, for total payments of $415,315.
For the year ended December 31, 2012, the Company
paid $50,000 for consulting services to a company in which a Board of Director member of the Company is the Senior Managing Principal
which was included in deferred stock issuance costs on the accompanying consolidated balance sheet as of December 31, 2012 and
was charged against additional paid-in capital upon the closing of the private placement on September 27, 2013.
NOTE 8. LEASE INCOME
The Company generally rents properties under
non-cancelable lease agreements with a term of one year. Future minimum rental revenues under leases existing on properties as
of December 31, 2013 are expected to be as follows:
2014 | |
$ | 535,301 | |
2015 | |
| 7,895 | |
| |
| | |
| |
$ | 543,196 | |
The Company operates in two states. The breakdown of lease income
between the two states for the years ending December 31, 2012 and 2013 are as follows:
| |
2012 | | |
2013 | |
| |
Rent | | |
Rent | |
| |
Revenue | | |
Revenue | |
Georgia | |
$ | 6,750 | | |
$ | 70,716 | |
Texas | |
| - | | |
| 271,527 | |
| |
| | | |
| | |
| |
$ | 6,750 | | |
$ | 342,243 | |
NOTE 9. COMMITMENTS
Property Management Agreement
The Company has entered into property management
agreements with unrelated property management companies in which the Company will pay management fees ranging from six to eight
percent of gross rental receipts.
REVEN HOUSING REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2013
NOTE 10. SUBSEQUENT EVENT
On January 31, 2014, a wholly owned subsidiary
of the Company closed on an additional 18 single family homes as part of the October 31, 2013 purchase (Note 2), located in the
Houston, Texas metropolitan area. The purchase price of the investment in the 18 homes, excluding acquisition and closing costs,
totaled $1,560,836.
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls
and Procedures
(a) Evaluation of Disclosure Controls and
Procedures.
Disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are controls and other procedures that are designed to provide reasonable
assurance that the information that we are required to disclose in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to our management, including our chief executive officer and chief financial officer,
as appropriate to allow timely decisions regarding required disclosure.
In connection with the preparation of this
Amendment No. 1, our management, under the supervision and with the participation of our chief executive officer and chief financial
officer, re-evaluated during the first quarter of 2015 the effectiveness of the design and operation of our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of December 31, 2013. In conducting their re-evaluation,
our management considered the material weaknesses in our internal control over financial reporting and the status of their remediation
as discussed below. Based on their current re-evaluation, our chief executive officer and chief financial officer concluded that
our disclosure controls and procedures were not effective as of December 31, 2013.
However, giving full consideration to the material
weaknesses described below, we performed additional analyses and other procedures, including among other things, engaging outside
professionals to further evaluate our accounting policies to verify that they were correctly applied based on our specific operating
business, additional transaction reviews, control activities and account reconciliations in order to provide assurance that our
consolidated financial statements included in this Amendment No. 1 were prepared in accordance with generally accepted accounting
principles (“GAAP”) and present fairly, in all material respects, our financial position, results of operations and
cash flows for the periods presented in conformity with GAAP. As a result of these and other expanded procedures, we believe that
the consolidated financial statements included in this Amendment No. 1 present fairly, in all material respects, our financial
position, results of operations and cash flows for the periods presented in conformity with GAAP.
(b) Management’s report on internal
controls over financial reporting.
Our management is responsible for establishing
and maintaining adequate internal controls over financial reporting, (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements
for external purposes in accordance with accounting principles generally accepted in the United States of America. Under the supervision
of and with the participation of our chief executive officer and chief financial officer, during the first quarter of 2015 management
conducted a re-assessment of the effectiveness of our internal control over financial reporting as of December 31, 2013 based on
the framework established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (2013 Framework). Management’s assessment included evaluation of elements such as the design and
operating effectiveness of key financial reporting controls, process documentation, and our overall control environment.
Based on this re-assessment, management concluded
that our internal controls over financial reporting were not effective as of December 31, 2013, for the reason described below.
In connection with the preparation of our consolidated
financial statement for the fiscal year ended December 31, 2014, we became aware that we had been improperly accounting for our
portfolio acquisitions of leased single family homes as asset acquisitions instead of business acquisitions. Therefore, we had
been capitalizing, instead of expensing, real property acquisition costs. Additionally, we determined that we had been improperly
allocating a portion of our purchase price relating to 2013 acquisitions on our balance sheet to building values instead of lease
origination costs. Our management concluded that these errors in accounting constituted “material weaknesses” in our
internal controls over financial reporting.
A “material weakness” is a significant
deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement
of the annual or interim financial statements presented will not be prevented or detected. A “significant deficiency”
is a control deficiency, or combination of control deficiencies, that adversely affects a company’s ability to initiate,
authorize, record, process or report external financial data reliably in accordance with GAAP such that there is more than a remote
likelihood that a misstatement of the annual or interim financial statements presented that is more than inconsequential will not
be prevented or detected.
Following our determination of the above-mentioned
errors in accounting, we performed additional analyses and other procedures, including among other things, engaging outside professionals
to further evaluate our accounting policies to verify that they were correctly applied based on our specific operating business,
additional transaction reviews, control activities and account reconciliations in order to provide assurance that our consolidated
financial statements included in this Amendment No. 1 were prepared in accordance with GAAP. Notwithstanding the fact that our
internal controls over financial reporting were not effective as of December 31, 2013, we believe that the consolidated financial
statements included in this Amendment No. 1 present fairly, in all material respects, our financial position, results of operations
and cash flows for the periods presented in conformity with GAAP.
This Amendment No. 1 does not include an attestation
report of our registered public accounting firm regarding internal control over financial reporting. Management’s report
was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange
Commission that permit us to provide only management’s report in this annual report.
(c) Changes in internal control over
financial reporting.
There were no changes to our internal control
over financial reporting (as defined in Rules 15a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter
ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
| Item 9B. | Other Information |
Not applicable.
PART III
Item
10. |
Directors,
Executive Officers and Corporate Governance |
Our Board of Directors
consists of six directors. Of these six directors, we believe that five, constituting a majority, are considered “independent”
as defined in Rule 5605 of the NASDAQ Marketplace Rules.
Set forth below are the
names, ages and positions of our directors and executive officers as of the date of this prospectus.
Name |
|
Age |
|
Position |
Chad M. Carpenter |
|
48 |
|
President, Chief Executive Officer, Chairman
of the Board of Directors |
Thad L. Meyer |
|
53 |
|
Chief Financial Officer and Secretary |
Jon Haahr |
|
60 |
|
Director |
Xiaofan Bai |
|
31 |
|
Director |
Xiaohang Bai |
|
25 |
|
Director |
Siyu Lan |
|
36 |
|
Director |
Guojuan Cheng |
|
57 |
|
Director |
Set forth below is biographical information
for each of our directors and executive officers.
Chad M. Carpenter
Mr. Carpenter has served
as our President and Chief Executive Officer and as a member of our Board of Directors since July 2, 2012, and as the Chairman
of our Board of Directors since August 29, 2012. Mr. Carpenter also served as our Chief Financial Officer from July 2, 2012 to
December 26, 2013 and as our Secretary from July 2, 2012 to July 5, 2012. He has also served as the Chief Executive Officer of
our subsidiaries, Reven Housing Georgia, LLC and Reven Housing Texas, LLC, since October 26, 2012 and October 9, 2013, respectively.
Mr. Carpenter is the chief executive officer and a member of the Board of Directors of Reven Capital, LLC (“Reven Capital”),
a private real estate investment firm focused on opportunistic investing, positions he has held since he founded Reven Capital
in January 2009. Mr. Carpenter oversees all aspects of Reven Capital’s operations and chairs all investment committees and
boards for each of its funds. Prior to founding Reven Capital, Mr. Carpenter served in various executive officer capacities, including
chief executive officer and as a member of the investment committee of Equastone, LLC (“Equastone”) since he co-founded
the company in 1994. Equastone was primarily engaged in the investment of office properties in the western and southern regions
of the United States. Mr. Carpenter has been involved in over $2 billion in real estate transactions, with over 25 years of experience
in real estate, investing, fund management, operations and brokerage across multiple property types. In addition, Mr. Carpenter
has experience with international investments and the acquisition of distressed debt and related foreclosure. He is a frequent
speaker on the topic of real estate investing and real estate capital markets. In 2005, Mr. Carpenter was selected as one of Real
Estate Southern California’s “40 Under 40.” In 2007, he was a finalist for the Ernst & Young Entrepreneur
of the Year Award in San Diego and was also chosen as one of the “20 Rising Stars of Real Estate” globally by Institutional
Investor News. Mr. Carpenter also currently serves on the Board of Directors of Western Residential Opportunity Fund, LLC, and
he was a member of the Board of Directors of Dahc Investments, Inc. from January 2009 to December 2012. Mr. Carpenter holds a Bachelor
of Arts degree in Economics from the University of Southern California.
We believe that Mr. Carpenter’s
experience as president and chief executive officer of Reven Housing REIT, Inc. and his many years of industry experience make
him a valuable member of our Board of Directors.
Jon K. Haahr
Mr. Haahr has served as
a member of our Board of Directors since July 5, 2012. Mr. Haahr is senior managing principal of Silver Portal Capital, LLC, which
is an investment and merchant bank focusing exclusively on the real estate sector. In this role, Mr. Haahr provides strategic and
financial advice and capital formation services to real estate clients with interests in a wide range of commercial, healthcare
and hospitality properties. Prior to founding Silver Portal in 2001, Mr. Haahr was co-head and managing director of real estate
investment banking for Wachovia Securities from 1999 to 2000. Mr. Haahr founded and managed the Real Estate and Lodging Group at
EVEREN Securities, Inc., the successor firm to Kemper Securities, from 1991 to 2000. Mr. Haahr also served on the board of directors
of Clarion Partners Property Trust Inc. from June 2010 to July 2013 and as non-executive chairman of the board of directors of
Genea Energy Partners, Inc. from April 2011 to August 2011. Other past board directorships that Mr. Haahr has served include Great
Lakes REIT, Inc. (NYSE: GL) and Arlington Hospitality, Inc. (NASDAQ: HOST). He also previously served as Trustee of the James A.
Graaskamp Center for Real Estate School at the University of Wisconsin in Madison. Mr. Haahr maintains a number of industry affiliations,
including the Urban Land Institute, an industry association representing community builders and Pension Real Estate Association,
an industry association for institutional real estate investors. Mr. Haahr is a certified public accountant and holds a Bachelor
of Arts in Economics from Iowa State University in Ames and a Master of Business Administration from the University of Iowa in
Iowa City.
We believe that Mr. Haahr’s
real estate investment banking experience, his prior experience on the board of directors of public and private companies, and
his certified public accountant designation are relevant experiences, attributes and skills that make him a valuable member of
our Board of Directors.
Xiaofan Bai
Mr. Bai was appointed to
our Board of Directors on September 27, 2013. He is currently the Chief Executive Officer and Chairman of the board of directors
of Allied Fortune (Hong Kong) Management Limited, which is a fund and asset management company focusing primarily in the real estate
sector. In this role, Mr. Bai oversees all aspects of Allied Fortune’s operations and manages its investment funds and real
assets. Prior to founding Allied Fortune in 2012, Mr. Bai was the Senior Investment Manager in China Pacific Insurance Co., the
third largest insurance company in China. Mr. Bai previously worked for the Real Estate Investment Banking team at Macquarie Bank,
where he participated in deals in Australia, Hong Kong, China, Japan and the USA and was primarily responsible for due diligence,
corporate valuation, negotiation and other investment banking activities. Mr. Bai also worked in the Proprietary Trading Department
of ShenYinWanGuo Securities Co., which was the earliest established securities company in China. Mr. Bai holds degrees in Finance
and Accounting from the University of Sydney.
We believe that Mr. Bai’s
extensive professional experience relating to investment banking, asset management and corporate management are relevant experiences,
attributes and skills that make him a valuable member of our Board of Directors.
Guojuan Cheng
Ms. Cheng was appointed
to our Board of Directors on September 27, 2013. Ms. Cheng worked for the Bank of China as a loan manager from 1998 to 2012. She
was an expert in corporate financing, corporate lending and relationship management. Ms. Cheng initiated and executed a large number
of corporate lending deals of large size for the Bank of China. Ms. Cheng holds a Bachelor’s Degree in Commerce from Shanghai
University.
We believe that Ms. Cheng’s
extensive professional experience in banking and finance are relevant experiences, attributes and skills that make her a valuable
member of our Board of Directors.
Siyu Lan
Ms. Lan was appointed to
our Board of Directors on September 27, 2013. Ms. Lan is currently the Chief Financial Officer of Allied Fortune (Hong Kong) Management
Limited. In this role, Ms. Lan oversees all company accounting practices and directs financial strategy, planning and forecasts.
Prior to joining Allied Fortune, Ms. Lan worked for China Development Bank as a senior loan officer from 2008 to 2012. She has
extensive experience in corporate lending, risk management, asset valuation and management accounting. Ms. Lan holds a Master of
Accounting from the University of Sydney and an Investment & Finance degree from Macquarie University Australia.
We believe that Ms. Lan’s
extensive professional experience in risk management and accounting are relevant experiences, attributes and skills that make her
a valuable member of our Board of Directors.
Xiaohang Bai
Mr. Bai was appointed to
our Board of Directors on September 27, 2013. Mr. Bai is currently the Chief Investment Officer of Allied Fortune (Hong Kong) Management
Limited. In this role, Mr. Bai leads the research team on global equities and provides professional skills in asset management.
Mr. Bai specializes in real estate stock investment and investment fund management. Mr. Bai is a FRM Part II candidate. He holds
a Bachelor of Science degree in Finance from the Shanghai University of International Business and Economics and a Master of Science
degree in Finance from the Clark University.
We believe that Mr. Bai’s
extensive professional experience relating to investments in global equities, especially in the real estate category, are relevant
experiences, attributes and skills that make him a valuable member of our board of directors.
Thad L. Meyer
Mr. Meyer has served as
our Secretary since October 30, 2013, and as our Chief Financial Officer since December 26, 2013. Mr. Meyer is President of Alliance
Turnaround Management, Inc., a position he has held since 2003. Alliance Turnaround Management is a problem resolution firm that
specializes in distressed real estate opportunities. Since February 2009, Mr. Meyer has also served as the Chief Financial Officer
of Reven Capital. From March 2011 to April 2013, Mr. Meyer served as principal and Chief Operating Officer of Southern California
Investors, Inc., a firm specializing in the acquisition, improvement and sale of distressed single family homes. Additionally,
from November 2004 to February 2009, Mr. Meyer served as the Chief Financial Officer of Equastone. Mr. Meyer is a Certified Public
Accountant, Certified Turnaround Professional, and a California Real Estate Broker. Mr. Meyer holds a Bachelor of Science degree
in Accounting from Colorado State University.
Family Relationships
Ms. Cheng is the mother
of Mr. Xiaofan Bai and the aunt of Mr. Xiaohang Bai, and Mr. Xiaofan Bai and Mr. Xiaohang Bai are cousins. There are no other family
relationships between any of our directors and executive officers.
Additional Information about our Board and
its Committees
The number of members of
our Board of Directors will be determined from time to time by resolution of our Board of Directors. Our Board of Directors currently
consists of six persons. Our directors hold office until the earlier of their death, resignation or removal or until their successors
have been qualified.
Our Board of Directors
has determined that all of our directors, with the exception of Mr. Carpenter, are “independent” as defined in Rule
5605 of the NASDAQ Marketplace Rules.
Our Board of Directors
believes its members collectively have the experience, qualifications, attributes and skills to effectively oversee the management
of our Company, including a high degree of personal and professional integrity, an ability to exercise sound business judgment
on a broad range of issues, sufficient experience and background to have an appreciation of the issues facing our Company, a willingness
to devote the necessary time to Board duties, a commitment to representing the best interests of our Company and a dedication to
enhancing stockholder value.
There have been no material
changes to the procedures by which our stockholders may recommend nominees to our Board of Directors.
Directors’
and Officers’ Liability Insurance
We do not have directors’
and officers’ liability insurance insuring our directors and officers against liability for acts or omissions in their capacities
as directors or officers. We have entered into indemnification agreements with key officers and directors, and such persons shall
also have indemnification rights under applicable laws, and our articles of incorporation and bylaws.
Executive Sessions of Independent Directors
We expect to have executive
sessions of our independent directors periodically at our board meetings.
Board Leadership Structure and Role in
Risk Oversight
We have not adopted a formal
policy on whether the chairman and chief executive officer positions should be separate or combined. Mr. Carpenter has served as
our chief executive officer since July 2012 and as our chairman of the board since August 2012.
Director Independence
We currently have six directors
serving on our Board of Directors: Chad M. Carpenter, Jon Haahr, Xiaofan Bai, Xiaohang Bai, Siyu Lan and Guojuan Cheng. We are
not currently a listed issuer and, as such, are not subject to any director independence standards. Using the independence standards
under the NASDAQ Marketplace Rules, all of our directors, with the exception of Mr. Carpenter, meet the independence standards.
Additionally, each of our compensation committee members (Messrs. Xiaofan Bai, Xiaohang Bai and Haahr) is “independent”
as defined in Rule 5605 of the NASDAQ Marketplace Rules.
Committees
The Company currently does
not have standing audit or nominating committees of the board of directors, and therefore our Board of Directors performs such
functions. Our common stock is not currently listed on any national exchange and we are not required to maintain such committees
by any self-regulatory agency. We do not believe it is currently necessary for our Board of Directors to appoint such committees
because the volume of matters that historically came before our Board of Directors for consideration permitted each director to
give sufficient time and attention to such matters to be involved in all decision making. At the appropriate time, the board intends
to form two standing committees of the board of directors: audit and nominating and corporate governance.
The Company does not currently
have an audit committee financial expert. The Board of Directors does not believe it is necessary to designate an audit committee
financial expert at this time due to the Company’s limited operating history and the limited volume of matters that come
before the Board of Directors requiring such an expert. At the time the Board forms the standing audit and nominating committees
of the Board of Directors, the Board intends to designate an audit committee financial expert.
Our compensation committee,
which is composed of Messrs. Xiaofan Bai, Xiaohang Bai, and Haahr, and for which Mr. Xiaofan Bai currently serves as the Chairman,
supports our Board of Directors in fulfilling its oversight responsibilities relating to senior management and director compensation,
including the administration of our Amended and Restated 2012 Incentive Compensation Plan. Each of the members of our Compensation
Committee is “independent” as defined in Rule 5605 of the NASDAQ Marketplace Rules.
Code of Ethics
Our Board of Directors
has adopted a code of ethics that applies to all of our employees, including our principal executive officer, principal financial
officer and principal accounting officer or controller, or persons performing similar functions. Among other matters, our code
of ethics is designed to deter wrongdoing and to promote the following:
| · | honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest; |
| · | full, fair, accurate, timely and understandable disclosure in our reports filed with the SEC and
other public communications; |
| · | compliance with applicable governmental laws, rules and regulations; |
| · | prompt internal reporting of violations of the code to appropriate persons identified in the code;
and |
| · | accountability for adherence to the code. |
Any waiver of the code
of ethics for our executive officers, directors or employees may be made only by the Nominating and Corporate Governance Committee
and will be promptly disclosed as required by law or stock exchange regulations.
A copy of our code of ethics
is available free of charge in print to any stockholder requesting a copy in writing from our corporate secretary at 7911 Herschel
Avenue, Suite 201, La Jolla, California 92037.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Securities
Exchange Act of 1934, as amended, or the Exchange Act, requires our directors and executive officers, and persons who beneficially
own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and
reports of changes of ownership of common stock and our other equity securities. Officers, directors and greater than ten percent
stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
Based solely on a review
of the copies of such reports furnished to us, and any written representations provided to us, during the fiscal year ended December
31, 2013, or with respect to such fiscal year, we believe that (i) Mr. Xiaofan Bai failed to file his initial statement of beneficial
ownership on Form 3; (ii) Mr. Xiaohang Bai, Ms. Guojuan Cheng and Ms. Siyu Lan failed to file on a timely basis each of their initial
statements of beneficial ownership on Form 3, which were filed on November 19, 2013; and (iii) Mr. Xiaofan Bai failed to file his
statements of changes in beneficial ownership on Form 4 in connection with his changes in ownership resulting from our private
placements on October 30, 2013 and November 22, 2013; and (iv) Allied Fortune (HK) Management Ltd failed to file on a timely basis
its statements of changes in beneficial ownership on Form 4 in connection with its changes in ownership resulting from our private
placements on October 30, 2013 and November 22, 2013, which was filed on March 12, 2014. With those exceptions, we believe that
all Section 16(a) filing requirements were met.
Item 11. | Executive Compensation |
Compensation Discussion and Analysis
SUMMARY COMPENSATION TABLE
Name and Principal Position | |
Year | |
Salary | | |
Bonus | | |
Stock Awards | | |
Option Awards | | |
Nonequity
Incentive Plan Compensation | | |
Nonqualified
Deferred Compensation Earnings | | |
All Other
Compensation | | |
Total | |
| |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Chad M. Carpenter, President, | |
2013 | |
$ | 60,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
$ | 60,000 | |
CEO, and Chairman (1) | |
2012 | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Thad L. Meyer, CFO, and | |
2013 | |
$ | 9,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
$ | 9,000 | |
Secretary (2) | |
2012 | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Michael P. Soni, Former | |
2013 | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
$ | 118,549 | | |
$ | 118,549 | |
Secretary (3) | |
2012 | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
$ | 27,500 | | |
$ | 27,500 | |
| (1) | Mr. Carpenter has served as our President, CEO and director since July 2, 2012, and as Chairman
since August 29, 2012. Mr. Carpenter also served as our CFO from July 2, 2012 to December 26, 2013 and as our Secretary from July
2-5, 2012. Mr. Carpenter received no compensation until September 2013, when the salary provisions of his employment agreement
were triggered based on our company reaching the benchmark of at least $10 million of capital (net of taxes and expenses). Mr.
Carpenter has been receiving monthly salary payments of $20,000 since October 1, 2013 in accordance with that agreement. |
| (2) | Mr. Meyer has served as our Secretary since October 30, 2013 and as our CFO since December 26,
2013. Mr. Meyer did not receive any compensation or payments in 2012. We do not have an employment agreement with Mr. Meyer but
intend to enter into an agreement in the near term. Mr. Meyer has been receiving monthly salary payments of $17,500 since January
1, 2014. Prior to joining our company as Secretary and CFO, Alliance Turnaround Management, Inc., a company of which Mr.
Meyer is the owner and President, provided certain consulting services to us and was paid $66,295 in fees in 2013 and $13,515 in
fees in 2012, and these fees paid to Alliance Turnaround were not executive compensation and therefore are not included in the
Summary Compensation Table. For more details regarding these consulting services provided to us, see the disclosure regarding
Alliance Turnaround Management, Inc., in Item 13 Certain Relationships and Related Party Transaction of this report. |
| (3) | Mr. Soni was our Secretary from July 5, 2012 until October 30, 2013. During the fiscal year ended
December 31, 2013, we paid an aggregate of $118,549 in consulting fees to Mr. Soni. During the fiscal year ended December 31, 2012,
we paid an aggregate of $27,500 in consulting fees to Mr. Soni. Other than such consulting fees, Mr. Soni did not receive any compensation
or payments in 2012 or 2013. We do not have an employment agreement with Mr. Soni. Mr. Soni has been receiving monthly consulting
payments of $13,333 since November 1, 2013. |
Executive Officers
Except as described above,
we have not paid any other salaries or other compensation to any of our executive officers from our inception through December
31, 2013. In addition, as of December 31, 2013, we had not granted any options or other equity awards, and therefore there are
no outstanding equity awards at fiscal year-end for fiscal 2013. As such, as of December 31, 2013, we had no information to report
in the form of the Outstanding Equity Awards at Fiscal Year-End Table.
Employment Agreement
On March 4, 2013, we entered
into an employment agreement with Chad M. Carpenter in connection with Mr. Carpenter’s services as our chief executive officer.
Mr. Carpenter has served as our president, chief executive officer, and a member of our board of directors since July 2012 when
Mr. Carpenter joined our company and is currently also the chairman of our Board of Directors.
The employment agreement
provides for an initial term of 5 years and automatically renews for successive 2-year terms, unless we or Mr. Carpenter elects
not to renew. Under the employment agreement, effective as of the date we have received at least $10 million of capital (net of
taxes and expenses) Mr. Carpenter is entitled to begin receiving an annual base salary of $240,000. As of September 2013, we reached
that benchmark, and Mr. Carpenter began receiving salary payments pursuant to the employment agreement. Mr. Carpenter will be entitled
to bonuses ranging from 50% to 200% of his base salary based on the satisfaction of performance criteria to be established by the
Board of Directors. Mr. Carpenter will also be entitled to participate in any benefit plans or other incentive plans that may be
offered by us to employees and executives and will be eligible to receive stock options and other equity awards under our 2012
Incentive Compensation Plan as determined by the Board. In the event that Mr. Carpenter’s employment is terminated by us
without cause, Mr. Carpenter leaves for good reason as specified in the employment agreement or the employment agreement is not
extended by us without cause or by Mr. Carpenter for good reason, then Mr. Carpenter will be entitled to receive a severance payment
equal to 2 times the sum of his annual base salary and target bonus plus a lump-sum payment equal to the greater of 1% of the value
of our company at the time of notice of termination or $2,000,000, less any gross amounts received or realized by Mr. Carpenter
in respect of any stock options or equity awards granted to him during the term his employment (the “Severance Payment”).
Mr. Carpenter will also be entitled to the Severance Payment if his employment is terminated by us without cause or by Mr. Carpenter
for good reason during the 18-month period following a change in control of our company. Furthermore, we have agreed to reimburse
Mr. Carpenter for actual expenses incurred in connection with the organization and startup of our business as a housing REIT and
any additional expenses incurred during the term of his employment.
We do not have an employment
agreement with Mr. Meyer but intend to enter into an agreement in the near term.
Compensation of Directors
Since inception we have
not paid any compensation to any of our directors for their services on our Board of Directors. It is the intention of our Board
of Directors to convene in the near future and adopt a compensation policy for members of our board of directors and to determine
appropriate compensation for our directors, to include reimbursement for our independent directors for reasonable out-of-pocket
expenses incurred in connection with the performance of their duties as directors, including, without limitation, travel expenses
in connection with their attendance in person at meetings of our Board of Directors and its committees.
Committee Interlocks and Insider Participation
During 2013, Messrs. Xiaofan
Bai, Xiaohang Bai, and Haahr served on our compensation committee, with Mr. Xiaofan Bai serving as chairman. None of these individuals
had any contractual or other relationships with us during such year except as directors. No interlocking relationship exists between
any member of our compensation committee and any member of any other company’s board of directors or compensation committee.
Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters
The following table sets
forth certain information regarding our shares of Common Stock beneficially owned as of March 19, 2014 for (i) each stockholder
known to be the beneficial owner of 5% or more of our outstanding shares of Common Stock, (ii) each named executive officer and
director, and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i)
over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person
has the right to acquire beneficial ownership at any time within 60 days. Unless otherwise indicated, the address of each stockholder
is c/o Reven Housing REIT, Inc., 7911 Herschel Avenue, Suite 201, La Jolla, California 92037.
For purposes of this table,
a person or group of persons is deemed to have “beneficial ownership” of any shares of Common Stock that such person
has the right to acquire within 60 days of this annual report. For purposes of computing the percentage of outstanding shares of
our Common Stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire
within 60 days of this annual report is deemed to be outstanding, but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not
constitute an admission of beneficial ownership. The beneficial ownership of each person was calculated based on 87,860,880 shares
of our Common Stock outstanding as of March 19, 2014.
Name and Address of Beneficial Owner | |
Number of Shares Beneficially Owned | | |
Percentage Beneficially Owned | |
5% Owners: | |
| | | |
| | |
King Apex Group Holdings II Limited (1) | |
| 37,500,000 | | |
| 42.7 | % |
King Apex Group Holdings III Limited (1) | |
| 37,500,000 | | |
| 42.7 | % |
Executive Officers and Directors: | |
| | | |
| | |
Chad M. Carpenter (2) | |
| 11,578,060 | | |
| 12.7 | % |
Jon Haahr (3) | |
| - | | |
| * | |
Xiaofan Bai (4) | |
| 75,000,000 | | |
| 85.4 | % |
Xiaohang Bai | |
| - | | |
| * | |
Siyu Lan | |
| - | | |
| * | |
Guojuan Cheng | |
| - | | |
| * | |
Thad L. Meyer | |
| 10,000 | | |
| * | |
All executive officers and directors as a group (7 persons) (2) | |
| 86,588,060 | | |
| 95.0 | % |
*Less than one percent.
| (1) | Address is OMC Chambers, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands. |
| (2) | Includes 3,260,880 shares underlying common stock purchase warrants held by Mr. Carpenter exercisable
as of January 1, 2014 and 10,000 shares owned by Mr. Carpenter’s minor child. |
| (3) | Mr. Haahr’s address is c/o Silver Portal Capital, LLC, 12265 El Camino Real, Suite 230, San
Diego, California 92130. |
| (4) | Includes 37,500,000 shares held of record by King Apex Group Holdings II Limited and 37,500,000
shares held of record by King Apex Group Holdings III Limited, shares of which Mr. Bai disclaims beneficial ownership. Mr. Bai
is the Chief Executive Officer of the two funds and has dispositive and voting control with respect to the shares held thereby. |
| Item 13. | Certain Relationships and Related Transactions, and
Director Independence |
Certain Relationships and Related Transactions
Except as described below,
since the beginning of fiscal year 2012, there have been no transactions, nor are there any currently proposed transactions, between
us and any of our officers, directors or their family members, in which the amount involved exceeds one percent of the average
of our total assets at year end for the last two completed fiscal years.
Silver Portal Capital, LLC
On July 24, 2012, we retained
Silver Portal Capital, LLC (“Silver Portal”) as our financial advisor and placement agent. In general, Silver Portal
provided advice to us on a broad range of matters relating to capital raising, including the introduction of one or more investors
to provide equity capital to us, and as may be mutually agreed upon. For its services, we paid Silver Portal an aggregate fee of
$50,000. In addition, Silver Portal was entitled to receive a success fee equal to 5% of the total amount of equity capital raised
by us from sources introduced to us by Silver Portal during the term of the engagement letter and the 12-month period following
the termination thereof. The $50,000 in fees previously paid to Silver Portal was to be deducted from the success fee. Under the
terms of the engagement, if Silver Portal was successful in placing at least $15,000,000 of aggregate capital for us, then Silver
Portal would be entitled to receive a warrant to purchase that number of shares of our common stock equal to the fees earned by
Silver Portal, which warrants would be exercisable at $1.00 per share and have a four-year term. Mr. Haahr, a member of our board
of directors, is senior managing principal of Silver Portal.
Alliance Turnaround Management, Inc.
From July 2012 to December
2013, Alliance Turnaround Management, Inc. provided financial, operational, and accounting services to us on a consulting basis.
Total fees paid were $66,295 in 2013 and $13,515 in 2012. Mr. Meyer is the owner of Alliance Turnaround Management, Inc. and serves
as its President.
Convertible Notes
At December 31, 2012, we
had convertible notes payable outstanding to Chad M. Carpenter in the amount of $252,176. On July 2, 2012, we issued convertible
promissory notes to four accredited investors in the aggregate principal amount of $52,789 (the “July Notes”), of which
Mr. Carpenter subscribed $26,395 prior to joining our company. The maturity date of the July Notes was July 2, 2013, and the July
Notes bore interest at a rate of 10 percent per annum payable in full on the maturity date and are unsecured.
On October 18, 2012, we
issued additional convertible promissory notes to five accredited investors in the aggregate principal amount of $500,000 (“October
Notes”). The maturity date for these notes was the earlier of December 31, 2013, or upon us raising $5 million of equity
capital. The notes bore interest at a rate of 10 percent per annum payable in full on the maturity date and are unsecured. Mr.
Carpenter was one of the individuals investing in this new note round and we issued a note for $225,000 to Mr. Carpenter in exchange
for his additional investment. Additionally, the July Notes bearing a principal balance of $52,789 were cancelled and exchanged,
along with the accrued interest due of $1,563, for new notes bearing terms identical to the October Notes round for an aggregate
principal balance of $554,352.
In connection with the
September 2013 Private Placement, we also entered into a Convertible Promissory Note Conversion Agreement (the “Note Conversion
Agreement”) on September 27, 2013, with certain holders of the October Notes. Pursuant to the Note Conversion Agreement,
we agreed to issue to those holders of the October Notes desiring to convert their October Notes shares of its common stock at
the conversion price of $0.20 per share for the cancellation of the outstanding principal amounts under those October Notes. Certain
holders elected to receive, and we agreed to make, cash payments on the outstanding principal amounts on their October Notes in
lieu of shares of common stock. In addition, we agreed to make cash payments on all of the accrued interest under the October Notes.
We closed on the conversion
of $902,176 of aggregate principal, representing approximately 86% of our issued and outstanding October Notes, on September 27,
2013. The remaining $152,176 of outstanding principal and all of the accrued interest under the October Notes have been repaid
in full, and all of the October Notes have therefore been cancelled and are no longer issued and outstanding.
Reven Capital, LLC
At December 31, 2012, we
owed Reven Capital, LLC $266,877 for advances made for operating expenses incurred during 2012. The advances are due on demand,
unsecured and are non-interest bearing. We sub-lease office space on a month-to-month basis from Reven Capital, LLC and reimburse
Reven Capital for Company expenses paid and previously advanced by Reven Capital, LLC. During the year ended December 31, 2013,
the Company incurred an additional $148,438 of expenses that were paid by Reven Capital, LLC. Reven Capital, LLC is wholly owned
by Mr. Carpenter. All of these advances were paid off in full during the year ending December 31, 2013.
Director Independence
We currently have six directors
serving on our board of directors: Chard M. Carpenter, Jon Haahr, Xiaofan Bai, Xiaohang Bai, Siyu Lan and Guojuan Cheng. We are
not currently a listed issuer and, as such, are not subject to any director independence standards. Using the independence standards
under the NASDAQ Marketplace Rules, all of our directors, with the exception of Mr. Carpenter, meet the independence standards.
Additionally, each of our compensation committee members (Messrs. Xiaofan Bai, Xiaohang Bai and Haahr) is “independent”
as defined in Rule 5605 of the NASDAQ Marketplace Rules.
| Item 14. | Principal Accountant Fees and Services |
Ronald R. Chadwick, P.C.
(“Chadwick”) audited our financial statements for the year ended December 31, 2011 and reviewed our interim financial
statements in fiscal years 2011 and 2012. On December 31, 2012, we dismissed Chadwick as our principal accountant and, on the same
date, retained PKF, Certified Public Accountants, A Professional Corporation (“PKF”). PKF audited our financial statements
for the years ended December 31, 2013 and December 31, 2012 and audited the acquisition with respect to our real estate acquisitions.
The following table presents fees for professional
audit services rendered by Chadwick during our fiscal years ended December 31, 2012:
| |
2012 | |
Audit Fees | |
$ | 4,500 | |
Audit-Related Fees | |
| — | |
Tax Fees | |
| — | |
All Other Fees | |
| — | |
| |
$ | 4,500 | |
The following table presents fees for professional
audit services rendered by PKF during our fiscal years ended December 31, 2013 and December 31, 2012:
| |
2013 | | |
2012 | |
Audit Fees | |
$ | 42,587 | | |
$ | — | |
Audit-Related Fees | |
| — | | |
| — | |
Tax Fees | |
| — | | |
| — | |
All Other Fees | |
| — | | |
| — | |
| |
$ | 42,587 | | |
$ | — | |
It is our board of director’s
policy and procedure to approve in advance all audit engagement fees and terms and all permitted non-audit services provided by
our independent auditors. All audit engagement fees and terms and permitted non-audit services provided by our independent registered
public accounting firm as described in the above tables were approved in advance by our board of directors.
PART IV
| Item 15. | Exhibits and Consolidated Financial Statement Schedules |
| (a) | Consolidated financial statements |
Reference is made to the
Index and Consolidated Financial Statements under Item 8 in Part II hereof where these documents are listed.
| (b) | Consolidated financial statement schedules |
Consolidated financial
statement schedules are either not required or the required information is included in the consolidated financial statements or
notes thereto filed under Item 8 in Part II hereof.
The exhibits to this Annual
Report on Form 10-K are set forth below. The exhibit index indicates each management contract or compensatory plan or arrangement
required to be filed as an exhibit.
Exhibit Index
Exhibit
Number |
|
Exhibit |
3.1 |
|
Restated Articles of Incorporation (16) |
3.2 |
|
Articles of Amendment to Restated Articles of Incorporation (17) |
3.3 |
|
Articles of Amendment to Restated Articles of Incorporation (3) |
3.4 |
|
Bylaws (16) |
10.1 |
|
Form of Convertible Promissory Note issued on July 2, 2012 (1) |
10.2 |
|
Letter Agreement dated July 24, 2012 (2) |
10.3† |
|
Amended and Restated 2012 Incentive Compensation Plan (3) |
10.4 |
|
Form of Convertible Promissory Note issued on October 18, 2012 (4) |
10.5 |
|
Form of Warrant issued on October 18, 2012(4) |
10.6 |
|
Single Family Homes Real Estate Purchase and Sale Agreement with WRI Capital Group II LLC (Atlanta, Georgia) (5) |
10.7 |
|
First Amendment to Real Estate Purchase and Sale Agreement with WRI Capital Group II LLC (Atlanta, Georgia) (5) |
10.8 |
|
Second Amendment to Real Estate Purchase and Sale Agreement with WRI Capital Group II LLC (Atlanta, Georgia) (5) |
10.9 |
|
Form of Convertible Promissory Note issued on January 3, 2013 (6) |
10.10 |
|
Form of Warrant issued on January 3, 2013 (6) |
10.11 |
|
Third Amendment to Real Estate Purchase and Sale Agreement with WRI Capital Group II LLC (Atlanta, Georgia) (7) |
10.12† |
|
Employment Agreement between Reven Housing REIT, Inc. and Chad M. Carpenter dated March 4, 2013 (8) |
10.13 |
|
Stock Purchase Agreement by and among Reven Housing REIT, Inc. and the purchasers identified on the signature pages thereto, dated as of September 27, 2013 (the “Stock Purchase Agreement”) (9) |
10.14 |
|
First Amendment to Stock Purchase Agreement, dated December 23, 2013 (10) |
10.15 |
|
Voting Agreement by and among Reven Housing REIT, Inc., Chad M. Carpenter and the purchasers identified on the signature pages thereto, dated as of September 27, 2013 (9) |
10.16 |
|
Convertible Promissory Note Conversion Agreement by and among Reven Housing REIT, Inc. and the Note holders identified on the signature pages thereto, dated as of September 27, 2013 (9) |
10.17 |
|
Single Family Homes Real Estate Purchase and Sale Agreement (Houston 170) (11) |
10.18 |
|
First Amendment to Single Family Homes Real Estate Purchase and Sale Agreement (Houston 170) (12) |
10.19 |
|
Second Amendment to Single Family Homes Real Estate Purchase and Sale Agreement (Houston 170) (10) |
10.20 |
|
Single Family Homes Real Estate Purchase and Sale Agreement (Atlanta 173) (13) |
10.21 |
|
First Amendment to Single Family Homes Real Estate Purchase and Sale Agreement (Atlanta 173) (14) |
10.22 |
|
Form of Indemnification Agreement between Reven Housing REIT, Inc. and each of its officers and directors (3) |
16.1 |
|
Letter from Ronald R. Chadwick, P.C., dated December 31, 2012, to the SEC (15) |
21.1 |
|
List of Subsidiaries of Reven Housing REIT, Inc. (18) |
23.1* |
|
Consent of PKF, Certified Public Accountants, A Professional Corporation |
31.1* |
|
Certification Under Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2* |
|
Certification Under Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1* |
|
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 |
101.INS* |
|
XBRL Instance Document |
101.SCH* |
|
XBRL Taxonomy Extension Schema Document |
101.CAL* |
|
XBRL Taxonomy Extension Calculation Linkbase Document |
101.LAB* |
|
XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* |
|
XBRL Taxonomy Extension Presentation Linkbase Document |
101.DEF* |
|
XBRL Taxonomy Extension Definition Linkbase Document |
* |
|
Filed herewith. |
† |
|
Indicates management compensatory plan, contract or arrangement. |
(1) |
|
Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on July 9, 2012. |
(2) |
|
Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on July 26, 2012. |
(3) |
|
Incorporated by reference from the Registrant’s Definitive Information Statement on Schedule 14C filed with the SEC on November 15, 2013. |
(4) |
|
Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on October 24, 2012. |
(5) |
|
Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on October 31, 2012. |
(6) |
|
Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on January 8, 2013. |
(7) |
|
Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on January 11, 2013. |
(8) |
|
Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on March 5, 2013. |
(9) |
|
Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on October 3, 2013. |
(10) |
|
Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on December 30, 2013. |
(11) |
|
Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on October 10, 2013. |
(12) |
|
Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on November 5, 2013. |
(13) |
|
Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on November 19, 2013. |
(14) |
|
Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on December 13, 2013. |
(15) |
|
Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the SEC on January 4, 2013. |
(16) |
|
Incorporated by reference from the Registrant's Registration Statement on Form S-1 filed with the SEC on August 10, 2010. |
(17) |
|
Incorporated by reference from the Registrant's Definitive Information Statement on Schedule 14C filed with the SEC on July 19, 2012. |
(18) |
|
Incorporated by reference from the Registrant's Annual Report on
Form 10-K filed with the SEC on March 31, 2015.
|
SIGNATURES
Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 to
this Annual Report on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized.
|
REVEN HOUSING REIT, INC. |
|
|
|
|
Date: April 17, 2015 |
By: |
/s/ Chad M. Carpenter |
|
|
Chad M. Carpenter |
|
|
President and Chief Executive Officer |
Pursuant to the requirements
of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
Name |
|
Title |
|
Date |
|
|
|
|
|
/s/
Chad M. Carpenter |
|
President, Chief Executive Officer and
Chairman of the |
|
April 17, 2015 |
Chad M. Carpenter |
|
Board (Principal Executive Officer) |
|
|
|
|
|
|
|
/s/
Thad L. Meyer |
|
Chief Financial Officer and Secretary
(Principal |
|
April 17, 2015 |
Thad L. Meyer |
|
Financial Officer and Principal
Accounting Officer) |
|
|
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-195042) of Reven Housing REIT, Inc. (the “Company”) of our report dated March
25, 2014 (Except for Restatement of Consolidated Financial Statements under Note 1, as to which the date is March
10, 2015) with respect to the consolidated financial statements of the Company included in this Amendment No. 1 to Annual Report
(Form 10-K/A) for the years ended December 31, 2013 and 2012.
San Diego, California |
/s/ PKF |
April 17, 2015 |
PKF |
|
Certified Public Accountants |
|
A Professional Corporation |
EXHIBIT 31.1
CERTIFICATIONS
I, Chad M. Carpenter,
certify that:
|
(1) |
I have reviewed this Amendment No. 1 to Annual Report on Form 10-K/A of Reven Housing REIT, Inc.; |
|
(2) |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
(3) |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
(4) |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company 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 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 quarter (the registrant’s fourth 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 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. |
|
REVEN HOUSING REIT, INC. |
|
|
Date: April 17, 2015 |
By: |
/s/ Chad M. Carpenter |
|
|
Chad M. Carpenter, Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATIONS
I, Thad L. Meyer, certify
that:
|
(1) |
I have reviewed this Amendment No. 1 to Annual Report on Form 10-K/A of Reven Housing REIT, Inc.; |
|
(2) |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
(3) |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
(4) |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company 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 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 quarter (the registrant’s fourth 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 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. |
|
REVEN HOUSING REIT, INC. |
|
|
Date: April 17, 2015 |
By: |
/s/ Thad L. Meyer |
|
|
Thad L. Meyer, Chief Financial Officer |
|
|
(Principal Financial Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. ss.1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with the Amendment No. 1 to Annual
Report of Reven Housing REIT, Inc. (the “Company”) on Form 10-K/A for the period ended December 31, 2013 as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), we, Chad M. Carpenter and Thad L. Meyer,
the Chief Executive Officer and Chief Financial Officer of the Company, respectively, certify, pursuant to 18 U.S.C. §1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 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. |
By: |
/s/ Chad M. Carpenter |
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Dated: April 17, 2015 |
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Chad M. Carpenter |
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Title: |
Chief Executive Officer, Principal Executive Officer |
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By: |
/s/ Thad L. Meyer |
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Dated: April 17, 2015 |
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Thad L. Meyer |
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Title: |
Chief Financial Officer, Principal Financial Officer |
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Grafico Azioni Reven Housing REIT (NASDAQ:RVEN)
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Grafico Azioni Reven Housing REIT (NASDAQ:RVEN)
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