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What changed in MANHATTAN BRIDGE CAPITAL, INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of MANHATTAN BRIDGE CAPITAL, INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+172 added−173 removedSource: 10-K (2025-03-12) vs 10-K (2024-03-11)

Top changes in MANHATTAN BRIDGE CAPITAL, INC's 2024 10-K

172 paragraphs added · 173 removed · 148 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur loan portfolio The following table highlights certain information regarding our real estate lending activities for the periods indicated: Year Ended December 31, ($ in thousands) 2023 2022 Loans originated $ 56,301 $ 60,916 Loans repaid $ 57,736 $ 52,147 Mortgage lending revenues $ 9,796 $ 8,571 Mortgage lending expenses $ 2,528 $ 1,827 Number of loans outstanding 120 122 Principal amount of loans earning interest $ 73,048 $ 74,483 Average outstanding loan balance $ 609 $ 611 Percent of loans secured by New York metropolitan area properties, including in New Jersey and Connecticut (1) 97.50 % 95.90 % Weighted average contractual interest rate 11.49 % 10.44 % Weighted average term to maturity (in months) (2) 6.77 6.23 (1) Calculated based on the number of loans.
Biggest changeIn addition, most of our loans contain an adjustable interest rate clause allowing us to charge no less than the prime rate plus 3% on the outstanding loans. 9 Our loan portfolio The following table highlights certain information regarding our real estate lending activities for the periods indicated: Year Ended December 31, ($ in thousands) 2024 2023 Loans originated $ 41,966 $ 56,301 Loans repaid $ 49,090 $ 57,736 Mortgage lending revenues $ 9,689 $ 9,796 Mortgage lending expenses $ 2,339 $ 2,528 Number of loans outstanding 95 120 Principal amount of loans earning interest $ 65,974 $ 73,048 Average outstanding loan balance $ 694 $ 609 Percent of loans secured by New York metropolitan area properties, including in New Jersey and Connecticut (1) 95.80 % 97.50 % Weighted average contractual interest rate 11.36 % 11.49 % Weighted average term to maturity (in months) (2) 6.35 6.77 (1) Calculated based on the number of loans.
However, in all instances the properties are held only for investment by the borrowers. Most of these properties do not generate any cash flow. The typical terms of our loans are as follows: Principal amount – In the last seven years, a minimum of $40,000 to a maximum of $3.3 million.
However, in all instances the properties are held only for investment by the borrowers. Most of these properties do not generate any cash flow. The typical terms of our loans are as follows: Principal amount – In the last seven years, a minimum of $40,000 to a maximum of $3.6 million.
Our loan commitments are generally issued subject to receipt by us of title documentation and title report, in a form satisfactory to us, for the underlying property. We require a personal guarantee from the principal or principals of the borrower. 10 Our Current Financing Strategies Our financing strategies are critical to the success and growth of our business.
Our loan commitments are generally issued subject to receipt by us of title documentation and title report, in a form satisfactory to us, for the underlying property. We require a personal guarantee from the principal or principals of the borrower. Our Current Financing Strategies Our financing strategies are critical to the success and growth of our business.
In addition, each loan is personally guaranteed by the principal(s) of the borrower, which guarantee may be collaterally secured by a pledge of the guarantor’s interest in the borrower. The face amount of the loans we originated in the past seven years ranged from $40,000 to a maximum of $3.3 million.
In addition, each loan is personally guaranteed by the principal(s) of the borrower, which guarantee may be collaterally secured by a pledge of the guarantor’s interest in the borrower. The face amount of the loans we originated in the past seven years ranged from $40,000 to a maximum of $3.6 million.
In conducting our due diligence, we rely, in part, on third party professionals and experts including appraisers, title insurers and attorneys. Before a loan commitment is issued, the loan must be reviewed and approved by our Chief Executive Officer.
In conducting our due diligence, we rely, in part, on third party professionals and experts including appraisers, title insurers and attorneys. 11 Before a loan commitment is issued, the loan must be reviewed and approved by our Chief Executive Officer.
Government securities and cash items) on an unconsolidated basis, which we refer to as the 40% test. 12 We rely on the exception set forth in Section 3(c)(5)(C) of the Investment Company Act which excludes from the definition of investment company “[a]ny person who is not engaged in the business of issuing redeemable securities, face-amount certificates of the installment type or periodic payment plan certificates, and who is primarily engaged in one or more of the following businesses...
Government securities and cash items) on an unconsolidated basis, which we refer to as the 40% test. 14 We rely on the exception set forth in Section 3(c)(5)(C) of the Investment Company Act which excludes from the definition of investment company “[a]ny person who is not engaged in the business of issuing redeemable securities, face-amount certificates of the installment type or periodic payment plan certificates, and who is primarily engaged in one or more of the following businesses...
However, there have been a few instances where we have either used loans as collateral, or sold participating interests in loans. At December 31, 2023, most of our loans are secured by properties located around the New York metropolitan area. Most of the properties we finance are residential, although on occasion they are classified as commercial.
However, there have been a few instances where we have either used loans as collateral, or sold participating interests in loans. At December 31, 2024, most of our loans are secured by properties located around the New York metropolitan area. Most of the properties we finance are residential, although on occasion they are classified as commercial.
In addition, during 2023 we used outside lawyers and other independent professionals to verify titles and ownership, to file liens and to consummate the transactions. Outside appraisers were used to assist management in evaluating the worth of collateral, when deemed necessary by management. We also used construction inspectors as well as mortgage brokers and deal initiators.
In addition, during 2024 we used outside lawyers and other independent professionals to verify titles and ownership, to file liens and to consummate the transactions. Outside appraisers were used to assist management in evaluating the worth of collateral, when deemed necessary by management. We also used construction inspectors as well as mortgage brokers and deal initiators.
As of December 31, 2023, the interest rates under the Webster Credit Line equaled (i) the Secured Overnight Financing Rate (“SOFR”) plus a premium, which rate aggregated 8.96%, including a 0.5% agency fee, or (ii) a Base Rate (as defined in the Amended and Restated Credit Agreement) plus 2.00% plus a 0.5% agency fee, as chosen by the Company for each drawdown.
As of December 31, 2024, the interest rates under the Webster Credit Line equaled (i) the Secured Overnight Financing Rate (“SOFR”) plus a premium, which rate aggregated 8.0%, including a 0.5% agency fee, or (ii) a Base Rate (as defined in the Amended and Restated Credit Agreement) plus 2.00% plus a 0.5% agency fee, as chosen by the Company for each drawdown.
Our lending policy limits the maximum amount of any loan to the lower of (i) 9.9% of the aggregate amount of our loan portfolio (not including the loan under consideration) and (ii) $3.5 million. Our loans typically have a maximum initial term of 12 months and bear interest at a fixed rate of 9% to 13.5% per year.
Our lending policy limits the maximum amount of any loan to the lower of (i) 9.9% of the aggregate amount of our loan portfolio (not including the loan under consideration) and (ii) $4 million. Our loans typically have a maximum initial term of 12 months and bear interest at a fixed rate of 9% to 13% per year.
Escrow - None. Reserves - None. Security - The loan is evidenced by a promissory note, which is secured by a first mortgage lien on the real property owned by the borrower. In addition, each loan is guaranteed by the principals of the borrower, which may be collaterally secured by a pledge of the guarantor’s interest in the borrower.
Security - The loan is evidenced by a promissory note, which is secured by a first mortgage lien on the real property owned by the borrower. In addition, each loan is guaranteed by the principals of the borrower, which may be collaterally secured by a pledge of the guarantor’s interest in the borrower.
Our lending policy limits the maximum loan amount to the lower of (i) 9.9% of the aggregate amount of our loan portfolio (not including the loan under consideration) and (ii) $3.5 million. Loan-to-Value Ratio - Up to 75%, and/or up to 80% of construction costs.
Our lending policy limits the maximum loan amount to the lower of (i) 9.9% of the aggregate amount of our loan portfolio (not including the loan under consideration) and (ii) $4 million. Loan-to-Value Ratio - Up to 75%, and/or up to 80% of construction costs.
However, our loan portfolio includes a number of construction loans, which are only partially funded at closing. At December 31, 2023 and 2022, our unfunded commitment was approximately $7.98 million and $8.58 million, respectively. Advances under construction loans are funded against requests supported by all required documentation as and when needed to pay contractors and other costs of construction.
However, our loan portfolio includes a number of construction loans, which are only partially funded at closing. At December 31, 2024 and 2023, our unfunded commitment was approximately $7.2 million and $7.98 million, respectively. Advances under construction loans are funded against requests supported by all required documentation as and when needed to pay contractors and other costs of construction.
Operating Data The continued increase in interest rates adversely impacts our interest costs, and also results in less competition and less liquidity in the real estate market. We have experienced a slowdown in the deployment of capital, as well as lower demand for new loans.
Operating Data The current high level of interest rates adversely impacts our interest costs, and also results in less competition and less liquidity in the real estate market. We have experienced a slowdown in the deployment of capital, as well as lower demand for new loans.
The information on our website is not incorporated by reference into this Report. 13
The information on our website is not incorporated by reference into this Report. 15
Our strategy to achieve our objective includes the following: ● capitalize on opportunities created by the long-term structural changes in the real estate lending market and the continuing demand for liquidity in the real estate market; ● take advantage of the prevailing economic environment as well as economic, political and social trends that may impact real estate lending currently and in the future as well as the outlook for real estate in general and particular asset classes; ● remain flexible in order to capitalize on changing sets of investment opportunities that may be present in the various points of an economic cycle; and ● operate so as to qualify for taxation as a REIT and for an exemption from registration under the Investment Company Act.
Our strategy to achieve our objective includes the following: ● capitalize on opportunities created by the long-term structural changes in the real estate lending market and the continuing demand for liquidity in the real estate market; ● take advantage of the prevailing economic environment as well as economic, political and social trends that may impact real estate lending currently and in the future as well as the outlook for real estate in general and particular asset classes; ● remain flexible in order to capitalize on changing sets of investment opportunities that may be present in the various points of an economic cycle; and ● operate so as to qualify for taxation as a REIT and for an exemption from registration under the Investment Company Act. 6 In furtherance of these strategies, we have a credit line agreement with Webster Business Credit Corporation (“Webster”), Flushing Bank (“Flushing”), and Mizrahi Tefahot Bank Ltd.
Interest rate - Most of the loans in our portfolio have a fixed rate of typically 9% to 13.5%. Term - Generally, one year with early termination in the event of a sale of the property or a refinancing. We entertain requests for granting extensions under certain conditions.
Interest rate - Most of the loans in our portfolio have a fixed rate of typically 9% to 13%. Term - Generally, one year with early termination in the event of a sale of the property or a refinancing.
The protective steps we have taken may not deter misappropriation of our proprietary information. These claims, if meritorious, could require us to license other rights or subject us to damages and, even if not meritorious, could result in the expenditure of significant financial and managerial resources on our part. Employees As of December 31, 2023, we employed five employees.
These claims, if meritorious, could require us to license other rights or subject us to damages and, even if not meritorious, could result in the expenditure of significant financial and managerial resources on our part. Employees As of December 31, 2024, we employed six employees.
At December 31, 2023 and 2022, no single loan, borrower or group of affiliated borrowers accounted for more than 10% of our loan portfolio. 9 The following table sets forth information regarding the types of properties securing our mortgage loans outstanding at December 31, 2023 and 2022, and the interest earned, on the active loans, in each category (dollars in thousands): 2023 2022 Number of Loans Interest Earned Percentage Number of Loans Interest Earned Percentage Residential 111 $ 4,504 84 % 108 $ 3,940 80 % Commercial 6 768 14 % 8 721 15 % Mixed Use 3 90 2 % 6 240 5 % Total 120 $ 5,362 100 % 122 $ 4,901 100 % Our Origination Process and Underwriting Criteria We primarily rely on our relationships with existing and former borrowers, real estate investors, real estate brokers, loan initiators, and mortgage brokers to originate loans.
The following table sets forth information regarding the types of properties securing our mortgage loans outstanding at December 31, 2024 and 2023, and the interest earned, on the active loans, in each category (dollars in thousands): 2024 2023 Number of Loans Interest Earned Percentage Number of Loans Interest Earned Percentage Residential 85 $ 4,515 85 % 111 $ 4,504 84 % Commercial 6 801 11 % 6 768 14 % Mixed Use 4 161 4 % 3 90 2 % Total 95 $ 5,477 100 % 120 $ 5,362 100 % Our Origination Process and Underwriting Criteria We primarily rely on our relationships with existing and former borrowers, real estate investors, real estate brokers, loan initiators, and mortgage brokers to originate loans.
(See Note 5 to the financial statements included elsewhere in this Report.) As of December 31, 2023 and March 4, 2024, $25,152,338 and $25,568,012, respectively, was outstanding under the Webster Credit Line.
(See Note 5 to the financial statements included elsewhere in this Report.) As of December 31, 2024 and March 4, 2025, $16,427,874 and $14,929,239, respectively, was outstanding under the Webster Credit Line.
Covenants - To timely pay all interest on the loan and to maintain hazard insurance with respect to the property. 8 Events of default - Include: (i) failure to comply with the loan terms; (ii) breach of a covenant. Payment terms - Interest only is payable monthly in arrears. Principal is due in a “balloon” payment at the maturity date.
Events of default - Include: (i) failure to comply with the loan terms; (ii) breach of a covenant. Payment terms - Interest only is payable monthly in arrears. Principal is due in a “balloon” payment at the maturity date. Escrow - None. Reserves - None.
A principal source of new transactions has been repeat business from prior customers and their referral of new leads. We also engage with third parties in order to support sales and marketing efforts as needed. Intellectual Property Our business does not depend on exploiting or leveraging any intellectual property rights.
We also engage with third parties in order to support sales and marketing efforts as needed. Intellectual Property Our business does not depend on exploiting or leveraging any intellectual property rights.
To the extent we own any rights to intellectual property, we rely on a combination of federal, state and common law trademarks, service marks and trade names, copyrights and trade secret protection. We have registered some of our trademarks and service marks in the United States Patent and Trademark Office including “Manhattan Bridge Capital”.
To the extent we own any rights to intellectual property, we rely on a combination of federal, state and common law trademarks, service marks and trade names, copyrights and trade secret protection.
The properties securing the loans are generally classified as residential or commercial real estate and, typically, are not income producing. Each loan is secured by a first mortgage lien on real estate.
The properties securing the loans are generally classified as residential or commercial real estate and, typically, are not income producing. All loans, except for one with a face value of approximately $47,000, are secured by a first mortgage lien on real estate.
The following table shows our capitalization, including our financing arrangements, and our loan portfolio as of December 31, 2023: Capitalization ($ in thousands): Debt: Line of credit $ 25,152 Senior secured notes (net of deferred financing costs of $172) 5,828 Total debt 30,980 Other liabilities 2,522 Capital (equity) 42,933 Total sources of capital $ 76,435 Assets: Loans $ 73,048 Other assets 3,387 Total assets $ 76,435 Competition The real estate finance market around the New York metropolitan area is highly competitive.
The following table shows our capitalization, including our financing arrangements, and our loan portfolio as of December 31, 2024: Capitalization ($ in thousands): Debt: Line of credit $ 16,428 Senior secured notes (net of deferred financing costs of $97) 5,903 Total debt 22,331 Other liabilities 2,333 Capital (equity) 43,265 Total sources of capital $ 67,929 Assets: Loans $ 65,974 Other assets 1,955 Total assets $ 67,929 12 Competition The real estate finance market around the New York metropolitan area is highly competitive.
Our management team has successfully originated and serviced a portfolio of real estate mortgage loans generating attractive annual returns under varying economic and real estate market conditions.
(“Mizrahi”) whereby Webster, Flushing and Mizrahi have extended us a $32.5 million credit line. Our Competitive Strengths We believe our competitive strengths include: ● Experienced management team. Our management team has successfully originated and serviced a portfolio of real estate mortgage loans generating attractive annual returns under varying economic and real estate market conditions.
As we have not operated in those markets for an extended period of time, we have faced competition from more established lenders, as well as some smaller lenders, in those markets. 11 Sales and Marketing We rely on our internal team to generate lending opportunities as well as referrals from existing or former borrowers, brokers and bankers and advertising to generate lending opportunities.
As we have not operated in those markets for an extended period of time, we have faced competition from more established lenders, as well as some smaller lenders, in those markets.
Prepayments - Borrower may prepay the loan at any time beginning three months after the funding date and in some instances, we waive prepayment fees.
We entertain requests for granting extensions under certain conditions. 8 Prepayments - Borrower may prepay the loan at any time beginning three months after the funding date and in some instances, we waive prepayment fees. Covenants - To timely pay all interest on the loan and to maintain hazard insurance with respect to the property.
We are increasing the interest rates charged on our commercial loans in order to offset our increased interest costs. In addition, most of our loans contain an adjustable interest rate clause allowing us to charge no less than the prime rate plus 3% on the outstanding loans.
We have increased the interest rates charged on our commercial loans in order to offset our increased interest costs.
Removed
In furtherance of these strategies, we have a credit line agreement with Webster Business Credit Corporation (“Webster”), Flushing Bank (“Flushing”), and Mizrahi Tefahot Bank Ltd. (“Mizrahi”) whereby Webster, Flushing and Mizrahi have extended us a $32.5 million credit line. 6 Our Competitive Strengths We believe our competitive strengths include: ● Experienced management team.
Added
(2) Without giving effect to extension options. 10 At December 31, 2023, no single loan, borrower or group of affiliated borrowers accounted for more than 10% of our loan portfolio. At December 31, 2024, we have made loans to four different entities in the aggregate amount of $7,225,000, or representing 11.0% of our loan portfolio.
Added
One individual holds at least a fifty percent interest in each of the different entities. This individual is not affiliated with any of our officers or directors.
Added
Sales and Marketing We rely on our internal team to generate lending opportunities as well as referrals from existing or former borrowers, brokers and bankers and advertising to generate lending opportunities. A principal source of new transactions has been repeat business from prior customers and their referral of new leads.
Added
We have registered some of our trademarks and service marks in the United States Patent and Trademark Office including “Manhattan Bridge Capital”. 13 The protective steps we have taken may not deter misappropriation of our proprietary information.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs a result, we cannot assure you that we will be able to make distributions to our shareholders at any time in the future or that the level of any distributions we do make to our shareholders will achieve a market yield or increase or even be maintained over time, any of which could materially and adversely affect us. 32 In addition, distributions that we make to our shareholders will generally be taxable to our shareholders as ordinary income (subject to the lower effective tax rates applicable to qualified REIT dividends via the deduction-without-outlay mechanism of Section 199A of the Code, which is generally available to our noncorporate U.S. shareholders that meet specified holding requirement for taxable years before 2026).
Biggest changeIn addition, distributions that we make to our shareholders will generally be taxable to our shareholders as ordinary income (subject to the lower effective tax rates applicable to qualified REIT dividends via the deduction-without-outlay mechanism of Section 199A of the Code, which is generally available to our noncorporate U.S. shareholders that meet specified holding requirement for taxable years before 2026).
The Webster Credit Line contains various covenants and restrictions that are typical for these kinds of credit facilities, including limiting the amount that we can borrow relative to the value of the underlying collateral, maintaining various financial ratios and limitations on the terms of loans we make to our customers.
The Webster Credit Line contains various covenants and restrictions that are typical for these kinds of credit facilities, including limiting the amount that we can borrow relative to the value of the underlying collateral, maintaining various financial ratios and limitations on the terms of loans we make to our customers.
This would significantly harm our business, financial condition, results of operations and ability to make distributions and could result in the foreclosure of our assets which secure our obligations, which could cause the value of our outstanding securities to decline.
This would significantly harm our business, financial condition, results of operations and ability to make distributions and could result in the foreclosure of our assets which secure our obligations, which could cause the value of our outstanding securities to decline.
Incurring substantial debt could subject us to many risks that, if realized, would materially and adversely affect us, including the risk that: ● our cash flow from operations may be insufficient to make required payments of principal and interest on our outstanding indebtedness or we may fail to comply with other covenants contained in the debt, which is likely to result in (i) acceleration of such debt (and any other debt containing a cross-default or cross-acceleration provision) that we may be unable to repay from internal funds or to refinance on favorable terms, or at all, (ii) our inability to borrow unused amounts under our financing arrangements, even if we are current in payments on borrowings under those arrangements and/or (iii) the loss of some or all of our assets pledged or liened to secure our indebtedness to foreclosure or sale; ● our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that yields will increase with higher financing costs; ● we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, future business opportunities, shareholder distributions or other purposes; and ● we are not able to refinance debt that matures prior to the asset it was used to finance on favorable terms, or at all.
Incurring substantial debt could subject us to many risks that, if realized, would materially and adversely affect us, including the risk that: ● our cash flow from operations may be insufficient to make required payments of principal and interest on our outstanding indebtedness or we may fail to comply with other covenants contained in the debt, which is likely to result in (i) acceleration of such debt (and any other debt containing a cross-default or cross-acceleration provision) that we may be unable to repay from internal funds or to refinance on favorable terms, or at all, (ii) our inability to borrow unused amounts under our financing arrangements, even if we are current in payments on borrowings under those arrangements and/or (iii) the loss of some or all of our assets pledged or liened to secure our indebtedness to foreclosure or sale; ● our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that yields will increase with higher financing costs; ● we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, future business opportunities, shareholder distributions or other purposes; and 31 ● we are not able to refinance debt that matures prior to the asset it was used to finance on favorable terms, or at all.
Other factors that could negatively affect the market price of our common shares include: ● our actual or projected operating results, financial condition, cash flows and liquidity, or changes in business strategy or prospects; ● actual or perceived conflicts of interest with individuals, including our executive officers; ● equity issuances by us, or share resales by our shareholders, or the perception that such issuances or resales may occur; ● actual or anticipated accounting problems; ● changes in our earnings estimates or publication of research reports about us or the real estate industry; ● changes in market valuations of similar companies; ● adverse market reaction to any increased indebtedness we incur in the future; ● additions to or departures of our key personnel; ● speculation in the press or investment community; ● our failure to meet, or the lowering of, our earnings’ estimates or those of any securities analysts; 39 ● increases in market interest rates, which may lead investors to demand a higher distribution yield for our common shares, would result in increased interest expenses on our debt; ● decreases in market interest rates, which will increase competition in the market for loans and may require use to lower our interest rates and fees for loans we originate; ● changes in the credit markets; ● failure to maintain our qualification for taxation as a REIT or exemption from the Investment Company Act; ● actions by our shareholders; ● price and volume fluctuations in the stock market generally; ● general market and economic conditions, including the current state of the credit and capital markets; ● sales of large blocks of our common shares; ● sales of our common shares by our executive officers, directors and significant shareholders; and ● restatements of our financial results and/or material weaknesses in our internal controls.
Other factors that could negatively affect the market price of our common shares include: ● our actual or projected operating results, financial condition, cash flows and liquidity, or changes in business strategy or prospects; 44 ● actual or perceived conflicts of interest with individuals, including our executive officers; ● equity issuances by us, or share resales by our shareholders, or the perception that such issuances or resales may occur; ● actual or anticipated accounting problems; ● changes in our earnings estimates or publication of research reports about us or the real estate industry; ● changes in market valuations of similar companies; ● adverse market reaction to any increased indebtedness we incur in the future; ● additions to or departures of our key personnel; ● speculation in the press or investment community; ● our failure to meet, or the lowering of, our earnings’ estimates or those of any securities analysts; ● increases in market interest rates, which may lead investors to demand a higher distribution yield for our common shares, would result in increased interest expenses on our debt; ● decreases in market interest rates, which will increase competition in the market for loans and may require use to lower our interest rates and fees for loans we originate; ● changes in the credit markets; ● failure to maintain our qualification for taxation as a REIT or exemption from the Investment Company Act; ● actions by our shareholders; ● price and volume fluctuations in the stock market generally; ● general market and economic conditions, including the current state of the credit and capital markets; ● sales of large blocks of our common shares; ● sales of our common shares by our executive officers, directors and significant shareholders; and ● restatements of our financial results and/or material weaknesses in our internal controls.
A default could also significantly limit our financing alternatives such that we would be unable to pursue our leverage strategy, which could adversely affect our returns. 27 Under the terms of the agreement governing the Webster Credit Line, our borrowing capacity is limited to 70% of Eligible Mortgage Loans (as defined). Moreover, Webster, in its discretion, may reduce this percentage.
A default could also significantly limit our financing alternatives such that we would be unable to pursue our leverage strategy, which could adversely affect our returns. Under the terms of the agreement governing the Webster Credit Line, our borrowing capacity is limited to 70% of Eligible Mortgage Loans (as defined). Moreover, Webster, in its discretion, may reduce this percentage.
Accordingly, compliance with REIT requirements may hinder our ability to operate solely on the basis of maximizing profits. Our failure to remain qualified for taxation as a REIT would subject us to U.S. federal income tax and applicable state and local taxes, which would reduce the amount of cash available for distribution to our shareholders.
Accordingly, compliance with REIT requirements may hinder our ability to operate solely on the basis of maximizing profits. 32 Our failure to remain qualified for taxation as a REIT would subject us to U.S. federal income tax and applicable state and local taxes, which would reduce the amount of cash available for distribution to our shareholders.
Any taxes paid by such subsidiary corporations would decrease the cash available for distribution to our shareholders. Our qualification for taxation as a REIT may depend on the accuracy of legal opinions or advice rendered or given and the inaccuracy of any such opinions, advice or statements may adversely affect our REIT qualification and result in significant corporate-level tax.
Any taxes paid by such subsidiary corporations would decrease the cash available for distribution to our shareholders. 34 Our qualification for taxation as a REIT may depend on the accuracy of legal opinions or advice rendered or given and the inaccuracy of any such opinions, advice or statements may adversely affect our REIT qualification and result in significant corporate-level tax.
The percentage of leverage we employ will vary depending on our assessment of a variety of factors, which may include the anticipated liquidity and price volatility of our existing portfolio, the potential for losses and extension risk in our portfolio, the gap between the duration of our assets and liabilities, the availability and cost of financing, our opinion as to the creditworthiness of our financing counterparties, the health of the U.S. economy and commercial mortgage markets, our outlook for the level, slope, and volatility of interest rates, the credit quality of our borrowers and the collateral underlying our assets. 38 Our access to financing will depend upon a number of factors, over which we have little or no control, including: ● general market conditions; ● the market’s view of the quality of our assets; ● the market’s perception of our growth potential; ● our eligibility to participate in and access capital from programs established by the U.S.
The percentage of leverage we employ will vary depending on our assessment of a variety of factors, which may include the anticipated liquidity and price volatility of our existing portfolio, the potential for losses and extension risk in our portfolio, the gap between the duration of our assets and liabilities, the availability and cost of financing, our opinion as to the creditworthiness of our financing counterparties, the health of the U.S. economy and commercial mortgage markets, our outlook for the level, slope, and volatility of interest rates, the credit quality of our borrowers and the collateral underlying our assets. 43 Our access to financing will depend upon a number of factors, over which we have little or no control, including: ● general market conditions; ● the market’s view of the quality of our assets; ● the market’s perception of our growth potential; ● our eligibility to participate in and access capital from programs established by the U.S.
Sales of substantial amounts of common shares or the perception that such sales could occur may adversely affect the prevailing market price for our common shares. We may, from time-to-time, issue common shares and securities convertible into, or exchangeable or exercisable for, common shares to attract or retain key employees or in public offerings or private placements to raise capital.
Sales of substantial amounts of common shares or the perception that such sales could occur may adversely affect the prevailing market price for our common shares. 45 We may, from time-to-time, issue common shares and securities convertible into, or exchangeable or exercisable for, common shares to attract or retain key employees or in public offerings or private placements to raise capital.
If property owners are unable to obtain affordable insurance coverage, the value of their properties could decline and in the event of an uninsured loss, we could lose all or a portion of our investment. 18 Our existing credit line has numerous covenants.
If property owners are unable to obtain affordable insurance coverage, the value of their properties could decline and in the event of an uninsured loss, we could lose all or a portion of our investment. Our existing credit line has numerous covenants.
Ran currently has and will continue to exercise control over all corporate actions of us and MBC Funding II. The Indenture contains restrictive covenants that may limit MBC Funding II’s operating flexibility and could adversely affect its financial condition. The Indenture contains restrictive covenants that could adversely affect MBC Funding II’s operating flexibility as well as its financial condition.
Ran currently has and will continue to exercise control over all corporate actions of us and MBC Funding II. 40 The Indenture contains restrictive covenants that may limit MBC Funding II’s operating flexibility and could adversely affect its financial condition. The Indenture contains restrictive covenants that could adversely affect MBC Funding II’s operating flexibility as well as its financial condition.
Thus, compliance with the REIT distribution requirements may hinder our ability to grow, which could adversely affect the value of our securities. 30 Even if we remain qualified for taxation as a REIT, we may face tax liabilities that reduce our cash flow.
Thus, compliance with the REIT distribution requirements may hinder our ability to grow, which could adversely affect the value of our securities. Even if we remain qualified for taxation as a REIT, we may face tax liabilities that reduce our cash flow.
Even if an active trading market develops, the market price of our common shares may be highly volatile and could be subject to wide fluctuations. Risks Related to Our Organization and Structure Certain provisions of New York law could inhibit changes in control.
Even if an active trading market develops, the market price of our common shares may be highly volatile and could be subject to wide fluctuations. 38 Risks Related to Our Organization and Structure Certain provisions of New York law could inhibit changes in control.
In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay our loans, which could also cause us to suffer losses. Our inability to promptly foreclose on defaulted loans could increase our costs and/or losses.
In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay our loans, which could also cause us to suffer losses. 27 Our inability to promptly foreclose on defaulted loans could increase our costs and/or losses.
While we believe that we qualified for taxation as a REIT for the taxable year ended December 31, 2023, we have not requested and do not intend to request a ruling from the IRS that we so qualified in 2023 or that we will qualify in future years.
While we believe that we qualified for taxation as a REIT for the taxable year ended December 31, 2024, we have not requested and do not intend to request a ruling from the IRS that we so qualified in 2023 or that we will qualify in future years.
This concentration of ownership could have an adverse impact on the market price of our common shares. 33 There is limited trading in our common shares, which could make it difficult for you to sell your common shares. Our common shares are listed on The Nasdaq Capital Market.
This concentration of ownership could have an adverse impact on the market price of our common shares. There is limited trading in our common shares, which could make it difficult for you to sell your common shares. Our common shares are listed on The Nasdaq Capital Market.
If our estimates and judgments are not correct, our results of operations and financial condition could be severely impacted. Our due diligence may not reveal all of a borrower’s liabilities and may not reveal other weaknesses in its business.
If our estimates and judgments are not correct, our results of operations and financial condition could be severely impacted. 26 Our due diligence may not reveal all of a borrower’s liabilities and may not reveal other weaknesses in its business.
We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. 16 We may change our investment, leverage, financing and operating strategies, policies or procedures without shareholder consent, which may adversely affect the market value of our common shares and our ability to make distributions to shareholders.
We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. 18 We may change our investment, leverage, financing and operating strategies, policies or procedures without shareholder consent, which may adversely affect the market value of our common shares and our ability to make distributions to shareholders.
These risks are discussed more fully below and include, but are not limited to, risks related to: Risks Relating to Our Business ● our loan origination activities, revenues and profits are limited by available funds; ● the competitive real estate lending market and competition; ● our investment, leverage and financing strategies; ● the broad authority of our management team in making lending decisions and their importance to our business; ● the impact of potential security breaches; Risks Related to Our Portfolio ● the impact of interest rates on our borrowing and business and the requirement to meet covenants contained in our credit line facility; ● the impact of overestimating loan yields or the value of collateral and interest rate fluctuations; ● market conditions for mortgages and mortgage-related assets; ● extension of existing loans; ● potential lender liability claims; ● the impact of the timing of prepayment of loans; ● the liquidity of our loan portfolio; ● the geographic concentration of our loan portfolio; ● our exposure to economic slowdowns or recessions; ● our ability to foreclose as promptly as may be necessary; ● potential liability relating to environmental matters; ● loan defaults; ● casualty events occurring on properties securing our loans; ● borrower concentration; 14 Risks Related to Financing Transactions ● complying with covenants in our existing credit line; ● our use of leverage; Risks Related to REIT Status and Investment Company Act Exemption ● potential challenges by the Internal Revenue Service (the “IRS”); ● compliance with REIT requirements, including REIT distribution requirements; ● potential tax liabilities and our reliance on tax and legal advice on our REIT status; ● the impact of our distributions and the tax impact of our dividend payments; ● the impact of the liquidation of our assets; ● the ownership restrictions set forth in our restated certificate of incorporation; ● our ability to generate sufficient cash flow to make distributions; ● the impact of being deemed an investment company under the Investment Company Act; Risks Related to Our Common Shares ● the potential for our largest shareholder’s interests not aligning with those of our other shareholders; Risks Related to Our Organization and Structure ● the impact of certain provisions of New York law; ● our capital structure may prevent a change in control and the limited rights of shareholders to take action against our officers and directors; Risks Related to the Notes issued by MBC Funding II ● our shareholders and noteholders may not have aligned interests; ● the restrictive covenants in the indenture (the “Indenture”), dated April 25, 2016, among MBC Funding, as Issuer, the Company, as Guarantor, and Worldwide Stock Transfer LLC, as Indenture Trustee (the “Indenture Trustee”) relating to the notes issued to certain noteholders (the Noteholders”); ● the potential lack of protection against certain events that may impact the obligations under the Notes; ● our inherent conflict of interest with MBC Funding II; ● the potential lack of ability of the Indenture Trustee and Noteholders to enforce their rights; ● the impact of bankruptcy on us or MBC Funding II; 15 General Risk Factors ● access to financing; ● the limited trading and volatility in our common stock; ● future events that may impact the price of our common stock; and ● future offerings may adversely affect the market and our stockholders.
These risks are discussed more fully below and include, but are not limited to, risks related to: Risks Relating to Our Business ● our loan origination activities, revenues and profits are limited by available funds; ● the competitive real estate lending market and competition; ● our investment, leverage and financing strategies; ● the broad authority of our management team in making lending decisions and their importance to our business; ● the impact of potential security breaches; Risks Related to Our Portfolio ● the impact of interest rates on our borrowing and business and the requirement to meet covenants contained in our credit line facility; ● the impact of overestimating loan yields or the value of collateral and interest rate fluctuations; ● market conditions for mortgages and mortgage-related assets; ● extension of existing loans; ● potential lender liability claims; ● the impact of the timing of prepayment of loans; ● the liquidity of our loan portfolio; 16 ● the geographic concentration of our loan portfolio; ● our exposure to economic slowdowns or recessions; ● our ability to foreclose as promptly as may be necessary; ● potential liability relating to environmental matters; ● loan defaults; ● casualty events occurring on properties securing our loans; ● borrower concentration; Risks Related to Financing Transactions ● complying with covenants in our existing credit line; ● our use of leverage; Risks Related to REIT Status and Investment Company Act Exemption ● potential challenges by the Internal Revenue Service (the “IRS”); ● compliance with REIT requirements, including REIT distribution requirements; ● potential tax liabilities and our reliance on tax and legal advice on our REIT status; ● the impact of our distributions and the tax impact of our dividend payments; ● the impact of the liquidation of our assets; ● the ownership restrictions set forth in our restated certificate of incorporation; ● our ability to generate sufficient cash flow to make distributions; ● the impact of being deemed an investment company under the Investment Company Act; Risks Related to Our Common Shares ● the potential for our largest shareholder’s interests not aligning with those of our other shareholders; Risks Related to Our Organization and Structure ● the impact of certain provisions of New York law; ● our capital structure may prevent a change in control and the limited rights of shareholders to take action against our officers and directors; Risks Related to the Notes issued by MBC Funding II ● our shareholders and noteholders may not have aligned interests; ● the restrictive covenants in the indenture (the “Indenture”), dated April 25, 2016, among MBC Funding II, as Issuer, the Company, as Guarantor, and Worldwide Stock Transfer LLC, as Indenture Trustee (the “Indenture Trustee”) relating to the Notes issued to certain noteholders (the Noteholders”); 17 ● the potential lack of protection against certain events that may impact the obligations under the Notes; ● our inherent conflict of interest with MBC Funding II; ● the potential lack of ability of the Indenture Trustee and Noteholders to enforce their rights; ● the impact of bankruptcy on us or MBC Funding II; ● the ability to make the required payments of interest and principal on the Notes or to refinance the Notes before their maturity; General Risk Factors ● access to financing; ● the limited trading and volatility in our common stock; ● future events that may impact the price of our common stock; and ● future offerings may adversely affect the market and our stockholders.
However, in the event of additional increases in, or sustained high levels of, interest rates, our borrowing costs would increase further or remain elevated which would adversely affect our results of operations and financial condition and may negatively impact our distributions to shareholders. 21 If we overestimate the yields on our loans or incorrectly value the collateral securing the loan, we may experience losses.
However, in the event of additional increases in, or sustained high levels of, interest rates, our borrowing costs would increase further or remain elevated which would adversely affect our results of operations and financial condition and may negatively impact our distributions to shareholders. 23 If we overestimate the yields on our loans or incorrectly value the collateral securing the loan, we may experience losses.
Risks Related to Our Common Shares Our largest shareholder’s interests may not always be aligned with the interests of our other shareholders. As of December 31, 2023, Assaf Ran, our Chief Executive Officer, beneficially owned 22.8% of our outstanding shares. Thus, Mr. Ran currently has and will continue to exercise significant control over all corporate actions.
Risks Related to Our Common Shares Our largest shareholder’s interests may not always be aligned with the interests of our other shareholders. As of December 31, 2024, Assaf Ran, our Chief Executive Officer, beneficially owned 22.8% of our outstanding shares. Thus, Mr. Ran currently has and will continue to exercise significant control over all corporate actions.
In addition, in the future we may enter into financing arrangements that may be determined by reference to floating rates, such as SOFR or a Treasury index, and the amount of the cost of borrowing may depend on the level and movement of interest rates. The U.S. Federal Reserve has raised interest rates significantly since March 2022.
In addition, in the future we may enter into financing arrangements that may be determined by reference to floating rates, such as SOFR or a Treasury index, and the amount of the cost of borrowing may depend on the level and movement of interest rates. The U.S. Federal Reserve had raised interest rates significantly since March 2022.
We cannot assure you that such claims will not arise or that we will not be subject to significant liability if a claim of this type did arise. 22 An increase in the rate of prepayment of outstanding loans may have an adverse impact on the value of our portfolio as well as our revenue and income.
We cannot assure you that such claims will not arise or that we will not be subject to significant liability if a claim of this type did arise. 24 An increase in the rate of prepayment of outstanding loans may have an adverse impact on the value of our portfolio as well as our revenue and income.
Under our current business model, we have one asset class — mortgage loans that we originate, service and manage — and we have no current plans to diversify. Moreover, most of our collateral is located in a limited geographic area. At December 31, 2023, most of our outstanding loans are secured by properties located in the New York metropolitan area.
Under our current business model, we have one asset class — mortgage loans that we originate, service and manage — and we have no current plans to diversify. Moreover, most of our collateral is located in a limited geographic area. At December 31, 2024, most of our outstanding loans are secured by properties located in the New York metropolitan area.
Risks Related to Our Business Our loan origination activities, revenues and profits are limited by available funds. If we do not increase our working capital, we will not be able to grow our business. As a real estate finance company, our revenue and net income is limited to interest received or accrued on our loan portfolio.
Risks Related to Our Business Our loan origination activities, revenues and profits are limited by available funds. If we do not increase our working capital, we will not be able to grow our business. As a real estate finance company, our revenue and net income is limited to interest and other fees received or accrued on our loan portfolio.
This impact could result in reputational, competitive, operational or other business harm as well as financial costs and regulatory action. See Item 1C. “ Cybersecurity ”, for additional information. 20 Risks Related to Our Portfolio Interest rate fluctuations could reduce our ability to generate income and may cause losses.
This impact could result in reputational, competitive, operational or other business harm as well as financial costs and regulatory action. See Item 1C. “ Cybersecurity ”, for additional information. 22 Risks Related to Our Portfolio Interest rate fluctuations could reduce our ability to generate income and may cause losses.
As a result, our returns and the value of our investment may be reduced. 26 Borrower concentration could lead to significant losses, which could have a material adverse impact on our operating results and financial condition. A single borrower or a group of affiliated borrowers may account for more than 10% of our loan portfolio.
As a result, our returns and the value of our investment may be reduced. 29 Borrower concentration could lead to significant losses, which could have a material adverse impact on our operating results and financial condition. A single borrower or a group of affiliated borrowers may account for more than 10% of our loan portfolio.
Thus, changes in interest rates will affect our revenue and net income in one or more of the following ways: ● an increase or continued high level in the SOFR rate impacts our cost of borrowing under the Webster Credit Line; ● our operating expenses may increase; ● our ability to originate loans may be adversely impacted; ● to the extent we use our credit line or other forms of debt financing to originate loans, our borrowing costs would rise, reducing the “spread” between our cost of funds and the yield on our outstanding mortgage loans, which tend to be fixed rate obligations; ● a rise in, or high level of, interest rates may discourage potential borrowers from refinancing existing loans or defer plans to renovate or improve their properties; ● a drop in interest rates may reduce our revenues by requiring us to reduce the interest rates we charge potential borrowers; ● borrower default rates may increase; ● property values may be negatively impacted, making our existing loans riskier and new loans that we originate smaller; and ● rising or continued high interest rates could also result in reduced turnover of properties which may reduce the demand for new mortgage loans.
Thus, changes in interest rates will affect our revenue and net income in one or more of the following ways: ● an increase or continued high level in the SOFR rate impacts our cost of borrowing under the Webster Credit Line and may impact any replacement thereof or refinancing of the Notes; ● our operating expenses may increase; ● our ability to originate loans may be adversely impacted; ● to the extent we use our credit line or other forms of debt financing to originate loans, our borrowing costs would rise, reducing the “spread” between our cost of funds and the yield on our outstanding mortgage loans, which tend to be fixed rate obligations; ● a rise in, or high level of, interest rates may discourage potential borrowers from refinancing existing loans or defer plans to renovate or improve their properties; ● a drop in interest rates may reduce our revenues by requiring us to reduce the interest rates we charge potential borrowers; ● borrower default rates may increase; ● property values may be negatively impacted, making our existing loans riskier and new loans that we originate smaller; and ● rising or continued high interest rates could also result in reduced turnover of properties which may reduce the demand for new mortgage loans.
In conducting periodic reviews, our board of directors will rely primarily on information provided to them by management. 17 Our Chief Executive Officer and Chief Financial Officer are each critical to our business and our future success may depend on our ability to retain them. In addition, as our business grows we will need to hire additional personnel.
In conducting periodic reviews, our board of directors will rely primarily on information provided to them by management. 19 Our Chief Executive Officer and Chief Financial Officer are each critical to our business and our future success may depend on our ability to retain them. In addition, as our business grows we will need to hire additional personnel.
We cannot assure you that the decisions we ultimately make will be in the best interest of the Noteholders. 36 Various provisions in the Indenture restrict the ability of the Indenture Trustee and the Noteholders to enforce their rights against us in the event MBC Funding II defaults on its obligations under the Notes.
We cannot assure you that the decisions we ultimately make will be in the best interest of the Noteholders. 41 Various provisions in the Indenture restrict the ability of the Indenture Trustee and the Noteholders to enforce their rights against us in the event MBC Funding II defaults on its obligations under the Notes.
This could have an adverse impact on the market price of our common shares. 31 Liquidation of our assets may jeopardize our qualification for taxation as a REIT. To qualify for taxation as a REIT, we must comply with requirements regarding our assets and our sources of income.
This could have an adverse impact on the market price of our common shares. 35 Liquidation of our assets may jeopardize our qualification for taxation as a REIT. To qualify for taxation as a REIT, we must comply with requirements regarding our assets and our sources of income.
As of December 31, 2023, Mr. Ran owns 22.8% of our outstanding common shares. In addition, our board of directors may grant such an exemption to such limitations in its sole discretion, subject to such conditions, representations and undertakings as it may determine.
As of December 31, 2024, Mr. Ran owns 22.8% of our outstanding common shares. In addition, our board of directors may grant such an exemption to such limitations in its sole discretion, subject to such conditions, representations and undertakings as it may determine.
In addition, in the event of the bankruptcy of the borrower, we may not have full recourse to the assets of the borrower, or the assets of the borrower or the guarantor may not be sufficient to satisfy the debt. 25 Liability relating to environmental matters may impact the value of properties that we may acquire or the properties underlying our investments.
In addition, in the event of the bankruptcy of the borrower, we may not have full recourse to the assets of the borrower, or the assets of the borrower or the guarantor may not be sufficient to satisfy the debt. 28 Liability relating to environmental matters may impact the value of properties that we may acquire or the properties underlying our investments.
Our restated certificate of incorporation authorizes us to issue up to 25,000,000 common shares and 5,000,000 preferred shares. As of March 4, 2024, we had 11,757,058 common shares issued and 11,438,651 common shares outstanding and no preferred shares issued or outstanding.
Our restated certificate of incorporation authorizes us to issue up to 25,000,000 common shares and 5,000,000 preferred shares. As of March 4, 2025, we had 11,757,058 common shares issued and 11,438,651 common shares outstanding and no preferred shares issued or outstanding.
The only limitation imposed by the board of directors is that no single loan may exceed the lower of (i) 9.9% of our loan portfolio (without taking into account the loan under consideration) and (ii) $3.5 million. Within these broad guidelines, our Chief Executive Officer has the absolute authority to make all lending decisions.
The only limitation imposed by the board of directors is that no single loan may exceed the lower of (i) 9.9% of our loan portfolio (without taking into account the loan under consideration) and (ii) $4 million. Within these broad guidelines, our Chief Executive Officer has the absolute authority to make all lending decisions.
This level of indebtedness increases the risk that we may be unable to generate cash sufficient to pay amounts due in respect of the indebtedness. Our indebtedness could have other important consequences to you and significantly impact our business.
This level of indebtedness and the pending maturity of such indebtedness increases the risk that we may be unable to generate cash sufficient to pay amounts due in respect of the indebtedness. Our indebtedness could have other important consequences to you and significantly impact our business.
The continued increases in, and current high level of, interest rates have adversely impact our interest costs. We have experienced a slowdown in the deployment of capital and lower demand for new loans. We have increased the interest rates charged on our commercial loans in order to offset our increased interest costs.
The increases in, and current high level of, interest rates have adversely impacted our interest costs. We have experienced a slowdown in the deployment of capital and lower demand for new loans. We have increased the interest rates charged on our commercial loans in order to offset our increased interest costs.
Average daily trading volume in our common shares was approximately 26,000 and 22,000 shares in 2022 and in 2023, respectively. The lack of liquidity may make it more difficult for you to sell your common shares when you wish to do so.
Average daily trading volume in our common shares was approximately 22,000 and 21,000 shares in 2023 and in 2024, respectively. The lack of liquidity may make it more difficult for you to sell your common shares when you wish to do so.
The price of our common shares is volatile, and purchasers of our common shares could incur substantial losses. Historically, the price at which our common shares trade on The Nasdaq Capital Market has been volatile and seemingly unrelated to our operating performance. In 2022, the range was $5.07 to $6.48. In 2023, the range was $4.27 to $5.91.
The price of our common shares is volatile, and purchasers of our common shares could incur substantial losses. Historically, the price at which our common shares trade on The Nasdaq Capital Market has been volatile and seemingly unrelated to our operating performance. In 2023, the range was $4.27 to $5.91. In 2024, the range was $4.60 to $5.90.
Any sustained period of increased payment delinquencies, foreclosures or losses could adversely affect both our net interest income from loans in our portfolio as well as our ability to originate new loans, which would materially and adversely affect our results of operations, financial condition, liquidity and business and our ability to make distributions to our shareholders. 23 We do not carry any loan loss reserves.
Any sustained period of increased payment delinquencies, foreclosures or losses could adversely affect both our net interest income from loans in our portfolio as well as our ability to originate new loans, which would materially and adversely affect our results of operations, financial condition, liquidity and business and our ability to make distributions to our shareholders.
For example, it could: ● make it more difficult for us to satisfy our obligations; ● increase our vulnerability to adverse changes in general economic, industry and competitive conditions; ● require us to dedicate a substantial portion of our cash flow from operations to make payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes; ● limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; ● limit our ability to make material acquisitions or take advantage of business opportunities that may arise; ● expose us to fluctuations in interest rates, to the extent our borrowings bear variable rates of interest; ● place us at a competitive disadvantage compared to our competitors that have less debt; ● limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business plan or other general corporate purposes on reasonable terms or at all; ● reduce the amount of surplus funds distributable by our subsidiary to us for use in our business, such as for the payment of indebtedness and dividends to our shareholders; and ● lead us to elect to make additional investments in our subsidiary if their cash flow from operations is insufficient for them to make payments on their indebtedness. 19 We may incur additional debt, which could exacerbate the risks associated with our leverage.
For example, it could: ● make it more difficult for us to satisfy our obligations; ● increase our vulnerability to adverse changes in general economic, industry and competitive conditions; ● require us to dedicate a substantial portion of our cash flow from operations to make payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes; 21 ● limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; ● limit our ability to make material acquisitions or take advantage of business opportunities that may arise; ● expose us to fluctuations in interest rates, to the extent our borrowings bear variable rates of interest; ● expose us to higher costs or interest rates if we extend or refinance such indebtedness and the risk that we will not be able to extend the Webster Credit Line or refinance the Notes on favorable terms or at all; ● place us at a competitive disadvantage compared to our competitors that have less debt; ● limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business plan or other general corporate purposes on reasonable terms or at all; ● reduce the amount of surplus funds distributable by our subsidiary to us for use in our business, such as for the payment of indebtedness and dividends to our shareholders; and ● lead us to elect to make additional investments in our subsidiary if their cash flow from operations is insufficient for them to make payments on their indebtedness.
Thus, holders of our common shares will bear the risk of our future offerings reducing the market price of our common shares and diluting the value of their stock holdings in us.
Thus, holders of our common shares will bear the risk of our future offerings reducing the market price of our common shares and diluting the value of their stock holdings in us. Item 1B. Unresolved Staff Comments None.
For example, the Indenture requires MBC Funding II to maintain a specific debt coverage ratio at all times, specifically providing that the aggregate outstanding principal balance of the mortgage loans held by us, together with our cash on hand, must always equal at least 120% of the aggregate outstanding principal amount of the Notes at all times, as well as limits or prohibits its ability to: ● acquire or dispose of assets; ● merge with another corporation; and ● incur additional secured and unsecured indebtedness. 35 MBC Funding II’s failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of the indebtedness evidenced by the Notes.
For example, the Indenture requires MBC Funding II to maintain a specific debt coverage ratio at all times, specifically providing that the aggregate outstanding principal balance of the mortgage loans held by us, together with our cash on hand, must always equal at least 120% of the aggregate outstanding principal amount of the Notes at all times, as well as limits or prohibits its ability to: ● acquire or dispose of assets; ● merge with another corporation; and ● incur additional secured and unsecured indebtedness.
We and our subsidiary may incur substantial additional indebtedness in the future. The covenants in the agreement governing the Webster Credit Line may limit our ability and the ability of our subsidiary to incur additional indebtedness.
We may incur additional debt, which could exacerbate the risks associated with our leverage. We and our subsidiary may incur substantial additional indebtedness in the future. The covenants in the agreement governing the Webster Credit Line may limit our ability and the ability of our subsidiary to incur additional indebtedness.
These considerations also might restrict the types of assets that we can acquire in the future. 29 If we fail to qualify for taxation as a REIT in any taxable year, and we do not qualify for certain statutory relief provisions, we would be required to pay U.S. federal income tax on our taxable income, and distributions to our shareholders would not be deductible by us in determining our taxable income.
If we fail to qualify for taxation as a REIT in any taxable year, and we do not qualify for certain statutory relief provisions, we would be required to pay U.S. federal income tax on our taxable income, and distributions to our shareholders would not be deductible by us in determining our taxable income.
To the extent that our portfolio is concentrated in one region and/or one type of asset, downturns relating generally to such region or type of asset may result in defaults on a number of our assets within a short time period, which may reduce our net income and the value of our securities and accordingly reduce our ability to make distributions to our shareholders.
To the extent that our portfolio is concentrated in one region and/or one type of asset, downturns relating generally to such region or type of asset may result in defaults on a number of our assets within a short time period, which may reduce our net income and the value of our securities and accordingly reduce our ability to make distributions to our shareholders. 25 A prolonged economic slowdown, a lengthy or severe recession or declining real estate values could impair our investments and harm our operations.
Registration under the Investment Company Act would require us to comply with a variety of substantive requirements that impose, among other things: ● limitations on capital structure; ● restrictions on specified investments; ● restrictions on leverage or senior securities; ● restrictions on unsecured borrowings; ● prohibitions on transactions with affiliates; and ● compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.
We may also be required to register as an investment company if we are unable to dispose of the disqualifying assets, which could have a material adverse effect on us. 37 Registration under the Investment Company Act would require us to comply with a variety of substantive requirements that impose, among other things: ● limitations on capital structure; ● restrictions on specified investments; ● restrictions on leverage or senior securities; ● restrictions on unsecured borrowings; ● prohibitions on transactions with affiliates; and ● compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.
The Notes are currently listed on the NYSE American and trade under the symbol “LOAN/26”. However, we cannot assure that a more active trading market for the Notes will develop. If a more active trading market does not develop the Noteholders may not be able to sell their Notes for the price they want at the time they want.
However, we cannot assure that a more active trading market for the Notes will develop. If a more active trading market does not develop the Noteholders may not be able to sell their Notes for the price they want at the time they want.
If we are required to write-off all or a portion of any loan in our portfolio, our net income will be adversely impacted. Loan loss reserves are particularly difficult to estimate in a turbulent economic environment. Based on our experience and our periodic evaluation of our loan portfolio, we have not deemed it necessary to create any loan loss reserves.
We do not carry any loan loss reserves. If we are required to write-off all or a portion of any loan in our portfolio, our net income will be adversely impacted. Loan loss reserves are particularly difficult to estimate in a turbulent economic environment.
The enactment of the Terrorism Risk Insurance Act of 2002, or the TRIA, and the subsequent enactment of the Terrorism Risk Insurance Program Reauthorization Act of 2007, which extended TRIA through the end of 2020, which in turn was extended by the Terrorism Risk Insurance Program Reauthorization Act of 2019 through the end of 2027 requires insurers to make terrorism insurance available under their property and casualty insurance policies in order to receive federal compensation under TRIA for insured losses.
We may suffer losses as a result of the adverse impact of any future terrorist attacks and these losses may adversely impact our results of operations. 20 The enactment of the Terrorism Risk Insurance Act of 2002, or the TRIA, and the subsequent enactment of the Terrorism Risk Insurance Program Reauthorization Act of 2007, which extended TRIA through the end of 2020, which in turn was extended by the Terrorism Risk Insurance Program Reauthorization Act of 2019 through the end of 2027 requires insurers to make terrorism insurance available under their property and casualty insurance policies in order to receive federal compensation under TRIA for insured losses.
Section 719 of the NYBCL limits director liability to the following four instances: ● declarations of dividends in violation of the NYBCL; ● a purchase or redemption by a corporation of its own shares in violation of the NYBCL; ● distributions of assets to shareholders following dissolution of the corporation without paying or providing for all known liabilities; and ● making any loans to directors in violation of the NYBCL. 34 Our restated certificate of incorporation and bylaws authorize us to indemnify our directors and officers for actions taken by them in those capacities to the maximum extent permitted by the NYBCL.
Section 719 of the NYBCL limits director liability to the following four instances: ● declarations of dividends in violation of the NYBCL; ● a purchase or redemption by a corporation of its own shares in violation of the NYBCL; ● distributions of assets to shareholders following dissolution of the corporation without paying or providing for all known liabilities; and ● making any loans to directors in violation of the NYBCL.
Thus, a loss with respect to all or a portion of a loan in our portfolio will have an immediate and adverse impact on our net income.
Based on our experience and our periodic evaluation of our loan portfolio, we have not deemed it necessary to create any loan loss reserves. Thus, a loss with respect to all or a portion of a loan in our portfolio will have an immediate and adverse impact on our net income.
Under the terms of the agreement governing the Webster Line of Credit, we are prohibited from paying dividends with respect to our common shares if at the time during the 90-day period before the payment of the dividend and the 90-day period following the payment of the dividend we are within $500,000 of our maximum borrowing ability under the facility.
We intend to distribute our net income to our shareholders in a manner that will satisfy the REIT 90% distribution requirement and avoid the 4% nondeductible excise tax. 33 Under the terms of the agreement governing the Webster Line of Credit, we are prohibited from paying dividends with respect to our common shares if at the time during the 90-day period before the payment of the dividend and the 90-day period following the payment of the dividend we are within $500,000 of our maximum borrowing ability under the facility.
Thus, upon a default by MBC Funding II, the Noteholders may never have full recourse to us under our guaranty. If a bankruptcy petition were filed by or against us or MBC Funding II, Noteholders may receive less than the outstanding balance on the Notes.
If a bankruptcy petition were filed by or against us or MBC Funding II, Noteholders may receive less than the outstanding balance on the Notes. If a bankruptcy case were filed by or against us or MBC Funding II under the U.S.
As of December 31, 2023, we had approximately $31.0 million of debt outstanding, consisting of the amounts outstanding under the Webster Credit Line and the balance of senior secured notes. As of March 4, 2024, another $6.9 million was available under the recently amended Webster Credit Line.
As of December 31, 2024, we had approximately $22.4 million of debt outstanding, consisting of the amounts outstanding under the Webster Credit Line and the balance of the Notes. The Webster Credit Line expires in 2026, and the Notes mature in April 2026. As of March 4, 2025, another $17.6 million was available under the Webster Credit Line.
The limited covenants in the Indenture and the terms of the Notes will not provide protection against significant events that could adversely impact MBC Funding II’s obligations under the Notes.
We cannot assure you that in that event MBC Funding II will be able to repay all the Notes in full, or at all. The limited covenants in the Indenture and the terms of the Notes will not provide protection against significant events that could adversely impact MBC Funding II’s obligations under the Notes.
For example, our board of directors may establish a series of common or preferred shares that could delay or prevent a transaction or a change in control that might involve a premium price for our common shares or otherwise be in the best interest of our shareholders.
For example, our board of directors may establish a series of common or preferred shares that could delay or prevent a transaction or a change in control that might involve a premium price for our common shares or otherwise be in the best interest of our shareholders. 39 Our rights and the rights of our shareholders to take action against our directors and officers are limited, which could limit your recourse in the event of actions not in your best interests.
If MBC Funding II is unable to generate sufficient cash flow to service the debt evidenced by the Notes, they will be in default of its obligations under the Notes. MBC Funding II is not obligated to contribute to a sinking fund to retire the Notes and the Notes are not guaranteed by any governmental agency.
If MBC Funding II is unable to generate sufficient cash flow to service the debt evidenced by the Notes, they will be in default of its obligations under the Notes. Further, the Notes mature in April 2026.
Our ability to originate real estate loans is limited by the funds at our disposal. As of March 4, 2024, we had approximately $6.9 million of borrowing availability under the Webster Credit Line. We intend to use the proceeds from the repayment of loans outstanding and the additional borrowing capacity under the Webster Credit Line to originate real estate loans.
Our ability to originate real estate loans is limited by the funds at our disposal. As of March 4, 2025, we had approximately $17.6 million of borrowing availability under the Webster Credit Line that expires on February 28, 2026.
Our board of directors may adopt leverage policies at any time without the consent of our shareholders, which could result in a portfolio with a different risk profile. 28 Risks Related to REIT Status and Investment Company Act Exemption Our investments in construction loans require us to make estimates about the fair value of land improvements that may be challenged by the IRS.
Risks Related to REIT Status and Investment Company Act Exemption Our investments in construction loans require us to make estimates about the fair value of land improvements that may be challenged by the IRS.
The liquidity of any such market will depend upon various factors, including: ● the number of Noteholders; ● the interest of securities dealers in making a market for the Notes; ● the overall market for debt securities; ● our financial performance and prospects; and ● the prospects for companies in our industry generally.
The liquidity of any such market will depend upon various factors, including: ● the number of Noteholders; ● the interest of securities dealers in making a market for the Notes; ● the overall market for debt securities; ● our financial performance and prospects; and ● the prospects for companies in our industry generally. 42 We cannot assure the Noteholders that they will be able to sell the Notes if they wish to do so or, even if they can sell their Notes that they will recover their entire investment.
While we try to mitigate these risks in various ways, including by getting personal guarantees from the principals of the borrower, we cannot assure you that these lending and credit enhancement strategies will be successful. 24 Volatility of values of residential and commercial properties may adversely affect our loans and investments.
Finally, there are difficulties associated with collecting debts from entities that may be judgment proof. While we try to mitigate these risks in various ways, including by getting personal guarantees from the principals of the borrower, we cannot assure you that these lending and credit enhancement strategies will be successful.
We cannot predict how changes in the tax laws might affect us or our shareholders. New legislation, Treasury regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to remain qualified for taxation as a REIT or the tax consequences of such qualification.
New legislation, Treasury regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to remain qualified for taxation as a REIT or the tax consequences of such qualification. 36 We may be unable to generate sufficient cash flows from our operations to make distributions to our shareholders at any time in the future.
These limitations include the following: ● limit our ability to pay dividends under certain circumstances; ● limit our ability to make certain investments or acquisitions; ● limit our ability to reduce liquidity below certain levels; ● limit our ability to redeem debt or equity securities; ● limit our ability to determine our operating policies and investment strategies; and ● limit our ability to repurchase our common shares, sell assets, engage in mergers or consolidations, grant liens and enter into transactions with affiliates.
These limitations include the following: ● limit our ability to pay dividends under certain circumstances; ● limit our ability to make certain investments or acquisitions; ● limit our ability to reduce liquidity below certain levels; ● limit our ability to redeem debt or equity securities; ● limit our ability to determine our operating policies and investment strategies; and ● limit our ability to repurchase our common shares, sell assets, engage in mergers or consolidations, grant liens and enter into transactions with affiliates. 30 If we fail to meet or satisfy any of these covenants, we would be in default under our agreement with Webster, Flushing and Mizrahi and they could elect to declare outstanding amounts due and payable, terminate its commitments to us, require us to post additional collateral and/or enforce their interests against existing collateral.
If a bankruptcy case were filed by or against us or MBC Funding II under the U.S. Bankruptcy Code, the Noteholders may receive, on account of their claims related to the Notes, less than they would be entitled to under the terms of the Indenture. An active public trading market for the Notes may not develop.
Bankruptcy Code, the Noteholders may receive, on account of their claims related to the Notes, less than they would be entitled to under the terms of the Indenture. An active public trading market for the Notes may not develop. The Notes are currently listed on the NYSE American and trade under the symbol “LOAN/26”.
We intend to satisfy this requirement through quarterly distributions of all or substantially all of our REIT taxable income in such year, subject to certain adjustments. Our ability to make distributions may be adversely affected by a number of factors, including the risk factors described in this Report.
Our ability to make distributions may be adversely affected by a number of factors, including the risk factors described in this Report.
Our taxable income may substantially exceed our net income as determined by U.S. GAAP and differences in timing between the recognition of taxable income and the actual receipt of cash may occur. For example, we may be required to accrue interest and discount income on mortgage loans before we receive any payments of interest or principal on such assets.
For example, we may be required to accrue interest and discount income on mortgage loans before we receive any payments of interest or principal on such assets.
Therefore, it may not be possible for existing shareholders to participate in such future share or security issuances, which may dilute the existing shareholders’ interests in us. 40 Future offerings of debt or equity securities, which would rank senior to our common shares, may adversely affect the market price of our common shares.
We are not required to offer any such shares or securities to existing shareholders on a preemptive basis. Therefore, it may not be possible for existing shareholders to participate in such future share or security issuances, which may dilute the existing shareholders’ interests in us.
In that case, MBC Funding II is required to make monthly payments of principal on the Notes until such debt coverage ratio covenant is in compliance. We cannot assure you that in that event MBC Funding II will be able to repay all the Notes in full, or at all.
For example, defaults under the mortgage loans held by MBC Funding II could result in a violation of the debt coverage ratio covenant. In that case, MBC Funding II is required to make monthly payments of principal on the Notes until such debt coverage ratio covenant is in compliance.
We cannot assure the Noteholders that they will be able to sell the Notes if they wish to do so or, even if they can sell their Notes that they will recover their entire investment. 37 MBC Funding II may not be able to make the required payments of interest and principal on the Notes.
MBC Funding II may not be able to make the required payments of interest and principal on the Notes or may not be able to refinance the Notes before their maturity.
Nevertheless, if demand for our mortgage loans increases, we cannot assure you that we will be able to capitalize on this demand given the limited funds available to us to originate loans. We operate in a highly competitive market and competition may limit our ability to originate loans with favorable interest rates.
We intend to use the proceeds from the repayment of loans outstanding and the additional borrowing capacity under the Webster Credit Line to originate real estate loans. Nevertheless, if demand for our mortgage loans increases, we cannot assure you that we will be able to capitalize on this demand given the limited funds available to us to originate loans.
We may be unable to generate sufficient cash flows from our operations to make distributions to our shareholders at any time in the future. As a REIT, we are required to distribute to our shareholders at least 90% of our REIT taxable income each year.
As a REIT, we are required to distribute to our shareholders at least 90% of our REIT taxable income each year. We intend to satisfy this requirement through quarterly distributions of all or substantially all of our REIT taxable income in such year, subject to certain adjustments.
In addition, a default by MBC Funding could serve as a default under our existing Webster Credit Line. For example, defaults under the mortgage loans held by MBC Funding II could result in a violation of the debt coverage ratio covenant.
MBC Funding II’s failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of the indebtedness evidenced by the Notes. In addition, a default by MBC Funding II could serve as a default under our existing Webster Credit Line.
A default by one borrower in a group is likely to result in a default by the other borrowers in the group.
A default by one borrower in a group is likely to result in a default by the other borrowers in the group. At December 31, 2024, we have made loans to four different entities in the aggregate amount of $7.2 million or representing 11.0% of our loan portfolio.
Removed
We may suffer losses as a result of the adverse impact of any future terrorist attacks and these losses may adversely impact our results of operations.
Added
Although the Company does not believe there will be any issues in extending the Webster Credit Line or securing a similar line from another bank before its expiration, there can be no assurance that we will be able to extend the Webster Credit Line or secure a similar line from another bank before its expiration.
Removed
A prolonged economic slowdown, a lengthy or severe recession or declining real estate values could impair our investments and harm our operations.
Added
We operate in a highly competitive market and competition may limit our ability to originate loans with favorable interest rates.
Removed
Finally, there are difficulties associated with collecting debts from entities that may be judgment proof.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

1 edited+0 added−0 removed7 unchanged
Biggest changeIn addition, we regularly review cybersecurity trends and, partially as a result of our prior cybersecurity exposure, have moved some of our internal servers to off-site locations. 41 Risk Management and Strategy As one of the critical elements of our overall ERM approach, our cybersecurity efforts are focused on the following key areas: ● Governance: Management oversees cybersecurity risk mitigation and reports to the board of directors any cybersecurity incidents.
Biggest changeIn addition, we regularly review cybersecurity trends and, partially as a result of our prior cybersecurity exposure, have moved some of our internal servers to off-site locations. 46 Risk Management and Strategy As one of the critical elements of our overall ERM approach, our cybersecurity efforts are focused on the following key areas: ● Governance: Management oversees cybersecurity risk mitigation and reports to the board of directors any cybersecurity incidents.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe this facility is adequate to meet our requirements at our current level of business activity. Item 3. Legal Proceedings None. Item 4. Mine Safety Disclosure Not applicable. 42 PART II
Biggest changeWe believe this facility is adequate to meet our requirements at our current level of business activity. Item 3. Legal Proceedings None. Item 4. Mine Safety Disclosure Not applicable. PART II
Item 2. Properties Our executive and principal operating office is located in Great Neck, New York. We use this space for all of our operations. This space is occupied under a lease, as amended, that expires November 30, 2027. The current monthly rent is $5,190, including electricity and real estate taxes.
Item 2. Properties Our executive and principal operating office is located in Great Neck, New York. We use this space for all of our operations. This space is occupied under a lease, as amended, that expires November 30, 2027. The current monthly rent is $5,330, including electricity and real estate taxes.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−3 removed2 unchanged
Biggest changeAmerican Stock Transfer & Trust Company serves as transfer agent for our common shares. Dividends We elected to be taxed as a REIT commencing with our year ended December 31, 2014.
Biggest changeEquiniti Trust Company, LLC serves as transfer agent for our common shares. 47 Dividends We elected to be taxed as a REIT commencing with our year ended December 31, 2014.
For tax reporting purposes, taxable income dividends/distributions and non-taxable return of capital distributions may result and will be reported as such to U.S. individual taxpayers on Form 1099-DIV. For the tax year of 2023, 100% of our total distributions are characterized as non-qualified dividends (Section 199A).
For tax reporting purposes, taxable income dividends/distributions and non-taxable return of capital distributions may result and will be reported as such to U.S. individual taxpayers on Form 1099-DIV. For the tax year of 2024, 100% of our total distributions are characterized as non-qualified dividends (Section 199A). Item 6. [Reserved.]
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities. Holders As of March 4, 2024, the number of registered holders of our common shares was 10 and the estimated number of beneficial owners of our common shares was approximately 5,500.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities. Holders As of March 4, 2025, the number of registered holders of our common shares was 10 and the estimated number of beneficial owners of our common shares was approximately 6,400.
Removed
Issuer Purchases of Equity Securities On April 11, 2023, our board of directors authorized a share buyback program for the repurchase of up to 100,000 of our common shares in the next twelve months. As of December 31, 2023, we repurchased an aggregate of 54,294 common shares under this repurchase program, at an aggregate cost of approximately $262,000.
Removed
An additional 2,000 shares were repurchased between January 1, 2024 and March 4, 2024, in the aggregate amount of approximately $10,000. As set forth in the table below, during the quarter ended December 31, 2023, we repurchased 16,434 of our common shares under the share buyback program at an aggregate cost of $75,977.
Removed
ISSUER PURCHASES OF EQUITY SECURITIES Period (a) Total Number of Shares (or Units) Purchased (b) Average Price Paid per Share (or Unit) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs October 2023 7,500 $ 4.61 7,500 54,640 November 2023 2,366 $ 4.45 2,366 52,274 December 2023 6,568 $ 4.70 6,568 45,706 Total 16,434 $ 4.62 16,434 45,706 43 Item 6. [Reserved.]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

38 edited+6 added−13 removed29 unchanged
Biggest changeThe interest rates relating to the Webster Credit Line equal (i) SOFR plus a premium, which rate aggregated approximately 8.96%, including a 0.5% agency fee, as of December 31, 2023, or (ii) a Base Rate (as defined in the Amended and Restated Credit Agreement) plus 2.00% and a 0.5% agency fee, as chosen by the Company for each drawdown. 48 The Webster Credit Line contains various covenants and restrictions including, among other covenants and restrictions, limiting the amount that the Company can borrow relative to the value of the underlying collateral, maintaining various financial ratios and limitations on the terms of loans the Company makes to its customers, limiting the Company’s ability to pay dividends under certain circumstances, and limiting the Company’s ability to repurchase its common shares, sell assets, engage in mergers or consolidations, grant liens, and enter into transactions with affiliates.
Biggest changeThe Webster Credit Line contains various covenants and restrictions including covenants limiting the amount that the Company can borrow relative to the value of the underlying collateral, maintaining various financial ratios and limitations on the terms of loans the Company makes to its customers, limiting the Company’s ability to pay dividends under certain circumstances, and limiting the Company’s ability to repurchase its common shares, sell assets, engage in mergers or consolidations, grant liens, and enter into transactions with affiliates.
If the total of the undiscounted cash flows is less than the carrying amount of these assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. 46 There are also areas in which in management’s judgment in selecting any available alternative would not produce a materially different result.
If the total of the undiscounted cash flows is less than the carrying amount of these assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. There are also areas in which in management’s judgment in selecting any available alternative would not produce a materially different result.
In addition, each loan is personally guaranteed by the principal(s) of the borrower, which guarantee may be collaterally secured by a pledge of the guarantor’s interest in the borrower. The face amount of the loans we originated in the past seven years ranged from $40,000 to a maximum of $3.3 million.
In addition, each loan is personally guaranteed by the principal(s) of the borrower, which guarantee may be collaterally secured by a pledge of the guarantor’s interest in the borrower. The face amount of the loans we originated in the past seven years ranged from $40,000 to a maximum of $3.6 million.
Our Amended and Restated Credit and Security Agreement with Webster, Flushing Bank and Mizrahi (the “Lenders”), provides for the Webster Credit Line. Currently, the Webster Credit Line provides us with a credit line of $32.5 million in the aggregate until February 28, 2026, secured by assignments of mortgages and other collateral.
Our Amended and Restated Credit and Security Agreement with Webster, Flushing Bank and Mizrahi provides for the Webster Credit Line. Currently, the Webster Credit Line provides us with a credit line of $32.5 million in the aggregate until February 28, 2026, secured by assignments of mortgages and other collateral.
As a REIT, we are required to distribute at least 90% of our REIT taxable income to our shareholders on an annual basis. In order to maintain our qualification for taxation as a REIT, we are required to distribute at least 90% of our REIT taxable income to our shareholders each year.
As a REIT, we are required to distribute at least 90% of our REIT taxable income to our shareholders on an annual basis. 48 In order to maintain our qualification for taxation as a REIT, we are required to distribute at least 90% of our REIT taxable income to our shareholders each year.
Further, the Company may issue up to $20 million in bonds through its subsidiary, of which not more than $10 million of such bonds may be secured by mortgage notes receivable, and provided that the terms and conditions of such bonds are approved by Webster, subject to its reasonable discretion.
Further, the Company may issue up to $20 million in bonds through its subsidiary, of which not more than $10 million of such bonds may be secured by mortgage notes receivable, and provided that the terms and conditions of such bonds are approved by Webster, subject to its reasonable discretion. In addition, Mr.
The redemption price will be equal to the outstanding principal amount of the Notes redeemed plus the accrued but unpaid interest thereon up to, but not including, the date of redemption, without penalty or premium. No Notes were redeemed by MBC Funding II as of December 31, 2023.
The redemption price will be equal to the outstanding principal amount of the Notes redeemed plus the accrued but unpaid interest thereon up to, but not including, the date of redemption, without penalty or premium. No Notes were redeemed by MBC Funding II as of December 31, 2024.
Origination fee revenue on commercial loans is amortized over the term of the respective note. Effective January 1, 2020, we adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326).
Origination fee revenue on commercial loans is amortized over the term of the respective note. 50 Effective January 1, 2020, we adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (ASU Topic 326).
We believe that the demand for relatively small loans secured by residential and commercial real estate held for investment around the New York metropolitan market, including New Jersey and Connecticut, and in the Florida market remains relatively strong, but weakened due to the continued increase in interest-rates.
We believe that the demand for relatively small loans secured by residential and commercial real estate held for investment around the New York metropolitan market, including New Jersey and Connecticut, and in the Florida market remains relatively strong, but weakened due to high interest rates.
We guarantee MBC Funding II’s obligations under the Notes, which are secured by our pledge of 100% of the outstanding common shares of MBC Funding II that we own. On April 11, 2023, our board of directors authorized a share buyback program for the repurchase of up to 100,000 of our common shares in the next twelve months.
We guarantee MBC Funding II’s obligations under the Notes, which are secured by our pledge of 100% of the outstanding common shares of MBC Funding II that we own. On April 11, 2023, our board of directors authorized a share buyback program for the repurchase of up to 100,000 of our common shares.
We rely on our own employees, independent legal counsel, and other independent professionals to verify titles and ownership, to file liens and to consummate the transactions. Outside appraisers are used to assist us in evaluating the worth of collateral, when deemed necessary by management.
We rely on our own employees, independent legal counsel, and other independent professionals to verify titles and ownership, to file liens and to consummate the transactions. Outside appraisers are used to assist us in evaluating the worth of collateral, when deemed necessary by management. We also use construction inspectors.
At December 31, 2023, the outstanding amount under the Amended and Restated Credit Agreement was $25,152,338. The interest rate on the amount outstanding fluctuates daily. The rate, including a 0.5% agency fee, as of December 31, 2023 was approximately 8.96%. MBC Funding II has $6,000,000 of outstanding principal amount of Notes.
At December 31, 2024, the outstanding amount under the Amended and Restated Credit Agreement was $16,427,874. The interest rate on the amount outstanding fluctuates daily. The rate, including a 0.5% agency fee, as of December 31, 2024 was approximately 8.0%. MBC Funding II has $6,000,000 of outstanding principal amount of Notes.
The increase in net cash provided by operating activities primarily resulted from the increases in net income and deferred origination fees, partially offset by the changes in interest receivable on loans as well as accounts payable and accrued expenses.
The decrease in net cash provided by operating activities primarily resulted from the increase in interest and other fees receivable on loans, and the decreases in deferred origination fees and in accounts payable and accrued expenses, partially offset by the increase in net income.
Critical Accounting Policies and Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Critical Accounting Policies and Use of Estimates The preparation of financial statements in conformity with U.S. 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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
In 2023, approximately $7,976,000 of our revenue represents interest income on secured, real estate loans that we offer to real estate investors compared to approximately $6,773,000 in 2022, and approximately $1,820,000 represents origination fees on such loans, compared to approximately $1,798,000 in 2022.
In 2024, approximately $8,047,000 of our revenue represents interest income on secured, real estate loans that we offer to real estate investors, compared to approximately $7,976,000 in 2023, and approximately $1,642,000 represents origination fees on such loans, compared to approximately $1,820,000 in 2023.
When we renew or extend a loan, we receive additional “points” and other fees. During February 2023, the Company sold one of its loans receivable to a third-party investor at its face value of $485,000. Mr. Assaf Ran, the Company’s President and Chief Executive Officer, participated in such acquisition in the amount of $152,000.
During February 2023, the Company sold one of its loans receivable to a third-party investor at its face value of $485,000. Mr. Assaf Ran, the Company’s President and Chief Executive Officer, participated in such acquisition in the amount of $152,000.
The increase is primarily attributable to the increase in interest expense due to higher interest rates and increases in amounts borrowed relating to the use of the Webster Credit Line. (See Note 5 to the financial statements included elsewhere in this Report).
The decrease is primarily attributable to the decrease in interest expense due to a reduction in borrowed amounts related to the use of the Webster Credit Line. (See Note 5 to the financial statements included elsewhere in this Report).
Net cash provided by investing activities for the year ended December 31, 2023, mainly consisted of collection of our commercial loans of approximately $57,736,000, offset by the issuance of our short-term commercial loans of approximately $56,301,000.
Net cash provided by investing activities for the year ended December 31, 2024, mainly consisted of collection of our commercial loans of approximately $49,090,000, offset by the issuance of our short-term commercial loans of approximately $41,538,000.
For this purpose, each mortgage loan is deemed to have a value equal to its outstanding principal balance, unless the borrower is in default of its obligations. 49 The Notes are secured by a first priority lien on all of MBC Funding II’s assets, including, primarily, mortgage notes, mortgages and other transaction documents entered into in connection with first mortgage loans originated and funded by us, which MBC Funding II acquired from MBC pursuant to an asset purchase agreement.
The Notes are secured by a first priority lien on all of MBC Funding II’s assets, including, primarily, mortgage notes, mortgages and other transaction documents entered into in connection with first mortgage loans originated and funded by us, which MBC Funding II acquired from MBC pursuant to an asset purchase agreement.
In that instance, the buyer of the property on which the Company had a valid mortgage suffered a data breach which resulted in the failure of the buyer to remit the funds needed for the loan payoff. In October 2023, the Company received the entire payoff amount for the loan receivable, including all unpaid fees, to rectify the situation.
In that instance, the buyer of the property on which the Company had a valid mortgage suffered a data breach which resulted in the failure of the buyer to remit the funds needed for the loan payoff.
Our primary business objective is to grow our loan portfolio while protecting and preserving capital in a manner that provides for attractive risk-adjusted returns to our shareholders over the long term through dividends.
In October 2023, the Company received the entire payoff amount for the loan receivable, including all unpaid fees, to rectify the situation. 49 Our primary business objective is to grow our loan portfolio while protecting and preserving capital in a manner that provides for attractive risk-adjusted returns to our shareholders over the long term through dividends.
For the year ended December 31, 2023, net cash provided by investing activities was approximately $1,430,000, compared to approximately $8,771,000 of net cash used in investing activities for the year ended December 31, 2022.
For the year ended December 31, 2024, net cash provided by investing activities was approximately $7,548,000, compared to approximately $1,643,000 of net cash provided by investing activities for the year ended December 31, 2023.
In addition, the terms of the personal guaranty provided by Mr. Ran were amended such that the potential sums owed under such guaranty will not exceed the sum of $1,000,000 plus any costs relating to the enforcement of the personal guaranty. We were in compliance with all covenants of the Webster Credit Line, as amended, as of December 31, 2023.
Rand provides a personal guaranty of the potential amounts owed under the Webster Credit Line, with such guaranty not to exceed $1,000,000 plus any costs relating to the enforcement of the personal guaranty. We were in compliance with all covenants of the Webster Credit Line, as amended, as of December 31, 2024.
The properties securing the loans are generally classified as residential or commercial real estate and, typically, are not income producing. Each loan is secured by a first mortgage lien on real estate.
The properties securing the loans are generally classified as residential or commercial real estate and, typically, are not income producing. All loans, except for one with a face value of approximately $47,000, are secured by a first mortgage lien on real estate.
General and administrative expenses General and administrative expenses for the year ended December 31, 2023, were approximately $1,825,000, compared to approximately $1,549,000 for the year ended December 31, 2022, an increase of $276,000, or 17.8%.
General and administrative expenses General and administrative expenses for the year ended December 31, 2024, were approximately $1,776,000, compared to approximately $1,825,000 for the year ended December 31, 2023, a decrease of $49,000, or 2.7%.
Net cash used in investing activities for the year ended December 31, 2022, mainly consisted of the issuance of our short-term commercial loans of approximately $60,916,000, offset by collection of our commercial loans of approximately $52,147,000.
Net cash provided by investing activities for the year ended December 31, 2023, mainly consisted of collection of our commercial loans of approximately $57,736,000, offset by the issuance of our short-term commercial loans of approximately $56,088,000. 52 For the year ended December 31, 2024, net cash used in financing activities was approximately $13,970,000, compared to approximately $5,450,000 of net cash used in financing activities for the year ended December 31, 2023.
The Notes mature on April 22, 2026, unless redeemed earlier, and accrue interest at a rate of 6% per annum commencing on May 16, 2016 and will be payable monthly, in arrears, in cash, on the 15 th day of each calendar month, commencing June 2016.
The Notes mature on April 22, 2026, unless redeemed earlier, and accrue interest at a rate of 6% per annum commencing on May 16, 2016 and will be payable monthly, in arrears, in cash, on the 15 th day of each calendar month, commencing June 2016. 53 Under the terms of the Indenture, the aggregate outstanding principal balance of the mortgage loans held by MBC Funding II, together with its cash on hand, must always equal at least 120% of the aggregate outstanding principal amount of the Notes at all times.
To date, none of the loans previously made have been non-collectable, although no assurances can be given that existing or future loans may not prove to be non-collectible or foreclosed in the future.
As of December 31, 2024, we were committed to $7,203,418 in construction loans that can be drawn by our borrowers when certain conditions are met. To date, none of the loans previously made have been non-collectable, although no assurances can be given that existing or future loans may not prove to be non-collectible or foreclosed in the future.
Our lending policy limits the maximum amount of any loan to the lower of (i) 9.9% of the aggregate amount of our loan portfolio (not including the loan under consideration) and (ii) $3.5 million. Our loans typically have a maximum initial term of 12 months bearing interest at a fixed rate of 9% to 13.5% per year.
Our lending policy limits the maximum amount of any loan to the lower of (i) 9.9% of the aggregate amount of our loan portfolio (not including the loan under consideration) and (ii) $4 million.
For the year ended December 31, 2023, net cash provided by operating activities was approximately $5,608,000, compared to approximately $5,167,000 of net cash provided by operating activities for the year ended December 31, 2022.
Liquidity and Capital Resources As of December 31, 2024, we had cash of approximately $178,000, compared to cash of approximately $104,000 at December 31, 2023. For the year ended December 31, 2024, net cash provided by operating activities was approximately $4,932,000, compared to approximately $5,395,000 of net cash provided by operating activities for the year ended December 31, 2023.
In the case of acquisition financing, the principal amount of the loan usually does not exceed 75% of the value of the property (as determined by an independent appraiser) and in the case of construction financing, it is typically up to 80% of construction costs. 44 Since commencing this business in 2007, we have made over 1,220 loans and never foreclosed on a property, except as set forth below, although sometimes we have renewed or extended our loans to enable the borrower to avoid premature sale or refinancing of the property.
Since commencing this business in 2007, we have made over 1,280 loans and never foreclosed on a property, except as set forth below, although sometimes we have renewed or extended our loans to enable the borrower to avoid premature sale or refinancing of the property. When we renew or extend a loan, we receive additional “points” and other fees.
In addition, from time to time, we receive short-term unsecured loans from our executive officers and others in order to provide us with the flexibility necessary to maintain a steady deployment of capital. However, we expect our working capital requirements to increase over the next 12 months as we continue to strive for growth at the right condition. 50
From time to time, we also receive short-term unsecured loans from our executive officers and others, providing the flexibility needed for the steady deployment of capital. However, we anticipate that our working capital requirements will increase in the coming 12 months as we continue to pursue growth under favorable conditions. 54
Net income Net income for the year ended December 31, 2023, was approximately $5,476,000, compared to approximately $5,212,000 for the year ended December 31, 2022, an increase of $264,000, or 5.1%.
Net income Net income for the year ended December 31, 2024, was approximately $5,591,000, compared to approximately $5,476,000 for the year ended December 31, 2023, an increase of $115,000, or 2.1%. This increase is primarily attributable to the decrease in interest expense, partially offset by the decrease in origination fees.
Results of operations Years ended December 31, 2023 and 2022 Total revenue Total revenue for the year ended December 31, 2023, was approximately $9,796,000, compared to approximately $8,571,000 for the year ended December 31, 2022, an increase of $1,225,000, or 14.3%. The increase in revenue was due to higher interest rates charged on our commercial loans.
Results of operations Years ended December 31, 2024 and 2023 Total revenue Total revenue for the year ended December 31, 2024, was approximately $9,689,000, compared to approximately $9,796,000 for the year ended December 31, 2023, a decrease of $107,000, or 1.1%.
Net cash provided by financing activities for the year ended December 31, 2022, reflects net proceeds from the Webster Credit Line of an aggregate of approximately $9,348,000, offset by dividend payments of approximately $5,747,000 and cash paid for deferred financing costs of approximately $36,000.
Net cash used in financing activities for the year ended December 31, 2024, reflects repayment of the Webster Credit Line of approximately $8,724,000, dividend payments of approximately $5,233,000, purchase of treasury shares of approximately $10,000 and cash paid for deferred financing costs of approximately $2,000.
We anticipate that our current cash balances and the Amended and Restated Credit Agreement, as described above, together with our cash flows from operations will be sufficient to fund our operations for the next 12 months.
Before this program expired on April 10, 2024, we had purchased an aggregate of 56,294 common shares at an aggregate cost of approximately $271,000. We expect that our current cash balances, the Amended and Restated Credit Agreement, as described above, and cash flows from operations will be sufficient to fund our operations over the next 12 months.
Interest and amortization of deferred financing costs Interest and amortization of deferred financing costs for the year ended December 31, 2023, were approximately $2,526,000, compared to approximately $1,823,000 for the year ended December 31, 2022, an increase of $703,000, or 38.6%.
The loans are principally secured by collateral consisting of real estate and accompanied by personal guarantees from the principals of the borrowers. 51 Interest and amortization of deferred financing costs Interest and amortization of deferred financing costs for the year ended December 31, 2024, were approximately $2,337,000, compared to approximately $2,526,000 for the year ended December 31, 2023, a decrease of $189,000, or 7.5%.
This increase is primarily attributable to a special bonus to officers for extending the Webster Credit Line as well as an annual bonus in 2023, totaling approximately $195,000, and increases in marketing, insurance, travel and meals expenses, partially offset by a decrease in advertising expense.
The decrease is primarily due to a special bonus awarded to officers in 2023 for extending the Webster Credit Line and a reduction in marketing expenses, partially offset by higher salaries and costs related to the filing of our registration statement on Form S-3 incurred in 2024.
Removed
In that regard, we have observed a steady increase in interest rates on our debt which, if it continues, may have an impact on our income, as well as may impact the rate of our dividends.
Added
Our loans typically have a maximum initial term of 12 months bearing interest at a fixed rate of 9% to 13% per year, except for one loan issued in June 2024, which had an initial interest rate of 11.5% that was reduced to 7.25% on January 2, 2025, for a period of up to one year.
Removed
We also use construction inspectors. 45 As of December 31, 2023, we were committed to $7,978,089 in construction loans that can be drawn by our borrowers when certain conditions are met.
Added
In the case of acquisition financing, the principal amount of the loan usually does not exceed 75% of the value of the property (as determined by an independent appraiser) and in the case of construction financing, it is typically up to 80% of construction costs.
Removed
The loans are principally secured by collateral consisting of real estate and accompanied by personal guarantees from the principals of the borrowers.
Added
The decrease in revenue was due to a reduction in loans receivable, period over period, and reduced origination fees, which were impacted by a slowdown in new loan originations, partially offset by higher interest rates charged on our commercial loans.
Removed
This increase is primarily attributable to the increase in interest income from loans, partially offset by the increases in interest expense and in general and administrative expenses. 47 Liquidity and Capital Resources As of December 31, 2023 and 2022, we had cash of approximately $104,000, not including restricted cash, which mainly represents collections received, pending clearance, from the Company’s commercial loans and is primarily dedicated to the reduction of the Webster Credit Line.
Added
The interest rates relating to the Webster Credit Line equal (i) SOFR plus a premium, which rate aggregated approximately 8.0%, including a 0.5% agency fee, as of December 31, 2024, or (ii) a Base Rate (as defined in the Amended and Restated Credit Agreement) plus 2.00% and a 0.5% agency fee, as chosen by the Company for each drawdown.
Removed
For the year ended December 31, 2023, net cash used in financing activities was approximately $5,450,000, compared to approximately $3,565,000 of net cash provided by financing activities for the year ended December 31, 2022.
Added
For this purpose, each mortgage loan is deemed to have a value equal to its outstanding principal balance, unless the borrower is in default of its obligations.
Removed
On January 31, 2023, we entered into another amendment, effective as of January 2, 2023, with respect to the Amended and Restated Credit Agreement with the Lenders and Mr.
Added
We currently do not believe there will be any issues in extending the Webster Credit Line or securing a similar line from another bank before its expiration, and we plan to refinance the Notes prior to their maturity, though we cannot assure you that we will be successful in doing so on favorable terms or at all.
Removed
Ran, as guarantor, to (i) extend the maturity date of the credit line by three years to February 28, 2026; (ii) transition the applicable benchmark from LIBOR to SOFR and adjust the applicable margin with respect to Base Rate Loans and SOFR Loans; (iii) update the required calculation with respect to the fixed charge coverage ratio covenant; (iv) further increase the limit on individual loans and the concentration of any mortgagor (together with guarantors and other related entities and affiliates); and (v) eliminate the requirement to pledge an additional mortgage loans as collateral for the credit line.
Removed
Under the terms of the Indenture, the aggregate outstanding principal balance of the mortgage loans held by MBC Funding II, together with its cash on hand, must always equal at least 120% of the aggregate outstanding principal amount of the Notes at all times.
Removed
Each Noteholder had the right to cause MBC Funding II to redeem his, her or its Notes on April 22, 2021 by notifying MBC Funding II in writing, no earlier than November 22, 2020 and no later than January 22, 2021.
Removed
No Noteholder exercised such right during the required time frame and as such the Notes are no longer redeemable by the Noteholders.
Removed
As of December 31, 2023, we have purchased an aggregate of 54,294 common shares under this repurchase program, at an aggregate cost of approximately $262,000. Outlook The interest rate on the Notes is fixed and the interest rate under the Webster Credit Line is adjustable. The high level of SOFR rates adversely impacts our interest costs.
Removed
We have experienced a slowdown in the deployment of capital and lower demand for new loans. We are increasing the interest rates charged on our commercial loans in order to offset our increased interest costs.
Removed
In addition, most of our loans contain an adjustable interest rate clause allowing us to charge no less than the prime rate plus 3% on the outstanding loans. We also believe that we benefit from our low equity-to-debt ratio in the current market condition.

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