DREAM HOMES & DEVELOPMENT CORP. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (form 10-K)
15 min readForward-Looking Statements
Management’s Discussion and Analysis or Plan of Operation contains
“forward-looking” statements, as well as historical information. Although we
believe that the expectations reflected in these forward-looking statements are
reasonable, we can give no assurance that the expectations reflected in these
forward-looking statements will prove to be correct. Forward-looking statements
include those that use forward-looking terminology, such as the words
“anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “project,”
“plan,” “will,” “shall,” “should,” and similar expressions, including when used
in the negative. Although we believe the expectations reflected in these
forward-looking statements are reasonable and achievable, these statements
involve risks and uncertainties, and no assurance can be given that actual
results will be consistent with these forward-looking statements. Current
shareholders and prospective investors are cautioned that any forward-looking
statements are not guarantees of future performance. Such forward-looking
statements by their nature involve substantial risks and uncertainties, certain
of which are beyond our control, and actual results for future periods could
differ materially from those discussed in this report, depending on a variety of
important factors, among which are our ability to implement our business
strategy, our ability to compete with major established companies, the
acceptance of our products in our target markets, our ability to attract and
retain qualified personnel, our ability to obtain financing, our ability to
continue as a going concern, and other risks described from time to time in our
filings with the
contained in this report speak only as of the date of this report. Future events
and actual results could differ materially from the forward-looking statements.
You should read this report completely and with the understanding that actual
future results may be materially different from what management expects. We will
not update forward-looking statements even though its situation may change in
the future.
We undertake no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise. Important
factors on which such statements are based are assumptions concerning
uncertainties, including but not limited to uncertainties associated with the
following:
(a) potential fluctuation in quarterly results;
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(b) our failure to earn revenues or profits;
(c) inadequate capital and barriers to raising the additional capital or to
obtaining the financing needed to implement our business plans;
(d) inadequate capital to continue business;
(e) changes in demand for our products and services;
(f) rapid and significant changes in markets;
(g) litigation with or legal claims and allegations by outside parties;
(h) insufficient revenues to cover operating costs.
You should read the following discussion and analysis in conjunction with our
financial statements and notes thereto, included herewith. This discussion
should not be construed to imply that the results discussed herein will
necessarily continue into the future, or that any conclusion reached herein will
necessarily be indicative of actual operating results in the future. Such
discussion represents only the best present assessment of management.
PLAN OF OPERATION
Building on a history of over 1,700 new homes built and over 400
elevation/renovation/addition projects since 1993, the management of
& Development Corporation
growing regional developer of new single-family subdivisions as well as a leader
in coastal new home and modular construction, elevation and mitigation. Since
Superstorm Sandy flooded 40,000 owner-occupied homes,
hundreds of homeowners to build new homes or raise their homes to comply with
new
Hazard Areas,
has even become known as the “rescue builders have struggled to adapt to the
changing market and complex Federal, State and local regulations” builder for
homeowners whose projects have been abandoned by others. Due to the damage
caused by the storm, as well as the material changes in the
which now require over 40,000 homeowners along the
elevate their homes,
for substantial revenue growth.
A new trend in the real estate market which has experienced significant growth
in the last year is the emerging Build To Lease trend. This focus and
concentration on building both single and multi-family developments with the
intention to lease them immediately upon completion is being made in response to
several factors. One factor is the extreme shortage of rental properties on the
market, not only for first time homemakers, but for retirees, and young
professionals who are unclear as to the intentions of settling in one location.
The second factor is the overall lender and funding source preference to lend to
Build To Lease developments, as opposed to more traditional Build To Sell
developments due to the perception of Build To Lease as a safer investment over
the long term. Finally, the extraordinary amount of interest from
non-traditional sources such as pension and hedge funds, insurance companies and
venture capital firms to purchase completed new For Lease developments at
attractive metrics based on capitalization rates has spurred a large growth in
this market segment.
The Company has made the decision to change focus in their new home developments
to better accommodate this growing trend. Currently all new multi-family
developments located in
units, will be changed from Build For Sale to Build for Lease. The Company now
intends to hold these properties upon completion and lease-up for an
indeterminate period of time, and realize the rental income from ownership. This
strategy will become a very significant revenue stream for the Company and will
become a third division of the Company, behind custom new homes and
renovation/elevation projects.
Management recognized that the effects of Super Storm Sandy, which occurred on
10/29/12, would be far reaching and cause an almost unlimited demand for
construction services, as well as specific construction information. Due to the
damage caused by the storm, as well as the material changes in the
maps which now require over 40,000 homeowners along the
elevate their homes, management feels that focusing on the construction field
will continue to provide a stable revenue stream for the company.
real estate field, specifically in new home construction, home elevations and
renovations. The amount of these projects currently under contract as of
In addition to the above projects, which are in process, the Company has also
estimated an additional
and added over 200 active prospects to its data base. All of these prospects are
prime candidates for rebuilding and new home projects.
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In addition to the projects which the Company currently has under contract for
elevation, renovation, new construction and development, there are a number of
parcels of land which the Company has the ability to secure, whether through
land contract or other types of options. These parcels represent additional
opportunities for development and construction potential on the order of an
additional 400 – 800 lots and/or residential units to be developed and built
within an approximate time horizon of 5 years. Conceivably, this volume of
production could yield
The Company opened an office in
Company to more effectively serve the northern
County
the modular and stick built home markets.
The Company has positioned itself to well serve a significant portion of the
entire coastal region, from southern
Properties currently owned and in the development stage
A contract was signed to acquire 70 approved townhome units in
after 31 months of discussion. This property was acquired in late
Site improvements will commence. Sales or rental revenues will accrete to 2023
income. The Company has secured a bridge loan and is awaiting a commitment with
a permanent lender for an acquisition, development and construction finance
facility.
The Company is preparing to begin infrastructure work on the property, and start
a prelease program.
68 new townhomes in the
are affordable housing. The acquisition of the contract was made for common
stock and occurred in the 4th quarter of 2016. This property is currently in the
approval process. This development project is scheduled to begin in late 2022
and will accrete to 2023 sales.
All costs associated with this property necessary to obtain all approvals,
acquire the land, install the infrastructure and prepare the property to
commence construction are the Company’s responsibility.
In order to obtain all developmental approvals and be prepared to begin
installing infrastructure, various permits and engineering work are required.
These permits include but are not limited to township subdivision, county,
municipal utility authority, CAFRA (
and
completed and a CAFRA application has been prepared and submitted to the
environmental scientist, and the NJ DEP has issued the CAFRA permit. Application
for this permit was made in
was held on
board and the next meeting was heard for preliminary and final approval on
19th
It is anticipated that complete development approvals will cost approximately
costs, infrastructure costs are anticipated to cost approximately
The total amount of funding required to acquire and make this property ready for
home construction is approximately
The Company may need to seek loans from banks to finance this project. As part
of their financing agreements, the banks typically require
personally guarantee these loans. If
and there is no one other than him in the Corporation to provide those
guarantees, the financing of the deal may be adversely affected. The exact
amount of funding required for this particular property is not clear at the
present time but will be determined when full approvals have been obtained and
the Company is prepared to take title to the property.
The closing to acquire this property occurred on
is currently in title.
Clayton NJ - 112 Apartments
On
acres of property in
112-unit apartment complex, with 8000 square feet of retail space. The Company
has a signed contract and has been proceeding with development approvals. The
property is designated as a redevelopment property, and a redevelopment
agreement is currently being negotiated with the township. Progress has been
delayed due to township closures due to the Covid-19 pandemic.
On
of 3 parcels.
The Company successfully obtained Redevelopment Approval from the Borough in
In October of 2018, the company entered into a contract to develop and acquire
17 townhouse lots in
process. Application was made to the
project was deemed complete by the township engineer. Municipal scheduling has
been delayed due to the Covid-19 virus.
The Company was heard before the
2020
Application is currently being made for final approvals, and the Company is
scheduled to be heard at the
The Company acquired this property on
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Properties Under Contract to Purchase and in the Approval Stage
On
manufactured housing. The property is currently in the approval stage. An
application was made to the DEP for a wetlands letter of interpretation, which
was approved as proposed. Further action before the planning board is pending
due to delays caused by township closures due to Covid-19. The Company had a
virtual workshop meeting on
was conducted on
The application for a use variance was heard on
was approved.
Application is currently being made for preliminary final site plan approval,
and the Company is scheduled to be heard at the
Properties on hold due to delay in approvals, environmental concerns or other
reasons
On
over 7 acres of land in
Homes
(issued in April 2017).
Since the transaction had not occurred for at least a portion of the Property
within 12 months of the completion of the Due Diligence Period, as well as two
6-month extensions, the seller chose to terminate the contract. Though the
Company retained the right to waive any remaining development contingencies and
proceed to close on the property, it was determined by senior management that
the risk of acquiring an unapproved property was not acceptable.
Properties in discussion with signed letters of intent, not in contract
Discussions have been occurring since December of 2017 and a signed letter of
intent has been offered to acquire property to develop 102 townhome units in
southern
development by the Company’s management team during the 2006-2009 period, at
which time the project was not finalized due to the financial crisis of 2009. As
such, a large amount of engineering, environmental, traffic and architectural
work has been completed. It is Management’s opinion that this property is moving
forward to contract. This property is not fully approved and is unimproved.
On
property to be developed as a solar farm in
well as a portion of the purchase price. There is also a PPA (power production
agreement) in place with a nursing home adjacent to the property, to purchase
the entire electrical output for the next 20 years. This property is still
available and is on hold pending funding availability.
These new developments with signed letters of intent, as well as the four
developments that we have under contract and in development represent over
million
occur over the next 3-4 years and is in addition to the elevation/renovation
division of the business. Management is very positive about these new
developments, as well as the cutting-edge construction technologies being
employed to create healthier, safer, more energy efficient homes.
divisions, as well as strong additions to our personnel infrastructure, which
are just now beginning to bear fruit.
For the 4th year in a row, the Company was again awarded the Ocean County
Reader’s
Builder and Best Home Improvement Contractor), which caused significant new
awareness and interest from the public. This has led to increased showroom
traffic, completed estimates and signed contracts. Referrals about
are also being generated from many industry professionals, such as architects,
engineers and attorneys, who’ve either had clients with abandoned projects or
simply want to retain Dream due to superior performance and reliability.
The phrase ‘The Region’s Most Trusted Builder’ accurately describes the Company,
which is becoming increasingly well known to homeowners in need of new custom
modular and site-built homes, elevation & renovation work. The management team
has never failed to complete a project in over 29 years in the industry.
The Company’s business model over the last year has been focused on increasing
the new home and new development portion of our business, until it represents
50% – 70% of our entire revenue stream, from the current level of 20%. New home
development has a much greater scalability and growth potential than
elevation/renovation work. The Company has enjoyed steady growth in the
renovation/elevation portion of the company and anticipates that by year end
2022 each part of the company (new homes and elevation work) will represent 50%
of total revenue. By mid-year 2023, new home construction and development should
represent over 70% of revenue.
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Management hopes for steady growth in all segments of the company, since the
rebuilding process will occur over the next 15-20 years. The combined total
number of homes affected by Storm Sandy that will need to be raised or
demolished and rebuilt is in excess of 30,000 homes, of which less than 10,000
have been rebuilt. This remaining combined market for new construction and
elevation projects in the Company’s market area is estimated to be in the range
of
address a decent percentage of this market.
include the development and sale of a variety of residential communities,
including construction of semi-custom homes, entry-level and first time move-up
single-family and multi-family homes.
Additionally, the Company has developed referral networks with 3 major modular
manufacturing companies, from which a dependable and steady stream of leads and
prospects has been received over the last 6-month period. Based on these
associations, it is anticipated that the Custom Modular segment of the business
will enjoy significant growth for the foreseeable future.
Since modular home manufacturers will not sell directly to the public, and will
only sell to a licensed builder, manufacturers need dependable new home builders
to refer their leads. The Company has proven itself to be a valuable trade
partner for these 3 manufacturers and has received numerous prospects and leads,
some of which have already turned into contracts.
Due to the opportunities afforded by the market conditions,
Development Corporation
construction and real estate field, specifically in new home construction, home
elevations and renovations.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations
are based on our financial statements, which have been prepared in accordance
with
financial statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenue and expenses and related
disclosures. We review our estimates and judgments on an on-going basis. We base
our estimates and judgments on historical experience and on various other
assumptions that we believe to be reasonable under the circumstances. Actual
results may differ from these estimates. We believe the following accounting
policies are critical to the judgments and estimates we use in preparing our
financial statements.
Net Income (Loss) Per Common Share
Basic net income (Basic net loss) per common share is calculated by dividing net
income (loss) by the weighted average number of common shares outstanding during
the period.
Diluted net income (loss) per common share is computed using the weighted
average number of common shares outstanding and potentially dilutive securities
outstanding during the period (none for the periods presented).
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RESULTS OF OPERATIONS - DREAM HOMES & DEVELOPMENT CORPORATION
The summary of selected financial data table below
DREAM HOMES & DEVELOPMENT CORPORATION
STATEMENTS OF OPERATIONS
Year ended Year ended
December 31, 2021 December 31, 2020
Revenue:
Construction contracts $ 3,884,946 $ 3,014,027
Cost of construction contracts 3,107,176 2,172,293
Gross profit 777,770 841,734
Operating Expenses:
Selling, general and administrative,
including stock based compensation of
$170,800 and $197,000 , respectively 818,711 1,032,419
Depreciation expense 6,756 8,445
Total operating expenses 825,467 1,040,864
Income (loss) from operations (47,697 ) (199,130 )
Other income (expenses):
Interest expense (122,781 ) (25,088 )
Total other income (expenses) (122,781 ) (25,088 )
Net income (loss) before income taxes (170,478 ) (224,218 )
Provision for income taxes -
Net loss $ (170,478 ) $ (224,218 )
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Results of Operations – Comparison for the years ended
2020
Revenues
For the years ended
resulting in a increase in net revenues of
2020, all of our sales were domestic. Increase due to acquisition of major
construction contracts.
Cost of Construction contracts and Sales
For the years ended
construction contracts and sales were
resulting in an increase in cost of construction contracts of
due to acquisition of major construction contracts.
Operating Expenses
Operating expenses decreased
2021. The decrease was primarily due to stock based compensation, commission
expenses and selling, general and administration expenses.
Major selling, general and administrative expenses for the year ended
31, 2021
compensation of
expense of
Liquidity and Capital Resources
As of
respectively, total assets were
total current liabilities amounted to
including loans payable to related parties of
25 Inflation
The impact of inflation on the costs of our company, and the ability to pass on
cost increases to clients over time is dependent upon market conditions.
Inflationary pressures have had a significant impact on our operations during
this year, and we anticipate that inflationary factors will continue to have a
significant impact on future operations.
OFF-BALANCE SHEET ARRANGEMENTS
We do not maintain off-balance sheet arrangements nor do we participate in
non-exchange traded contracts requiring fair value accounting treatment.
Risk
Foreign Currency Exchange Rate Risk
We are not exposed to potential gains or losses from foreign currency
fluctuations.
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