ITEM 1. BUSINESS.
Introduction
We are a Delaware company incorporated on December 5, 2005 in order to serve as a vehicle to invest in, renovate and, in some cases, manage and operate residential real estate in the New York metropolitan area.
Property Investment
General
During 2006, we completed the renovation of one apartment in New York City. During 2007 and 2008, we entered into agreements and completed in the design and renovation of two additional residential apartments in New York City, as well as the design and construction of a residential home in Kent, Connecticut. The residential home in Kent, Connecticut, is currently in the design phase and no construction on this property has commenced. Both 2007 and 2008 projects have been completed. We entered into and completed one renovation of a residential apartment in New York City during 2009.
We intend to utilize cash derived from the proceeds of our proposed offering, together with mortgage financing, in order to effect our initial property acquisition. Our property acquisitions may be delayed due to any number of factors, including those relating to due diligence, mortgage financing and a seller’s preparation for the closing. In the alternative, we may acquire a building whose rental income is subject to delinquencies or which requires substantial funding to maintain or renovate any of which could render such a building financially unstable. While we ultimately plan to purchase additional residential properties, we will probably have the ability, as a result of our limited resources, to effect only a single property acquisition.
We have not Identified a Target Property
To date, we have not identified or selected any target property for acquisition. We will have virtually unrestricted flexibility in identifying and selecting a prospective acquisition candidate. Accordingly, there is no basis for investors to evaluate the possible merits or risks of the specific property which we may ultimately acquire. To the extent we acquire a financially unstable building or one that is in a state of disrepair or a low occupancy rate, we may be affected by numerous risks inherent in the business and operations of such a building. Although our management will endeavor to evaluate the risks inherent in a particular target property, we cannot assure you that we will properly ascertain or assess all significant risk factors.
Sources and Selection of Target Properties
Any evaluation relating to the merits of a particular property acquisition will be based on several factors as well as other considerations deemed relevant by our management consistent with our business objective. In evaluating prospective target properties, we will conduct an extensive due diligence review which will encompass, among other things, meetings with building management and inspection of facilities, as well as review of financial and other information which will be made available to us.
The time and costs required to select and evaluate a target property and to complete the acquisition cannot presently be ascertained with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target property which we do not ultimately acquire will result in a loss to us and reduce the amount of capital available to otherwise complete an acquisition. However, we will not pay any finders or consulting fees to our existing stockholder, or any of his affiliates, for services rendered to or in connection with a property acquisition.
Probable Lack of Business Diversification
It is probable that we will have the ability to effect only a single property acquisition at the outset. Accordingly, the prospects for our success may be entirely dependent upon the future appreciation or performance of a single property. Moreover, since substantially all of our tangible assets are expected to consist of residential real estate in the New York metropolitan area, a significant downturn in the New York residential real estate market (either for rentals or purchases) could severely damage our business or cause a total loss of value of our tangible assets. Unlike other real estate acquisition entities which may have the resources to purchase a variety of properties in more than one market or area, it is probable that we will not have the resources to diversify our operations or benefit from the possible spreading of risks or offsetting of losses. Our lack of diversification subjects us to fluctuations in the New York residential real estate market and, initially, to the appreciation or successful operation of a single property.
Competition
The residential real estate market in the New York City metropolitan area is highly competitive. We face significant competition in winning renovation contracts and will face significant competition in acquiring properties for our property acquisition. Moreover, as a newcomer to the New York City residential real estate market, we will have a disadvantage in competing with existing, more substantial entities in this market most of whom have vastly greater resources than we do.
Renovation
In addition to renovating the properties in which we invest, we intend to generate revenues by taking on renovation projects for other residential properties to meet our costs to continue as a public company. To date, we have engaged in a renovation of four apartments in New York City. The projects involved complete renovations of the apartments. We received from December 31, 2005 (inception) through December 31, 2009 payments for completed projects in the amount of $743,664 and paid $549,999 in costs associated therewith. These costs included payment of independent sub-contractors and tradespersons to complete work on the projects. Our President and CEO directly coordinates such renovations, retaining contractors and tradesmen to perform the work. We are not certain at this point whether or not we will continue to pursue renovation projects pending our initial property acquisition.
Facilities
Our principal executive office is located at 15 West 72nd Street, Suite 15K, New York, NY 10023. Our President and CEO has permitted us to use this space at no charge to date. We may enter into an agreement with him to compensate him for our use of the space at a future date.
Employees
Robert Kornstein is currently our sole officer and director and as such is our only employee at this time. We rely on licensed contractors for work done on our renovation projects.
Litigation
We are currently not a party to any material pending legal proceedings and no such action by, or to the best of our knowledge, against our company has been threatened. From time to time, we are a party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not involved currently in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.
ITEM 1A.
ITEM 1A. RISK FACTORS.
We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and are not required to provide information under this item.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and are not required to provide information under this item, however there are no unresolved staff comments.
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTY.
Our principal executive offices are located at 15 West 72nd Street, Suite 15K, New York, NY 10023. Our President and CEO has permitted us to use this space at no charge to date. We may enter into an agreement with him to compensate him for our use of the space at a future date.
We believe that our principal executive offices are adequate to meet our current needs. Our offices are in good condition and are sufficient to conduct our operations. We do not intend to renovate, improve, or develop properties. We are not subject to competitive conditions for property and currently have no property to insure. We have no policy with respect to investments in real estate or interests in real estate and no policy with respect to investments in real estate mortgages. Further, we have no policy with respect to investments in securities of or interests in persons primarily engaged in real estate activities.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4.
ITEM 4. (REMOVED AND RESERVED).
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
We have not sold, or received any commitments from public investors to purchase, the units that were previously offered pursuant to our registration statement which was declared effective by the Securities and Exchange Commission (“SEC”) on November 10, 2008. There is presently no public market for our units, common stock or warrants. Assuming we sell units in our proposed public offering, of which there can be no assurance and the units are accepted for quotation on the OTC Bulletin Board, we anticipate that our common stock and the warrants will be quoted on the OTC Bulletin Board as soon as practicable after they are able to be traded separately. If we sell units, we plan for the common stock and warrants to be separately tradable. However, we cannot be certain that they will be accepted for quotation.
Number of Shareholders
As of April 9, 2010, there were 3,060,000 shares of our common stock issued and outstanding and 4 holders of record of our common stock. We are authorized to issue 20,000,000 shares of common stock, par value $.001, and 1,000,000 shares of preferred stock, par value $.001. The transfer agent of our common stock is Island Stock Transfer, 100 Second Avenue South, Suite 705S, St. Petersburg, FL 33701.
Dividends
We have not paid any dividends on our common stock to date and do not intend to pay dividends in the near future. The payment of dividends in the future will be contingent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of our initial property acquisition. The payment of any dividends will be within the discretion of our then board of directors. It is the present intention of our board of directors to retain all earnings, if any, for use in our business operations and, accordingly, our board does not anticipate declaring any dividends in the foreseeable future.
Equity Compensation Plan Information
As of December 31, 2009, we do not have any stock option, bonus, profit sharing, pension or similar plan.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
There were no purchases or repurchases of our equity securities by the Company or any affiliated purchasers.
Unregistered Sales of Equity Securities and Use of Proceeds
During the fourth quarter of 2009, we did not issue any equity securities without registration under the Securities Act of 1933, as amended.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, as amended and are not required to provide information under this item.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
WE URGE YOU TO READ THE FOLLOWING DISCUSSION IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE NOTES THERETO BEGINNING ON PAGE F−1. THIS DISCUSSION MAY CONTAIN FORWARD−LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY THE FORWARD−LOOKING STATEMENTS AS A RESULT OF A NUMBER OF FACTORS, INCLUDING BUT NOT LIMITED TO THE RISKS AND UNCERTAINTIES DISCUSSED UNDER THE HEADING “RISK FACTORS” IN OUR FILINGS WITH THE SEC. IN ADDITION, SEE “CAUTIONARY STATEMENT REGARDING FORWARD−LOOKING STATEMENTS ” SET FORTH IN THIS REPORT.
Overview
We are a Delaware company incorporated on December 5, 2005 in order to serve as a vehicle to invest in, renovate and, in some cases, manage and operate residential real estate in the New York metropolitan area.
During 2006, we completed the renovation of one apartment in New York City. During 2007 and 2008, we entered into agreements and completed in the design and renovation of two additional residential apartments in New York City, as well as the design and construction of a residential home in Kent, Connecticut. The residential home in Kent, Connecticut, is currently in the design phase and no construction on this property has commenced. Both 2007 and 2008 projects have been completed. We entered into and completed one renovation of a residential apartment in New York City during 2009.
We intend to utilize cash derived from the proceeds of our proposed initial public offering, together with mortgage financing, in order to effect our initial property acquisition. Although we intend to apply substantially all of the net proceeds of our offering applied toward effecting our initial property acquisition and renovation of such property as described in our prospectus, the proceeds are not otherwise being designated for any more specific purposes. Accordingly, our investors will invest in us without an opportunity to evaluate the specific merits or risks of any one or more property acquisitions.
Our property acquisitions may be delayed due to any number of factors, including those relating to due diligence, mortgage financing and a seller’s preparation for the closing. Due to the current credit environment and lack of available credit to finance one or more property acquisitions, although we are currently researching potential acquisition(s), we believe now is not the appropriate time to consummate one or more property acquisitions. In the alternative, we may acquire a building whose rental income is subject to delinquencies or which requires substantial funding to maintain or renovate any of which could render such a building financially unstable. While we ultimately plan to purchase additional residential properties, we will probably have the ability, as a result of our limited resources, to effect only a single property acquisition.
Critical Accounting Policies and Estimates
Cash and Cash Equivalents
Cash and cash equivalents represent cash on hand, demand deposits and all highly liquid investments placed with banks or other financial institutions with original maturities of three months or less.
Revenue and Cost Recognition
Revenues from fixed−price construction contracts are recognized on the completed contract method. This method is used because the typical contract is completed in two months or less and financial position and results of operations do not vary significantly from those that would result from use of the percentage−of−completion method. A contract is considered complete when all costs except insignificant items have been incurred and the construction meets specifications or has been accepted by the customer.
Revenues from time and material contracts are recognized currently as the work is performed. Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation costs. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Costs in excess of amounts billed are classified as current assets, and billings in excess of costs are classified as current liabilities.
Income Taxes
The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of the Company assets and liabilities along with net operating loss and credit carryforwards in accordance with ASC 740-10 (formerly SFAS no.109 “Accounting for Income Taxes”). A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.
In June 2006, ASC 740-10 was established regarding the uncertainty in income taxes. ASC 740-10 establishes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to as "unrecognized benefits". A liability is recognized (or amount of net operating loss carry forward or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise's potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740-10.
In accordance with ASC 740-10, interest costs related to unrecognized tax benefits are required to be calculated (if applicable) and would be classified as "Interest Expense, net" in the statements of operations. Penalties would be recognized as a component of "General and administrative expenses".
The Company files income tax returns in the United States (federal) and in the State of New York and the City of New York all of which it deems to be its principal tax jurisdictions. The Company is subject to federal, state and local income tax examinations by tax authorities for the years 2006, 2007, 2008 and 2009.
Results of Operations
To date, our operating activities have consisted of renovation of a residential property owned by others. For the year ended December 31, 2009 we have generated $618,319 from such activities (almost all of which were from the renovation of one apartment in New York City). After deducting costs and expenses of $651,172, we had net loss of $(32,853) for the year ended December 31, 2009. For the year ended December 31, 2008 we had no revenue. In addition, after deducting net costs of $348,076, we had net loss of $(348,076) for the year ended December 31, 2008. From December 31, 2005 (inception) to December 31, 2009 we have received payments from renovations totaling $743,664. The projects were billed on a fixed−price basis. Our President and CEO directly coordinated the projects, and independent contractors were hired as needed. The costs included direct material and labor costs and those indirect costs related to performance of the contracts, such as indirect labor, supplies, tools, repairs, and depreciation costs. We are not certain at this point whether or not we will continue to pursue renovation projects pending our initial property acquisition.
For the years ended December 31, 2009 and 2008, we had a net loss of $(32,853) and $(348,076), respectively.
Liquidity and Capital Resources
As of December 31, 2009, we have been financed by our President. We intend to utilize cash derived from the proceeds of our proposed offering (as described below), together with mortgage financing, if necessary and available, to effect our initial property investment. Due to the current credit environment and lack of available credit to finance one or more property acquisitions, although we are currently researching potential acquisition(s), we believe now is not the appropriate time to consummate one or more property acquisitions. We have not yet entered into any arrangements with a lender to provide such mortgage financing nor have we determined what amount, if any, we will require, which determination will depend in part on the amount of proceeds we receive from our offering. We may be unable to obtain mortgage financing on terms which we find economically feasible or acceptable.
Following our initial investment, we will likely require additional funding in order to continue purchasing properties, which will likely include the issuance of additional equity or debt securities. The issuance of additional shares of our common stock will result in dilution to our existing shareholders, which could be substantial. Such issuance could even cause a change in control of the company and also could create an overhang in the market for our common stock causing the price to decline. Similarly, if we issue debt securities, it could result in default and foreclosure on our properties if our operating revenues are insufficient to pay our debt obligations or could restrict our ability to obtain additional financing, if necessary, if the debt securities contain covenants restricting our ability to obtain additional financing.
Pursuant to our registration statement which was declared effective by the SEC on November 10, 2008, we offered for sale through May 11, 2009, on a best−efforts basis, units of securities of our company at an offering price of $1.00 per unit. We have suspended the offering, but intend to extend the offering for a period of six months after obtaining the applicable regulatory approvals to allow such extension. Each unit consists of: (i) one share of our common stock; and (ii) one warrant to purchase one share of common stock.
We have not sold, or received any commitments from public investors to purchase, the units being offered pursuant to our registration statement which was declared effective by the SEC on November 10, 2008. Assuming sale of all units in our offering, of which we can offer no assurances, we estimate that the net proceeds from the sale of the units, after deducting offering expenses of approximately $325,000, will be approximately $2,675,000.
The warrants will be immediately exercisable at a price of $.75.
The warrants will expire at 5:00 p.m., New York City time, three years following the closing of the offering or earlier upon redemption. We may redeem the outstanding warrants:
• in whole and not in part;
• at a price of $.01 per warrant at any time after the warrants become exercisable;
• upon a minimum of 30 days’ prior written notice of redemption; and
• if, and only if, the last sales price of our common stock equals or exceeds $1.50 per share for any 20 trading days within a 30 trading day period ending three business days before we send the notice of redemption.
In the event we call the warrants for redemption, we have agreed that any warrants purchased by our directors during the six month period following separate trading of the warrants will be exercisable by them on a cashless basis.
No warrants will be exercisable unless at the time of exercise a prospectus relating to common stock issuable upon exercise of the warrants is current and the common stock has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the warrants. Under the terms of the warrant agreement, we have agreed to meet these conditions and use our best efforts to maintain a current prospectus relating to common stock issuable upon exercise of the warrants until the expiration of the warrants. However, we cannot assure you that we will be able to do so. The warrants may be deprived of any value and the market for the warrants may be limited if the prospectus relating to the common stock issuable upon the exercise of the warrants is not current or if the common stock is not qualified or exempt from qualification in the jurisdictions in which the holders of the warrants reside. Under no circumstances will we be obligated to net cash settle any of the warrants. In the event that these warrants are not exercisable, we will not be able to realize any of the proceeds from the exercise of such warrants.
We intend to use substantially all of the net proceeds of our offering to effect our initial property acquisition, including identifying and evaluating prospective properties for acquisition, selecting properties and negotiating and consummating their acquisition. We believe that, upon consummation of our offering (assuming the sale of all units offered thereby), the funds available to us will be sufficient to allow us to operate for at least the next 10−12 months, assuming that we make only our initial property acquisition during that time. However, if we are able to sell only a portion of the units offered hereby, we may require more additional funding than anticipated. We plan to scale the size of our initial property acquisition and operations to the amount of proceeds received in our offering, but we may require additional funding if we are unable to do so. If we do sell all of the units offered hereby, we do not believe we will need to raise additional funds following our offering in order to meet the expenditures required for operating our business. However, we still may need to raise additional funds through a private offering of debt or equity securities if such funds are required to consummate additional property acquisitions that are presented to us. Also, we intend to use mortgage financing to acquire real estate going forward.
Our financial statements have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have an accumulated deficit of approximately $319,000 since inception. Additionally, we had a net working capital deficiency of approximately $266,000 at December 31, 2009. In addition, we are not generating any revenues. These factors raise substantial doubt about our ability to continue operating as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Our financial statements are prepared in accordance with United States generally accepted accounting principles. Preparation of the statements in accordance with theses principles requires that we make estimates, using available data and our judgment, for such things as valuing assets, accruing liabilities and estimating expenses. The following is a list of what we feel are the most critical estimates that we make when preparing our financial statements.
Off−Balance Sheet Arrangements
We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.
Recently Issued Accounting Standards
The Financial Accounting Standards Board (“FASB”), in June 2009, issued new accounting guidance that established the FASB Accounting Standards Codification, ("Codification" or “ASC”) as the single source of authoritative generally accepted accounting principles (“GAAP”) to be applied by nongovernmental entities, except for the rules and interpretive releases of the SEC under authority of federal securities laws, which are sources of authoritative GAAP for SEC registrants. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates. Accounting Standards Updates will not be authoritative in their own right as they will only serve to update the Codification. These changes and the Codification itself do not change GAAP. This new guidance became effective for interim and annual periods ending after September 15, 2009. Other than the manner in which new accounting guidance is referenced, the adoption of these changes did not have a material effect on the Company’s consolidated financial statements.
In December 2007, the FASB issued new accounting guidance, under ASC Topic 805 on business combinations, which established principles and requirements as to how acquirers recognize and measure in these financial statements the identifiable assets acquired, the liabilities assumed, noncontrolling interests and goodwill acquired in the business combination or a gain from a bargain purchase. This guidance is effective for business combinations with an acquisition date on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. This guidance will have an impact on the Company’s accounting for any future business acquisitions.
In December 2007, the FASB issued new accounting guidance, under ASC Topic 810 on consolidations, which establishes the accounting for noncontrolling interests in a subsidiary and the deconsolidation of a subsidiary. This guidance requires (a) the ownership interest in the subsidiary held by parties other than the parent to be clearly identified and presented in the consolidated balance sheet within equity, but separate from the parent’s equity, (b) the amount of consolidated net income attributable to the parent and to the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of operations and (c) changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary to be accounted for consistently. Entities must provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. This guidance is effective for financial statements issued for fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. This guidance will have an impact on the Company’s accounting for any future business acquisitions.
In April 2008, the FASB issued new accounting guidance, under ASC Topic 350 on intangibles, which outlines the requirements for determining the useful life of an intangible asset. The new guidance is intended to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset. Companies estimating the useful life of a recognized intangible asset must now consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, must consider assumptions that market participants would use about renewal or extension as adjusted for entity-specific factors. This guidance is effective for financial statements issued for fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. The Company expects the new guidance to have an impact on the accounting for any future business acquisitions.
In May 2009, the FASB issued new accounting guidance, under ASC Topic 855 on subsequent events, which sets forth: 1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; 2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and 3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This guidance was effective for interim and annual periods ending after June 15, 2009. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.
In January 2010, the Company adopted FASB ASU No. 2010-06, “Fair Value Measurement and Disclosures (Topic 820) - Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”). These standards require new disclosures on the amount and reason for transfers in and out of Level 1 and 2 fair value measurements. The standards also require new disclosures of activities, including purchases, sales, issuances, and settlements within the Level 3 fair value measurements. The standard also clarifies existing disclosure requirements on levels of disaggregation and disclosures about inputs and valuation techniques. These new disclosures are effective beginning with the first interim filing in 2010. The disclosures about the rollforward of information in Level 3 are required for the Company with its first interim filing in 2011. The Company does not believe this standard will impact their financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the interim condensed financial statements
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, as amended and are not required to provide information under this item.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
New York Residential, Inc.
(A Development Stage Company)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
New York Residential, Inc.
We have audited the accompanying balance sheets of New York Residential, Inc. (A Development Stage Company) (the “Company”) as of December 31, 2009 and 2008, and the related statements of operations, changes in stockholders’ deficiency, and cash flows for the years ended December 31, 2009 and 2008, and for the period from December 5, 2005 (inception) to December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of New York Residential, Inc. (A Development Stage Company) as of December 31, 2009 and 2008, and the results of its operations and its cash flows for the years ended December 31, 2009 and 2008, and for the period from December 5, 2005 (inception) to December 31, 2009 in conformity with United States generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has deficiencies in working capital and tangible stockholders' deficiency. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding this matter are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Marcum LLP
New York, New York
April 15, 2010
NEW YORK RESIDENTIAL, INC.
(A Development Stage Company)
BALANCE SHEETS
The accompanying notes are an integral part of these financial statements.
NEW YORK RESIDENTIAL, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
For the period from December 5, 2005 (Inception) to December 31, 2009
The accompanying notes are an integral part of these financial statements.
NEW YORK RESIDENTIAL, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
For the period from December 5, 2005 (Inception) to December 31, 2009
The accompanying notes are an integral part of these financial statements.
NEW YORK RESIDENTIAL, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the period from December 5, 2005 (Inception) to December 31, 2009
The accompanying notes are an integral part of these financial statements.
NEW YORK RESIDENTIAL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
For the Period from December 5, 2005 (Inception) to December 31, 2009
NOTE 1: Organization, Going Concern and Management Plan
Organization and Basis of Accounting
New York Residential, Inc. (the “Company”) was incorporated in Delaware on December 5, 2005 and was organized for the purpose of acquiring, renovating, investing in, improving and in some cases managing residential real estate in the New York Metropolitan area.
During 2006, we completed the renovation of one apartment in New York City. During 2007 and 2008, we entered into agreements and completed the design and renovation of two additional residential apartments in New York City, as well as the design and construction of a residential home in Kent, Connecticut. The residential home in Kent, Connecticut, is currently in the design phase and no construction on this property has commenced. Both 2007 and 2008 projects have been completed. We entered into and completed one renovation of a residential apartment in New York City during 2009.
The Company’s principal activities have centered on raising capital, small renovation jobs, and beginning to look toward the longer term plan of pursuing on IPO. Accordingly, the Company remains a development stage company as of December 31, 2009 as defined by the Financial Standards Board (FASB), Accounting Standards Codification or FASB ASC 910-10. To date the Company is still in the raising capital stage and is substantially devoting all of its effects to establishing itself as a new business. The Company has no substantial continuing revenue source or backlog of renovation projects. The Company has and will need continuing loans from its officers to meet its ongoing expenses the Company has incurred cumulative operating losses of approximately $376,000.
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate the continuation of the Company as a going concern.
Going Concern
At December 31, 2009, the Company had $0 in cash, working capital deficiency and stockholders' deficiency of $265,901 and a net loss of $32,853. These factors raise substantial doubt the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Management Plan
The Company is in the initial stage of operations. The Company’s ability to execute its business plan is contingent upon obtaining adequate financial resources through a proposed public offering which is discussed in Note 5. The Company’s management has broad discretion with respect to the specific application of the net proceeds of this proposed offering, although substantially all of the net proceeds of this proposed offering are intended to be generally applied toward the acquisition of residential real property within the New York Metropolitan Area. Furthermore, there is no assurance that the Company will be able to successfully effect such a purchase of residential property. The Company has funded its operations to date from proceeds received from the renovation of apartments, the sale of its Common Stock totaling approximately $53,000 and from net advances from the Company's sole director and officer totaling approximately $21,000 through December 31, 2009 (Note 3). The Company's sole director and officer have agreed verbally to fund the Company's operations through the closing of the proposed offering (Note 5).
NOTE 2 - Summary of Significant Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents represent cash on hand, demand deposits and all highly liquid investments placed with banks or other financial institutions with original maturities of three months or less.
Revenue and Cost Recognition
Revenues from fixed-price construction contracts are recognized on the completed contract method. This method is used because the typical contract is completed in two months or less and financial position and results of operations do not vary significantly from those that would result from use of the percentage-of-completion method. A contract is considered complete when all costs except insignificant items have been incurred and the construction is in accordance with the specifications or has been accepted by the customer.
NEW YORK RESIDENTIAL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
For the Period from December 5, 2005 (Inception) to December 31, 2009
NOTE 2 - Summary of Significant Accounting Policies-continued
Revenues from time and material contracts are recognized currently as the work is performed.
Subsequent Events
Management has evaluated subsequent events or transactions occurring through the date the financial statements were issued to determine if such events or transactions required adjustments or disclosures in the financial statements.
NOTE 2 - Summary of Significant Accounting Policies-continued
Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation costs. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.
Costs in excess of amounts billed are classified as current assets under costs in excess of billings on uncompleted contracts. Billings in excess of costs are classified under current liabilities as billings in excess of costs on uncompleted contracts. As of December 31, 2009 and 2008, costs in excess of billings were $8,027 and $0 respectively. As of December 31, 2008 billings in excess of costs totaled $125,655.
Income Taxes
The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of the Company assets and liabilities along with net operating loss and credit carryforwards in accordance with ASC 740-10 (formerly SFAS no.109 “Accounting for Income Taxes”). A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.
In June 2006, ASC 740-10 was established regarding the uncertainty in income taxes. ASC 740-10 establishes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to as "unrecognized benefits". A liability is recognized (or amount of net operating loss carry forward or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise's potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740-10.
In accordance with ASC 740-10, interest costs related to unrecognized tax benefits are required to be calculated (if applicable) and would be classified as "Interest Expense, net" in the statements of operations. Penalties would be recognized as a component of "General and administrative expenses".
The Company files income tax returns in the United States (federal) and in the State of New York and the City of New York all of which it deems to be its principal tax jurisdictions. The Company is subject to federal, state and local income tax examination by tax authorities amounted for the years 2006, 2007, 2008 and 2009.
The adoption of the provisions of ASC 740-10 did not have a material impact on the Company's financial position and results of operations. As of December 31, 2009, no liability for unrecognized tax benefits was required to be recorded.
NEW YORK RESIDENTIAL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
For the Period from December 5, 2005 (Inception) to December 31, 2009
NOTE 2 - Summary of Significant Accounting Policies-continued
The Company has a net operating loss carry-forward of $39,121 as of December 31, 2009. The net operating loss carry-forward expires in 2022.
There was a recovery of income taxes of $2,973 that was recorded during the year ended December 31, 2008. Income taxes of $1,085 were recorded for 2009.
Concentration of Credit Risk
The Company places its cash deposits and cash equivalents with high quality financial institutions. At times, its cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal deposit Insurance Corporation (“FDIC”) insurance limit. As of December 31, 2009, the Company’s cash is held at one financial institution.
The Company offers its services primarily in the state of New York and it extends credit based on an evaluation of a customer’s financial condition, generally without collateral. Exposure to losses on accounts receivable is principally dependent on each customer’s financial condition. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses, if required. Although the Company expects to collect amounts due, actual collections may differ from the estimated amounts.
Income (Loss) Per Share
The Company computes basic income (loss) per share in accordance with FASB Accounting Standards Codification (“ASC”) Topic 260 by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the periods presented. Diluted income (loss) attributable to common shares adjusts basic income (loss) per share for the effects of convertible securities, warrants, stock options and other potentially dilutive financial instruments only in the periods in which such effect is dilutive. The shares issuable upon the conversion of preferred stock, the exercise of stock options and warrants are excluded from the calculation of net income (loss) per share as their effect would be anti-dilutive.
Use of Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Deferred Offering Costs
Deferred offering costs consist principally of legal and accounting fees incurred through December 31, 2008 in connection with the Company’s Proposed Offering. These costs of $324,272 were charged to operations at December 31, 2008 due to the continued delays in completing the proposed offering.
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheet for cash and cash equivalents and accrued expenses approximate fair value based on the short-term maturities of these instruments. The carrying amounts of the Company’s promissory notes payable approximate fair value based on the prevailing market interest rates.
NEW YORK RESIDENTIAL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
For the Period from December 5, 2005 (Inception) to December 31, 2009
NOTE 2 - Summary of Significant Accounting Policies-continued
Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board (“FASB”), in June 2009, issued new accounting guidance that established the FASB Accounting Standards Codification, ("Codification" or “ASC”) as the single source of authoritative generally accepted accounting principles (“GAAP”) to be applied by nongovernmental entities, except for the rules and interpretive releases of the SEC under authority of federal securities laws, which are sources of authoritative GAAP for SEC registrants. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates. Accounting Standards Updates will not be authoritative in their own right as they will only serve to update the Codification. These changes and the Codification itself do not change GAAP. This new guidance became effective for interim and annual periods ending after September 15, 2009. Other than the manner in which new accounting guidance is referenced, the adoption of these changes did not have a material effect on the Company’s consolidated financial statements
In December 2007, the FASB issued new accounting guidance, under ASC Topic 805 on business combinations, which established principles and requirements as to how acquirers recognize and measure in these financial statements the identifiable assets acquired, the liabilities assumed, noncontrolling interests and goodwill acquired in the business combination or a gain from a bargain purchase. This guidance is effective for business combinations with an acquisition date on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. This guidance will have an impact on the Company’s accounting for any future business acquisitions.
In December 2007, the FASB issued new accounting guidance, under ASC Topic 810 on consolidations, which establishes the accounting for noncontrolling interests in a subsidiary and the deconsolidation of a subsidiary. This guidance requires (a) the ownership interest in the subsidiary held by parties other than the parent to be clearly identified and presented in the consolidated balance sheet within equity, but separate from the parent’s equity, (b) the amount of consolidated net income attributable to the parent and to the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of operations and (c) changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary to be accounted for consistently. Entities must provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. This guidance is effective for financial statements issued for fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. This guidance will have an impact on the Company’s accounting for any future business acquisitions.
In April 2008, the FASB issued new accounting guidance, under ASC Topic 350 on intangibles, which outlines the requirements for determining the useful life of an intangible asset. The new guidance is intended to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset. Companies estimating the useful life of a recognized intangible asset must now consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, must consider assumptions that market participants would use about renewal or extension as adjusted for entity-specific factors. This guidance is effective for financial statements issued for fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. The Company expects the new guidance to have an impact on the accounting for any future business acquisitions.
In May 2009, the FASB issued new accounting guidance, under ASC Topic 855 on subsequent events, which sets forth: 1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; 2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and 3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This guidance was effective for interim and annual periods ending after June 15, 2009. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.
NEW YORK RESIDENTIAL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
For the Period from December 5, 2005 (Inception) to December 31, 2009
NOTE 2 - Summary of Significant Accounting Policies-continued
In January 2010, the Company adopted FASB ASU No. 2010-06, “Fair Value Measurement and Disclosures (Topic 820) - Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”). These standards require new disclosures on the amount and reason for transfers in and out of Level 1 and 2 fair value measurements. The standards also require new disclosures of activities, including purchases, sales, issuances, and settlements within the Level 3 fair value measurements. The standard also clarifies existing disclosure requirements on levels of disaggregation and disclosures about inputs and valuation techniques. These new disclosures are effective beginning with the first interim filing in 2010. The disclosures about the rollforward of information in Level 3 are required for the Company with its first interim filing in 2011. The Company does not believe this standard will impact their financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the interim condensed financial statements.
NOTE 3 - Shareholder Promissory Note
At December 31, 2009, the Company has a $21,311 promissory note from Robert Kornstein, the sole officer and director of the Company. The note bears interest of 15% and is payable on the consummation of the proposed offering. As of December 31, 2009, $14,641 of accrued interest is owed to Robert Kornstein. At December 31, 2008, the Company has a $41,311 promissory note from Robert Kornstein, the sole officer and director of the Company. The note bears interest of 15% and is payable on the consummation of the proposed offering. As of December 31, 2008, $9,953 of accrued interest is owed to Robert Kornstein.
NOTE 4 - Commitments
As of December 31, 2009, the Company has no significant backlog of signed contracts.
At December 31, 2009, the Company had unbilled expenses for one job in the amount of $8,027.
Below is a summary of billings in excess of costs at December 31, 2008:
NEW YORK RESIDENTIAL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
For the Period from December 5, 2005 (Inception) to December 31, 2009
NOTE 4 - Commitments (continued)
Below is a summary of costs in excess of billings as of December 31, 2009:
Note the above renovation projects were completed as of December 31, 2009.
NOTE 5 - Stockholders’ Equity
Common Stock
The Company is authorized to issue 20,000,000 shares of common stock, par value $.001. On December 5, 2005, the Company issued 3,060,000 shares of its common stock to its founders for a price of $.0174 per share, totaling $53,327. Of this amount, 510,000 shares were issued to the Company's sole director and officer.
Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock, par value $.001 with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. At December 31, 2009 and 2008, there are no outstanding preferred shares.
Proposed Offering
The Company filed a registration statement which was declared effective by the SEC on November 10, 2008. The Company offered for sale through May 11, 2009 on a best-efforts basis, 2,940,000 units of securities at an effective price of $1.00 per unit. The Company has suspended the offering but intends to extend the offer for a period of six months after obtaining the applicable regulatory approval to allow such extension. Each unit consists of one share of the Company’s common stock, $.001 par value, and one redeemable common Stock purchase warrant (“warrant”). Each warrant will entitle the holder to purchase from the Company one share of common stock at an exercise price of $.75 commencing one year from the effective date of the proposed offering and expiring four years from the effective date of the proposed offering. The warrants will be redeemable, at a price of $.01 per warrant upon thirty (30) days notice after the warrants become exercisable, only in the event that the last sale price of the common stock is at least $1.50 per share for any 20 trading days within a 30 trading day period ending three business days before the Company send the notice of redemption.
In the event, the Company calls the warrants for redemption, the Company has agreed that any warrants purchased by its directors during the nine month period following separate trading of the warrants will be exercisable by them on a cashless basis.
NEW YORK RESIDENTIAL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
For the Period from December 5, 2005 (Inception) to December 31, 2009
NOTE 5 - Stockholders’ Equity (continued)
No warrants will be exercisable unless at the time of exercise a prospectus relating to common stock issuable upon exercise of the warrants is current and the common stock has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the warrants. Under the terms of the warrant agreement, the Company has agreed to meet these conditions and use its best efforts to maintain a current prospectus relating to common stock issuable upon exercise of the warrants until the expiration of the warrants. However, the Company cannot assure that it will be able to do so. The warrants may be deprived of any value and the market for the warrants may be limited if the prospectus relating to the common stock issuable upon the exercise of the warrants is not current or if the common stock is not qualified or exempt from qualification in the jurisdictions in which the holders of the warrants reside. Under no circumstances will the Company be obligated to net cash settle any of the warrants.
The Company has incurred approximately $324,272 of costs in connection with the proposed offering and at December 31, 2008, these costs were charged to operations due to continued delays in completing this proposed offering.
The Company has not sold, or received any commitments from public investors to purchase, any of the units as described in this proposed offering.
There is presently no public market for the Company’s units, common stock or warrants. Assuming the units are accepted for quotation on the OTC Bulletin Board, the Company anticipates that its common stock and the warrants will be quoted on the OTC Bulletin Board as soon as practicable after they are able to be traded separately. The Company plans for the common stock and warrants to be separately tradable. However, the Company cannot be certain that they will be accepted for quotation. The Company expects that these securities will be separately tradable commencing the 90 th day following the date of the Prospectus Supplement related to such securities or on such date thereafter as they are approved for quotation, unless the board of directors approves an earlier date.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9AT. CONTROLS AND PROCEDURES.
(a) Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Our internal control over financial reporting includes those policies and procedures that:
•
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
•
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
•
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
We are a development stage organization, with our president, chief executive officer and acting chief financial officer having control over all of our accounting transactions and the day-to-day activities. Although this control rests with our president, chief executive officer and chief financial officer, care was taken to select and employ key controls which are responsive to the issue of segregation of duties. Based on our assessment of those criteria, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2009.
The Company maintains disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Company’s management, as appropriate, to allow timely decisions regarding disclosure.
As of December 31, 2009, the end of the period covered by this Annual Report on Form 10-K, the Company’s management, including the Company’s Principal Executive Officer and acting Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures, as such term is defined in Rule 13a-15(e) promulgated under the Exchange Act. Based on that evaluation, the Company’s Principal Executive Officer and acting Chief Financial Officer concluded that, as of December 31, 2009, the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.
This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report on Form 10-K.
(b) Changes in internal controls. During the quarter ended December 31, 2009, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a−15 or Rule 15d−15 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Executive Officers and Directors
Our current director and executive officer is as follows:
Robert Kornstein. Mr. Kornstein is the President of Arcadia Design, Inc., a New Jersey corporation, which is engaged in the furniture design business. From June 2000 to July 2002, Mr. Kornstein was a Job Supervisor for Fountainhead Construction, a New York corporation, where he managed projects for residential and commercial real estate projects. He also has performed various residential renovation projects as an independent contractor. Mr. Kornstein has experience in construction management and in buying and renovating smaller residential buildings. From 2003 to the present, he purchased five residential apartments in New York City ranging in size from approximately 500 to 1,500 square feet in which he renovated and combined a number of such apartments to over 3,000 square feet. During such time, Mr. Kornstein has completed designs and drawings for a 14,000 square foot lakefront home in Kent, Connecticut and will be the project manager for this home when construction commences. In addition, he currently serves as a construction management consultant to the board of the Arcadia Building and to Sherwood Residential for the Cornado Building and Square Condominium, all of which are located in New York City. Moreover, Mr. Kornstein currently serves as a designer and project manager for 1,000 and 3,000 square foot residential apartments in New York City. From 2000 to 2003, he was a project manager for Fountain Head Construction, where his work included commercial projects in New York City such as retail stores and photography studios. In addition, during such time, Mr. Kornstein completed residential projects in New York City such as townhouse renovations, and renovations of apartments up to a size of approximately 7,000 square feet. From 1985 to 2003, Mr. Kornstein performed renovations and additions for residential homes in New Jersey and New York, including, but not limited to, the design, construction and sale of two approximately 10,000 square foot residential homes in Tenafly, New Jersey. Although his experience does not include day−to−day operation of properties, he has served as an ongoing consultant for buildings which he renovated after completion of such renovation and is called in to manage issues which arise from time to time at the properties. In all, he has 20 years of design and construction experience. Mr. Kornstein has no experience conducting a public offering or running a public company.
Role of the Board of Directors
Pursuant to Delaware law, our business, property and affairs are managed under the direction of the Company’s board of directors. The board has responsibility for establishing broad corporate policies and for the overall performance and direction of the Company, but is not involved in day−to−day operations.
Compensation of the Board of Directors
Our sole director, who is also an employee of our company, does not receive additional compensation for serving on the Board. We intend to procure directors and officers liability insurance.
Board Meeting and Actions by Written Consent
In 2009, the board did not meet or take action by unanimous written consent.
Board Committees
We have not established an audit committee, compensation committee, nominating committee or other committee of our board of directors.
Advisory Board
We do not currently have an advisory board.
Director Independence
We do not have any independent directors as defined by any national securities exchange registered pursuant to Section 6(a) of the Exchange Act.
Involvement in Certain Legal Proceedings.
Our officer and sole director has not, during the last ten years: (i) been convicted in or is currently subject to a pending a criminal proceeding; (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to any federal or state securities or banking laws including, without limitation, in any way limiting involvement in any business activity, or finding any violation with respect to such law, nor (iii) has any bankruptcy petition been filed by or against the business of which such person was an executive officer or a general partner, whether at the time of the bankruptcy of for the two years prior thereto.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act, requires our director, executive officer, and shareholders holding more than 10% of our outstanding common stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in beneficial ownership of our common stock. Executive officers, directors and greater−than−10% shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. To our knowledge, based solely on review of the copies of such reports furnished to us for the year ended December 31, 2009, the Section 16(a) reports required to be filed by our executive officer, director and greater−than−10% shareholders were filed on a timely basis.
Code of Ethics
The Company has not adopted a Code of Ethics and Business Conduct for Officers, Directors and Employees that applies to all of the officers, directors and employees of the Company.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
We do not intend to pay compensation to any directors or officers who join our company until such time as we have completed our initial property acquisition. However, our existing stockholders and our sole director and executive officer will receive reimbursement for any out−of−pocket expenses incurred by them in connection with activities on our behalf, such as identifying and performing due diligence on potential investment properties. We expect that these expenses will be limited to general and administrative expenses including office expenses, communications, travel and entertainment, which we will use to meet with investors and discuss the merits of an investment in our business.
We expect to pay compensation to our officers, as we recruit and employ them. Because we do not yet know the extent of the labor and expertise required to oversee management of the properties we will eventually acquire, we are unable to determine what remuneration, if any, we will eventually pay our management. We intend to base it upon the market for executives at the time we seek to recruit them as well as our available resources.
For the year ended December 31, 2009, the Company paid its sole officer $12,000 which he contributed to the Company as additional paid in capital.
Stock Option, Bonus, Profit Sharing, Pension or Similar Plan
As of December 31, 2009, we do not have any stock option, bonus, profit sharing, pension or similar plan.
Employment Agreements
We have not entered into an employment agreement with Robert Kornstein, our sole officer and employee.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth information regarding the beneficial ownership of our common stock as of April 9, 2010 by:
• each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;
• each of our officers and directors; and
• all our officers and directors as a group.
Based on information available to us, all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them, unless otherwise indicated. Beneficial ownership is determined in accordance with Rule 13d−3 under the Securities Exchange Act of 1934, as amended. In computing the number of shares beneficially owned by a person or a group and the percentage ownership of that person or group, shares of our common stock subject to options or warrants currently exercisable or exercisable within 60 days after the date of our prospectus are deemed outstanding, but are not deemed outstanding for the purpose of computing the percentage of ownership of any other person. Applicable percentage ownership as of April 9, 2010 is based upon 3,060,000 shares of common stock outstanding.
Unless otherwise indicated, the address of each individual named below is our address located at 15 West 72nd Street, Suite 15K, New York, NY 10023.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
At December 31, 2008 there was $41,311 principal amount and $9,953 of accrued and unpaid interest owed by us to Robert Kornstein, our sole officer and director pursuant to a promissory note. During fiscal year ended December 31, 2009, Mr. Kornstein advanced to us an additional $30,000 under the promissory note and we repaid $50,000 of the outstanding principal amount of this promissory note. As of December 31, 2009, we owe $21,311 principal amount and $14,641 accrued and unpaid interest under this note. The note bears interest at 15% per annum and is payable on the consummation of our proposed offering. The proceeds of the note have been used primarily to pay costs associated with the offering, including legal and accounting fees and costs of printing and filing of documents with the Securities and Exchange Commission.
All ongoing and future transactions between us and any of our officers and directors or their respective affiliates, including loans by our officers and directors, will be on terms believed by us to be no less favorable than are available from unaffiliated third parties and such transactions or loans, including any forgiveness of loans, will require prior approval in each instance by a majority of our uninterested “independent” directors (to the extent we have any) or the members of our board who do not have an interest in the transaction, in either case who had access, at our expense, to our attorneys or independent legal counsel.
Other than the above transactions, we have not entered into any material transactions with any director, executive officer, and nominee for director, beneficial owner of five percent or more of our common stock, or family members of such persons. Also, other than the above transactions, we have not had any transactions with any promoter.
Conflicts of Interest
Certain potential conflicts of interest are inherent in the relationships between our sole officer and director and us. We do not have any independent directors as defined by any national securities exchange registered pursuant to Section 6(a) of the Securities Exchange Act of 1934.
Conflicts Relating to Officers and Directors
To date, we do not believe that there are any conflicts of interest involving our sole officer and director.
With respect to transactions involving real or apparent conflicts of interest, we have adopted policies and procedures which require that: (i) the fact of the relationship or interest giving rise to the potential conflict be disclosed or known to the directors who authorize or approve the transaction prior to such authorization or approval, (ii) the transaction be approved by a majority of our disinterested outside directors, and (iii) the transaction be fair and reasonable to us at the time it is authorized or approved by our directors.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Audit Fees
Marcum LLP billed us $38,500 and $55,000 in fees for audit services for the years ended December 31, 2009 and 2008, respectively.
Audit−Related Fees
We did not pay any fees to Marcum LLP for assurance and related services that are not reported under Audit Fees above during our fiscal year ending December 31, 2009 and 2008.
Tax and All Other Fees
We did not pay any fees to Marcum LLP for tax compliance, tax advice, tax planning or other work during our fiscal years ending December 31, 2009 and December 31, 2008.
Pre−Approval Policies and Procedures
We have implemented pre−approval policies and procedures related to the provision of audit and non−audit services. Under these procedures, our sole director pre−approves all services to be provided by Marcum LLP and the estimated fees related to these services.
With respect to the audit of our financial statements as of December 31, 2009, and for the year then ended, none of the hours expended by Marcum LLP’s engagement to audit those financial statements were attributed to work by persons other than Marcum LLP, and its full−time, permanent employees.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements and Schedules
1. Financial Statements. The following financial statements are filed as part of this report under Item 8 of Part II “Financial Statements and Supplementary Data”:
A. Balance Sheets as of December 31, 2009 and 2008.
B. Statements of Operations for the years ended of December 31, 2009 and 2008 and for the period from December 5, 2005 (inception) to December 31, 2009.
C. Statements of Changes in Stockholders’ deficiency for the period from December 5, 2005 (inception) to December 31, 2009.
D. Statements of Cash Flows for the years ended of December 31, 2009 and 2008 and for the period from December 5, 2005 (inception) to December 31, 2009.
2. Financial Statement Schedules. Financial statement schedules not included herein have been omitted because they are either not required, not applicable, or the information is otherwise included herein.
(b) Exhibits.
* Previously filed
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NEW YORK RESIDENTIAL, INC.
Date: April 15, 2010
By:
/s/ Robert Kornstein
Robert Kornstein
President, Chief Executive Officer (Principal Executive Officer), Acting Chief Financial Officer (Principal Accounting and Financial Officer) and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Name
Title
Date
/s/ Robert Kornstein
Robert Kornstein
Director, President, Chief Executive Officer (Principal Executive Officer), Acting Chief Financial Officer (Principal Accounting and Financial Officer) and Secretary
April 15, 2010
EXHIBIT INDEX
*Previously Filed