10-Q: My City Builders Reports Q1 2025 Results: Revenue Growth Offset by Increased Expenses

My City Builders, Inc. reported a net loss for the quarter ended October 31, 2024, despite an increase in rental income, due to higher operating and interest expenses.

Summary

• My City Builders, Inc. reported a net loss of $74,485 for the three months ended October 31, 2024, compared to a net loss of $78,577 for the same period in 2023.
• The company's revenue increased to $25,528 from $6,169 year-over-year, primarily from rental income.
• Operating expenses rose to $80,092 from $75,488, driven by professional fees, depreciation, and costs associated with rental homes.
• Other expenses increased to $19,921 from $9,258, mainly due to interest expenses on bank borrowings and loans.
• The company's cash balance decreased to $15,169 from $20,245 at the end of the previous quarter.
• The company has a working capital deficiency of $149,043 as of October 31, 2024.
• The company has completed eleven homes and has leased seven of them with monthly lease payments ranging from $1,100 to $1,250.
• The company is continuing to develop properties in Gadsden, Alabama, and plans to build duplex apartments in Glencoe, Alabama.

Sentiment

Score: 3

Explanation: The document indicates significant financial challenges, including a net loss, working capital deficiency, and reliance on related party transactions. While there is some revenue growth, the overall sentiment is negative due to the company's uncertain financial position and going concern risk.

Positives

• The company experienced a significant increase in rental income, indicating progress in its real estate operations.
• The net loss decreased slightly compared to the same quarter last year.
• The company has completed eleven homes and has leased seven of them, generating rental income.
• The company is actively developing properties in Gadsden, Alabama, and has plans for further development in Glencoe, Alabama.

Negatives

• The company continues to operate at a net loss, indicating ongoing financial challenges.
• Operating expenses and interest expenses have increased, offsetting the revenue growth.
• The company has a working capital deficiency, raising concerns about its short-term financial health.
• The company's cash balance has decreased, indicating a need for additional capital.
• The company's disclosure controls were not effective as of October 31, 2024, due to the inadequacy of internal controls over financial reporting.

Risks

• The company's ability to continue as a going concern is uncertain, dependent on securing additional capital.
• The company's internal controls over financial reporting are inadequate, which could lead to errors in financial reporting.
• The company is exposed to risks related to real estate development, including construction delays and cost overruns.
• The company is reliant on related party transactions, which may not be on an arm's-length basis.
• The company has a significant amount of debt, which could impact its financial stability.

Future Outlook

The company plans to continue developing properties in Gadsden, Alabama, and build duplex apartments in Glencoe, Alabama. The company's ability to continue operations is dependent on obtaining additional financing.

Management Comments

• Management plans to raise necessary funding through equity and debt financing arrangements.
• Management believes that the credit risk associated with cash balances is minimal.
• Management has determined that the company's internal controls contain material weaknesses.

Industry Context

The company operates in the low-income housing market, which is characterized by high demand and potential for growth. The company's focus on acquiring and developing properties in this sector aligns with broader industry trends. However, the company faces competition from other real estate developers and investors.

Comparison to Industry Standards

• It is difficult to compare My City Builders directly to industry standards due to its unique focus on low-income housing and its recent transition from a shell company.
• Many larger real estate development companies have more established revenue streams and stronger balance sheets.
• Companies like Lennar and D.R. Horton, which focus on new home construction, have significantly higher revenue and profit margins.
• Companies like Invitation Homes and American Homes 4 Rent, which focus on single-family rentals, have more established rental portfolios and lower operating expenses.
• My City Builders' reliance on related party transactions and its high level of debt are not typical of larger, more established real estate companies.

Legal Proceedings

• RAC was awarded a judgement from the District Court in Clark County Nevada enabling the company to cancel common shares held in the name of HUI PING LIU.
• RAC filed a complaint against Fix Pads Holdings, LLC for breach of promissory notes and obtained temporary injunctive relief.
• RAC filed a complaint against Fix Pads Holdings LLC, FixPads Management, LLC and RAC FixPads II, LLC for appointment of receiver, breach of LLC agreement, and breach of fiduciary duty.
• The company entered into two settlement agreements with FixPads Holdings LLC, resulting in the transfer of 44 properties to the company.

Related Party Transactions

• The company had due to related parties of $1,345,000 as of October 31, 2024.
• The company's related party advanced $239,000 to the company during the three months ended October 31, 2024.
• The company repaid related party's loan of $28,500 during the three months ended October 31, 2024.
• On January 17, 2024, the company's Board of Directors approved the settlement of $2,850,000 due to one related party in exchange for an issuance of 11,400,000 shares of common stock.

Stakeholder Impact

• Shareholders are impacted by the company's net loss and uncertain financial position.
• Employees may be impacted by the company's financial challenges and potential need for restructuring.
• Customers (tenants) are impacted by the company's ability to provide quality housing.
• Suppliers and creditors are impacted by the company's ability to pay its obligations.
• The company's ability to continue as a going concern is dependent on securing additional capital, which could impact all stakeholders.

Next Steps

• The company plans to continue developing properties in Gadsden, Alabama.
• The company plans to build seven to eight duplex apartments in Glencoe, Alabama during the calendar year of 2025.
• The company intends to sell the twenty-nine properties obtained through the settlement agreements once fully renovated.

Key Dates

Keywords

real estate, low-income housing, rental income, property development, foreclosures, land banks, HECM, financial results, net loss, operating expenses, related party transactions, bank borrowings