Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Fof the quarterly period ended September 30, 2010
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commision file number: 001-32574
---------
GOLDEN GATE HOMES, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 87-0745202
(State or other jurisdiction of incorporation (I.R.S.
or organization) Employer Identification No.)
855 Bordeaux Way Suite 200, Napa, California 94558
(Address of principal executive offices)
(707) 254-8880
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 [ ] No [X]
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 No
Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act (Check one).
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if smaller reporting company)
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 number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 3,755,188 common shares as of
December 14, 2010
1
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GOLDEN GATE HOMES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
2010 2009
ASSETS
Current assets:
Cash $ 31,381 $ 10
Deposit 50,000 -
Prepaid Expenses 984 -
Other Current Assets 7,150 -
----------------------------
Total Assets $89,515 $ 10
============================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 143,597 $ 10,000
Other current liabilities 109 -
----------------------------
Total liabilities 143,706 10,000
Stockholders' deficit
Preferred stock, $0.0001 par value, 1,000,000
shares authorized, 0 issued and outstanding - -
Common stock, $0.0001 par value, 600,000,000
shares authorized, 3,755,188 and 3,648,511
shares issued outstanding as of September 30,
2010 and December 31, 2009, respectively 375 364
Paid-in capital 2,564,956 2,019,022
Deficit accumulated during the
development stage (2,619,522) (2,029,376)
---------------------------
Total Stockholders' deficit (54,191) (9,990)
---------------------------
Total Liabilities and Stockholders' deficit $89,515 $ 10
===========================
See notes to unaudited financial statements.
3
GOLDEN GATE HOMES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF INCOME
(Unaudited)
Period from
May 11, 2005
Three Months Ended Nine Months Ended (inception) to
September September September 30 September September
30, 2010 30, 2009 30, 2010 30, 2009 30, 2010
------------------------------------------------------------
Brokerage & Fee
Income 3,741 - 3,741 - 3,741
Operating Expenses:
General &
Administrative 235,809 8,266 594,250 34,673 1,547,839
Impairment of deferred
transaction costs - - - - 1,844,724
---------------------------------------------------------
Operating loss (232,068) (8,266) (590,509) (34,673) (3,388,822)
-----------
Other income (expense):
Interest income 28 - 363 - 5,663,893
Interest Expense - (12,272) - (36,228) (77,471)
Gain/loss on settlement
of debt - - - - 669,656
Gain(loss) on derivative
liabilities - - - - 203,596
Extinguishment of Debt - - - - (928,182)
---------------------------------------------------------
Total Other income 28 (12,272) 363 (36,228) 5,531,492
--------------------------------------------------------
Pretax income (loss) (232,040) (20,538) (590,146) (70,901) 2,142,670
Income tax expense
(benefit) - - - - (5,692)
----------------------------------------------------------
Net income (loss) $(232,040) $ (20,538) (590,146) $ (70,901) $ 2,136,978
==========================================================
Earnings (loss) per
common share
Basic & Diluted $ (0.06) $ (0.13) (0.16) (0.45) N/A
Weighted average number
of common shares
outstanding
Basic & Diluted 3,739,087 157,302 3,688,650 157,302 N/A
See notes to unaudited financial statements
4
GOLDEN GATE HOMES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
Period from
May 11, 2005
Nine Months Ended (inception) to
September 30, September 30, September 30,
2010 2009 2010
-------------------------------------------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $ (590,146) $ (70,901) $ 2,136,978
Adjustments to reconcile net
income (loss) to net cash used
in operating activities:
Shares issued for services 15,150 - 15,150
Investment income - - (5,663,530)
Loss(Gain) on derivative
liability - - (203,596)
Gain on settlement of debt - - (6,937)
Gain on settlement of
interest expense - - (711,441)
Impairment of deferred
transaction costs - - 1,828,626
Loss on extinguishment of debt - - 928,182
Change in:
Other current assets and
prepaid expenses (8,134) - (8,134)
Deposit (50,000) (50,000)
Accounts payable and accrued
expenses 133,706 1,147 810,828
Due to related party - 36,228 51,254
-----------------------------------------------
Net cash used in operating
activities (499,424) (33,526) (872,620)
CASH FLOWS FROM INVESTING
ACTIVITIES
Deferred transaction costs - - (1,828,626)
Payment to trust account - - (76,532,404)
Disbursements from trust account - - 82,195,934
------------------------------------------------
Net cash provided by investing
activities - - 3,834,904
5
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from sale of stock 48,295 - 79,545
Contributed Capital 482,500 - 595,615
Proceeds from advances from
stockholders - - 33,365 1,270,282
Gross proceeds from public
offering - - 79,350,000
Gross proceeds from private
placement - - 2,000,004
Proceeds from sale of
underwriter options - - 100
Payments on advances from
stockholders - - (329,000)
Cash paid for offering costs - - (4,743,110)
Special dividend payment - - (81,190,596)
Proceeds from convertible debt - - 36,257
-------------------------------------------------
Net cash provided by (used
in) financing activities 530,795 33,365 (2,930,903)
--------------------------------------------------
Net change in cash 31,371 (161) 31,381
Cash at beginning of period 10 171 -
---------------------------------------------------
Cash at end of period $ 31,381 $ 10 $ 31,381
==================================================
Supplemental disclosures:
Cash paid for interest $ - - $ -
Cash paid for income taxes - - 7,228
Non-cash transactions:
Conversion of Shareholder
to Notes - - 928,182
Conversion of Notes to
common stock - - 977,539
See notes to unaudited financial statements
6
GOLDEN GATE HOMES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
General
The accompanying unaudited interim financial statements of Golden Gate Homes,
Inc. (hereinafter referred to as the "Company") have been prepared in accordance
with accounting principles generally accepted in the United States of America
and the rules of the Securities and Exchange Commission, and should be read in
conjunction with the audited financial statements and notes thereto contained in
the Company's Annual Report on Form 10-K for the year ended December 31, 2009
filed with the SEC. In the opinion of management, all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of financial
position and the results of operations for the interim periods presented, have
been reflected herein. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year. Notes to
the financial statements that would substantially duplicate the disclosures
contained in the audited financial statements for the year ended December 31,
2009 and the period from May 11, 2005 (inception) to December 31, 2009 as
reported in the Form 10-K have been omitted.
Business
The Company is a development stage company that markets and sells residential
property located in California to buyers in mainland China through a Chinese
broker. The Company enlists the services of acquisition brokers in California,
who present the Company with residential properties that are typically owned by
a developer or financial institution. The Company is currently focusing on
"consignment" transactions whereby the Company enters into an agreement with the
owner of the properties to market such properties overseas. Terms of the
consignment agreement specify the price at which the Company has an option to
purchase each of the properties, which the Company then seeks to re-sell to
buyers in China.
7
Revenue Recognition
Our revenue is recognized based on objective criteria that do not require
significant estimates or uncertainties. Our policy follows the guidance from SEC
Staff Accounting Bulletin 104, "Revenue Recognition" ("SAB 104"). SAB 104
provides guidance on the recognition, presentation, and disclosure of revenue in
financial statements. The Company books revenue at the close of escrow, after
the sale of the property has been consummated and all fees paid and title
recorded. The mechanism of the Company's closings is as follows: the Company
purchases the property from the developer at the agreed upon option price,
records the deed of trust and pays the settlement fees. The Company then sells
the property to the third-party buyer, who pays his share of settlement fees and
records the deed of trust in his or her name. Only after the cash is in hand
does the Company recognize the revenue. The Company records revenue as the net
difference between the sale price to the third-party buyer and the price paid to
the developer for the option. For its asset management services, the asset
management agreement provides for the Company to receive a portion of the fee
for leasing properties to tenants. Revenue is booked only after the lease has
been signed, the fee collected by the property manager, and the fee reflecting
the Company's portion received by the Company. In addition, monthly asset
management service fees are recorded only after the monthly rental has been
collected from the tenant and the portion of the fee allocated to the Company
for its services has been received.
Contingencies
We account for claims and contingencies in accordance with SFAS No. 5,
"Accounting for Contingencies" ("SFAS 5"). SFAS 5 requires that we record an
estimated loss from a claim or loss contingency when information available prior
to issuance of our financial statements indicates that it is probable that an
asset has been impaired or a liability has been incurred at the date of the
financial statements and the amount of the loss can be reasonably estimated.
Accounting for claims and contingencies requires us to use our judgment.
DEVELOPMENT STAGE COMPANY
The Company is a development stage company.
REVERSE STOCK SPLIT
On March 8, 2010, the Company effected a 1-for-35 reverse split, which did not
change the par value of the common stock. The reverse stock split changed the
issued and outstanding shares of our common stock to 3,648,511 as of March 8,
2010. All references to common stock and per share data have been retroactively
restated to account for 1-for-35 reverse stock split as if it occurred on the
first day of the first period presented.
8
DEPOSIT
In conjunction with a consignment arrangement to market and sell certain real
estate properties in northern California, the Company deposited into escrow
$50,000 as an option payment for these properties, which was subsequently
released to the developer of the properties. The option payment is reflected on
the Company's balance sheet as an asset. The Company is currently in the
process of attempting to negotiate certain terms with the developer of the
properties. Among the terms being negotiated are performance based targets
leading to the return of the option payment.
NOTE 2 - GOING CONCERN
The Company's cash position as of September 30, 2010 is $31,381. The Company
has outstanding payables and other current liabilities of $143,706 as of
September 30, 2010. Because of the Company's current cash position versus its
outstanding payables and accruals, there is substantial doubt about the
Company's ability to continue as a going concern. The accompanying financial
statements have been prepared assuming the Company will continue as a going
concern. The future of the Company is dependent upon the Company's ability to
consummate sales of properties and the development of new business
opportunities. See "PART II - OTHER INFORMATION - ITEM 1A. RISK FACTORS."
Should all current sales for which there are deposits close, the Company expects
its cash position to be adequate. Management may need to raise additional funds
via a combination of equity and/or debt offerings. These financial statements
do not include any adjustments that might arise from this uncertainty.
NOTE 3 - RELATED PARTY TRANSACTIONS
Expenses paid on behalf of the Company and funds contributed to the Company
through the entity that holds a controlling interest in the Company are treated
as contributed capital and reflected in additional paid-in capital. $482,500
was contributed during the nine months ended September 30, 2010.
The Company paid Great Western Holdings, a wholly-owned entity of certain family
trusts of Tim Wilkens, a fee of $4,500 per month for providing us with the use
of certain limited office space in Napa, California. No other executive officer
or director has a relationship with or interest in Great Western Holdings.
NOTE 4 - EQUITY
In June 2010, the Company sold 83,985 shares of common stock to an officer of
the Company and to a former director of the Company for $38,295 in private
transactions.
The Company issued 15,000 shares valued at $15,150 to an individual as
compensation for consulting work. In addition, on August 9, 2010, the Company
sold 7,692 shares of common stock to an individual in a private transaction for
$10,000.
9
NOTE 5 - RESERVES
The Company has provided a rental rate guarantee for a period of one year to the
purchaser of one of the properties sold during the third quarter. However,
because the property is currently rented at a price above the rate of the rental
guarantee, and the current tenant has furnished a security deposit that would
apply to any early termination of such lease and the Company's property manager
has assured the Company that the property could be re-leased at an equivalent
price in a short time frame, the Company has not reserved against this
guarantee. There may be situations in the future, however, that will require
the Company to reserve against similar guarantees.
NOTE 6 - REVENUE
Our revenue is comprised of the following:
Three Months Ended Nine Months Ended Period from May 11,
September 30, 2010 September 30, 2010 2005 (inception) to
September 30, 2010
------------------------------------------------------------
Revenues:
Gross revenues
from brokerage sales $ 650,500 $ 650,500 $ 650,500
Cost of properties sold (601,500) (601,500) (601,500)
Broker commissions (U.S.) (8,732) (8,732) (8,732)
Broker commissions (H.K.) (35,290) (35,290) (35,290)
Closing costs (1,825) (1,825) (1,825)
-----------------------------------------------
Income from brokerage sales 3,153 3,153 3,153
Asset Management Services:
Asset management fees 88 88 88
Property leasing fees 500 500 500
-----------------------------------------------
Brokerage & Fee Income 3,741 3,741 3,741
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Quarterly Report on Form 10-Q includes 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. We have based
these forward-looking statements on our current expectations and projections
about future events, and we assume no obligation to update any such
forward-looking statements. These forward-looking statements are subject to
known and unknown risks, uncertainties and assumptions about us that may cause
our actual results to be materially different from any future results expressed
or implied by such forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as "may," "should," "could,
"would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or
the negative of such terms or other similar expressions. Factors that might
cause our future results to differ from those statements include, but are not
limited to, those described in the section entitled "Risk Factors" of the
Form 10-K. The following discussion should be read in conjunction with
our condensed financial statements and related notes thereto included
elsewhere in this report and with the section entitled "Risk Factors" of the
Form 10-K.
GENERAL
The Company has historically been a blank check company. It was formed in 2005
under the name "JK Acquisition Company" (which was subsequently changed to "JK
Acquisition Corp."), to serve as a vehicle for the acquisition, through a
merger, capital stock exchange, asset acquisition or other similar business
combination with a then unidentified operating business. On April 11, 2006, the
Company completed its initial public offering (the "IPO") of equity securities,
raising net proceeds of $79,350,000. On September 6, 2006, the Company,
Multi-Shot, LLC ("Multi-Shot") and various other parties entered into the
Agreement and Plan of Merger (the "Merger Agreement") and related agreements.
Over the course of this transaction, the parties twice amended the terms of the
Merger Agreement and twice extended the transaction. On January 31, 2008, the
Company announced that the special meeting of its stockholders to vote on the
proposed merger with Multi-Shot had been cancelled. The Company determined and
informed Multi-Shot that the proposed merger would not receive the votes of its
stockholders required for approval. The Merger Agreement expired on January 31,
2008, and the proposed merger with Multi-Shot was abandoned. As a result, the
Company's Board of Directors determined it would be in the best interests of the
stockholders to distribute to stockholders holding shares of common stock issued
in the IPO all amounts held in a trust fund (net of applicable taxes)
established by the Company at the consummation of the IPO into which a certain
amount of the net proceeds from the IPO had been deposited.
Because the Company did not consummate a qualifying business combination, the
Company's Board of Directors contemplated alternatives for preserving value for
stockholders. Ultimately, the Board of Directors proposed to amend the
Company's certificate of incorporation to permit the continuance of the Company
as a corporation beyond the time currently specified in the Company's
certificate of incorporation. The Company's stockholders approved this
amendment to the Company's certificate of incorporation. After such approval,
the Board of Directors began seeking a company or companies that the Company
could acquire or with which it could merge.
11
Before any such action was taken, a change of control of the Company occurred on
December 31, 2009 when GGH, Inc. (formerly Golden Gate Homes, Inc.), a privately
held Delaware corporation ("GGH"), acquired from the Company's two largest
stockholders shares of the Company's common stock representing approximately
96.5% of the outstanding shares of the common stock. GGH purchased the shares
to pursue a business opportunity through the Company, pursuant to which the
Company is seeking to sell residential real estate in the United States
(initially primarily in California) to international home buyers.
In connection with the transaction described in the preceding paragraph, James
P. Wilson resigned from the Company's Board of Directors on December 31, 2009,
and Steven Gidumal was elected to the Board to fill the newly created vacancy,
to serve along with Keith D. Spickelmier, who subsequently resigned as a
director on March 17, 2010, and was replaced by Tim Wilkens. In addition, on
December 31, 2009, all of the Company's then serving officers resigned, and the
Company elected a new slate of officers. Furthermore, on March 8, 2010, the
Company changed its corporate name to "Golden Gate Homes, Inc." and effected a
1-for-35 reverse split of the Company's common stock to improve the Company's
capital structure.
As a result of the change in control of the Company, the Company adopted a
significant change in its corporate direction. The Company has decided to focus
its initial efforts on a plan of operation that focuses on marketing
high-quality, distressed residential properties in exclusive US markets (with an
initial focus on California) to international buyers (primarily from Asia)
through exclusive selling agreements or consignment arrangements. In the event
that the Company is successful in completing a major capital raising
transaction, it will also consider purchasing similar assets for resale to the
same target market.
The Company has entered into an exclusive marketing agreement with Premier
Capital, Ltd. ("Premier Capital"), which management believes is critical to the
Company's success. Management believes that Premier Capital is one of the most
reputable international real estate consulting firms in Asia, and is highly
regarded for selling international properties throughout China and other parts
of Asia. Premier Capital was founded in Hong Kong in 1988 and expanded into
China in 1997. It has offices in Hong Kong, Beijing, Shanghai, Guangzhou and
Shenzhen, the five Asian cities on which the Company will initially focus its
selling efforts. Premier Capital also has offices in Australia, Singapore and
New Zealand.
12
Under the exclusive marketing agreement, Premier Capital has agreed to act as
the Company's exclusive agent in Hong Kong and mainland China to market
properties that are approved by Premier Capital and for which the Company has
obtained sales options or agreements ("Approved Properties"). Premier Capital
has agreed not to list, market or sell any properties from the U.S. states of
California, Nevada, Arizona or Washington from any source other than the Company
without the Company's approval. The Company will pay the bulk of the expenses
arising in connection with the marketing of Approved Properties in Hong Kong and
China, although Premier Capital will bear some of these expenses as well. For
its services, Premier Capital will be paid a customary brokerage fee for
Approved Properties sold in Hong Kong and China. The agreement is for a
four-year term ending in the middle of October 2014 and will renew for
additional one-year terms so long as the Company provides at least 100 Approved
Properties per year pursuant to the agreement. The agreement is the result of
an almost 20-year personal relationship between Tim Wilkens, the Company's Chief
Executive Officer, and Philip Leung, the owner of Premier Capital. Management
believes that, so long as the Company performs satisfactorily under the
agreement, the agreement will be renewed. However, if the agreement were to
terminate for any reason, the Company would be forced to find an alternative
third party to market the Company's properties in China and other parts of Asia.
The Company has no assurance that it would be able to find such an alternative
third party, in which case the Company's business, prospects, financial
condition and results of operations would most likely be materially and
adversely affected.
RESULTS OF OPERATIONS
Comparison of Nine Months Ended September 30, 2010 and 2009
For the nine months ended September 30, 2010, we had a net loss of $590,146,
compared to a net loss of $70,901 for the nine months ended September 30, 2009.
For the nine months ended September 30, 2010, we incurred $594,250 of general
and administrative expenses, compared to $34,673 of general and administrative
expenses for the nine months ended September 30, 2009. This increase in
expenses is reflective, in part, of the Company's increased activity as it puts
its new business plan into effect. Of the $594,250 of general and
administrative expenses reflected on the Company's Statements of Income for the
nine months ended September 30, 2010, $48,457 was expended on the Company's
behalf by the entity that holds a controlling interest in the Company to
research and develop the Company's new business plan prior to its acquisition of
such control on December 31, 2009.
Comparison of Three Months Ended September 30, 2010 and 2009
During the three months ended September 30, 2010, we had $650,500 in gross
revenues on the sale of two properties. Margins on these transactions were
narrow, as the consignment agreement the Company entered into with the developer
of the properties was priced aggressively as the Company attempts to prove its
business concept. In addition, the Company had revenues of $588 from its asset
management business. For the three months ended September 30, 2010, we had a
net loss of $232,040, compared to a net loss of $20,538 for the three months
ended September 30, 2009. For the three months ended September 30, 2010, we
incurred $235,809 of general and administrative expenses as compared to the
three months ended September 30, 2009, when we incurred $8,266 of general and
administrative expenses.
13
CHANGES IN FINANCIAL CONDITION
Liquidity and Capital Resources
The Company's cash position as of September 30, 2010 is $31,381. The Company
has outstanding payables and other current liabilities of $143,706 as of
September 30, 2010. Because of the Company's current cash position versus its
outstanding payables and accruals, there is substantial doubt about the
Company's ability to continue as a going concern. The accompanying financial
statements have been prepared assuming the Company will continue as a going
concern. The future of the Company is dependent upon the Company's ability to
consummate sales of properties and the development of new business
opportunities. See "PART II - OTHER INFORMATION - ITEM 1A. RISK FACTORS."
Management may need to raise additional funds via a combination of equity and/or
debt offerings. These financial statements do not include any adjustments that
might arise from this uncertainty.
As described in the Form 10-K, the Company is in the process of raising
additional funds for its new business plan. The Company currently has twenty-two
sale reservations across three projects totaling approximately $7.8 million of
gross real estate sales which represent approximately $1,000,000 of net revenue
before commissions and expenses and $440,000 of gross income after all expenses
that are currently waiting on third-party mortgage financing that it expects to
close in the next few months, and that the Company expects will be a source of
cash for operations. In addition, the Company made a $50,000 option payment in
connection with a consignment transaction we entered into to sell certain
properties in northern California, which is reflected on the Company's balance
sheet as an asset. The Company is currently in the process of attempting to
negotiate certain terms with the developer of the properties. Among the terms
being negotiated are performance based targets leading to the return of the
option payment.
Off-Balance Sheet Arrangements
Other than contractual obligations incurred in the normal course of business, we
do not have any off-balance sheet financing arrangements or liabilities,
guarantee contracts, retained or contingent interests in transferred assets or
any obligation arising out of a material variable interest in an unconsolidated
entity. We do not have any majority-owned subsidiaries.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk is a broad term for the risk of economic loss due to adverse changes
in the fair value of a financial instrument. These changes may be the result of
various factors, including interest rates, foreign exchange rates, commodity
prices and/or equity prices. We are exposed to market risk from changes in
interest rates and foreign currency exchange rates. Our exposure to interest
rate risk is limited to interest income sensitivity for working capital funds
placed in a money market account. The effect of interest rate changes does not
pose significant market risk to us. Also, we are exposed to foreign currency
exchange rates whereby the strengthening of the US currency could make it more
expensive for our foreign purchasers to buy our US properties, while a weakening
US currency would make our properties less expensive to our international
clients. We do not currently hedge against interest rate or currency risks.
The effect of other changes, such as commodity prices and/or equity prices, does
not pose significant market risk to us.
14
ITEM 4T. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision of our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of our disclosure
controls and procedures pursuant to Rule 13a-15 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), as of the end of the period
covered by this quarterly report. Based on that evaluation, management has
concluded that, as of September 30, 2010, our internal control over financial
reporting was effective.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in our internal controls over financial reporting in
connection with the evaluation required by Rule 13a-15(d) under the Exchange Act
that occurred during the period covered by this Quarterly Report on Form 10-Q
that have materially affected, or are reasonably likely to materially affect,
our internal controls over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 1A. RISK FACTORS
WE MAY NOT BE ABLE TO ARRANGE FINANCING FOR OUR OVERSEAS BUYERS.
We sell our homes to buyers who expect the Company to assist them in securing a
mortgage for their purchase. Our buyers put between 30% and 40% of the purchase
price down in cash, a high percentage relative to current and historical
averages in the U.S., which we believe makes these buyers attractive to mortgage
lenders. However, we do not yet have a program in place with a lending partner
that assures a steady supply of mortgage capital for our buyers. Therefore, our
buyers may meet with delays in securing mortgages as information requirements
vary from lender to lender, which may result in an increase in costs and fees to
both the buyer and the Company, and which may also ultimately result in a loss
of sales for the Company. We believe we can secure such a relationship with a
lending partner, but there is no assurance that we will be able to do so.
Other than the risk factor set forth above, there have been no material
changes to the risk factors previously disclosed in the Annual Report on
Form 10-K for the year ended December 31, 2009.
15
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
On July 31, 2010, the Company issued 15,000 shares of common stock to a
consultant of the Company as compensation for services rendered. On August 9,
2010, the Company also issued 7,692 shares of common stock to another individual
for $10,000 in cash, at a purchase price of $1.30 per share. Such shares are
exempt from registration under regulations promulgated by the Securities
Exchange Commission under Section 4(2) of the Securities Act, as amended. The
exemption was available on the basis that there was no general solicitation in
connection with the placement and sales were only made to accredited investors.
ITEM 6. EXHIBITS.
NUMBER DESCRIPTION
31.1 Certificate of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
31.2 Certificate of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley of 2002
32.1 Certificate of Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
32.2 Certificate of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley of 2002
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GOLDEN GATE HOMES, INC.
Date: December 15, 2010 By:/s/ Steven Gidumal
-------------------
Steven Gidumal
Chairman of the Board
and Chief Financial Officer
(Principal Financial and Accounting
Officer)
1
