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LOAN > SEC Filings for LOAN > Form 10-Q on 29-Oct-2012All Recent SEC Filings

Show all filings for MANHATTAN BRIDGE CAPITAL, INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for MANHATTAN BRIDGE CAPITAL, INC


29-Oct-2012

Quarterly Report


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

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

The Company offers short-term, secured, non-banking loans to real estate investors (also known as hard money) to fund their acquisition and construction of properties located in the New York Metropolitan area. The loans are principally secured by collateral consisting of real estate and, generally, accompanied by personal guarantees from the principals of the businesses. The loans are generally for a term of one year. Most of the loans provide for receipt of interest only during the term of the loan and a balloon payment at the end of the term. For the nine month periods ended September 30, 2012 and 2011 the total amounts of $11,148,500 and $6,504,036 have been lent, offset by collections received from borrowers, under the Company's commercial loans in the amount of $7,874,691 and $6,212,018, respectively. Loans ranging in size from $50,000 to $1,100,000 were concluded at stated interest rates of 12% to 16%, but often at higher effective rates based upon points or other up-front fees.

The Company uses its own employees, outside lawyers and other independent professionals to verify titles and ownership, to file liens and to consummate the transactions. Outside appraisers are used to assist the Company's officials in evaluating the worth of collateral, when deemed necessary by management. The Company also uses independent construction inspectors as well as mortgage brokers and deal initiators.

The Company generally grants loans for a term of one year. In certain situations the Company and its borrowers have mutually agreed to the extension of the loans as a result of the downturn in the economy and the real estate industry in the New York metropolitan area. Potential buyers of the real estate serving as collateral for the short-term loans may have difficulty securing financing due to restrictions imposed by financial institutions resulting from the recent mortgage crisis. In addition, the Company's borrowers may be having difficulty securing permanent financing. Prior to the Company granting an extension of any loan, it reevaluates the underlying collateral.

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

At September 30, 2012, we were committed to an additional $2,367,000 in construction loans that can be drawn by the borrower when certain conditions are met.

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Results of Operations

Three Months Ended September 30, 2012 Compared to Three Months Ended September 30, 2011

Revenue

Total revenues for the three month period ended September 30, 2012 were approximately $491,000 compared to approximately $351,000 for the three month period ended September 30, 2011, an increase of $140,000 or 39.9%. The increase in revenue represents an increase in lending operations. For the three month period ended September 30, 2012, $402,000 of our revenue represents interest income on the secured commercial loans that we offer to small businesses compared to $284,000 for the same period in 2011, and $89,000 represents origination fees on such loans compared to $67,000 for the same period in 2011. The loans are principally secured by collateral consisting of real estate and, generally, accompanied by personal guarantees from the principals of the businesses.

Interest and amortization of debt service costs

Interest and amortization of debt service costs for the three month period ended September 30, 2012 was $87,000 compared to $49,000 for the three month period ended September 30, 2011. The increase in interest and amortization of debt service costs is primarily attributable to the Company's receipt of short term loans and a line of credit in order to increase our ability to make loans. (See also Notes 8 and 9 to the financial statements included elsewhere in this report).

Referral fees

Referral fees for the three month periods ended September 30, 2012 and 2011 were approximately $1,000 each. The referral fees represent fees paid on such loans which amortize over the life of the loan.

General and administrative expenses

General and administrative expenses for the three month period ended September 30, 2012 were approximately $184,000 compared to approximately $195,000 for the three month period ended September 30, 2011. This decrease is primarily attributable to decreases in relocation-related expenses and in stock based compensation expense resulting from the forfeit of options and the agreement by the CEO not to exercise additional options partially offset by the issuance of shares of restricted stock to our CEO (See Note 7 to the financial statements included elsewhere in this report), offset by the increase in legal expenses resulting from the derivative action (See Note 11 to the financial statements included elsewhere in this report).

Other income

Other income for the three month periods ended September 30, 2012 and 2011 was approximately $7,000 and $32,000, respectively, which represents the fees generated from the seller buy back options. (See Note 4 to the financial statements included elsewhere in this report).

Income tax expense

For the three month period ended September 30, 2012 we had income tax expense of $65,000 compared to $41,000 for the three month period ended September30, 2011.

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Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011

Revenue

Total revenues for the nine month period ended September 30, 2012 were approximately $1,298,000 compared to approximately $1,031,000 for the nine month period ended September 30, 2011, an increase of $267,000, or 25.9%. The increase in revenue represents an increase in lending operations. Revenue of approximately $1,042,000 for the nine month period ended September 30, 2012, compared to approximately $842,000 for the same period in 2011, represents interest income on the secured commercial loans that we offer to small businesses, and $256,000 represents origination fees on such loans compared to $189,000 for the same period in 2011. The loans are principally secured by collateral consisting of real estate and, generally, accompanied by personal guarantees from the principals of the businesses.

Interest and amortization of debt service costs

Interest and amortization of debt service costs for the nine month period ended September 30, 2012 was approximately $187,000 compared to $112,000 for the nine month period ended September 30, 2011. The increase in interest and amortization of debt service costs is primarily attributable to the Company's receipt of short term loans and a line of credit in order to increase our ability to make loans (See also Notes 8 and 9 to the financial statements included elsewhere in this report).

Referral fees

Referral fees for the nine month period ended September 30, 2012 were approximately $5,000 compared to approximately $2,000 for the nine month period ended September 30, 2011. The referral fees represent fees paid on such loans which amortize over the life of the loan.

General and administrative expenses

General and administrative expenses for the nine month period ended September 30, 2012 were approximately $548,000 compared to approximately $566,000 for the nine month period ended September 30, 2011. This decrease is primarily attributable to decreases in office rent and in stock based compensation expense resulting from the forfeit of options and the agreement by the CEO not to exercise additional options partially offset by the issuance of shares of restricted stock to our CEO (See Note 7 to the financial statements included elsewhere in this report), offset by the increase in legal expenses resulting from the derivative action (See Notes 11 to the financial statements included elsewhere in this report).

Other income

Other income for the nine month periods ended September 30, 2012 and 2011 was approximately $21,000 and $71,000, respectively, which represents the fees generated from the seller buy back options. (See Note 4 to the financial statements included elsewhere in this report).

Income tax expense

For the nine month period ended September 30, 2012 we had income tax expense of approximately $222,000 compared to $157,000 for the nine month period ended September 30, 2011.

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Liquidity and Capital Resources

On May 2, 2012, the Company entered into a Line of Credit Agreement with Sterling National Bank pursuant to which the Bank has agreed to advance up to $3.5 million against assignments of mortgages and other collateral (the "Sterling Credit Line"). The Sterling Credit Line was conditioned on an unlimited personal guarantee from Assaf Ran, the Company's CEO. The interest rate on the Sterling Credit Line is 2% in excess of the Wall Street Journal prime rate, but in no event less than 6%, per annum, on the money in use.

At September 30, 2012, we had cash and cash equivalents of approximately $208,000 and working capital of approximately $5,572,000 as compared to cash and cash equivalents of approximately $222,000 and working capital of approximately $5,763,000 at December 31, 2011. The decrease in cash and cash equivalents primarily reflects the increase in lending operations. The decrease in working capital is primarily attributable to the reclassification of certain short term loans to long term loans receivable.

For the nine month periods ended September 30, 2012 and 2011, net cash provided by operating activities were approximately $313,000 and $304,000, respectively. The increase in net cash provided by operating activities primarily results from increases in net income and in income taxes payable, offset by a decrease in non cash compensation expense and increases in interest receivable on loans and in other current and non current assets.

Net cash used in investing activities was approximately $3,274,000 for the nine months ended September 30, 2012, compared to net cash used in investing activities of approximately $586,000 for the period ended September 30, 2011. Net cash used in investing activities for the nine months ended September 30, 2012 consisted primarily of the issuance of the our short term commercial loans in the amount of approximately $11,149,000, offset by collection of these loans in the amount of approximately $7,875,000. In the period ended September 30, 2011 net cash used in investing activities consisted primarily of the issuance of the our short term commercial loans in the amount of approximately $6,504,000, offset by collection of these loans in the amount of approximately $6,212,000 and the investment in real estate in the amount of $675,000, which was offset by the proceeds of approximately $381,000upon the partial exercise of option by the option holder.

Net cash provided by financing activities for the nine months ended September 30, 2012 was approximately $2,947,000 as compared to $1,159,000 for the period ended September 30, 2011. This increase reflects the use of the Sterling Credit Line, offset by the purchase of treasury shares and repaying some of the Company's short-term loans (See note 8 to the consolidated financial statementswhich appear elsewhere in this quarterly report).

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

We anticipate that our current cash balances will be sufficient to fund our operations for the next 12 months. However, we expect our working capital requirements to increase over the next 12 months as we continue to strive for growth.

Changes to Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

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