SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q/A

 

x Quarterly Report Pursuant to Section 13 or 15(d) Securities Exchange Act of 1934 for Quarterly Period Ended September 30, 2014

 

-OR-

 

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transaction period from _________ to ________

 

Commission File Number 000-54165

 

Reven Housing REIT, Inc.

(Exact name of Registrant in its charter)

 

Maryland		84-1306078
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

 

7911 Herschel Avenue, Suite 201

La Jolla, CA 92037

(Address of principal executive offices)

 

Registrant's Telephone Number, Including Area Code:

(858) 459-4000

 

Not Applicable

(Former name or former address, if changed since last report)

 

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 (section 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-accelerate filer, or a small reporting company as defined by Rule 12b-2 of the Exchange Act):

 

Large accelerated filer	¨		Non-accelerated filer	¨
Accelerated filer	¨		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

 

The number of outstanding shares of the registrant's common stock, as of November 10, 2014: 7,016,796

 

  

REVEN HOUSING REIT, INC.

FORM 10-Q/A

INDEX

 

		Page
PART I – FINANCIAL INFORMATION		3
Item 1.  Financial Statements (Unaudited)		3
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3.  Quantitative and Qualitative Disclosure About Market Risk		19
Item 4.  Controls and Procedures		19
PART II - OTHER INFORMATION		20
Item 1.  Legal Proceedings		20
Item 1A. Risk Factors		20
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds		20
Item 3.  Defaults Upon Senior Securities		20
Item 4.  Mine Safety Disclosures		20
Item 5.  Other Information		20
Item 6.  Exhibits		21
SIGNATURES		22

 

EXPLANATORY NOTE—RESTATEMENT OF FINANCIAL INFORMATION

 

This Amendment No. 1 on Form 10-Q/A (“Amendment No. 1”) is being filed to effect a restatement of the previously issued consolidated financial statements of Reven Housing REIT, Inc. (either the “Company,” “we” or “our”) as of and for the three and nine months ended September 30, 2014 filed as part of the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 12, 2014 (“Original Form 10-Q”).

 

The Company is restating its previously issued third quarter 2014 consolidated financial statements to correct an error that resulted from the inadvertent failure to properly account for our portfolio acquisitions of leased single family homes as asset acquisitions instead of business acquisitions. In addition, a portion of the purchase price relating to our third quarter 2014 acquisitions should have been allocated on our balance sheet to lease origination costs instead of building values.

 

This Amendment No.1 amends and restates Items 1, 2 and 4 of Part I of the Original Form 10-Q to reflect the effects of the restatements. In addition, in accordance with Rule 12b-15 promulgated under the Securities and Exchange Act of 1934, as amended, this Amendment also includes updated certifications from our Chief Executive Officer and Chief Financial Officer as Exhibits 31.1, 31.2 and 32.1. The remaining Items contained within this Amendment No. 1 consist of all other Items originally contained in Original Form 10-Q. This Amendment No. 1 does not reflect events occurring after the filing of the Original Form 10-Q or modify or update those disclosures in any way other than as required to reflect the effects of the restatements.

 

 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

REVEN HOUSING REIT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, 2013 and September 30, 2014

 

		(Restated, Note 1)				(Restated, Note 1)
		December 31, 2013				September 30, 2014
		(Audited)				(Unaudited)
ASSETS
Investment in real estate:
Land		$	2,514,009			$	4,090,909
Buildings and improvements			9,685,361				17,917,326
			12,199,370				22,008,235
Accumulated depreciation			(73,950	)			(430,552	)
Investment in real estate, net			12,125,420				21,577,683
Cash			2,134,510				6,584,098
Rents and other receivables			10,053				95,714
Tax and insurance reserves			-				169,740
Escrow deposits and prepaid expenses			151,128				896,545
Lease origination costs, net			75,038				124,886
Loan fees, net			-				253,177
Deferred stock issuance costs			35,000				472,357
Total Assets		$	14,531,149			$	30,174,200
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses		$	347,179			$	722,329
Security deposits			156,985				253,870
Note payable			-				7,570,000
Total Liabilities			504,164				8,546,199
Commitments (Note 9)
Stockholders' Equity
Preferred stock, $.001 par value; 25,000,000 shares authorized; No shares issued & outstanding			-				-
Common stock, $.001 par value; 100,000,000 shares authorized; 4,393,044 and 6,591,796 shares issued & outstanding at December 31, 2013 and September 30, 2014, respectively			4,393				6,592
Additional paid-in capital			16,036,648				24,601,719
Accumulated deficit			(2,014,056	)			(2,980,310	)
Total Stockholders' Equity			14,026,985				21,628,001
Total Liabilities and Stockholders' Equity		$	14,531,149			$	30,174,200

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

  

REVEN HOUSING REIT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Nine Months Ended September 30, 2013 and 2014 (Unaudited)

 

						(Restated, Note 1)								(Restated, Note 1)
		Three Months Ended				Three Months Ended				Nine Months Ended				Nine Months Ended
		September 30, 2013				September 30, 2014				September 30, 2013				September 30, 2014
Rental income, net		$	14,193			$	740,778			$	55,817			$	1,716,758
Operating expenses:
Rental expenses			11,978				262,311				25,718				682,700
General and administrative			17,060				278,543				121,599				988,790
Legal and accounting			21,536				49,809				114,411				219,661
Real estate acquisition costs			-				256,764				-				295,122
Interest expense			25,081				50,603				77,382				53,090
Amortization of discount on notes payable			281,625				-				563,253				-
Depreciation and amortization			4,200				240,650				12,600				443,650
Total operating expenses			361,480				1,138,680				914,963				2,683,013
Net loss		$	(347,287	)		$	(397,902	)		$	(859,146	)		$	(966,255	)
Net loss per share
(Basic and fully diluted)		$	(0.64	)		$	(0.06	)		$	(1.86	)		$	(0.17	)
Weighted average number of common shares outstanding			546,872				6,591,796				461,098				5,610,265

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

  

REVEN HOUSING REIT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2013 and 2014 (Unaudited)

 

						(Restated, Note 1)
		2013				2014
Cash Flows From Operating Activities:
Net loss		$	(859,146	)		$	(966,255	)
Adjustments to reconcile net loss to Net cash used for operating activities:
Amortization of debt discount			563,253				-
Stock compensation			-				195,000
Depreciation and amortization			12,600				443,650
Changes in operating assets and liabilities:
Rents and other receivables			(7,090	)			(85,661	)
Tax and insurance reserves			-				(169,740	)
Accounts payable, accrued expenses, accrued interest and security deposits			(76,242	)			472,035
Related party advances			(263,877	)			-
Net cash used for operating activities			(630,502	)			(110,971	)
Cash Flows From Investing Activities:
Additions to investments in real estate			(263,428	)			(9,808,865	)
Lease origination costs			-				(123,569	)
Payments for escrow deposits and prepaids on residential homes			-				(1,590,763	)
Reduction of escrow deposits and prepaids expenses			-				845,346
Net cash used for investing activities			(263,428	)			(10,677,851	)
Cash Flows From Financing Activities:
Proceeds from notes payable			500,000				7,570,000
Payment of convertible notes payable			(152,176	)			-
Loan fees			-				(266,503	)
Net proceeds from common stock issuance			10,646,457				8,372,270
Payments for deferred stock issuance costs			-				(437,357	)
Net cash provided by financing activities			10,994,281				15,238,410
Net Increase In Cash			10,100,351				4,449,588
Cash at the Beginning of the Period			5,763				2,134,510
Cash at the End of the Period		$	10,106,114			$	6,584,098
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Debt discount for allocation of proceeds to warrants and beneficial conversion feature of debt		$	291,920			$	-
Conversion of debt to common shares		$	902,176			$	-
Deferred costs of common stock issuance		$	50,000			$	-
Supplemental Disclosure:
Cash paid for interest		$	-			$	34,778

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

  

REVEN HOUSING REIT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

 

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Reven Housing REIT, Inc. was initially incorporated in the State of Colorado and then converted to a Maryland corporation on April 1, 2014 (Reven Housing REIT, Inc., along with its subsidiaries, are also referred to herein collectively as the “Company”). The Company acquires portfolios of occupied and rented single-family homes throughout the United States with the objective of receiving income from rental property activity and future profits from the sale of rental property at appreciated values.

 

Restatement of Consolidated Financial Statements

 

In connection with preparing the annual financial information for the year ending December 31, 2014, prior period errors were identified which affected the annual period ended December 31, 2013, and the quarterly period ending September 30, 2014. These errors occurred in the Company’s accounting for the acquisition of certain real property portfolios of single family homes included in investment in real estate and involve acquisition costs that were improperly capitalized, and the reallocation of acquisition values from building and improvements to lease origination costs. These errors require the Company to restate previously reported financial results contained in this report. The effects of these prior period errors in the consolidated financial statements for the period ended December 31, 2013 are disclosed in the Form 10K/A filing for that period. The changes to the condensed consolidated financial statements for the period ended September 30, 2014 are shown in the following table and include reclassification of expenses in order to enable the presentation to be consistent with the December 31, 2013 year end amended filing.

 

  

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  

		September 30, 2014
		As				As previously
		Restated				Reported				Adjustment
Consolidated Balance Sheet
Buildings and improvements		$	22,008,235			$	22,693,455			$	(685,220	)
Accumulated depreciation		$	(430,552	)		$	(432,802	)		$	2,250
Investment in real estate, net		$	21,577,683			$	22,260,653			$	(682,970	)
Lease origination costs, net		$	124,886			$	-			$	124,886
Total Assets		$	30,174,200			$	30,732,284			$	(558,084	)
Accumulated deficit		$	(2,980,310	)		$	(2,422,226	)		$	(558,084	)
Total Stockholders' Equity		$	21,628,001			$	22,186,085			$	(558,084	)
Total Liabilities and Stockholders' Equity		$	30,174,200			$	30,732,284			$	(558,084	)

 

		Three months ended September 30, 2014
		As				As previously
		Restated				Reported				Adjustment
Consolidated Statement of Operations
Rental expenses		$	262,311			$	317,444			$	(55,133	)
Legal and accounting		$	49,809			$	69,054			$	(19,245	)
Real estate acquisition costs		$	256,764			$	-			$	256,764
Depreciation and amortization		$	240,650			$	166,928			$	73,722
Total operating expenses		$	1,138,680			$	882,572			$	256,108
Net loss		$	(397,902	)		$	(141,794	)		$	(256,108	)
Net loss per share		$	(0.06	)		$	(0.02	)		$	(0.04	)

 

		Nine months ended September 30, 2014
		As				As previously
		Restated				Reported				Adjustment
Consolidated Statement of Operations
Rental expenses		$	682,700			$	737,833			$	(55,133	)
General and administrative		$	988,790			$	1,005,648			$	(16,858	)
Legal and accounting		$	219,661			$	260,406			$	(40,745	)
Real estate acquisition costs		$	295,122			$	-			$	295,122
Depreciation and amortization		$	443,650			$	369,928			$	73,722
Total operating expenses		$	2,683,013			$	2,426,905			$	256,108
Net loss		$	(966,255	)		$	(710,147	)		$	(256,108	)
Net loss per share		$	(0.17	)		$	(0.13	)		$	(0.04	)

 

		Nine months ended September 30, 2014
		As				As previously
		Restated				Reported				Adjustment
Consolidated Statement of Cash Flows
Net loss		$	(966,255	)		$	(710,147	)		$	(256,108	)
Depreciation and amortization		$	443,650			$	369,928			$	73,722
Net cash used for operating activities		$	(110,971	)		$	71,415			$	(182,386	)
Acquisitions of investments in real estate		$	(9,808,865	)		$	(10,114,820	)		$	305,955
Lease origination costs		$	(123,569	)		$	-			$	(123,569	)
Net cash used for investing activities		$	(10,677,851	)		$	(10,860,237	)		$	182,386

 

  

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated interim financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, all adjustments (which include only normal recurring adjustments except as noted in management’s discussion and analysis of financial condition and results of operations) necessary to present fairly the financial position, results of operations and changes in cash flows have been made.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the 2013 Annual Report on Form 10-KA, filed April 17, 2015. The results of operations for the period ended September 30, 2014 are not necessarily indicative of the operating results for the full year.

 

On November 5, 2014, the Company effected a 1-for-20 reverse stock split of the issued common stock. Each stockholder’s percentage ownership and proportional voting power generally remained unchanged as a result of the reverse stock split. All applicable share data, per share amounts and related information in the condensed consolidated financial statements and notes thereto have been adjusted retroactively to give effect to the 1-for-20 reverse stock split. See Note 5.

 

Principles of Consolidation

 

The accompanying financial statements consolidate the accounts of the Company and its wholly-owned subsidiaries, Reven Housing Georgia, LLC, Reven Housing Texas, LLC, Reven Housing Florida, LLC, and Reven Housing Tennessee, LLC. All significant inter-company transactions have been eliminated in consolidation.

 

New Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-09 Revenue from Contracts with Customers, or ASU No. 2014-09, which will supersede nearly all existing revenue recognition guidance under GAAP. ASU No. 2014-09 provides that an entity recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU No. 2014-09 allows for either full retrospective or modified retrospective adoption and will become effective for the Company in the fourth quarter of 2017.

 

The Company has adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents.

 

Rents and Other Receivables

 

Rents and other receivables represent the amount of rent receivables, security deposits and net rental funds which are held by the property manager on behalf of the Company, net of any allowance for amounts deemed uncollectible.

 

Tax and Insurance reserves

 

Tax and insurance reserves represent amounts held in accordance with the terms of our loan for taxes and insurance.

 

  

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Loan Fees

 

Loan closing costs and fees totaled $266,503 and will be amortized over the term of the loan which is 60 months. For the three and nine months ended September 30, 2014, amortization expense for these loan fees was $13,326.

 

Deferred Stock Issuance Costs

 

Deferred stock issuance costs represent amounts paid for consulting services and other offering expenses in conjunction with the future raising of additional capital to be performed within one year. These costs are charged against additional paid-in capital as a cost of the stock issuance upon closing of the respective stock placement.

 

Warrant Issuance and Note Conversion Feature

 

The Company accounts for the proceeds from the issuance of convertible notes payable with detachable stock purchase warrants and embedded conversion features in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 470-20, Debt with Conversion and Other Options. Under FASB ASC 470-20, the proceeds from the issuance of a debt instrument with detachable stock purchase warrants shall be allocated to the two elements based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance. The portion of the proceeds allocated to the warrants is accounted for as additional paid-in capital and the remaining proceeds are allocated to the debt instrument which resulted in a discount to debt which is amortized and charged as interest expense over the term of the note agreement. Additionally, pursuant to FASB ASC 470-20, the intrinsic value of the embedded conversion feature of the convertible notes payable is included in the discount to debt and amortized and charged to interest expense over the life of the note agreement.

 

Revenue Recognition

 

Property is leased under rental agreements of generally one year and revenue is recognized over the lease term on a straight-line basis.

 

Income Taxes

 

The Company intends to elect to be taxed as a real estate investment trust (“REIT”), as defined in the Internal Revenue Code, upon meeting the necessary requirements. Management believes that the Company will be able to satisfy the requirements for qualification as a REIT. Accordingly, the Company is not expecting to be subject to federal income tax, provided that it qualifies as a REIT and distributions to the stockholders equal or exceed REIT taxable income.

 

However, qualification and taxation as a REIT depends upon the Company’s ability to meet the various qualification tests imposed under the Internal Revenue Code related to the percentage of income that are earned from specified sources, the percentage of assets that fall within specified categories, the diversity of capital stock ownership, and the percentage of earnings that are distributed. Accordingly, no assurance can be given that the Company will be organized or be able to operate in a manner so as to qualify or remain qualified as a REIT. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal and state income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate tax rates, and the Company may be ineligible to qualify as a REIT for four subsequent tax years. Even if the Company qualifies as a REIT, it may be subject to certain state or local income taxes.

 

The tax benefit of uncertain tax positions is recognized only if it is “more likely than not” that the tax position will be sustained, based solely on its technical merits, with the taxing authority having full knowledge of relevant information. The measurement of a tax benefit for an uncertain tax position that meets the “more likely than not” threshold is based on a cumulative probability model under which the largest amount of tax benefit recognized is the amount with a greater than 50% likelihood of being realized upon ultimate settlement with the taxing authority, having full knowledge of all the relevant information. As of December 31, 2013 and September 30, 2014, the Company had no unrecognized tax benefits. The Company does not anticipate a significant change in the total amount of unrecognized tax benefits during 2014.

 

  

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Incentive Compensation Plan

 

During 2012, the Company established the 2012 Incentive Compensation Plan, which was subsequently amended and restated in December 2013 (“2012 Plan”). The 2012 Plan allows for the grant of options and other awards representing up to 1,650,000 shares of the Company’s common stock. Such awards may be granted to officers, directors, employees, consultants and other persons who provide services to the Company or any related entity. Under the 2012 Plan, options may be granted at an exercise price greater than or equal to the market value at the date of the grant, for owners of 10% or more of the voting shares, at an exercise price of not less than 110% of the market value. Awards are exercisable over a period of time as determined by a committee designated by the Board of Directors, but in no event longer than ten years.

 

On April 4, 2014, the Board of Directors authorized the issuance of, and the Company issued, an aggregate of 48,750 shares of the Company’s common stock under the 2012 Plan to the members of the Board of Directors as compensation for their services.

 

On October 16, 2014, the Board of Directors authorized the issuance of, and the Company issued, an aggregate of 425,000 shares of the Company’s common stock under the 2012 Plan to certain officers and consultants of the Company. The shares issued are subject to restrictions and future vesting conditions based on the Company reaching certain future milestones. None of the shares were vested as of the issuance date.

 

Net Loss Per Share

 

Net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company's preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share. For the nine months ended September 30, 2013, and 2014, potentially dilutive securities excluded from the calculations were 263,588 shares issuable upon exercise of outstanding warrants granted in conjunction with the convertible notes.

 

Financial Instruments

 

The carrying value of the Company’s financial instruments, as reported in the accompanying condensed consolidated balance sheets, approximates fair value.

 

Security Deposits

 

Security deposits represent amounts deposited by tenants at the inception of the lease.

 

Use of Estimates

 

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates and reported amounts of expenses for the periods presented. Accordingly, actual results could differ from those estimates. Significant estimates include assumptions used to determine the allocation of purchase prices of property acquisitions.

 

  

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Investments in Real Estate

 

The Company accounts for its investments in real estate as business combinations under the guidance of FASB ASC Topic 805, Business Combinations (“ASC 805”) and these acquisitions are recorded at fair value, allocated to land, building and the existing leases based upon their fair values at the date of acquisition, with acquisition costs expensed as incurred. In making estimates of fair values for purposes of allocating purchase price, the Company utilizes its own market knowledge and published market data. The estimated fair value of acquired in-place leases represents the expected costs the Company would have incurred to lease the property at the date of acquisition. Each portfolio of acquired property is recorded as a separate business combination.

 

Land, buildings and improvements are recorded at cost. Buildings and improvements are depreciated over estimated useful lives of approximately 27.5 years using the straight-line method. Lease origination costs are amortized over the average remaining term of the in-place leases which is generally less than one year. Maintenance and repair costs are charged to expenses as incurred.

 

The Company assesses the impairment of investments in real estate, whenever events or changes in business circumstances indicate that carrying amounts of the assets may not be fully recoverable. When such events occur, management determines whether there has been impairment by comparing the asset’s carrying value with its fair value. Should impairment exist, the asset is written down to its estimated fair value. The Company has not recognized any impairment losses through September 30, 2014.

 

Reclassifications

 

Certain amounts for 2013 have been reclassified to conform to the current period’s presentation.

 

NOTE 2. RESIDENTIAL HOMES

 

Residential homes purchased by the Company are recorded at cost. The homes are leased on short-term leases expiring on various dates primarily over the coming year.

 

The following table represents the Company’s investment in the homes and allocates purchase price in accordance with ASC 805:

 

		Number								Residential				Total
		of Homes				Land				Homes				Investment
Total at December 31, 2013			159			$	2,514,009			$	9,685,361			$	12,199,370
Purchases and improvements during 2014:
Houston, TX			18				319,500				1,236,765				1,556,265
Jacksonville, FL			47				479,700				2,745,578				3,225,278
Memphis, TN			69				777,700				4,229,978				5,007,678
Atlanta, GA improvements			-				-				19,644				19,644
Total at September 30, 2014			293			$	4,090,909			$	17,917,326			$	22,008,235

 

  

NOTE 3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

At December 31, 2013 and September 30, 2014, accounts payable and accrued expenses consisted of the following:

 

		2013				2014
Accounts payable		$	89,666			$	74,926
Accrued property taxes			196,141				197,606
Accrued legal, board fees and other expenses			61,372				422,987
Accrued interest			-				26,810
		$	347,179			$	722,329

 

NOTE 4. NOTE PAYABLE

 

On June 12, 2014, Reven Housing Texas, LLC, a wholly owned subsidiary of the Company, issued a promissory note in the principal amount of up to $7,570,000 to Silvergate Bank, secured by deeds of trust encumbering the Company’s homes located in Texas. The entire balance of principal and accrued interest is due and payable on July 5, 2019. The note provides for monthly payments of interest only at a rate of 1.00% over the prime rate (current interest rate is 4.25%) until July 5, 2016. Thereafter, monthly payments of interest and principal, assuming a 25 year amortization rate will be made until maturity. The note has a prepayment penalty of 3% calculated on principal amounts prepaid prior to July 5, 2016. There is no prepayment penalty on amounts paid after that date. Loan closing costs and fees totaled $266,503 and will be amortized over the term of the loan which is 60 months.

 

The terms of the note also provide for escrows of taxes and insurance reserves. As of September 30, 2014, a total of $169,740 of cash was held in these lender escrow accounts.

 

NOTE 5. STOCKHOLDERS’ EQUITY

 

On April 4, 2014, in a separate follow-on private placement to the September 27, 2013 private placement, the Company issued an additional 675,000 shares of its common stock for a purchase price of $4.00 per share for gross proceeds of $2,700,000. On May 16, 2014, the Company completed the final tranche of this follow-on private placement with the same accredited investor upon the receipt of additional gross proceeds of $5,900,000 and issued an additional 1,475,000 shares of its common stock for a purchase price of $4.00 per share. Offering costs related to this follow-on private placement totaled $227,730 resulting in combined net proceeds of $8,372,270.

 

On November 5, 2014, the Company effected a 1-for-20 reverse stock split of issued common stock. In conjunction with the reverse stock split, the Board of Directors approved a change in the number of authorized common shares from 600,000,000 to 100,000,000, which change was effected immediately after the effectiveness of the reverse stock split. Additionally, the par value of the shares was modified from $.02 to $.001 per share so that the par value per share of the common stock before the reverse stock split and after the reverse stock split remained at $.001 per share. References in these condensed consolidated financial statements and notes have been adjusted to retroactively account for the effects of the reverse split.

 

  

NOTE 6. INCOME TAXES

 

The Company plans to elect REIT status when it meets all requirements allowing it to do so. At that time, the Company would generally not be subject to income taxes assuming it complied with the specific distribution rules applicable to REITs.

 

Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and expected carry-forwards are available to reduce taxable income. The Company records a valuation allowance when, in the opinion of management, it is more likely than not, that the Company will not realize some or all deferred tax assets. As the achievement of required future taxable income is uncertain, the Company recorded a valuation allowance equal to the deferred tax asset at December 31, 2013 and September 30, 2014. At December 31, 2013 the Company had federal and state net operating loss carry-forwards of approximately $675,000 and $673,000, respectively. The federal and state tax loss carry-forwards will begin to expire in 2032, unless previously utilized.

 

Pursuant to Internal Revenue Code Section 382, use of the Company’s net operating loss carry-forwards may be limited if a cumulative change in ownership of more than 50% occurs within a three year period. Management believes that such an ownership change had occurred but has not performed a study of the limitations on the net operating losses.

 

NOTE 7. RELATED PARTY TRANSACTIONS

 

The Company sub-leases office space on a month-to-month basis from Reven Capital, LLC which is wholly-owned by Chad M. Carpenter, a shareholder of the Company and the Company’s Chief Executive Officer, and reimburses Reven Capital, LLC for Company expenses paid and previously advanced by Reven Capital, LLC. The advances are due on demand, unsecured and are non-interest bearing. These advances were paid off in full during the year ended December 31, 2013. During the period ended September 30, 2013, the Company paid previous advances of $263,877.

 

NOTE 8. STOCK COMPENSATION

 

On April 4, 2014, the Board of Directors authorized the issuance of, and the Company issued, an aggregate of 48,750 shares of the Company’s common stock under the 2012 Plan to the members of the Board of Directors as compensation for their services. These shares were valued at $4.00 per share, for a total expense of $195,000 which has been included in the Company’s Condensed Consolidated Statement of Operations for the nine months ended September 30, 2014.

 

On October 16, 2014, the Board of Directors authorized the issuance of, and the Company issued, an aggregate of 425,000 shares of the Company’s common stock under the 2012 Plan to certain officers and consultants of the Company. The shares issued are subject to restrictions and future vesting conditions based on the Company reaching certain future milestones. None of the shares were vested as of the issuance date. Compensation expense will be recognized in the applicable future periods should the applicable milestones be achieved in accordance with the vesting schedule. At the time of filing there is no assurance that these milestones will in fact be achieved and that the shares will in fact vest in the future.

 

NOTE 9. COMMITMENTS

 

Property Management Agreement

 

The Company has entered into property management agreements with unrelated property management companies in which the Company will pay management fees ranging from six to eight percent of gross rental receipts.

 

NOTE 10. SUBSEQUENT EVENTS

 

On November 10, 2014, Reven Housing Tennessee, LLC, a wholly-owned subsidiary of the Company, completed the acquisition of 21 residential homes, pursuant to a purchase and sale agreement. The homes are located in the Memphis, Tennessee metropolitan area. The contract purchase price for the 21 homes was approximately $1,725,000, excluding closing costs, which was funded primarily from cash.

 

  

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Unless otherwise provided in this Quarterly Report, references to the “Company,” “we,” “us,” and “our” refer to Reven Housing REIT, Inc. and Subsidiaries. Reven Housing REIT, Inc. was initially incorporated in the State of Colorado and then converted to a Maryland corporation on April 1, 2014.

 

The information contained in this report contains forward-looking statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events and similar expressions. Forward-looking statements may be identified by use of words such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” or “potential” or similar words or phrases which are predictions of or indicate future events or trends. Statements such as those concerning potential acquisition activity, investment objectives, strategies, opportunities, other plans and objectives for future operations or economic performance are based on the Company’s current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties, including the Company’s ability to successfully (i) acquire real estate investment properties in the future, (ii) to execute future agreements or understandings concerning the Company’s acquisition of real estate investment properties and (iii) be able to raise the capital required to acquire any such properties. Any of these statements could prove to be inaccurate and actual events or investments and results of operations could differ materially from those expressed or implied. To the extent that the Company’s assumptions differ from actual results, the Company’s ability to meet such forward-looking statements, including its ability to invest in a diversified portfolio of quality real estate investments, may be significantly and negatively impacted. You are cautioned not to place undue reliance on any forward-looking statements and the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, future events or other changes.

 

Restatement of Consolidated Financial Statements

 

In connection with preparing the annual financial information for the year ending December 31, 2014, prior period errors were identified which affected the annual period ended December 31, 2013, and the quarterly period ending September 30, 2014. These errors occurred in the Company’s accounting for the acquisition of certain real property portfolios of single family homes included in investment in real estate and involve acquisition costs that were improperly capitalized, and the reallocation of acquisition values from building and improvements to lease origination costs. These errors require the Company to restate previously reported financial results contained in this report. The effects of these prior period errors in the consolidated financial statements for the period ended December 31, 2013 are disclosed in the Form 10K/A filing for that period. The changes to the condensed consolidated financial statements for the period ended September 30, 2014 are shown in the following table and include reclassification of expenses in order to enable the presentation to be consistent with the December 31, 2013 year end amended filing.

 

  

		September 30, 2014
		As				As previously
		Restated				Reported				Adjustment
Consolidated Balance Sheet
Buildings and improvements		$	22,008,235			$	22,693,455			$	(685,220	)
Accumulated depreciation		$	(430,552	)		$	(432,802	)		$	2,250
Investment in real estate, net		$	21,577,683			$	22,260,653			$	(682,970	)
Lease origination costs, net		$	124,886			$	-			$	124,886
Total Assets		$	30,174,200			$	30,732,284			$	(558,084	)
Accumulated deficit		$	(2,980,310	)		$	(2,422,226	)		$	(558,084	)
Total Stockholders' Equity		$	21,628,001			$	22,186,085			$	(558,084	)
Total Liabilities and Stockholders' Equity		$	30,174,200			$	30,732,284			$	(558,084	)

 

		Three months ended September 30, 2014
		As				As previously
		Restated				Reported				Adjustment
Consolidated Statement of Operations
Rental expenses		$	262,311			$	317,444			$	(55,133	)
Legal and accounting		$	49,809			$	69,054			$	(19,245	)
Real estate acquisition costs		$	256,764			$	-			$	256,764
Depreciation and amortization		$	240,650			$	166,928			$	73,722
Total operating expenses		$	1,138,680			$	882,572			$	256,108
Net loss		$	(397,902	)		$	(141,794	)		$	(256,108	)
Net loss per share		$	(0.06	)		$	(0.02	)		$	(0.04	)

 

		Nine months ended September 30, 2014
		As				As previously
		Restated				Reported				Adjustment
Consolidated Statement of Operations
Rental expenses		$	682,700			$	737,833			$	(55,133	)
General and administrative		$	988,790			$	1,005,648			$	(16,858	)
Legal and accounting		$	219,661			$	260,406			$	(40,745	)
Real estate acquisition costs		$	295,122			$	-			$	295,122
Depreciation and amortization		$	443,650			$	369,928			$	73,722
Total operating expenses		$	2,683,013			$	2,426,905			$	256,108
Net loss		$	(966,255	)		$	(710,147	)		$	(256,108	)
Net loss per share		$	(0.17	)		$	(0.13	)		$	(0.04	)

 

		Nine months ended September 30, 2014
		As				As previously
		Restated				Reported				Adjustment
Consolidated Statement of Cash Flows
Net loss		$	(966,255	)		$	(710,147	)		$	(256,108	)
Depreciation and amortization		$	443,650			$	369,928			$	73,722
Net cash used for operating activities		$	(110,971	)		$	71,415			$	(182,386	)
Acquisitions of investments in real estate		$	(9,808,865	)		$	(10,114,820	)		$	305,955
Lease origination costs		$	(123,569	)		$	-			$	(123,569	)
Net cash used for investing activities		$	(10,677,851	)		$	(10,860,237	)		$	182,386

 

  

Overview

 

We are an internally-managed real estate investment company focused on the acquisition, leasing, and management of recently renovated and stabilized single-family properties in select markets in the United States. Our objective is to generate attractive risk-adjusted returns for our stockholders over the long term through dividends and capital appreciation. We generate virtually all of our revenue by leasing our portfolio of single-family properties. As of September 30, 2014, we owned 293 single-family properties, of which 168 are in the Houston, Texas metropolitan area, 69 are in the Memphis, Tennessee metropolitan area, 47 are in the Jacksonville, Florida metropolitan area, and 9 are in the Atlanta, Georgia metropolitan area. The average investment in the 293 homes is approximately $75,100 per home. Of the 293 homes owned at September 30, 2014, 280 were occupied, or 96%. The per home average rent for the portfolio is approximately $959 per month.

 

On September 27, 2013, the Company entered into a stock purchase agreement with King APEX Group II, Ltd. and King APEX Group III, Ltd., which are funds managed by Allied Fortune (“HK”) Management Limited, a Hong Kong based funds management company, in connection with a private placement of up to 6,250,000 shares of its common stock at a price of $4.00 per share, for aggregate gross proceeds of up to $25 million. Upon the completion of the private placement, we consummated the sale of a total of 3,750,000 shares for a gross purchase price of $15 million in three closings with the final closing occurring on November 22, 2013. Cash proceeds after offering expenses were $14,539,082, plus an additional non-cash expense of $50,000 representing additional deferred costs relating to the private placement resulting in net proceeds of $14,489,082.

 

The proceeds of this private placement have allowed the Company to purchase 168 homes in Houston, Texas, and provided the funds necessary to support the Company’s acquisition and operating expenses. On October 31, 2013, 150 of the Houston homes were purchased at a total cost of $11,592,532 excluding closing expenses. On January 31, 2014, the Company closed on the remaining 18 single family homes at a total cost of $1,556,265, excluding acquisition and closing costs.

 

On April 4, 2014, in a separate follow-on private placement to the September 27, 2013 private placement, the Company issued an additional 675,000 shares of its common stock for a purchase price of $4.00 per share for gross proceeds of $2,700,000. On May 16, 2014, the Company completed the final tranche of this follow-on private placement with the same accredited investor upon the receipt of additional gross proceeds of $5,900,000 and issued an additional 1,475,000 shares of its common stock for a purchase price of $4.00 per share. Offering costs related to this follow-on private placement totaled $227,730 resulting in combined net proceeds of $8,372,270.

 

The Company utilized the proceeds of this follow-on private placement to purchase additional homes. During the quarter ended September 30, 2014, the Company completed the acquisition of 47 residential homes located in the Jacksonville, Florida metropolitan area. The purchase price for the 47 homes was approximately $3,225,000. Also during the quarter ended September 30, 2014, the Company completed the acquisition of 69 residential homes located in the Memphis, Tennessee metropolitan area. The purchase price for the 69 homes was approximately $5,008,000.

 

In order to supplement its financial resources, the Company received $1,227,100 of loan proceeds per the terms of a $7,570,000 loan with Silvergate Bank on June 12, 2014. The loan is secured by deeds of trust encumbering the Company’s homes located in Texas. The entire balance of principal and accrued interest is due and payable on July 5, 2019. The note provides for monthly payments of interest only at a rate of 1.00% over the prime rate (current interest rate is 4.25%) until August 5, 2014. Thereafter, monthly payments of interest and principal, assuming a 25 year amortization rate will be made until maturity. The remaining principal amount of $6,342,900 was received by the Company on August 6, 2014. Thus the outstanding balance owed on the loan was $7,570,000 as of September 30, 2014.

 

On November 10, 2014, the Company completed the acquisition of 21 residential homes in the Memphis, Tennessee metropolitan area. The contract purchase price for the 21 homes was approximately $1,725,000, excluding closing costs, which was funded primarily by cash.

 

The Company plans to continue to acquire and manage single family homes with a focus on long term earnings growth and appreciation in asset value. The Company’s ability to identify and acquire single-family properties that meet our investment criteria will be affected by home prices in our markets, the inventory of properties available through our acquisition channels, competition for our target assets, our capital available for investment, and the cost of that capital. The housing market environment in our markets remains attractive for single-family property acquisitions and rentals. Pricing for housing in certain markets remains attractive and demand for housing is growing. At the same time, we continue to face relatively steady competition for new properties and residents from local operators and institutional managers. Housing prices across all of our core markets have appreciated over the past year. Despite these gains, we believe housing in certain of our markets continues to provide attractive acquisition opportunities and remains inexpensive relative to replacement cost and affordability metrics.

 

We anticipate continued strong rental demand for single-family homes. While new building activity has begun to increase, it remains below historical averages and we believe substantial under-investment in residential housing over the past years will create upward pressure on home prices and rents as demand exceeds supply.

 

  

The Company completed its conversion to a Maryland corporation on April 1, 2014 and intends to take all necessary steps to qualify, and elect to be taxed as, a real estate investment trust (“REIT”) under the Internal Revenue Code, as soon as practicable. However, no assurance can be given that we will qualify or remain qualified as a REIT.

 

Results of Operations

 

Our results of operations and financial condition will be affected by numerous factors, many of which are beyond our control. The key factors we expect to impact our results of operations and financial condition include our pace and costs of acquisitions, rental rates, the varying costs of external property management, occupancy levels, rates of resident turnover, turnover costs, changes in homeownership rates, changes in homeowners’ association fees, insurance costs, real estate taxes, our expense ratios, and our capital structure.

 

Comparisons of our quarterly results of operations for September 30, 2014 to September 30, 2013 presented in our condensed consolidated financial statements are not generally meaningful as we did not have substantial rental operations in 2013. Operations and activity did not increase significantly until the fourth quarter of 2013 when we purchased an additional 150 homes, and raised equity through our private placement activities as mentioned above. As of September 30, 2014 the Company owned 293 homes, however as of September 30, 2013, the Company only owned 9 homes.

 

For the quarter ended September 30, 2014, the Company had total rental income of $740,778 and rental expenses of $262,311, resulting in net operating income from rentals of $478,467. General and administrative expenses including personnel, occupancy, travel, board of director fees, and public filing fees totaled $278,543. Legal and accounting totaled $49,809. Real estate acquisition costs totaled $256,764. Interest expense on the note payable was $50,603. Depreciation and amortization on our home investments totaled $240,650. This resulted in a net loss of $397,902.

 

For the quarter ended September 30, 2013, the Company had total rental income of $14,193. Rental expenses were $11,978, resulting in net operating income from rentals of $2,215. General and administrative expenses were $17,060. Legal and accounting expenses totaled $21,536. Interest expense on convertible notes payable was $25,081. Amortization of discount on the convertible notes payable totaled $281,625. The convertible notes were paid off in September of 2013, thus the corresponding interest and amortization expenses do not recur in the current quarter. Depreciation expense was $4,200. As a result, the Company had a net loss of $347,287 for the quarter ended September 30, 2013.

 

The increase in net rental operating income for the quarter ended September 30, 2014 compared to the quarter ended in 2013 is due to the increase of rental homes owned from 9 to 293. General and administrative expenses increased due to an increase in personnel and activities due to our increase in operations. Real estate acquisition costs were incurred due to the Company’s acquisition activity. The amortization of discount on the convertible notes was completed in the quarter ended September 30, 2013 when the notes were paid off or converted. Thus this expense was not incurred in the quarter ended September 30, 2014. Depreciation increased due to the increase in rental homes owned.

 

For the nine months ended September 30, 2014, the Company had total rental income of $1,716,758 and rental expenses of $682,700, resulting in net operating income from rentals of $1,034,058. General and administrative expenses including personnel, occupancy, travel, board of director fees, and public filing fees totaled $988,790. Legal and accounting totaled $219,661. Real estate acquisition costs totaled $295,122. Interest expense on the note payable was $53,090. Depreciation and amortization on our home investments totaled $443,650. This resulted in a net loss of $966,255.

 

For the nine months ended September 30, 2013, the Company had total rental income of $55,817. Rental expenses were $25,718, resulting in net operating income from rentals of $30,099. General and administrative expenses were $121,599, legal and accounting expenses totaled $114,411. Interest expense on convertible notes payable was $77,382. Amortization of discount on the convertible notes payable totaled $563,253. Depreciation expense was $12,600. As a result, the Company had a net loss of $859,146 for the nine months ended September 30, 2013.

 

The increase in net rental operating income for the nine months ended September 30, 2014 compared to the nine months ended in 2013 is due to the increase of rental homes during the period ended September 30, 2014. General and administrative expenses increased due to an increase in personnel and activities due to our increase in operations. Real estate acquisition costs were incurred due to the Company’s acquisition activity. The amortization of discount on the convertible notes was completed in the quarter ended September 30, 2013 when the notes were paid off or converted. Thus this expense was not incurred during the period ended September 30, 2014. Depreciation increased due to the increase in rental homes owned.

 

Liquidity and Capital Resources

 

The Company’s liquidity positon at September 30, 2014 consisted of $6,584,098 of cash, $95,714 of rents and other receivables, $169,740 of tax and insurance reserves, and $896,545 of escrow deposits and prepaid expenses, for a total of $7,746,097. As of December 31, 2013, the cash balance was $2,134,510, rents and other receivables were $10,053, and escrow deposits and prepaid expenses totaled $151,128, for a total liquidity position of $2,295,691. The liquidity position at September 30, 2014 resulted primarily from the excess of funds raised from the Company’s private placement and note proceeds over funds invested in the purchase of home inventory.

 

  

For the nine months ended September 30, 2014, the Company used $110,971 of cash for its operating activities. This resulted from adding back stock compensation of $195,000, depreciation and amortization of $443,650, and adding the net change in operating assets and liabilities of $216,634 to the net loss of $966,255. The Company used $630,502 in operations during the nine months ended September 30, 2013.

 

During the nine months ended September 30, 2014, the Company invested $9,808,865 in acquiring homes and additions to new homes, $123,569 in lease origination costs, and had a net increase in escrow deposits and prepaid expenses in the amount of $745,417 resulting in $10,677,851 of cash used for investing activities. For the nine months ended September 30, 2013, the Company used $263,428 of cash in investing activities to acquire homes.

 

The Company received $8,372,270 of net proceeds on the issuance of stock from its follow-on private placement and $7,570,000 of loan proceeds. The loan proceeds represented the $7,570,000 loan due on July 5, 2019 secured by deeds of trust encumbering the Company’s homes in Texas. The note provides for monthly payments of interest only at a rate of 1.00% over the prime rate (current interest rate is 4.25%) until July 5, 2016. Thereafter monthly payments of interest and principal will be made until maturity. Loan costs totaled $266,503 and additional deferred stock issuance costs totaled $437,357, resulting in $15,238,410 of net cash provided by financing activities for the nine months ended September 30, 2014. For the nine months ended September 30, 2013, the Company received $10,646,457 of net proceeds on the issuance of stock from its private placement, $500,000 of proceeds from the issuance of convertible notes payable, and used $152,176 of cash to retire convertible notes payable resulting in $10,994,281 of cash provided by financing activities.

 

The Company’s future acquisition activity relies primarily on its ability to raise funds from the further issuance of common shares combined with new loan transactions secured by its current and future home inventories. The Company remains focused on acquiring new capital. The Company believes its current cash balance combined with its estimated future net rental revenue is sufficient to fund its future operating activities.

 

Off Balance Sheet Arrangements

 

None.

 

  

Item 3.  Quantitative and Qualitative Disclosure About Market Risk.

 

As a “smaller reporting company” defined in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this item.

 

Item 4.  Controls and Procedures.

 

(a) Evaluation of Disclosure Controls and Procedures.

 

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are controls and other procedures that are designed to provide reasonable assurance that the information that we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

In connection with the preparation of this Amendment No. 1, our management, under the supervision and with the participation of our chief executive officer and chief financial officer, re-evaluated during the first quarter of 2015 the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of September 30, 2014. In conducting their re-evaluation, our management considered the material weaknesses in our internal control over financial reporting and the status of their remediation as described in our Annual Report on Form 10-K/A filed with the SEC on April 17, 2015, and as set forth below:

 

In connection with the preparation of our consolidated financial statement for the fiscal year ended December 31, 2014, we became aware that we had been improperly accounting for our portfolio acquisitions of leased single family homes as asset acquisitions instead of business acquisitions. Therefore, we had been capitalizing, instead of expensing, real property acquisition costs. Additionally, we determined that we had been improperly allocating a portion of our purchase price relating to 2013 acquisitions on our balance sheet to building values instead of lease origination costs. Our management concluded that these errors in accounting constituted “material weaknesses” in our internal control over financial reporting.

 

A “material weakness” is a significant deficiency, or combination of significant deficiencies that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements presented will not be prevented or detected. A “significant deficiency” is a control deficiency, or combination of control deficiencies, that adversely affects a company’s ability to initiate, authorize, record, process or report external financial data reliably in accordance with GAAP such that there is more than a remote likelihood that a misstatement of the annual or interim financial statements presented that is more than inconsequential will not be prevented or detected.

 

Based on their current re-evaluation, our chief executive officer and chief financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2014.

 

Following our determination of the above-mentioned errors in accounting, we performed additional analyses and other procedures, including among other things, engaging outside professionals to further evaluate our accounting policies to verify that they were correctly applied based on our specific operating business, additional transaction reviews, control activities and account reconciliations in order to provide assurance that our condensed consolidated financial statements included in this Amendment No. 1 were prepared in accordance with GAAP. Notwithstanding the fact that our internal control over financial reporting was not effective as of September 30, 2014, we believe that the consolidated financial statements included in this Amendment No. 1 present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP.

 

(b)  Changes in internal control over financial reporting.

 

There were no changes to our internal control over financial reporting (as defined in Rules 15a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended September 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

  

PART II - OTHER INFORMATION

 

Item 1.   Legal Proceedings.

 

We are currently not a party to any pending legal proceeding. From time to time, we may receive claims of and become subject to routine litigation that is incidental to the business.

 

Item 1A.  Risk Factors.

 

As a "smaller reporting company" defined in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this item.

 

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.

 

Not applicable.

 

Item 3.   Defaults Upon Senior Securities.

             

Not applicable.

 

Item 4.   Mine Safety Disclosures.

 

Not applicable.

 

Item 5.   Other Information.

 

Not applicable.

 

  

Item 6.   Exhibits.

 

Exhibit No.		Description
10.1		Second Amendment to Single Family Homes Real Estate Purchase and Sale Agreement dated July 2, 2014 (Jacksonville 49) (Incorporated by reference from the Registrant’s Form 8-K filed on July 7, 2014).
10.2		Fourth Amendment to Single Family Homes Real Estate Purchase and Sale Agreement dated July 22, 2014 (Memphis 60) (Incorporated by reference from the Registrant’s Form 8-K filed on July 28, 2014).
10.3		First Amendment to Single Family Homes Real Estate Purchase and Sale Agreement dated July 22, 2014 (Memphis 14) (Incorporated by reference from the Registrant’s Form 8-K filed on July 28, 2014).
10.4		Single Family Homes Real Estate Purchase and Sale Agreement dated September 9, 2014 (Jacksonville 50) (Incorporated by reference from the Registrant’s Form 8-K filed on September 11, 2014).
10.5		Single Family Homes Real Estate Purchase and Sale Agreement dated September 9, 2014 (Memphis 22) (Incorporated by reference from the Registrant’s Form 8-K filed on September 11, 2014).
10.6		Single Family Homes Real Estate Purchase and Sale Agreement dated September 11, 2014 (Jacksonville 77) (Incorporated by reference from the Registrant’s Form 8-K filed on September 17, 2014).
10.7		Single Family Homes Real Estate Purchase and Sale Agreement dated September 26, 2014 (Houston 100) (Incorporated by reference from the Registrant’s Form 8-K filed on September 30, 2014).
31.1*		Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS‡		XBRL Instance Document
101.SCH‡		XBRL Taxonomy Extension Schema Document
101.CAL‡		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB‡		XBRL Taxonomy Extension Label Linkbase Document
101.PRE‡		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF‡		XBRL Taxonomy Extension Definition Linkbase Document

 

* Filed herewith.

 

‡ Furnished herewith.

 

  

SIGNATURES

 

Pursuant to the requirements 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.

 

Dated: April 24, 2015	REVEN HOUSING REIT, INC.
	/s/ Chad M. Carpenter
	Chad M. Carpenter,
	Chief Executive Officer
	(Principal Executive Officer)
Dated: April 24, 2015	REVEN HOUSING REIT, INC.
	/s/ THAD L. MEYEr
	Thad L. Meyer,
	Chief Financial Officer
	(Principal Financial Officer)