Golden Gate Homes, Inc. - FORM 10-Q - November 1, 2012

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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

For the quarterly period ended September 30, 2012

o           TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                     to                                                
 
Commission 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 or organization)
(I.R.S. Employer Identification No.)
 
14 Wall Street, 20th Floor, New York, New York 10005
 (Address of principal executive offices)

(212) 385-0955
 (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  x No o

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 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   o  
Accelerated filer     o
   
Non-accelerated filer     o
(Do not check if smaller reporting company)
Smaller reporting company    x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 3,837,688 common shares as of October 31, 2012.
 
 
TABLE OF CONTENTS
 
PART I – FINANCIAL INFORMATION
Page
   
Item 1.
3
Item 2.
7
Item 3.
8
Item 4T.
8
     
PART II – OTHER INFORMATION
  
   
Item 1.
9
Item 1A.
9
Item 6.
9
     
10
 
 
PART I - FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS
 
GOLDEN GATE HOMES, INC.
BALANCE SHEETS
 (UNAUDITED)

   
September 30, 2012
    
December 31, 2011
  
ASSETS
            
             
Current assets:
            
Cash
  
$
  31,565
    
$
45,120
  
Rental guarantee advances
    
5,612
      
16,105
  
Prepaid Expenses and other current assets
    
6,060
      
6,060
  
Total Assets
  
 $
43,237
    
 $
67,285
  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                
                 
Current liabilities:
                
                 
Accounts payable and accrued expenses
  
 $
14,860
    
 $
26,015
  
Total liabilities
    
14,860
      
26,015
  
                 
Stockholders' equity
                
                 
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, 3,837,688 shares issued and outstanding as of September 30, 2012 and December 31, 2011
    
384
      
384
  
Paid-in capital
    
2,641,697
      
2,641,697
  
Accumulated deficit
    
(2,613,704
)
    
(2,600,811
)
Total Stockholders' equity
    
28,377
      
41,270
  
Total Liabilities and Stockholders' equity
  
$
43,237
    
$
67,285
  

See notes to unaudited financial statements.

 
GOLDEN GATE HOMES, INC.
STATEMENTS OF INCOME
 (Unaudited)
 
   
Three Months Ended
    
Nine Months Ended
  
   
September 30, 2012
    
September 30, 2011
    
September 30, 2012
    
September 30, 2011
  
                                 
Brokerage and Fee Income
  
$
1,082
      
49,103
    
$
18,184
    
$
188,384
  
Operating Expenses:
                                
General & Administrative
    
7,900
      
11,033
      
31,077
      
41,021
  
Impairment of deferred transaction costs
    
-
      
-
      
-
      
-
  
Operating income (loss)
    
(6,818
 )    
38,070
      
(12,893
 )    
147,363
  
                                 
Other income (expense):
                                
Interest income
    
-
      
-
      
-
      
21
  
Gain/(loss) on settlement of accounts payable
    
-
      
-
      
-
      
(12,300
)
Total Other income
    
-
      
-
      
-
      
(12,279
)
                                 
Net income (loss)
  
$
(6,818
 )  
$
38,070
    
$
(12,893
 )  
$
135,084
  
                                 
Earnings (loss) per common share Basic & Diluted
  
$
(0.00
 )  
$
0.01
      
(0.00
 )    
0.04
  
                                 
Weighted average number of common shares outstanding Basic & Diluted
    
3,837,688
      
3,837,688
      
3,837,688
      
3,821,000
  

See notes to unaudited financial statements.

 
GOLDEN GATE HOMES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
 
   
Nine Months Ended
  
   
September 30, 2012
    
September 30, 2011
  
CASH FLOWS FROM OPERATING ACTIVITIES
            
Net income (loss)
  
$
(12,893
)
  
$
135,084
  
                 
                 
Adjustments to reconcile net income (loss) to net cash used in operating activities:
                
Gain/(loss) on settlement of accounts payable
    
-
      
(12,300
)
Shares issued for services 
  
  
-
  
  
  
40,750 
  
Change in operating assets and liabilities :
                
Other current assets and prepaid expenses
            
1,235
  
Accounts payable and accrued expenses
    
(11,155
)
    
(88,017
)
Net cash provided by (used in) operating activities
    
(24,048
 )    
76,752
  
                 
                 
CASH FLOWS FROM INVESTING ACTIVITIES
                
Loans made to buyers
    
-
      
(21,062
)
Repayment on rental guarantee advances
    
10,493
      
-
  
Net cash provided by (used in) investing activities
    
10,493
      
(21,062
)
                 
 CASH FLOWS FROM FINANCING ACTIVITIES
                
Proceeds from sale of stock
    
-
      
-
  
Contributed capital
    
-
      
20,000
  
Payments on advances from related party
    
-
      
(16,455
 ) 
Net cash provided by financing activities
    
-
      
3,545
  
                 
Net change in cash
    
(13,555
)
    
59,235
  
Cash at beginning of period
    
45,120
      
1,913
  
Cash at end of period
  
$
31,565
    
$
61,148
  
 
See notes to unaudited financial statements.


GOLDEN GATE HOMES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 – BASIS OF PRESENTATION
 
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 ("SEC"), 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, 2011 (the “Form 10-K”) 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, 2011 as reported in the Form 10-K have been omitted.

NOTE 2 – RENTAL GUARANTEE ADVANCES
 
The Company has nine properties being managed under its property management program. The Company has provided rental guarantees for a period of one year for 7% of the purchase price of the property for seven of these properties, four of which have now expired without any liability. Of the three remaining properties, one property is rented at a rate above its monthly rent guarantee amount, so no liability is evident to the Company at this time unless the tenant fails to make the rent payments or terminates the lease.  For the remaining two properties, the Company advanced one-half of the amount of such guarantee to the purchasers of two properties. These two purchasers have agreed to reimburse the funds advanced for their rental guarantees from funds received from the rental of their properties over a period of 13.5 months for one property and 18 months for the other. At September 30, 2012, an aggregate of $5,612 was outstanding. The Company reflects these advances on its balance sheet as loan advances. The Company expects that the full amount for one advance of rental guarantee will be repaid completely based on the current rent amounts while the other rent advance is expected to be repaid but may have an uncollectable exposure of no more than $1,400. . Therefore, the Company has not reserved against any of these rent guarantees at this time, but may re-evaluate the accounting treatment of this minor liability at year end. The other half of the funds for the rental guarantees were advanced by Premier Capital, Ltd. (“Premier Capital”), the Company’s selling agent in Asia. The Company collects the reimbursements from the purchasers on behalf of Premier Capital and typically forwards these funds every three months. At September 30, 2012, the Company had collected $713 on behalf of Premier Capital but had not yet forwarded the funds. These funds are reflected on the Company’s balance sheet as a current liability. 

NOTE 3 – RELATED PARTY

As of September 30, 2012, a related party was paid an aggregate of $1,750 for consulting services provided to the Company during the first two quarters of fiscal 2012. There was $0 due to the related party as of September 30, 2012.
 

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.

OVERVIEW

The focus of the Company is on marketing high-quality, distressed residential properties in certain US markets (currently in California and Florida) 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.

In October 2009, the Company entered into an exclusive marketing agreement with Premier Capital, Ltd. (“Premier Capital”).  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 in which the Company markets properties.  Premier Capital also has offices in Australia, Singapore and New Zealand. 

Premier Capital acts as the Company’s 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”).  The Company pays the bulk of the expenses arising in connection with the marketing of Approved Properties in Hong Kong and China, although Premier Capital bears some of these expenses as well.  For its services, Premier Capital is paid a customary brokerage fee for Approved Properties sold in Hong Kong and China.

Premier Capital terminated the exclusive marketing agreement with the Company in April 2011, although it has stated that it will continue to work with the Company to sell the Company’s current inventory as well as future projects.  The Company is in discussions with Premier Capital about entering into an exclusive marketing agreement for another geographical market in the United States, and expects to complete such an agreement on a non-exclusive agreement upon the completion of the current sales program.  The Company will also seek additional selling agents to market its properties, although there can be no assurance that the Company will be successful in finding additional selling agents.  Inasmuch as Premier Capital has agreed to continue to work with the Company, the Company does not believe that the termination of the exclusive marketing agreement with Premier Capital will have a material adverse effect on the Company’s business, prospects, financial condition and results of operations.
 
RESULTS OF OPERATIONS

Comparison of Nine Months Ended September 30, 2012 and 2011

For the nine months ended September 30, 2012, we had a net loss of $12,893, compared to net income of $135,084 for the nine months ended September 30, 2011. For the nine months ended September 30, 2012, we incurred $31,077 of general and administrative expenses, compared to $41,021 of general and administrative expenses for the nine months ended September 30, 2011.   
 
Comparison of Three Months Ended September 30, 2012 and 2011

For the three months ended September 30, 2012, we had a net loss of $6,818, compared to net income of $38,070 for the three months ended September 30, 2011.  For the three months ended September 30, 2012, we incurred $7,900 of general and administrative expenses as compared to the three months ended September 30, 2011, when we incurred $11,033 of general and administrative expenses.
 
 
CHANGES IN FINANCIAL CONDITION

Liquidity and Capital Resources

The Company's cash position as of September 30, 2012 is $31,565.  As of September 30, 2012, the Company has outstanding payables of $14,860.  Capital constraints currently limit the Company’s ability to purchase residential properties for resale to international clients, and consequently the Company is restricted to selling agreements and consignment arrangements.  Currently, the Company is out of contract with the developers with whom the Company had entered into such agreements, although the Company has one property under contract that it expects to close and four additional properties that these developers are allowing the Company to market to its international clients for resale.  The Company is seeking to enter into additional selling agreements and consignment arrangements for residential properties that will have lower sales prices than those it has previously sold to minimize the need for prospective international purchasers to obtain financing.  The Company has identified certain properties that fit its criteria, but has not entered into any definitive agreements.  There can be no assurances that the Company will enter into any such agreements.  Absent new agreements, the Company will be unable to generate future revenues beyond the income derived from asset management fees.

The Company has taken numerous steps to conserve cash. We have closed our shared office in Napa and eliminated our full-time employees. However, given the Company’s current cash position, it may be difficult for the Company to enter into any new agreements to market properties to its international clients without obtaining additional funding. The Company can make no assurances that any additional financing will be available to it when needed or, if available, that it can be obtained on commercially reasonable terms.

To conserve on the Company's capital requirements, the Company may issue shares of its common stock to pay certain expenses.

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.

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, 2012, our internal control over financial reporting was ineffective.

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

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, 2011.
 
ITEM 6.  EXHIBITS
 
NUMBER  
  
DESCRIPTION
     
31.1
  
     
31.2
  
     
32
  
     
101.CAL
  
XBRL Taxonomy Extension Calculation Linkbase
     
101.DEF
  
XBRL Taxonomy Extension Definition Linkbase
     
101.INS
  
XBRL Instance Document
     
101.LAB
  
XBRL Taxonomy Extension Label Linkbase
     
101.PRE
  
XBRL Taxonomy Extension Presentation Linkbase
     
101.SCH
  
XBRL Taxonomy Extension Schema Linkbase

 
 
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: November 1, 2012
By:
/s/ Steven Gidumal
  
   
Steven Gidumal
  
   
Chairman of the Board, CEO and Chief Financial Officer
  
   
(Principal Executive, Financial and Accounting Officer)
  
 
 
 

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