SECURITIES
AND EXCHANGE COMMISSION
Amendment No. 1 to
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
MAGNOLIA
LANE INCOME FUND
(Exact
Name of Small Business Issuer in its Charter)
Delaware |
|
4911 |
|
|
(State
or other Jurisdiction
of Incorporation) |
|
(Primary
Standard
Classification
Code) |
|
(IRS
Employer
Identification
No.) |
7
Grove Street
Topsfield,
MA 01983
Tel.
No.: (978) 887-5981
(Address
and Telephone Number of Registrant’s Principal
Executive
Offices and Principal Place of Business)
Copies
of communications to:
Gregg
E. Jaclin, Esq.
Szaferman
Lakind Blumstein & Blader, PC
101
Grovers Mill Road, Second Floor
Lawrenceville,
NJ 08648
Tel.
No.: (609) 275-0400
Fax
No.: (609) 555-0969
If any of
the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. ☒
If this
Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please
check the following box and list the Securities Act registration Statement number of the earlier effective registration statement
for the same offering. ☐
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and
list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and
list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
Non-accelerated
filer |
☐ |
Smaller reporting
company |
☒ |
CALCULATION
OF REGISTRATION FEE
Title of Each Class Of Securities to be Registered | |
Amount
to be Registered (1) | | |
Proposed Maximum Aggregate Offering Price per
share (2) | | |
Proposed Maximum Aggregate Offering Price | | |
Amount
of Registration fee | |
| |
| | |
| | |
| | |
| |
Common Stock, par value $0.0001 per share | |
| 107,814 | | |
$ | 7 | | |
$ | 754,698 | | |
$ | 87.70 | |
Total | |
| 107,814 | | |
$ | 7 | | |
$ | 754,698 | | |
$ | 87.70 | |
(1) Pursuant
to Rule 416 under the Securities Act of 1933, as amended, this registration statement shall be deemed to cover the additional
securities (i) to be offered or issued in connection with any provision of any securities purported to be registered hereby to
be offered pursuant to terms which provide for a change in the amount of securities being offered or issued to prevent dilution
resulting from stock splits, stock dividends or similar transactions and (ii) of the same class as the securities covered by this
registration statement issued or issuable prior to completion of the distribution of the securities covered by this registration
statement as a result of a split of, or a stock dividend on, the registered securities.
(2) The
offering price has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule
457(o) of the Securities Act. Our common stock is not traded on an established public market and, therefore, these shares must
be sold at a fixed price until the existing market requirement is satisfied. The offering price is based on the fixed price our
selling shareholders will be offering the shares for resale.
THE REGISTRANT
HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS
THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE.
The information
in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission becomes effective. This preliminary prospectus is not an offer to sell these
securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.
EXPLANATORY
NOTE
This Registration
Statement contains one preliminary prospectus as set forth below:
● |
Resale
Prospectus. This preliminary prospectus is to be used by the selling security holders in connection with a potential
resale by certain seller security holders of up to an aggregate of 107,814 shares of the registrant’s common stock,
par value $0.0001, per share consisting of: (i) 53,907 shares of common stock, par value $0.0001 and (ii) 53,907 shares of
common stock, par value $0.0001. |
PRELIMINARY
PROSPECTUS |
Subject to
completion, dated August 20, 2015
|
MAGNOLIA
LANE INCOME FUND
107,814
SHARES OF COMMON STOCK
This preliminary
prospectus is to be used by certain investors (the “Selling Security Holders”) in connection with a potential resale
by certain seller security holders of up to an aggregate of 107,814 shares of Magnolia Lane Income Fund (the “Company”)
common stock, par value $0.0001, per share (the “Common Stock”) consisting of: (i) 53,907 shares of common stock,
par value $0.0001 and (ii) 53,907 shares of common stock, par value $0.0001.
Our common
stock is quoted on the Over-The-Counter Pink Market (“OTC PINK”) under the ticker symbol “MIFC”. The selling
security holders have not engaged any underwriter in connection with the sale of their shares of common stock. The price of $7.00
is a fixed price at which the selling security holders may sell their shares until our Common Stock is quoted on the OTCQB or
other established public trading market at which time the shares may be sold at prevailing market prices or privately negotiated
prices.
Investing
in our common stock involves a high degree of risk. Before buying any shares, you should carefully read the discussion of material
risks of investing in our common stock in “Risk Factors” beginning on page 3 of this prospectus.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The information
in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement
filed with the SEC is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting
an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
The date of this prospectus is August 20,
2015
TABLE
OF CONTENTS
Please read
this prospectus carefully. It describes our business, our financial condition and results of operations. We have prepared this
prospectus so that you will have the information necessary to make an informed investment decision.
You should
rely only on information contained in this prospectus. We have not authorized any other person to provide you with
different information. This prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities
in any state where the offer or sale is not permitted. The information in this prospectus is complete and accurate
as of the date on the front cover, but the information may have changed since that date.
PROSPECTUS
SUMMARY
This
summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the
information that you should consider before investing in the common stock. You should carefully read the entire prospectus,
including “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and the Financial Statements, before making an investment decision. In this Prospectus, the terms “Magnolia
Lane,” “MIFC,” “Company,” “we,” “us” and “our” refer to Magnolia
Lane Income Fund.
Overview
Magnolia
Lane Income Fund was incorporated in the state of Delaware on May 12, 2009. We were formed to commence business as a stock agent
in the wool trade.
On
May 13, 2013, we entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Ian Raleigh and Michael
Raleigh (the “Sellers”) and Magnolia Lane Financial, Inc. (the “Purchaser”), whereby the Purchaser purchased
from the Sellers, 10,000,000 shares of common stock, par value $0.0001 per share, of the Company (the “Shares”), representing
approximately 69.57% of the issued and outstanding shares of the Company. As a result, the Purchaser became the majority shareholder
of the Company.
In
connection with the Stock Purchase Agreement, we have ceased pursuing our prior business plan and have begun focusing on our new
business which is to manage and invest in real property. Our
current Chief Executive Officer and sole director, Brian Woodland, has numerous years in the real estate acquisition, syndication
and asset management business. We intend to acquire real estate in small markets with high degrees of safety to provide income
streams to our shareholders. In addition, we will develop property, syndicate, manage and acquire property for capital appreciation.
In
connection with this change of control and change of business, we have conducted a name change and reverse stock split. On August
1, 2013, we filed a Certificate of Amendment to our Articles of Incorporation (the “Amendment”) to change its name
from “Palmerston Stock Agency, Inc.” to “Magnolia Lane Income Fund” (the “Name Change”) and
to memorialize a 8 to 1 reverse stock split (the “Stock Split”). The Amendment was effective as of August 1, 2013.
On
August 12, 2013, the Company received approval from the Financial Industry Regulatory Authority (“FINRA”) to effectuate
the Name Change and Stock Split. FINRA also confirmed that the new stock symbol is MIFC.
Where
You Can Find Us
Our principal
executive offices are located at 7 Grove Street, Topsfield, MA 01983. Our telephone number is (978) 887-5981.
Implications
of Being an Emerging Growth Company
We qualify
as an emerging growth company as that term is used in the JOBS Act. An emerging growth company may take advantage of specified
reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:
● |
A
requirement to have only two years of audited financial statements and only two years of related MD&A; |
● |
Exemption
from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial
reporting under Section 404 of the Sarbanes-Oxley Act of 2002; |
● |
Reduced
disclosure about the emerging growth company’s executive compensation arrangements; and |
● |
No
non-binding advisory votes on executive compensation or golden parachute arrangements. |
We have
already taken advantage of these reduced reporting burdens in this prospectus, which are also available to us as a smaller reporting
company as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
In addition,
Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period
provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with
new or revised accounting standards. We have elected to use the extended transition period provided above and therefore our financial
statements may not be comparable to companies that comply with public company effective dates.
We could
remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in
which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined
in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates
exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which
we have issued more than $1 billion in non-convertible debt during the preceding three year period.
For more
details regarding this exemption, see “Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Critical Accounting Policies.”
THE
OFFERING
Securities Offered |
|
107,814 shares of Common Stock, par value $0.0001, per share (the “Common Stock”) consisting of: (i) 53,907 shares of common stock, par value $0.0001 and (ii) 53,907 shares of common stock, par value $0.0001. The Shares of Common Stock are fully vested and exercisable immediately. |
|
|
|
Common stock outstanding before the offering: |
|
1,796,875 |
|
|
|
Common stock outstanding after the offering: |
|
1,796,875
|
|
|
|
Offering Price: |
|
Fixed Price of $7.00 until our Common Stock is quoted on the OTCQB or other
established public trading market at which time the shares may be sold at prevailing market prices or privately negotiated
prices. |
|
|
|
Termination of the Offering: |
|
The offering will conclude upon such time as all of the common stock becomes eligible for resale without volume limitations pursuant to Rule 144 under the Securities Act, or any other rule of similar effect. |
|
|
|
OTC PINK Trading Symbol: |
|
MIFC |
|
|
|
Use of proceeds: |
|
We are not selling any shares of the common stock covered by this prospectus. As such, we will not receive any of the offering proceeds from the registration of the shares of common stock covered by this prospectus. |
|
|
|
Risk Factors: |
|
The Common Stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors” beginning on page 4. |
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The information
contained in this prospectus, including in the documents incorporated by reference into this prospectus, includes some statements
that are not purely historical and that are “forward-looking statements.” Such forward-looking statements include,
but are not limited to, statements regarding our Company and management’s expectations, hopes, beliefs, intentions or strategies
regarding the future, including our financial condition, results of operations, and the expected impact of the offering on the
parties’ individual and combined financial performance. In addition, any statements that refer to projections, forecasts
or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.
The words “anticipates,” “believes,” “continue,” “could,” “estimates,”
“expects,” “intends,” “may,” “might,” “plans,” “possible,”
“potential,” “predicts,” “projects,” “seeks,” “should,” “will,”
“would” and similar expressions, or the negatives of such terms, may identify forward-looking statements, but the
absence of these words does not mean that a statement is not forward-looking.
The forward-looking
statements contained in this prospectus are based on current expectations and beliefs concerning future developments and the potential
effects on the parties and the transaction. There can be no assurance that future developments actually affecting us will be those
anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the parties’
control) or other assumptions that may cause actual results or performance to be materially different from those expressed or
implied by these forward-looking statements.
RISK
FACTORS
The shares
of our common stock being offered are highly speculative in nature, involve a high degree of risk and should be purchased only
by persons who can afford to lose the entire amount invested in the common stock. Before purchasing any of the shares of common
stock, you should carefully consider the following factors relating to our business and prospects. If any of the following risks
actually occurs, our business, financial condition or operating results could be materially adversely affected. In such case,
you may lose all or part of your investment. You should carefully consider the risks described below and the other
information in this process before investing in our common stock.
Relating
to Our Business
WE
HAVE A LIMITED OPERATING HISTORY THAT YOU CAN USE TO EVALUATE US, AND THE LIKELIHOOD OF OUR SUCCESS MUST BE CONSIDERED IN LIGHT
OF THE PROBLEMS, EXPENSES, DIFFICULTIES, COMPLICATIONS AND DELAYS FREQUENTLY ENCOUNTERED BY A SMALL DEVELOPING COMPANY.
We were
incorporated in Delaware in May, 2009. The likelihood of our success must be considered in light of the problems, expenses, difficulties,
complications and delays frequently encountered by a small developing company starting a new business enterprise and the potentially
highly competitive environment in which we will operate. Since we have a limited operating history, we cannot assure you that
our business will be profitable or that we will ever generate sufficient revenues to meet our expenses and support our anticipated
activities.
These conditions
raise substantial doubt about the Company’s ability to continue as a going concern. Our accounting firm’s opinion
on the Company’s April 30, 2014 consolidated financial statements include an explanatory paragraph relating to the Company’s
ability to continue as a going concern.
WE
NEED TO MANAGE GROWTH IN OPERATIONS TO MAXIMIZE OUR POTENTIAL GROWTH AND ACHIEVE OUR EXPECTED REVENUES AND OUR FAILURE TO MANAGE
GROWTH WILL CAUSE A DISRUPTION OF OUR OPERATIONS RESULTING IN THE FAILURE TO GENERATE REVENUE.
In order
to maximize growth in our current and potential markets, we believe that we must expand our marketing operations. This expansion
will place a significant strain on our management and our operational, accounting, and information systems. We expect that we
will need to continue to improve our financial controls, operating procedures and management information systems. We will also
need to effectively train, motivate and manage our employees. Our failure to manage our growth could disrupt our operations and
ultimately prevent us from generating the revenues we expect.
In order
to achieve the above-mentioned targets, the general strategies of our Company are to maintain and search for hard-working employees
who have innovative initiatives; as well as to keep a close eye on expansion opportunities through merger or and/or acquisition.
IF
WE NEED ADDITIONAL CAPITAL TO FUND OUR GROWING OPERATIONS, WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT CAPITAL AND MAY BE FORCED TO
LIMIT THE SCOPE OF OUR OPERATIONS.
If adequate
additional financing is not available on reasonable terms, we may not be able to undertake expansion or continue our marketing
efforts and we would have to modify our business plans accordingly. There is no assurance that additional financing will be available
to us.
In connection
with our growth strategies, we may experience increased capital needs; accordingly, we may not have sufficient capital to fund
our future operations without additional capital investments. Our capital needs will depend on numerous factors, including (i)
our profitability; (ii) the release of competitive products and/or services by our competition; (iii) the level of our investment
in research and development; (iv) the amount of our capital expenditures, including acquisitions, and (v) our growth.
We cannot assure you that we will be able to obtain capital in the future to meet our needs.
Even if
we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital
that are acceptable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings
or rights of our existing shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing
could have rights, preferences and privileges senior to our common stock. We cannot give you any assurance that any additional
financing will be available to us, or if available, will be on terms favorable to us.
OUR
FUTURE SUCCESS IS DEPENDENT, IN PART, ON THE PERFORMANCE AND CONTINUED SERVICE OF OUR OFFICERS.
We are presently
dependent to a great extent upon the experience, abilities and continued services of Brian Woodland, our President, CEO and Director. The
loss of services of Mr. Woodland could have a material adverse effect on our business, financial condition or results of operation.
NEED
FOR ADDITIONAL EMPLOYEES
Our future success also depends upon our ability to attract and retain highly qualified personnel. Expansion of our business and
the management and operation of the Company will require additional managers and employees with industry experience, and our success
will be highly dependent on our ability to attract and retain skilled management personnel and other employees. There can be no
assurance that we will be able to attract or retain highly qualified personnel. As our industry continues to evolve, competition
for skilled personnel with the requisite experience will be significant. This competition may make it more difficult and expensive
to attract, hire and retain qualified managers and employees.
WE
ARE IN AN INTENSELY COMPETITIVE INDUSTRY AND THERE CAN BE NO ASSURANCE THAT WE WILL BE ABLE TO COMPETE WITH OUR COMPETITORS WHO
MAY HAVE GREATER RESOURCES.
The Company
could face strong competition from competitors in the property management industry who could duplicate the model. These
competitors may have substantially greater financial, marketing and development resources and other capabilities than the Company.
In addition, there are very few barriers to enter into the market for our services. There can be no assurance, therefore,
that any of our competitors, many of whom have far greater resources, will not independently develop services that are substantially
equivalent or superior to our services. Therefore, an investment in the Company is very risky and speculative due to
the competitive environment in which the Company operates.
OUR
FUTURE SUCCESS IS DEPENDENT UPON THE FUTURE GENERATION OF A MARKET FOR OUR SERVICE
The Company
currently remains and will continue to remain in a position of dependence on the sustainability of the real estate market.
Therefore, an investment in the Company is very risky and speculative due to the uncertain future of the electric vehicle market.
Risks
Associated with Our Common Stock
IF
WE FAIL TO ESTABLISH AND MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROL, WE MAY NOT BE ABLE TO REPORT OUR FINANCIAL RESULTS
ACCURATELY OR PREVENT FRAUD. ANY INABILITY TO REPORT AND FILE OUR FINANCIAL RESULTS ACCURATELY AND TIMELY COULD HARM OUR
REPUTATION AND ADVERSELY IMPACT THE TRADING PRICE OF OUR COMMON STOCK.
Effective
internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide
reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective
control environment existed, and our business and reputation with investors may be harmed. As a result, our small size
and any current internal control deficiencies may adversely affect our financial condition, results of operations and access to
capital. We have carried out an evaluation under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this report. Based on the foregoing, our principal executive officer
and principal financial officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance
level due to the material weaknesses described below.
A material
weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard
No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the
annual or interim financial statements will not be prevented or detected. Management has identified the following two material
weaknesses which have caused management to conclude that as of January 31, 2015 our disclosure controls and procedures were not
effective at the reasonable assurance level:
1. |
We
do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls
over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the quarter
ended January 31, 2015. Management evaluated the impact of our failure to have written documentation of our internal controls
and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that
resulted represented a material weakness. |
2. |
We
do not have sufficient resources in our accounting function, which restricts the Company’s ability to gather, analyze
and properly review information related to financial reporting in a timely manner. In addition, due to our size
and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However,
to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be
performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment
of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material
weakness. |
To
address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial
statements included herein fairly present. Our Code of Ethics requires members of our management team to report any conduct by
our Chief Executive Officer, believed to be in violation of law or business ethics or in violation of any provision of the Code
of Ethics to our audit committee.
OUR COMMON STOCK IS QUOTED ONLY ON THE OTC BULLENTIN BOARD (“OTC
PINK”), WHICH MAY HAVE AN UNFAVORABLE IMPACT ON OUR STOCK PRICE AND LIQUIDITY.
Our common stock is quoted on the OTC PINK. The OTC PINK is a significantly
more limited market than the New York Stock Exchange or the NASDAQ Stock Market. The quotation of our shares on the OTC PINK may
result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress
the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.
There can
be no assurance that there will be an active market for our shares of common stock either now or in the future. Market liquidity
will depend on the perception of our operating business and any steps that our management might take to bring us to the awareness
of investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able
to liquidate their investment or liquidate it at a price that reflects the value of the business. As a result holders of our securities
may not find purchasers for our securities should they to desire to sell them. Consequently, our securities should be purchased
only by investors having no need for liquidity in their investment and who can hold our securities for an indefinite period of
time.
OUR
SHARES OF COMMON STOCK ARE VERY THINLY TRADED, AND THE PRICE MAY NOT REFLECT OUR VALUE AND THERE CAN BE NO ASSURANCE THAT THERE
WILL BE AN ACTIVE MARKET FOR OUR SHARES OF COMMON STOCK EITHER NOW OR IN THE FUTURE.
Our shares
of common stock are very thinly traded, and the price, if traded, may not reflect our value. There can be no assurance that there
will be an active market for our shares of common stock either now or in the future. The market liquidity will be dependent on
the perception of our operating business and any steps that our management might take to increase awareness of the Company with
investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able
to liquidate their investment or liquidate it at a price that reflects the value of the business. If a more active market should
develop, the price may be highly volatile. Because there may be a low price for our shares of common stock, many brokerage firms
may not be willing to effect transactions in the securities. Even if an investor finds a broker willing to effect a transaction
in the shares of our common stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling
costs may exceed the selling price. Further, many lending institutions will not permit the use of such shares of common stock
as collateral for loans.
FUTURE
ISSUANCE OF OUR COMMON STOCK COULD DILUTE THE INTERESTS OF EXISITNG STOCKHOLDERS.
We may issue
additional shares of our common stock in the future. The issuance of a substantial amount of common stock could have the effect
of substantially diluting the interests of our current stockholders. In addition, the sale of a substantial amount of common stock
in the public market, either in the initial issuance or in a subsequent resale by the target company in an acquisition which received
such common stock as consideration or by investors who acquired such common stock in a private placement could have an adverse
affect on the market price of our common stock.
THE
APPLICATION OF THE SECURITY AND EXCHANGE COMMISSION’S “PENNY STOCK” RULES TO OUR COMMON STOCK COULD LIMIT
TRADING ACIVITY IN THE MARKET, AND OUR STOCKHOLDERS MAY FIND IT MORE DIFFICULT TO SELL THEIR STOCK.
Our common
stock continues to trade at less than $5.00 per share and is therefore subject to the Securities and Exchange Commission’s
(“SEC”) penny stock rules. Penny stocks generally are equity securities with a price of less than $5.00. Penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer
also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the
customer’s account. The broker-dealer must also make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser’s written agreement to the transaction. These requirements may have
the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the
penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from
effecting transactions in our securities, which could severely limit their market price and liquidity of our securities. These
requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common
stock.
WE
DO NOT INTEND TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE, AND YOU MUST RELY ON INCREASES IN THE MARKET PRICES OF OUR COMMON STOCK
FOR RETURNS ON YOUR INVESTMENT.
For the
foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate
paying any cash dividends on our common stock. Accordingly, investors must be prepared to rely on sales of their common stock
after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase
our common stock. Any determination to pay dividends in the future will be made at the discretion of our board of directors and
will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law
and other factors our board of directors deems relevant.
USE
OF PROCEEDS
All proceeds
from the resale of the shares of our common stock offered by this prospectus will belong to the selling stockholders identified
in this prospectus under “Selling Stockholders.” We will not receive any proceeds from the resale of the shares of
our common stock by the selling stockholders.
DETERMINATION
OF OFFERING PRICE
The prices at which the shares of common stock covered by this prospectus
may actually be sold will be at a fixed price of $7.00 per share or as otherwise described in “Plan of Distribution.”
DILUTION
The Company is not issuing any new shares
as a result of this Offering. Therefore, the Common Stock in the amount of 107,814 shares to be registered in this prospectus
has no effect on the dilution of the existing common shares outstanding in the amount of 1,796,875.
SELLING SECURITY HOLDERS
The common
shares being offered for resale by the Selling Security Holders consist of 107,814 shares of Common Stock, par value
$0.0001, per share.
The following
table sets forth the names of the selling stockholders, the number of shares of common stock beneficially owned by each of the
selling stockholders as of August 20, 2015 and the number of shares of common stock being offered by the selling stockholders.
The shares being offered hereby are being registered to permit public secondary trading, and the selling stockholders may offer
all or part of the shares for resale from time to time. However, the selling stockholders are under no obligation to sell all
or any portion of such shares nor are the selling stockholders obligated to sell any shares immediately upon effectiveness of
this prospectus. All information with respect to share ownership has been furnished by the selling stockholders.
Magnolia
Lane Income Fund
Registration
of Common Shares
| |
| | |
Common Stock | |
| |
| | |
Prior to the offering | | |
After the offering | |
Selling Security Holder | |
Number of Shares of Common Stock Beneficially Owned | | |
Percentage of Common Stock (1) | | |
Shares being Offered | | |
Number of Shares of common Stock Beneficially Owned | | |
Percentage of Common Stock (1) | |
Timothy Dowd | |
| 53,907 | | |
| 3.00 | % | |
| 53,907 | | |
| 0 | | |
| 0.00 | % |
PS and CS Family Limited Partnership LLP | |
| 53,907 | | |
| 3.00 | % | |
| 53,907 | | |
| 0 | | |
| 0.00 | % |
Total | |
| | | |
| | | |
| 107,814 | | |
| | | |
| | |
To our knowledge,
none of the selling stockholders or their beneficial owners:
● |
has
had a material relationship with us other than as a shareholder at any time within the past three years; or |
● |
has ever been
one of our officers or directors or an officer or director of our predecessors or affiliates; |
|
(1) |
Based on 1,796,875 shares
of common stock issued and outstanding as of August 20, 2015. |
PLAN
OF DISTRIBUTION
This prospectus
is to be used by the selling security holders in connection with a potential resale by certain seller security holders of up to
an aggregate of 107,814 shares of the registrant’s Common Stock, issuable upon the effectiveness of this registration statement.
The selling
stockholders and any of their pledgees, donees, transferees, assignees and successors-in-interest may, from time to time, sell
any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or
in private transactions. The shares of our common stock may be offered and sold by selling stockholders at a fixed price of $7.00
per share until our common stock is quoted on either the OTCQB or other established public trading market and thereafter at prevailing
market prices or privately negotiated prices or in transactions that are not in the public market.
A selling stockholder may use any one or more of the following methods
when selling shares:
● |
ordinary
brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
● |
block
trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction; |
● |
purchases
by a broker-dealer as principal and resale by the broker-dealer for its account; |
● |
an
exchange distribution in accordance with the rules of the applicable exchange; |
● |
privately
negotiated transactions; |
● |
settlement
of short sales entered into after the effective date of the registration statement of which this prospectus is a part; |
● |
in
transactions through broker-dealers that agree with the Selling Stockholders to sell a specified number of such shares at
a stipulated price per share; |
● |
through
the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
● |
a
combination of any such methods of sale; or |
● |
any
other method permitted pursuant to applicable law. |
The selling
stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.
Broker-dealers
engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from
the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal
transaction a markup or markdown in compliance with FINRA IM-2440.
The selling
stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters”
within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers
or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. Each selling stockholder has informed the Company that it does not have any written or oral agreement
or understanding, directly or indirectly, with any person to distribute the common stock. In no event shall any broker-dealer
receive fees, commissions and markups which, in the aggregate, would exceed ten percent (10%).
Because
selling stockholders may be deemed to be “underwriters” within the meaning of the Securities Act, they will be subject
to the prospectus delivery requirements of the Securities Act including Rule 172 thereunder. The selling stockholders have advised
us that there is no underwriter or coordinating broker acting in connection with the proposed sale of the resale shares by the
selling stockholders.
Under applicable
rules and regulations under the Exchange Act, any person engaged in the distribution of the resale shares may not simultaneously
engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation
M, prior to the commencement of the distribution. In addition, the selling stockholders will be subject to applicable provisions
of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases
and sales of shares of the common stock by the selling stockholders or any other person. We will make copies of this prospectus
available to the selling stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser
at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).
DESCRIPTION
OF SECURITIES
Authorized
Capital and Preferred Stock
Our authorized capital stock consists of 200,000,000 shares
of common stock, par value $0.0001 per share and 100,000,000 shares of preferred stock, par value $0.0001 per share. As of August
20, 2015, there were 1,796,875 shares of common stock outstanding.
Common
Stock
The following
is a summary of the material rights and restrictions associated with our common stock.
The holders
of our common stock currently have: (i) equal ratable rights to dividends from funds legally available therefore, when, as and
if declared by the Board of Directors of the Company; (ii) are entitled to share ratably in all of the assets of the Company available
for distribution to holders of common stock upon liquidation, dissolution or winding up of the affairs of the Company; (iii) do
not have preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights applicable
thereto; and (iv) are entitled to one non-cumulative vote per share on all matters on which stock holders may vote. Please refer
to the Company’s Articles of Incorporation, Bylaws and the applicable statutes of the State of Nevada for a more complete
description of the rights and liabilities of holders of the Company’s securities.
Preferred
Stock
Preferred
stock includes 100,000,000 shares authorized at a par value of $0.0001, of which none are issued or outstanding.
INTERESTS
OF NAMED EXPERTS AND COUNSEL
No expert
or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon
the validity of the securities being registered or upon other legal matters in connection with the registration or offering of
the common stock was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial
interest, direct or indirect, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with
the registrant or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director,
officer, or employee.
The
financial statements as of April 30, 2014 and 2013 and each of the years then ended included in this prospectus and the registration
statement have been audited by Baker Tilly Virchow Krause, LLP to the extent and for the periods set forth in their report appearing
elsewhere herein and in the registration statement, and are included in reliance upon such report given upon the authority of
said firm as experts in auditing and accounting.
The validity
of the issuance of the common stock hereby will be passed upon for us by Szaferman Lakind Blumstein & Blader, PC, Lawrenceville,
New Jersey.
DESCRIPTION
OF BUSINESS
Overview
Magnolia
Lane Income Fund was incorporated in the state of Delaware on May 12, 2009. We were formed to commence business as a stock agent
in the wool trade.
On
May 13, 2013, we entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Ian Raleigh and Michael
Raleigh (the “Sellers”) and Magnolia Lane Financial, Inc. (the “Purchaser”), whereby the Purchaser purchased
from the Sellers, 10,000,000 shares of common stock, par value $0.0001 per share, of the Company (the “Shares”), representing
approximately 69.57% of the issued and outstanding shares of the Company. As a result, the Purchaser became the majority shareholder
of the Company.
In
connection with the Stock Purchase Agreement, we have ceased pursuing our prior business plan and have begun focusing on our new
business which is to manage and invest in real property. Our
current Chief Executive Officer and sole director, Brian Woodland, has numerous years in the real estate acquisition, syndication
and asset management business. We intend to acquire real estate in small markets with high degrees of safety to provide income
streams to our shareholders. In addition, we will develop property, syndicate, manage and acquire property for capital appreciation.
In
connection with this change of control and change of business, we have conducted a name change and reverse stock split. On August
1, 2013, we filed a Certificate of Amendment to our Articles of Incorporation (the “Amendment”) to change its name
from “Palmerston Stock Agency, Inc.” to “Magnolia Lane Income Fund” (the “Name Change”) and
to memorialize a 8 to 1 reverse stock split (the “Stock Split”). The Amendment was effective as of August 1, 2013.
On
August 12, 2013, the Company received approval from the Financial Industry Regulatory Authority (“FINRA”) to effectuate
the Name Change and Stock Split. FINRA also confirmed that the new stock symbol is MIFC.
Our
Operating Strategy
Our
business plan is focused on managing real property. Specifically, we intend to acquire real estate in small markets with high
degrees of safety to provide income streams to our shareholders. In addition, we will develop property, syndicate, manage and
acquire property for capital appreciation.
On
December 23, 2013, a majority shareholder, Magnolia Lane Financial, entered into three separate LLC Membership Interest Purchase
and Sale Agreements for the acquisition of two limited liability companies, Grove Realty Partners, LLC and Walker Partners, LLC
(the “Acquisition Agreements”). Pursuant to the Acquisition Agreements, Magnolia Lane Financial acquired 100%
of the equity interests in Grove Realty Partners, LLC and Walker Partners, LLC. As consideration for the acquisition, Magnolia
Lane Financial transferred 134,574 shares of our Common Stock to WS Advantage and Phalanx Wealth Management (the “Consideration
Shares”). For purposes of the Acquisition Agreements, the parties valued the shares at $16.60 per share for a total
purchase price of $2,233,928. Prior to this transaction, Magnolia Lane Financial owned 1,250,000 shares of our common stock and
now owns 1,115,426 shares of our common stock. WS Advantage, LP owns 115,347 shares of our common stock and Phalanx Partners,
LLC owns 19,227 shares of our common stock.
Subsequently,
on January 16, 2014, we entered into an LLC Membership Interest Purchase and Sale Agreement with Magnolia Lane Financial, Inc.
(the “Agreement”). Pursuant to the Agreement, we acquired all rights, title and interest to all assets of Magnolia
Lane Financial, including the assets acquired in the Acquisition Agreements, in exchange for $3,000.
As
of April 30, 2015, real estate that we own through our subsidiaries consisted of two properties:
7
Grove Street, Topsfield, Ma 01983.
|
● |
Description:
12,000 Square foot, Business Office, Retail and Professional Space |
|
● |
Status: Rented
at 100% occupancy. Lease term: 3-Year |
|
● |
Owner: Grove Realty
Partners, LLC |
|
● |
Purchase Price: $2.025
million |
|
● |
Mortgage Debt as of April 30, 2015: $1,425,982 |
|
58
Main Street, Topsfield, Ma 01983
|
● |
Description: 4,000
Square foot, Commercial Building |
|
● |
Status: Rented
100% occupancy. Lease term: 3-Year |
|
● |
Owner: Walker
Partners, LLC |
|
● |
Purchase Price: $503,000 |
|
● |
Mortgage Debt as of April 30, 2015: $542,694 |
Competition
We
believe that we face a lot of competition for properties that meet our investment objectives. Many of our competitors have greater
resources than we do. We compete with similarly situated entities engaged in real estate investment activities, including individuals,
corporations, banks and insurance company investment accounts, REITs, real estate limited partnerships, the U.S. Government and
other entities, to acquire, manage and rent real estate properties. Our competitors may demonstrate significant competitive advantages
that result from, among other things, a lower cost of capital, additional access to capital and enhanced operating efficiencies.
In addition, the number of entities and the amount of funds competing for suitable investments may increase which would cause
our competition to increase.
Government
Regulation
We do not
expect any governmental regulations to have an impact on our planned business operations. Existing laws with which we must comply
cover issues that include:
|
● |
Corporate Taxes |
|
● |
Environmental |
New
laws may impact our ability to market our products in the future. However, we are not aware of any pending laws or regulations
that would have an impact on our business.
Employees
As of
August 20, 2015, we have no full time employees. Our President and Chief Executive Officer, Brian Woodland, spends
approximately 30 hours per week on the Company’s matters. We believe this is sufficient time to successfully implement
our business plan and further commence our operations. We plan to employ more qualified employees in the near
future.
Smaller
reporting companies are not required to provide the information required by this item.
Item
1B. Unresolved Staff Comments. |
Smaller
reporting companies are not required to provide the information required by this item.
Our principal
office is located at 7 Grove Street, Topsfield, MA 01983. Our primary telephone number is (978) 887-5981.
Item
3. Legal Proceedings. |
We
are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or
results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our
subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our
subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse
effect.
Item
4. Mine Safety Disclosures. |
Not Applicable.
DESCRIPTION
OF PROPERTY
As of April 30, 2015, real estate that we own through
our subsidiaries consisted of two properties:
7
Grove Street, Topsfield, Ma 01983.
|
● |
Description: 12,000
Square foot, Business Office, Retail and Professional Space |
|
● |
Status: Rented
at 100% occupancy. Lease term: 3-Year |
|
● |
Owner: Grove Realty
Partners, LLC |
|
● |
Purchase Price: $2.025
million |
|
● |
Mortgage Debt as of April 30, 2015: $1,425,982 |
58
Main Street, Topsfield, Ma 01983
|
● |
Description: 4,000
Square foot, Commercial Building |
|
● |
Status: Rented
100% occupancy. Lease term: 3-Year |
|
● |
Owner: Walker
Partners, LLC |
|
● |
Purchase Price: $503,000 |
|
● |
Mortgage Debt as of April 30, 2015: $542,694 |
LEGAL
PROCEEDINGS
We are currently
not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations.
There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened
against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers
or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
MARKET
FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Price
Range of Common Stock
Our common stock is quoted on the OTC PINK under the symbol “MIFC.”
The OTC PINK is a quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter
equity securities. An OTC PINK equity security generally is any equity that is not listed or traded on a national securities exchange.
Although the stock is quoted on the OTC PINK, there has been no active trading activity.
HOLDERS
As of August 20, 2015 we had eight (8) record holders of our common
stock, holding 1,796,875 shares of common stock.
Holders of our common stock are
entitled to one vote for each share on all matters submitted to a stockholder vote. Holders of common stock do not have cumulative
voting rights.
Therefore,
holders of a majority of the shares of common stock voting for the election of directors can elect all of the directors. Holders
of our common stock representing a majority of the voting power of our capital stock issued and outstanding and entitled to vote,
represented in person or by proxy, are necessary to constitute a quorum at any meeting of our stockholders. A vote by the holders
of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger
or an amendment to our Articles of Incorporation.
Although
there are no provisions in our charter or by-laws that may delay, defer or prevent a change in control, we are authorized, without
shareholder approval, to issue shares of preferred stock that may contain rights or restrictions that could have this effect.
Holders
of common stock are entitled to share in all dividends that the board of directors, in its discretion, declares from legally available
funds. In the event of liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata
in all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference
over the common stock. Holders of our common stock have no pre-emptive rights, no conversion rights and there are no redemption
provisions applicable to our common stock.
DIVIDEND
POLICY
We
have never declared or paid dividends on our common stock. We do not intend to declare dividends in the foreseeable future because
we anticipate that we will reinvest any future earnings into the development and growth of our business. Any decision as to the
future payment of dividends will depend on our results of operations and financial position and such other factors as our Board
of Directors in its discretion deems relevant.
TRANSFER
AGENT AND REGISTRAR
The
transfer agent for our common stock is American Registrar & Transfer Co. located at342 East 900 South, Salt Lake City, Utah
84111, and its telephone number is (801) 363-9065.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the results of operations
and financial condition for the fiscal years ended April 30, 2015 and 2014 should be read in conjunction with our consolidated
financial statements and the notes to those consolidated financial statements that are included elsewhere in this Registration
Statement. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties,
such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from
those anticipated in these forward-looking statements as a result of a number of factors. See “Forward-Looking
Statements.”
Overview
Magnolia
Lane Income Fund was incorporated in the state of Delaware on May 12, 2009. We were formed to commence business as a stock agent
in the wool trade.
On
May 13, 2013, we entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Ian Raleigh and Michael
Raleigh (the “Sellers”) and Magnolia Lane Financial, Inc. (the “Purchaser”), whereby the Purchaser purchased
from the Sellers, 10,000,000 shares of common stock, par value $0.0001 per share, of the Company (the “Shares”), representing
approximately 69.57% of the issued and outstanding shares of the Company. As a result, the Purchaser became the majority shareholder
of the Company.
In
connection with the Stock Purchase Agreement, we have ceased pursuing our prior business plan and have begun focusing on our new
business which is to manage and invest in real property. Our
current Chief Executive Officer and sole director, Brian Woodland, has numerous years in the real estate acquisition, syndication
and asset management business. We intend to acquire real estate in small markets with high degrees of safety to provide income
streams to our shareholders. In addition, we will develop property, syndicate, manage and acquire property for capital appreciation.
In
connection with this change of control and change of business, we have conducted a name change and reverse stock split. On August
1, 2013, we filed a Certificate of Amendment to our Articles of Incorporation (the “Amendment”) to change its name
from “Palmerston Stock Agency, Inc.” to “Magnolia Lane Income Fund” (the “Name Change”) and
to memorialize a 8 to 1 reverse stock split (the “Stock Split”). The Amendment was effective as of August 1, 2013.
On
August 12, 2013, the Company received approval from the Financial Industry Regulatory Authority (“FINRA”) to effectuate
the Name Change and Stock Split. FINRA also confirmed that the new stock symbol is MIFC.
On
December 23, 2013, a shareholder of ours, Magnolia Lane Financial, entered into three separate LLC Membership Interest Purchase
and Sale Agreements for the acquisition of two limited liability companies, Grove Realty Partners, LLC and Walker Partners, LLC
(the “Acquisition Agreements”). Pursuant to the Acquisition Agreements, Magnolia Lane Financial acquired 100%
of the equity interests in Grove Realty Partners, LLC and Walker Partners, LLC. As consideration for the acquisition, Magnolia
Lane Financial transferred 134,574 shares of our Common Stock to WS Advantage and Phalanx Wealth Management (the “Consideration
Shares”). For purposes of the Acquisition Agreements, the parties valued the shares at $16.60 per share for a total
purchase price of $2,233,928. Prior to this transaction, Magnolia Lane Financial owned 1,250,000 shares of our common stock and
now owns 1,115,426 shares of our common stock. WS Advantage, LP owns 115,347 shares of our common stock and Phalanx Partners,
LLC owns 19,227 shares of our common stock.
Subsequently,
on January 16, 2014, we entered into an LLC Membership Interest Purchase and Sale Agreement with Magnolia Lane Financial, Inc.
(the “Agreement”). Pursuant to the Agreement, we acquired all rights, title and interest to all assets of Magnolia
Lane Financial, including the assets acquired in the Acquisition Agreements, for a total purchase price of $3,000.
Limited
Operating History
We have only begun generating modest revenue, have
a limited financial history and have limited capital. Our business is subject to risks inherent in growing an enterprise, including
limited capital resources and possible rejection of our business model and/or sales methods.
Going Concern
The ability of the Company to continue as a going
concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.
The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going
concern. Management believes that the actions presently being taken to further implement its business plan and generate revenues
provide the opportunity for the Company to continue as a going concern.
Results of Operations
For the years ended
April 30, 2015 and 2014
Our rental revenue for the fiscal year ended April
30, 2015 reflects the contribution of rental properties to the Company on January 16, 2014. Revenues were $248,351 as compared
to $214,235 in revenue for the fiscal year ended April 30, 2014. The increase in rental revenue of $34,116 is primarily the result
of an increase in revenue to new leasing activity (TASR and Competitive Energy) and partial annual contribution for the rents last
January as the buildings were contributed in January, 2015. Operating expenses for the fiscal year ended April 30, 2015 totaled
$435,645, resulting in a loss of $187,294 as compared with operating expenses of $413,335 for the fiscal year ended April 30,
2014. The increase of $22,310 in our operation expenses was primarily due to an increase in repairs, maintenance and utilities.
Liquidity
and Capital Resources
As of April 30, 2015 we had $17,286 cash on hand.
As of April 30, 2015, the Company had a stockholders’
deficit of $203,694. For the fiscal years ended April 30, 2015 and 2014, the Company had a net loss of $187,294 and $199,100,
respectively. The Company’s stockholders’ deficiency is primarily due to, among other reasons, interest expenses and
general administrative expenses.
Net cash provided by operating activities
was $13,985 for the fiscal year ended April 30, 2015 as compared to cash used in operating activities of $119,280 for the fiscal
year ended April 30, 2014.
Net cash used in investing activities was
$9,493 for the fiscal year ended April 30, 2015 as compared to cash used in investing activities of $50,298 for the fiscal year
ended April 30, 2014.
Net cash used by financing activities amounted
to $6,585 for the fiscal year ended April 30, 2015 as compared to cash used by financing activities of $186,727 for the fiscal
year ended April 30, 2014.
Liquidity is the ability of a company to generate
funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Our principal
sources of liquidity include cash from rental revenue and loans from a related party to cover mortgage obligations.
Mortgage Obligations
58 Main Street
On January 16, 2014, the Company assumed a mortgage
note payable to a third-party, unrelated to the seller, on a property located at 58 Main Street, Topsfield, Massachusetts. The
note bears interest at 6.75% per annum and is due August 26, 2019. Monthly principal and interest payments totaling
$4,320 started on September 26, 2009 and will continue through the maturity date. The mortgage note is secured by the
property. At maturity, the balloon payment will be due in full. The remaining principal balance as of April 30, 2015 was $542,694.
7 Grove Street
On January 16, 2014, the Company assumed a mortgage
note payable to a third-party, unrelated to the seller, on a property located at 7 Grove Street, Topsfield, Massachusetts. The
note bore interest at 7.9 % per annum and was scheduled to mature on September 5, 2032. Monthly payments of $17,775
started on October 5, 2008. The mortgage note was secured by the property. At maturity, the balloon payment was to
be due in full.
On April 12, 2014, the mortgage note payable on
the property at 7 Grove Street was paid in full by its majority shareholder. On that same date, a new mortgage payable was established
between the Company and its majority shareholder for an amount equal to the balance that was remaining on the original mortgage.
The new related party mortgage payable began on April 12, 2014 and is a 5-year fixed loan at 5.5% interest, with a balloon payment
on May 15, 2019 for the outstanding balance. Interest only payments until maturity began on May 15, 2014 in the amount of $6,536.
Related Party Transactions
From time to time, the Company receives loans and
advances from Phalanx Partners and WS Advantage LP for working capital purposes. Phalanx Partners and WS Advantage
LP formerly held equity interests in Grove Realty Partners, LLC and Walker Partners, LLC and are currently controlled by the Company’s
president and are shareholders.
An aggregate of $454,581 has been received from
related parties for working capital purposes and debt and expenses paid on the Company’s behalf. These advances are interest-free
and payable upon demand. During the fiscal years ended April 30, 2015 and 2014, the Company has imputed interest expense of $27,991
and $0, respectively.
During the fiscal years ended April 30, 2015 and
2014, the Company received $36,000 in rental income from Phalanx Partners, who occupies an office in one of the Company’s
properties.
We believe that our currently available working
capital and availability of loans from related parties referred to above should be adequate to sustain our operations at the current
level for the next twelve months. Should we not be able to meet our current financial needs, the Company will seek alternative
methods of financing, such as issuing convertible debt or introducing additional shares of its common stock into the market.
Off Balance
Sheet Arrangements
We have
no off-balance sheet arrangements
Critical
Accounting Policies and Estimates
Rental
Property, Net
Rental
property assets are stated at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated
useful lives of the asset.
We
capitalize replacements and improvements, such as HVAC equipment, structural replacements, windows, appliances, flooring, carpeting
and renovations. Ordinary repairs and maintenance, such as unit cleaning, painting and appliance repairs, are expensed when incurred.
Asset |
|
Useful
Life
(in years) |
Building |
|
30
years |
Land |
|
Indefinite |
Building Improvements |
|
30
years |
Impairment
of Real Estate Investments
The
Company assesses on a regular basis whether there are any indicators that the carrying value of rental property assets may be
impaired. Potential indicators may include an increase in vacancy at a property, tenant reduction in utilization of a property,
tenant financial instability and the potential sale of the property in the near future. An asset is determined to be impaired
if the asset’s carrying value is in excess of its estimated fair value.
Recent
Accounting Pronouncements
There are
no new accounting pronouncements that are expected to have a material impact on the Company's financial position or results of
operations.
Critical
Accounting Policies and Estimates
Rental
Property, Net
Rental
property assets are stated at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated
useful lives of the asset.
We
capitalize replacements and improvements, such as HVAC equipment, structural replacements, windows, appliances, flooring, carpeting
and renovations. Ordinary repairs and maintenance, such as unit cleaning, painting and appliance repairs, are expensed when incurred.
Asset |
|
Useful
Life
(in years) |
Building |
|
30
years |
Land |
|
Indefinite |
Building Improvements |
|
30
years |
Impairment
of Real Estate Investments
The
Company assesses on a regular basis whether there are any indicators that the carrying value of rental property assets may be
impaired. Potential indicators may include an increase in vacancy at a property, tenant reduction in utilization of a property,
tenant financial instability and the potential sale of the property in the near future. An asset is determined to be impaired
if the asset’s carrying value is in excess of its estimated fair value.
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Our directors,
executive officers and key employees are listed below. The number of directors is determined by our board of directors. All directors
hold office until the next annual meeting of the board or until their successors have been duly elected and qualified. Officers
are elected by the board of directors and their terms of office are, except to the extent governed by employment contract, at
the discretion of the board of directors.
Name |
|
Age |
|
Principal
Positions With Us |
Brian Woodland |
|
43 |
|
President, Chief
Executive Officer and Director |
Set forth
below is a brief description of the background and business experience of our director and executive officer for the past five
years.
Brian
Woodland, age 43, Brian has 20 years of investment management experience. He has specialized in managing portfolios for
individuals and small institutions during his career. He has also worked closely with trading desks, research analysts, and buy-side
portfolio managers at different firms during his career. Brian began his career with Winthrop Securities in 1992. In 1993 joined
Olde Financial and became an assistant Branch Manager. Brian joined Cowen & Company in 1996, as a Vice President in the Private
Client Group, working with small institutions and private clients. Cowen was widely recognized for its research excellence, specifically
in the areas of Technology and Healthcare.
Brian
joined Salomon Smith Barney as a Senior Vice President of Investments in Boston, MA in 2000. Mr. Woodland managed portfolios for
individuals, small institutions, and advised small institutional clients of the firm. Brian was certified as a Financial Planning
Specialist for the firm in 2003. Brian left Smith Barney to start Woodland Asset Management in 2006, where he managed portfolios
for private clients and small institutions. In 2008, Brian founded and became President of Phalanx Trading, LLC. In 2009, Brian
also rebranded WAM into Phalanx Wealth Management in 2009.
Brian
holds the Series 7, 8, 22, 24, 63, and 65 individual securities industry qualifying examinations.
Family
Relationships
Because
Mr. Woodland serves as our sole executive officer and director, there are no family relationships between our director and executive
officer.
Involvement
in Certain Legal Proceedings
To the best
of our knowledge, none of our directors or executive officers has, during the past ten years:
● |
been
convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding
traffic violations and other minor offenses);
|
● |
had
any bankruptcy petition filed by or against the business or property of the person, or
of any partnership, corporation or business association of which he was a general partner
or executive officer, either at the time of the bankruptcy filing or within two years
prior to that time;
|
● |
been
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated,
of any court of competent jurisdiction or federal or state authority, permanently or
temporarily enjoining, barring, suspending or otherwise limiting, his involvement in
any type of business, securities, futures, commodities, investment, banking, savings
and loan, or insurance activities, or to be associated with persons engaged in any such
activity;
|
● |
been
found by a court of competent jurisdiction in a civil action or by the Securities and
Exchange Commission or the Commodity Futures Trading Commission to have violated a federal
or state securities or commodities law, and the judgment has not been reversed, suspended,
or vacated;
|
● |
been
the subject of, or a party to, any federal or state judicial or administrative order,
judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including
any settlement of a civil proceeding among private litigants), relating to an alleged
violation of any federal or state securities or commodities law or regulation, any law
or regulation respecting financial institutions or insurance companies including, but
not limited to, a temporary or permanent injunction, order of disgorgement or restitution,
civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition
order, or any law or regulation prohibiting mail or wire fraud or fraud in connection
with any business entity; or
|
● |
been
the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of
the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority
over its members or persons associated with a member. |
Except as
set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive
officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which
are required to be disclosed pursuant to the rules and regulations of the Commission.
Term
of Office
Our directors
are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from
office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the
board.
Board
Committees
Our Board
of Directors has no separate committees and our Board of Directors acts as the audit committee and the compensation committee. We
do not have an audit committee financial expert serving on our Board of Directors.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than 10% of our
common stock to file initial reports of ownership and changes in ownership with the SEC.
Based
solely upon a review of copies of such forms filed on Forms 3, 4, and 5, and amendments thereto, furnished to us, we believe that
as of the end of our fiscal year, April 30, 2014, our executive officers, directors and greater than 10 percent beneficial owners
have complied on a timely basis with all Section 16(a) filing requirements, with the exception of our officers, directors and
greater than 10 percent beneficial owners listed in the table below:
Name |
|
Number
of
Unfiled Reports |
|
Number
and Description of Transactions Not Reported |
|
|
|
|
|
Brian Woodland |
|
1 |
|
1 transaction
was not reported (upon the Change of Control, he was appointed the sole officer and director and purchased 1,250,000 shares,
or 69.57%, of common stock owned indirectly through Magnolia Lane Financial, Inc, Phalanx Partners, LLC and WS Advantage LP). |
Code
of Ethics
We have
not adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting
officer, or persons performing similar functions, because of the small number of persons involved in the management of the Company.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The following
summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officer during the
years ended April 30, 2015 and April 30, 2014.
SUMMARY
COMPENSATION TABLE
Name and Principal Position | |
Year | | |
Salary ($) | | |
Bonus ($) | | |
Stock Awards ($) | | |
Option Awards ($) | | |
Non-Equity Incentive Plan Compensation ($) | |
Non-Qualified Deferred Compensation Earnings ($) | | |
All Other Compensation ($) | |
Totals ($) | |
| |
| | |
| | |
| | |
| | |
| | |
| |
| | |
| |
| |
Brian Woodland, | |
| 2014 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | $ |
0 | |
$ | 0 | | |
0 | |
$ | 0 | |
President, Chief Executive Officer | |
| 2015 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | $ |
0 | |
$ | 0 | | $ |
0 | |
$ | 0 | |
Outstanding
Equity Awards at Fiscal Year-End Table
There were
no outstanding equity awards at April 30, 2015 and April 30, 2014.
Compensation
of Directors
Directors
are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority
to fix the compensation of directors. No amounts have been paid to, or accrued to, directors in such capacity.
Employment
Agreements
We currently
do not have an employment agreement with Mr. Brian Woodland.
Compensation
of Directors
Directors
are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority
to fix the compensation of directors. No amounts have been paid to, or accrued to, directors in such capacity.
Certain
Relationships and Related Transactions, and Director Independence
Related
parties to the Company include, but are not limited to, officers, directors, and shareholders. From time to time, the Company
receives loans and advances from Phalanx Partners and WS Advantage LP for working capital purposes. Phalanx Partners and WS Advantage
LP formerly held equity interests in Grove Realty Partners, LLC and Walker Partners, LLC and are currently shareholders and controlled
by the Company’s president.
An
aggregate of $441,516 was received by related parties during the twelve-months ended April 30, 2014 for working capital purposes
and debt and expenses paid on the Company’s behalf. These advances are interest-free and payable upon demand.
During
the twelve months ended April 30, 2014, the Company received $36,000 in rental income from Phalanx Partners, who occupies an office
in one of the Company’s properties.
Involvement
in Certain Legal Proceedings
To our knowledge,
during the past ten years, none of our directors, executive officers, promoters, control persons, or nominees has:
● |
been
convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding
traffic violations and other minor offenses);
|
● |
had
any bankruptcy petition filed by or against the business or property of the person, or
of any partnership, corporation or business association of which he was a general partner
or executive officer, either at the time of the bankruptcy filing or within two years
prior to that time;
|
● |
been subject to
any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or
federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement
in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities,
or to be associated with persons engaged in any such activity; |
● |
been
found by a court of competent jurisdiction in a civil action or by the Commission or the Commodity Futures Trading Commission
to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
● |
been
the subject of, or a party to, any federal or state judicial or administrative order,
judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including
any settlement of a civil proceeding among private litigants), relating to an alleged
violation of any federal or state securities or commodities law or regulation, any law
or regulation respecting financial institutions or insurance companies including, but
not limited to, a temporary or permanent injunction, order of disgorgement or restitution,
civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition
order, or any law or regulation prohibiting mail or wire fraud or fraud in connection
with any business entity; or
|
● |
been the subject
of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization
(as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity
Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members
or persons associated with a member. |
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding our shares
of common stock beneficially owned as of August 20, 2015, for (i) each stockholder known to be the beneficial owner of 5% or
more of our outstanding shares of common stock, (ii) each named executive officer and director, and (iii) all executive officers
and directors as a group. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly,
exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership
at any time within 60 days through an exercise of stock options or warrants. Unless otherwise indicated, voting and investment
power relating to the shares shown in the table for our directors and executive officers is exercised solely by the beneficial
owner or shared by the owner and the owner’s spouse or children.
For purposes of this table, a person or group of persons is deemed to
have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days
of August 20, 2015. For purposes of computing the percentage of outstanding shares of our common stock held by each person or
group of persons named above, any shares that such person or persons has the right to acquire within 60 days of February 18, 2014
is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any
other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.
Name | |
Number of Shares Beneficially Owned | | |
Percent of Class | |
Director and Officer | |
| | |
| |
Brian Woodland, President and Chief Executive Officer 7 Grove Street Topsfield, MA 01983 | |
| 1,581,251 | (1) | |
| 87.99 | % |
(1) Owned
indirectly through Magnolia Lane Financial, Inc, Phalanx Partners, LLC and WS Advantage LP.
Securities Authorized For Issuance Under Equity Compensation Plans
There are no securities authorized for issuance under an Equity Compensation
Plan.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION OF SECURITIES ACT LIABILITIES
Our directors
and officers are indemnified as provided by the Delaware corporate law and our Bylaws. We have agreed to indemnify each of our
directors and certain officers against certain liabilities, including liabilities under the Securities Act. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant
to the provisions described above, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than our payment of expenses incurred or paid by our director, officer or controlling person in
the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection
with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy
as expressed in the Securities Act and will be governed by the final adjudication of such issue.
We have
been advised that in the opinion of the SEC indemnification for liabilities arising under the Securities Act is against public
policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against
such liabilities is asserted by one of our directors, officers, or controlling persons in connection with the securities being
registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling precedent, submit the
question of whether such indemnification is against public policy to a court of appropriate jurisdiction. We will then be governed
by the court’s decision.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We filed
with the Securities and Exchange Commission a registration statement under the Securities Act of 1933 for the shares of common
stock in this offering. This prospectus does not contain all of the information in the registration statement and the exhibits
and schedule that were filed with the registration statement. For further information with respect to us and our common stock,
we refer you to the registration statement and the exhibits and schedule that were filed with the registration statement. Statements
contained in this prospectus about the contents of any contract or any other document that is filed as an exhibit to the registration
statement are not necessarily complete, and we refer you to the full text of the contract or other document filed as an exhibit
to the registration statement. A copy of the registration statement and the exhibits and schedules that were filed with the registration
statement may be inspected without charge at the Public Reference Room maintained by the Securities and Exchange Commission at
100 F. Street, N.E., Washington, DC 20549-6010, and copies of all or any part of the registration statement may be obtained from
the Securities and Exchange Commission upon payment of the prescribed fee. Information regarding the operation of the Public Reference
Room may be obtained by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission
maintains a web site that contains reports, proxy and information statements, and other information regarding registrants that
file electronically with the SEC. The address of the site is www.sec.gov.
MAGNOLIA
LANE INCOME FUND
(fka
PALMERSTON STOCK AGENCY, INC.)
April
30, 2015
Index
to the Consolidated Financial Statements
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Shareholders of Magnolia Lane
Income Fund Topsfield,
Massachusetts
We
have audited the accompanying consolidated balance sheets of Magnolia Lane Income Fund (the "Company") as of April 30,
2015 and 2014, and the related consolidated statements of operations stockholders' deficit and cash flows for the years then ended.
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 consolidated 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
audits included consideration of its 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 includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management as well as evaluating the overall consolidated financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the financial position of Magnolia Lane Income Fund as of April 30,
2015 and 2014 and the results of their operations and cash flows for the years then ended, in conformity with accounting principles
generally accepted in the
United States of America.
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial
statements, the Company has an accumulated deficit of $507,846 and stockholders' deficit of $203,694. These factors raise substantial
doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note
3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ BAKER TILLY VIRCHOW KRAUSE, LLP
New York, New York
July 29, 2015
MAGNOLIA
LANE INCOME FUND
Consolidated
Balance Sheets
| |
April
30,
2015 | | |
April
30,
2014 | |
| |
| | |
As Revised | |
| |
| | |
(See
Note 2) | |
| |
| | |
| |
ASSETS
| |
| | |
| |
| |
| | |
| |
Rental
property, net | |
$ | 2,289,618 | | |
$ | 2,373,763 | |
Cash | |
| 17,286 | | |
| 19,379 | |
Restricted
cash | |
| 13,799 | | |
| 15,559 | |
Accounts
receivable | |
| 1,225 | | |
| 1,750 | |
| |
| | | |
| | |
Total
Assets | |
$ | 2,321,928 | | |
$ | 2,410,451 | |
| |
| | | |
| | |
LIABILITIES
AND STOCKHOLDERS DEFICIT | |
| | | |
| | |
| |
| | | |
| | |
Mortgage
payable | |
$ | 542,694 | | |
$ | 558,176 | |
Related
party mortgage payable | |
| 1,425,982 | | |
| 1,425,982 | |
Accounts
payable and accrued expenses | |
| 103,465 | | |
| 22,500 | |
Deferred
revenue | |
| - | | |
| 4,800 | |
Security
deposits | |
| 2,900 | | |
| 1,700 | |
Loans
payable – related parties | |
| 450,581 | | |
| 441,684 | |
| |
| | | |
| | |
Total
Liabilities | |
| 2,525,622 | | |
| 2,454,842 | |
| |
| | | |
| | |
STOCKHOLDERS'
DEFICIT: | |
| | | |
| | |
Preferred
stock: par value $0.0001; 100,000,000 shares authorized; None issued or outstanding | |
| - | | |
| - | |
Common
stock: par value $0.0001; 200,000,000 shares authorized; 1,796,875 and 1,796,875 shares issued and outstanding, respectively | |
| 180 | | |
| 180 | |
Additional
paid-in capital | |
| 303,972 | | |
| 275,981 | |
Accumulated
deficit | |
| (507,846 | ) | |
| (320,552 | ) |
| |
| | | |
| | |
Total
Stockholders' Deficit | |
| (203,694 | ) | |
| (44,391 | ) |
| |
| | | |
| | |
Total
Liabilities and Stockholders' Deficit | |
$ | 2,321,928 | | |
$ | 2,410, 451 | |
See
accompanying notes to the consolidated financial statements.
MAGNOLIA LANE
INCOME FUND
Consolidated
Statements of Operations
| |
For the year | | |
For the year | |
| |
ended | | |
ended | |
| |
April 30,
2015 | | |
April 30,
2014 | |
| |
| | |
As Revised | |
| |
| | |
(See Note 2) | |
| |
| | |
| |
RENTAL REVENUE | |
$ | 248,351 | | |
$ | 214,235 | |
| |
| | | |
| | |
OPERATING EXPENSES | |
| | | |
| | |
Operating costs | |
| 91,813 | | |
| 72,443 | |
Professional fees | |
| 91,764 | | |
| 62,275 | |
Repairs and maintenance | |
| 20,519 | | |
| 18,161 | |
Depreciation | |
| 93,638 | | |
| 90,228 | |
Interest expense | |
| 137,911 | | |
| 170,228 | |
| |
| | | |
| | |
Total operating expenses | |
| 435,645 | | |
| 413,335 | |
| |
| | | |
| | |
NET LOSS | |
$ | (187,294 | ) | |
$ | (199,100 | ) |
| |
| | | |
| | |
NET LOSS PER COMMON SHARE | |
| | | |
| | |
- BASIC AND DILUTED: | |
$ | (0.10 | ) | |
$ | (0.11 | ) |
| |
| | | |
| | |
Weighted average common shares outstanding | |
| | | |
| | |
- basic and diluted | |
| 1,796,875 | | |
| 1,796,875 | |
See accompanying
notes to the consolidated financial statements.
MAGNOLIA LANE
INCOME FUND
Consolidated
Statements of Cash Flows
| |
For the year | | |
For the year | |
| |
ended | | |
ended | |
| |
April 30, 2015 | | |
April 30, 2014 | |
| |
| | |
As Revised | |
| |
| | |
(See Note 2) | |
| |
| | |
| |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | |
| |
Net loss | |
$ | (187,294 | ) | |
$ | (199,100 | ) |
Adjustments to reconcile net loss to net cash used in/(provided by) operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 93,638 | | |
| 90,228 | |
Imputed interest | |
| 27,991 | | |
| - | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| 525 | | |
| 13,300 | |
Accounts payable and accrued expenses | |
| 80,965 | | |
| (17,144 | ) |
Deferred revenue | |
| (4,800 | ) | |
| 4,800 | |
Security deposits | |
| 1,200 | | |
| (1,828 | ) |
Restricted cash | |
| 1,760 | | |
| (9,536 | ) |
| |
| | | |
| | |
Net cash provided by / (used in) operating activities | |
| 13,985 | | |
| (119,280 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
Building Improvements | |
| (9,493 | ) | |
| (47,298 | ) |
Purchase of LLC interests | |
| - | | |
| (3,000 | ) |
| |
| | | |
| | |
Net cash used in investing activities | |
| (9,493 | ) | |
| (50,298 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
Advances from shareholders | |
| 8,897 | | |
| 441,684 | |
Proceeds from mortgage payable - related party | |
| - | | |
| 1,425,982 | |
Repayments of mortgages payable | |
| (15,482 | ) | |
| (1,728,353 | ) |
Capital contribution | |
| - | | |
| 47,414 | |
| |
| | | |
| | |
Net cash (used in)/provided by financing activities | |
| (6,585 | ) | |
| 186,727 | |
| |
| | | |
| | |
NET CHANGE IN CASH | |
| (2,093 | ) | |
| 17,149 | |
| |
| | | |
| | |
Cash at beginning of year | |
| 19,379 | | |
| 2,230 | |
| |
| | | |
| | |
Cash at end of year | |
$ | 17,286 | | |
$ | 19,379 | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: | |
| | | |
| | |
Cash paid for interest | |
$ | 106,921 | | |
$ | 127,860 | |
| |
| | | |
| | |
NON-CASH INVESTING AND FINANCING ACTIVITIES: | |
| | | |
| | |
Assets contributed by stockholder | |
$ | - | | |
$ | 2,492,306 | |
Liabilities contributed by stockholder | |
$ | - | | |
$ | 2,317,469 | |
Imputed interest on stockholder loans | |
$ | 27,991 | | |
$ | - | |
See accompanying notes
to the consolidated financial statements.
MAGNOLIA LANE
INCOME FUND
Consolidated
Statement of Stockholders' Deficit
| |
| | |
| | |
ADDITIONAL | | |
| | |
TOTAL | |
| |
| | |
COMMON | | |
PAID-IN | | |
ACCUMULATED | | |
STOCKHOLDERS' | |
| |
SHARES | | |
STOCK | | |
CAPITAL | | |
DEFICIT | | |
DEFICIENCY | |
| |
| | |
| | |
| | |
| | |
| |
Total, April 30, 2013 | |
| 1,796,875 | | |
$ | 180 | | |
$ | 73,858 | | |
$ | (121,452 | ) | |
$ | (47,414 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Capital Contribution | |
| | | |
| | | |
| 47,414 | | |
| | | |
| 47,414 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net assets contributed from entity under common control | |
| | | |
| | | |
| 154,709 | * | |
| | | |
| 154,709 | * |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Loss | |
| | | |
| | | |
| | * | |
| (199,100
| )* | |
| (199,100 | )* |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total, April 30, 2014 | |
| 1,796,875 | | |
$ | 180 | | |
$ | 275,981 | * | |
$ | (320,552
| )* | |
$ | (44,391 | )* |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Imputed interest on related party debt | |
| - | | |
| - | | |
| 27,991 | | |
| | | |
| 27,991 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Loss | |
| | | |
| | | |
| | | |
| (187,294 | ) | |
| (187,294 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total, April 30, 2015 | |
| 1,796,875 | | |
$ | 180 | | |
$ | 303,972 | | |
$ | (507,846 | ) | |
$ | (203,694 | ) |
* Prior-period amounts have been
revised to reflect an immaterial adjustment of additional paid-in capital and depreciation expense. Summary of Significant Accounting
Policies Note 2, Revisions of previous issued financial statements.
See accompanying
notes to the consolidated financial statements.
MAGNOLIA
LANE INCOME FUND
(fka
PALMERSTON STOCK AGENCY, INC.)
As
of and for the Years Ended April 30, 2015 and 2014
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 - ORGANIZATION
Magnolia
Lane Income Fund, formerly known as Palmerston Stock Agency, Inc. (the “Company,” ”We,” “Ours,”
“Us”), was incorporated on May 12, 2009 under the laws of the State of Delaware. The Company was originally formed
to commence business as a stock agent in the wool trade.
On
May 13, 2013, we entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Ian Raleigh and Michael
Raleigh (the “Sellers”) and Magnolia Lane Financial, Inc. (the “Purchaser”), whereby the Purchaser purchased
from the Sellers, 10,000,000 shares of common stock, par value $0.0001 per share, of the Company (the “Shares”), representing
approximately 69.57% of the issued and outstanding shares of the Company. As a result, the Purchaser became the majority shareholder
of the Company.
In
connection with the Stock Purchase Agreement, we have ceased pursuing our prior business plan and have begun focusing on our new
business which is to manage and invest in real property. Our current Chief Executive Officer, Chief Financial Officer and
sole director, Brian Woodland, has numerous years in the real estate acquisition, syndication and asset management business. We
intend to acquire real estate in small markets with high degrees of safety to provide income streams to our shareholders. In addition,
we will develop property, syndicate, manage and acquire property for capital appreciation.
On
January 16, 2014, the Company entered into an LLC Membership Interest Purchase and Sale Agreement with Magnolia Lane Financial,
Inc. (a shareholder). Pursuant to the Agreement, all rights, title and interest of two commercial real estate properties in Massachusetts
were contributed to the Company. (See Note 4)
NOTE
2 – SUMMARY OF ACCOUNTING POLICIES
Basis
of presentation
The
accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America, the rules and regulations of the United States Securities and Exchange Commission.
Revisions
of Previously Issued Financial Statements
In connection with
the preparation of the consolidated financial statements of the Company for the year ended April 30, 2015, the Company identified
certain errors in its previously issued consolidated financial statements for the year ended April 30, 2014. The errors related
to the understatement of depreciation expense due to an incorrect allocation of cost between the building and land on one of its
properties.
In
accordance with SEC Staff Accounting Bulletin No. 99, Materiality, codified in ASC 250 (“ASC 250”), Presentation of
Financial Statements, and SAB 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current
Year Consolidated Statements of Income, Balance Sheets, Shareholders Equity and Cash Flows, also codified in ASC 250, management
assessed the materiality of the errors from a qualitative and quantitative basis and concluded that these errors were immaterial
to its previously issued consolidated financial statements. Management concluded that the errors were material if not corrected
in the current years’ consolidated financial statements. Therefore, in accordance with ASC 250, the consolidated financial
statements as of April 30, 2014, which are presented herein, have been revised in this 2015 Annual Report on Form 10-K.
| |
April
30, 2014 | | |
| |
| |
As | | |
As Previously | | |
| |
Balance
Sheet | |
revised | | |
presented | | |
Difference | |
Rental
property, net | |
$ | 2,373,763 | | |
$ | 2,399,022 | | |
$ | (25,259 | ) |
Additional
paid-in capital | |
| 275,981 | | |
| 296,109
| | |
| (20,128 | ) |
Accumulated
deficit | |
$ | (320,552 | ) | |
$ | (315,421 | ) | |
$ | (5,131 | ) |
| |
| | | |
| | | |
| | |
Income
Statement | |
| | | |
| | | |
| | |
Depreciation
expense | |
$ | 90,228 | | |
$ | 85,097 | | |
$ | 5,131 | |
Net
Loss | |
$ | (199,100 | ) | |
$ | (193,969 | ) | |
$ | (5,131 | ) |
| |
| | | |
| | | |
| | |
Cash
flows | |
| | | |
| | | |
| | |
Net
Loss | |
$ | (199,100 | ) | |
$ | (193,969 | ) | |
$ | (5,131 | ) |
Depreciation
expense | |
$ | 90,228 | | |
$ | 85,097 | | |
$ | 5,131 | |
| |
| | | |
| | | |
| | |
NET
LOSS PER COMMON SHARE | |
| | | |
| | | |
| | |
-
BASIC AND DILUTED: | |
$ | (0.11 | ) | |
$ | (0.11 | ) | |
$ | - | |
Principles
of consolidation
The
accompanying consolidated financial statements represent the consolidated financial position and results of operations of the
Company and include the accounts and results of operations of the Company and its subsidiaries. The accompanying financial statements
include the active entity of Magnolia Lane Income Fund and its wholly owned subsidiaries, Walker Partners, LLC and Grove Realty
Partners, LLC.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 as well as the reported amount of revenues and expenses during
the reporting period. Actual results could differ from these estimates.
Cash
Equivalents
The
Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.
Restricted
Cash
Restricted cash consists
of cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements. The
Company’s restricted cash is reserved for real estate taxes on both of its properties.
Concentrations
Concentration
in a geographic area
The
Company operates in the real estate industry and the operations are concentrated in the State of Massachusetts.
Rental
Property, Net
Rental
property assets are stated at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated
useful lives of the asset.
We
capitalize replacements and improvements, such as HVAC equipment, structural replacements, windows, appliances, flooring, carpeting
and renovations. Ordinary repairs and maintenance, such as unit cleaning, painting and appliance repairs, are expensed when incurred.
Asset | |
Useful
Life (in years) |
Building | |
30
years |
Land | |
Indefinite |
Building
Improvements | |
30
years |
Net
loss per common share
Net
loss per common share is computed pursuant to section 260-10-45 of the Financial Accounting Standards Board Accounting Standards
Codification. Basic net loss per common share is computed by dividing net loss by the weighted average number of shares of common
stock outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average
number of shares of common stock and potentially dilutive outstanding shares of common stock during the period.
There
were no potentially dilutive shares outstanding for any periods presented.
Income
Taxes
The
Company utilizes the asset and liability method to measure and record deferred income tax assets and liabilities. Deferred tax
assets and liabilities reflect the future income tax effects of temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that apply
to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets
are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized.
The
Company follows the provisions of Income Taxes Topic of the FASB Accounting Standards Codification,
which provides clarification on accounting for uncertainty in income taxes recognized in an enterprise’s financial statements.
The guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognition, classification,
interest and penalties, disclosure and transition. At April 30, 2015, no significant income tax uncertainties have been included
in the Company’s Balance Sheets. The Company’s policy is to recognize interest and penalties on unrecognized tax benefits
in income tax expense in the Statements of Operations. No interest and penalties are present for periods open.
The
Company is subject to the United States federal and state income tax examinations by the tax authorities for the 2015, 2014, and
2013 tax years.
Property
Revenue Recognition
Our
commercial property leases are for varied terms ranging from month-to-month to 3 years. Rental income is recognized on a straight-line
basis over the term of the lease.
Rent
concessions, including free rent incurred in connection with commercial property leases, are amortized on a straight-line basis
over the terms of the related leases and are charged as a reduction of rental revenue.
Impairment
of Real Estate Investments
The
Company assesses on a regular basis whether there are any indicators that the carrying value of rental property assets may be
impaired. Potential indicators may include an increase in vacancy at a property, tenant reduction in utilization of a property,
tenant financial instability and the potential sale of the property in the near future. An asset is determined to be impaired
if the asset’s carrying value is in excess of its estimated fair value.
Deferred
Revenue
From
time to time, rental payments may be paid by tenants, but not earned yet by the Company. Such revenue is initially recorded as
a deferred liability and is recognized as revenue once earned. As of April 30, 2015 and 2014, the Company had $0 and $4,800 in
deferred revenue, respectively.
NOTE
3 – GOING CONCERN
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern,
which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As
reflected in the accompanying consolidated financial statements, the Company had an accumulated deficit of $507,846 and a stockholders’
deficit of $203,694. These conditions raise substantial doubt about its ability to continue as a going concern.
The
ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business
plan and generate sufficient revenues. The consolidated financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern. Management believes that the actions presently being taken to further
implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern.
The
consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded
asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue
in existence.
NOTE
4 – ASSETS CONTRIBUTED
On
December 23, 2013, a shareholder of the Company, Magnolia Lane Financial, Inc. entered into three separate LLC Membership Interest
Purchase and Sale Agreements for the acquisition of two limited liability companies; Grove Realty Partners, LLC and Walker Partners,
LLC. Pursuant to the Membership Interest Purchase and Sale Agreements, Magnolia Lane Financial, Inc. acquired 100% of the equity
interests in Grove Realty Partners, LLC and Walker Partners, LLC.
Each
of the entities acquired hold commercial real estate properties. More specifically,
|
● |
Grove
Realty Partners, LLC holds a single commercial property located at 7 Grove St., Topsfield,
Massachusetts. |
|
● |
Walker
Partners, LLC holds a single commercial property located at 58 Main St., Topsfield, Massachusetts. |
Subsequent
to the Membership Interest Purchase described above, on January 16, 2014, the Company entered into an LLC Membership Interest
Purchase and Sale Agreement with Magnolia Lane Financial, Inc. Pursuant to the Agreement, Magnolia Lane Financial, Inc. contributed
all rights, title and interest of Magnolia Lane Financial to the Company for total consideration of $3,000.
Because
of the related party nature of this transaction, the Company recorded this as a contribution of capital. Assets and liabilities
contributed were recorded at their carrying amounts at the date of the transfer. The results of operations included in the financial
statements are reported as though the contribution had occurred on May 12, 2013, which is the date that common control was first
established among the related parties.
The Company recorded
the contribution at carrying value. The net of $2,472,178 in assets contributed and $2,317,469 in liabilities assumed was recorded
as a contribution of capital to the Company in the amount of $154,709.
Cash | |
$ | 13,730 | |
Cash – escrow | |
| 6,023 | |
Accounts receivable | |
| 15,050 | |
Related Party note receivable | |
| 10,000 | |
Real property, net | |
| 2,427,375 | |
Deferred tax asset | |
| 458,324 | |
Valuation allowance on deferred tax asset | |
| (458,324 | ) |
Assets
contributed | |
$ | 2,472,178 | |
Security deposits | |
| (3,528 | ) |
Mortgage notes payable | |
| (2,313,941 | ) |
Liabilities
assumed | |
$ | (2,317,469 | ) |
| |
| | |
Net assets
contributed | |
$ | 154,709 | |
NOTE
5 – RENTAL PROPERTY, NET
Rental
Property, Net consisted of the following at April 30, 2015 and April 30, 2014:
| |
April
30, 2015 | | |
April
30, 2014 As
Revised See
Note 2 | |
Land | |
| 120,733 | | |
| 120,733 | |
Buildings | |
| 2,695,016 | | |
| 2,695,016 | |
Leasehold Improvements | |
| 130,731 | | |
| 121,238 | |
Accumulated Depreciation | |
| (656,862 | ) | |
| (563,224 | ) |
Net,
Real Estate Investments | |
| 2,289,618 | | |
| 2,373,763 | |
As
of April 30, 2014, real estate investments consisted of two properties:
58
Main St. Topsfield, Ma 01983
|
● |
Description:
4,000 Square foot, Commercial Building |
|
● |
Status:
Rented 100% occupancy. Lease term: 3-Year |
|
● |
Owner:
Walker Partners, LLC |
|
● |
Purchase
Price: $503,000 |
|
● |
Mortgage
Debt as of April 30, 2015: $542,694 |
7
Grove St., Topsfield, Ma 01983
|
● |
Description:
12,000 Square foot, Business Office, Retail and Professional Space |
|
● |
Status:
Rented at 100% occupancy. Lease term: 3-Year |
|
● |
Owner:
Grove Realty Partners, LLC |
|
● |
Purchase
Price: $2.025 million |
|
● |
Mortgage
Debt as of April 30, 2015: $1,425,982
|
For
the years ended April 30, 2015 and 2014, the Company recognized revenues of $248,351 and $214,235, respectively. Rent for the
year ended April 30, 2015 and 2014 included $36,000 from a related party who occupies an office in one of the Company’s
properties.
Depreciation expense
for the years ended April 30, 2015 and 2014 totaled $93,638 and $90,228, respectively.
NOTE
6 – MORTGAGE AND RELATED PARTY NOTES PAYABLE
58 Main Street
On
January 16, 2014, the Company assumed a mortgage note payable to a third-party, unrelated to the seller, on the property located
at 58 Main Street, Topsfield, Massachusetts. The note bears interest at 6.75% per annum and is due August 26,
2019. Monthly principle and interest payments totaling $4,320 started on September 26, 2009 and will continue through
the maturity date. The mortgage note is secured by the underlying property. At maturity, the balloon payment of $481,454
will be due in full. The remaining principal balance as of April 30, 2015 and 2014 is $542,694 and $558,177, respectively.
7
Grove Street
On
January 16, 2014, the Company assumed a mortgage note payable to a third-party, unrelated to the seller, on the property located
at 7 Grove Street, Topsfield, Massachusetts. The note bore interest at 7.9 % per annum and was scheduled to mature
on September 5, 2032. Monthly payments of $17,775 started on October 5, 2008. The mortgage note was secured
by a mortgage on the property. At maturity, the balloon payment was to be due in full.
On
April 12, 2014, the mortgage note payable on the property at 7 Grove Street was paid in full by a shareholder. On that same date,
a new mortgage payable was established between the Company and the shareholder for an amount equal to the balance that was remaining
on the original mortgage. The new related party mortgage payable began on April 12, 2014 and is a 5-year fixed loan
at 5.5% interest, with a balloon payment on May 15, 2019 for the outstanding balance. Interest only payments began
on May 15, 2014 in the amount of $6,536.
Future
principle requirements on long-term debt for fiscal years ending after April 30, 2015 are as follows:
Mortgage
Payable - Related Party | |
Mortgage
Payable |
For
fiscal year ending | |
Future
Payout | | |
For
fiscal year ending | |
Future
Payout | |
2016 | |
$ | - | | |
2016 | |
$ | 12,051 | |
2017 | |
| - | | |
2017 | |
| 15,291 | |
2018 | |
| | | |
2018 | |
| 16,371 | |
2019 | |
| - | | |
2019 | |
| 17,527 | |
2020
and thereafter | |
| 1,425,982 | | |
2020
and thereafter | |
| 481,454 | |
Total | |
$ | 1,425,982 | | |
Total | |
$ | 542,694 | |
NOTE
7 – FUTURE RENTS AND TENANT CONCENTRATION
The
Company’s revenue is derived from property leases with varied lease terms. The following table represents future minimum
rents to be received under non-cancelable leases with terms of twelve months or more as of April 30, 2015:
Future
Rents |
2015 | |
$ | 88,236 | |
2016 | |
| 93,457 | |
2017 | |
| 11,172 | |
Thereafter | |
| - | |
| |
$ | 192,865 | |
For
the year ended April 30, 2015, two tenants represented approximately 17% and 14% of the Company’s revenue. For the year
ended April 30, 2014, two tenants represented approximately 19% and 15% of the Company’s revenue.
NOTE
8 – RELATED PARTY TRANSACTIONS
Related
parties to the Company include, but are not limited to, officers, directors, and shareholders. From time to time, the Company
receives loans and advances from Phalanx Partners and WS Advantage LP for working capital purposes. Phalanx Partners and WS Advantage
LP formerly held equity interests in Grove Realty Partners, LLC and Walker Partners, LLC and are currently shareholders and controlled
by the Company’s president.
An
aggregate of $454,581 has been received from related parties for working capital purposes and debt and expenses paid on the Company’s
behalf. These advances are interest-free and payable upon demand. During the year ended April 30, 2015 and 2014 the Company imputed
interest expense of $27,991 and $0, respectively.
During
the years ended April 30, 2015 and 2014, the Company received $36,000 in rental income from Phalanx Partners, who occupies an
office in one of the Company’s properties.
NOTE
9 - STOCKHOLDERS’ EQUITY
Preferred
stock
Preferred
stock includes 100,000,000 shares authorized at a par value of $0.0001, of which none are issued or outstanding.
Common
stock
Common
Stock includes 200,000,000 shares authorized at a par value of $0.0001, of which 10,000,000 have been issued for the amount of
$1,000 on May 12, 2009 to the Company’s officers as founders’ shares.
On
May 13, 2013, we entered into a stock purchase agreement with Ian Raleigh and Michael Raleigh (the “Sellers”) and
Magnolia Lane Financial, Inc. (the “Purchaser”), whereby the Purchaser purchased from the Sellers, 10,000,000 shares
of common stock, par value $0.0001 per share, of the Company (the “Shares”), representing approximately 69.57% of
the issued and outstanding shares of the Company. As a result, the Purchaser became the majority shareholder of the Company.
On
July 22, 2013, the Company authorized a 1:8 reverse split of its common shares. Prior to the split, the Company had 14,375,000
shares and post-split shares outstanding are 1,796,875.
Capital
Contribution
As a result of the
contribution of member interests of Grove Realty Partners, LLC and Walker Partners, LLC on January 16, 2014, the Company recorded
$154,709 as contributed capital, representing the net of assets acquired and liabilities assumed.
NOTE
10 – INCOME TAXES
FASB
ASC 740-10 provides guidance for the recognition and measurement of certain tax positions in an enterprise’s financial statements.
Recognition involves a determination of whether it is more likely than not that a tax position will be sustained upon examination
with the presumption that the tax position will be examined by the appropriate taxing authority having full knowledge of all relevant
information.
Pursuant
to FASB ASC 740-10-10, an entity recognizes deferred tax assets and liabilities for future tax consequences or events that have
been previously recognized in the Company’s financial statements or tax returns. The measurement of deferred tax assets
and liabilities is based on provisions of enacted tax law. The effects of future changes in tax laws or rates are not anticipated.
At April 30, 2015,
the Company has net operating loss (“NOL”) carry–forwards for Federal
income tax purposes of approximately $389,317 that may be offset against future taxable income through 2035. Due
to changes in ownership, approximately $121,000 of the NOL carry-forward may be subject to certain annual limitations imposed
under Section 382 of the Internal Revenue Code. At this time, the amount of the limitation has not been determined, since the
Company has not completed its Section 382 study. Deferred tax assets would arise from the recognition of anticipated utilization
of these net operating losses to offset future taxable income. No tax benefit has been reported with respect to these deferred
tax assets in the accompanying financial statements because of Management’s assertion that it is more likely than not that
the Company’s deferred tax assets of $596,111 will not be realized and accordingly, the deferred tax assets are offset
by a full valuation allowance.
Deferred Tax Assets | |
April
30, 2015 | | |
April
30, 2014 | |
Net Operating Loss | |
$ | 155,727 | | |
$ | 68,631 | |
Book to tax basis difference on depreciable assets | |
| 440,384 | | |
| 480,016 | |
Total Deferred Tax Asset | |
| 596,111 | | |
| 548,647 | |
Valuation allowance | |
| (596,111 | ) | |
| (548,647 | ) |
Net Deferred
Tax Asset | |
$ | - | | |
$ | - | |
NOTE
11 – SUBSEQUENT EVENTS
The
Company has evaluated all events that occur after the balance sheet date through the date when the consolidated financial statements
were issued to determine if they must be reported.
PROSPECTUS
YOU SHOULD
RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE
YOU WITH INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL COMMON STOCK AND IS NOT SOLICITING AN OFFER TO
BUY COMMON STOCK IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Until _____________,
all dealers that effect transactions in these securities whether or not participating in this offering may be required to deliver
a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
The Date of This Prospectus is August 20, 2015
PART
II INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution.
Securities and Exchange Commission Registration Fee | |
$ | 87.70 | |
Transfer Agent Fees* | |
$ | 0.00 | |
Accounting fees and expenses* | |
$ | 5,000 | |
Legal fees and expenses* | |
$ | 10,000 | |
Blue Sky fees and expenses* | |
$ | 0.00 | |
Total* | |
$ | 15,087.70 | |
* Estimated
Item
14. Indemnification of Directors and Officers.
Our directors
and officers are indemnified as provided by the Nevada corporate law and our Bylaws. We have agreed to indemnify each of our directors
and certain officers against certain liabilities, including liabilities under the Securities Act. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the
provisions described above, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than our payment of expenses incurred or paid by our director, officer
or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
We have
been advised that in the opinion of the Securities and Exchange Commission indemnification for liabilities arising under the Securities
Act is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities is asserted by one of our directors, officers, or controlling persons in connection with
the securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling
precedent, submit the question of whether such indemnification is against public policy to a court of appropriate jurisdiction.
We will then be governed by the court’s decision.
Item
15. Recent Sales of Unregistered Securities.
None.
Item
16. Exhibits and Financial Statement Schedules.
EXHIBIT
NUMBER | |
DESCRIPTION |
3.1 | |
Articles of Incorporation* |
3.2 | |
By-Laws* |
5.1 | |
Opinion of Szaferman Lakind Blumstein & Blader, PC** |
23.1 | |
Consent of Baker Tilly Virchow Krause, LLP** |
23.2 | |
Consent of Counsel (filed as Exhibit 5.1)** |
* Previously filed on Form S-1
dated November 12, 2010.
** File herewith.
Item
17. Undertakings.
(A) The
undersigned Registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
i. To
include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
ii. To
reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective registration statement.
iii. To
include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
(2) That,
for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove
from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination
of the offering.
(4) Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(5) Each
prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included
in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in
a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to
a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date
of first use.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
|
MAGNOLIA
LANE INCOME FUND |
|
|
Date: August
20, 2015 |
By: |
/s/
Brian Woodland |
|
|
Brian
Woodland |
|
|
President
and Chief Financial Officer |
|
|
(Duly
Authorized Officer, Principal Executive Officer ,
and
Principal Financial and Accounting Officer) |
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the dates indicated:
Signature |
|
Title
|
|
Date
|
|
|
|
|
|
/s/Brian Woodland |
|
Chief Executive Officer, Principal Executive Officer and |
|
August 20, 2015 |
Brian Woodland |
|
Principal Financial and Accounting Officer |
|
|
28
Exhibit 5.1
|
Arnold
C. Lakind
Barry
D. Szaferman
Jeffrey
P. Blumstein
Steven
Blader
Brian
G. Paul+
Craig
J. Hubert++
Michael
R. Paglione*
Lionel
J. Frank**
Jeffrey
K. Epstein+
Stuart
A. Tucker
Scott
P. Borsack***
Daniel
S. Sweetser*
Robert
E. Lytle
Janine
G. Bauer***
Daniel
J. Graziano Jr.
Nathan
M. Edelstein**
Bruce
M. Sattin***
Gregg
E. Jaclin**
Robert
P. Panzer
Benjamin
T. Branche* |
Of
Counsel
Stephen
Skillman
Linda
R. Feinberg
Anthony
J. Parrillo
Paul
T. Koenig, Jr.
Robert
A. Gladstone
Janine
Danks Fox*
Richard
A. Catalina Jr.*†
E.
Elizabeth Sweetser
Robert
G. Stevens Jr.**
Michael
D. Brottman**
Lindsey
Moskowitz Medvin**
Mark
A. Fisher
Robert
L. Lakind***
Thomas
J. Manzo**
Carley
Ward**
Melissa
A. Chimbangu
Kathleen
O’Brien
Steven
A. Lipstein**
Yarona
Y. Liang#
Brian
A. Heyesey
Mengyi
"Jason" Ye
John
O’Leary***
Christopher
S. Myles
+Certified
Matrimonial Attorney
++Certified
Civil and Criminal Trial Attorney
*NJ
& PA Bars
**NJ
& NY Bars
***NJ,
NY & PA Bars
#NY
Bar
†U.S.
Patent & Trademark Office |
Szaferman,
Lakind, Blumstein & Blader, P.C.
Attorneys
at Law
101
Grovers Mill Road, Suite 200
Lawrenceville,
NJ 08648
P:
609.275.0400
F:
609.275.4511
www.szaferman.com |
August
20, 2015
Magnolia
Lane Income Fund
7
Grove Street
Topsfield,
MA 01983
Gentlemen:
You
have requested our opinion as counsel for Magnolia Lane Income Fund, a Delaware corporation (the “Company”),
in connection with the registration statement on Form S-1 (the “Registration Statement”), under the Securities
Act of 1933 (the “Act”), filed by the Company with the Securities and Exchange Commission (the “Commission”).
The Registration Statement relates to an offering of 107,814 shares (the “Shares”) of the Company’s common stock,
par value $0.001 per share, issued pursuant to Regulation D, Rule 506 exemption, as promulgated by the Commission under the Act.
In
order to render our opinion, we have examined the following documents identified and authenticated to our satisfaction:
|
(a) |
the
Registration Statement which includes the prospectus; |
|
(b) |
the
certificate of an Officer of the Company dated on even date herewith (the “Officer’s Certificate”); |
|
(c) |
the
Certificate of Incorporation of the Company dated May 12, 2009; |
|
(d) |
a
Board of Directors resolution ratifying the registration of the Shares on the Registration Statement; |
August
20, 2015
|
(e) |
the
Board of Directors resolution authorizing the issuance of shares pursuant to Regulation D, Section 506 of Act; and |
|
(f) |
a
certificate of good standing of the Company issued by the Secretary of State of the State of Delaware dated August 19, 2015. |
In
each instance we have relied upon the content of each of the documents set out above, and have relied upon the content of the
Officer’s Certificate. In reliance on the factual matters contained therein, and based upon our review of the foregoing,
it is our opinion that the Shares, have been duly authorized, were legally issued, fully paid and are non-assessable.
We
offer our opinion based upon the laws of the State of Delaware. This opinion opines upon Delaware law including statutory provisions,
all applicable provisions of the Delaware General Corporation Law and reported judicial decisions interpreting those laws. We
express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction.
We
hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm in the
Registration Statement. In so doing, we do not admit that we are in the category of persons whose consent is required under Section
7 of the Act and the rules and regulations of the Securities and Exchange Commission promulgated thereunder.
Very
truly yours,
SZAFERMAN,
LAKIND, BLUMSTEIN & BLADER, PC |
|
|
|
|
By: |
/s/
Gregg Jaclin |
|
|
Gregg
E. Jaclin |
|
|
For
the Firm |
|
Exhibit
23.1
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the inclusion in this Amendment No.1 to the Registration
Statement on Form S-1 of Magnolia Lane Income Fund of our report dated July 29, 2015, relating to the consolidated financial
statements, which includes an explanatory paragraph relating to the Company’s ability to continue as a going concern and
appears on page F-1 of this Registration Statement. We also consent to the reference to us under the heading "Interests of
Named Experts and Counsel" in this Registration Statement.
/s/ BAKER
TILLY VIRCHOW KRAUSE, LLP
New York,
New York
August 20,
2015
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