MANHATTAN BRIDGE CAPITAL INC

Previous wording

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Current wording

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Previous wording

The properties securing the loans are generally classified as residential or commercial real estate and, typically, are not income producing. Our loans are generally secured by a first mortgage lien on real estate. In addition, each loan is personally guaranteed by the principal(s) of the borrower, which guarantee may be collaterally secured by a pledge of the guarantor’s interest in the borrower. The face amount of the loans we originated in the past seven years ranged from $40,000 to a maximum of $3.6 million. Our lending policy limits the maximum amount of any loan to the lower of (i) 9.9% of the aggregate amount of our loan portfolio (not including the loan under consideration) and (ii) $4 million. Our loans typically have a maximum initial term of 12 months and bear interest at a fixed rate of 9% to 13.5% per year. In addition, we usually receive origination fees or “points” ranging from 0% to 2% of the original principal amount of the loan as well as other fees relating to underwriting and funding the loan. Interest is always payable monthly, in arrears. In the case of acquisition financing, the principal amount of the loan usually does not exceed 75% of the value of the property (as determined by an independent appraiser) and in the case of construction financing, it is typically up to 80% of construction costs.

Current wording

The properties securing the loans are generally classified as residential or commercial real estate and, typically, are not income producing. Our loans are generally secured by a first mortgage lien on real estate. In addition, each loan is personally guaranteed by the principal(s) of the borrower, which guarantee may be collaterally secured by a pledge of the guarantor’s interest in the borrower. The face amount of the loans we originated in the past seven years ranged from $40,000 to a maximum of $3.6 million. Our lending policy limits the maximum amount of any loan to the lower of (i) 9.9% of the aggregate amount of our loan portfolio (not including the loan under consideration) and (ii) $4 million. Our loans typically have a maximum initial term of 12 months and bear interest at a fixed rate of 9% to 13% per year, except for one loan issued in June 2024, which had an initial interest rate of 11.5% that was reduced to 7.25% on January 2, 2025, for a period of up to one year. In addition, we usually receive origination fees or “points” ranging from 0% to 2% of the original principal amount of the loan as well as other fees relating to underwriting and funding the loan. Interest is always payable monthly, in arrears. In the case of acquisition financing, the principal amount of the loan usually does not exceed 75% of the value of the property (as determined by an independent appraiser) and in the case of construction financing, it is typically up to 80% of construction costs.

Previous wording

For the nine month periods ended September 30, 2024 and 2023, the total amounts of $29,362,922 and $40,810,565, respectively, have been lent, offset by collections received from borrowers, under our commercial loans of $33,749,887 and $44,512,989, respectively.

Current wording

For the three month periods ended March 31, 2025 and 2024, the total amounts of $10,953,162 and $9,650,271, respectively, have been lent, offset by collections received from borrowers under our commercial loans in the amounts of $12,698,051 and $10,102,525, respectively.

Previous wording

At September 30, 2024, we were committed to $8,147,338 in construction loans that can be drawn by our borrowers when certain conditions are met.

Current wording

At March 31, 2025, we were committed to $5,983,256 in construction loans that can be drawn by our borrowers when certain conditions are met.

Previous wording

Total revenues for the three months ended September 30, 2024 were approximately $2,313,000 compared to approximately $2,434,000 for the three months ended September 30, 2023, a decrease of $121,000 or 5.0%. The decrease in revenue was due to a reduction in loans receivable, period over period, and reduced origination fees, which were impacted by a slowdown in new loan originations, partially offset by higher interest rates charged on our commercial loans. For the three months ended September 30, 2024 and 2023, approximately $1,953,000 and $1,992,000, respectively, of our revenues were attributable to interest income on secured commercial loans that we offer to real estate investors, and approximately $360,000 and $441,000, respectively, of our revenues were attributable to origination fees on such loans. The loans are principally secured by collateral consisting of real estate and accompanied by personal guarantees from the principals of the borrowers.

Current wording

Total revenues for the three months ended March 31, 2025 were approximately $2,274,000, compared to approximately $2,573,000 for the three months ended March 31, 2024, a decrease of $299,000, or 11.6%. The decrease in revenue was primarily attributable to lower interest income, resulting from a reduction in loans receivable, period over period. For the three months ended March 31, 2025, approximately $1,834,000 of our revenue represents interest income on secured commercial loans that we offer to real estate investors, compared to approximately $2,142,000 for the same period in 2024, and approximately $440,000 and $431,000, respectively, represent origination fees on such loans. The loans are principally secured by collateral consisting of real estate and accompanied by personal guarantees from the principals of the borrowers.

Previous wording

Interest and amortization of deferred financing costs for the three months ended September 30, 2024 were approximately $537,000 compared to approximately $614,000 for the three months ended September 30, 2023, a decrease of $77,000, or 12.5%. The decrease is primarily attributable to the decrease in interest expense due to a reduction in borrowed amounts related to the use of the Webster Credit Line. (See Note 5 to the condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q).

Current wording

Interest and amortization of deferred financing costs for the three months ended March 31, 2025 were approximately $451,000, compared to approximately $691,000 for the three months ended March 31, 2024, a decrease of $240,000, or 34.7%. The decrease is primarily attributable to the decrease in interest expense due to lower SOFR rates and a reduction in borrowed amounts related to the use of the Webster Credit Line (see Note 5 to the condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q).

Previous wording

General and administrative expenses for the three months ended September 30, 2024 were approximately $380,000 compared to approximately $377,000 for the three months ended September 30, 2023, an increase of $3,000. The increase is primarily due to higher salaries, partially offset by reductions in marketing expenses and legal fees.

Current wording

General and administrative expenses for the three months ended March 31, 2025 were approximately $454,000 compared to approximately $410,000 for the three months ended March 31, 2024, an increase of $44,000, or 10.7%. The increase is primarily attributable to increases in payroll and appraisal expenses, partially offset by reductions in travel and meals expenses.

Previous wording

Net income for the three months ended September 30, 2024 was approximately $1,399,000 compared to approximately $1,446,000 for the three months ended September 30, 2023, a decrease of $47,000, or 3.3%. This decrease is primarily attributable to the decrease in revenue, partially offset by the decrease in interest expense.

Current wording

Net income for the three months ended March 31, 2025 was approximately $1,373,000 compared to approximately $1,476,000 for the three months ended March 31, 2024, a decrease of $103,000, or 7.0%. This decrease is primarily attributable to the decrease in interest income from loans, partially offset by the decrease in interest expense.

Previous wording

At September 30, 2024, we had cash of approximately $168,000, compared to cash of approximately $104,000 at December 31, 2023.

Current wording

At March 31, 2025, we had cash of approximately $201,000, compared to cash of approximately $178,000 at December 31, 2024, not including restricted cash, which mainly represents collections received, pending clearance, from the Company’s commercial loans and is primarily dedicated to the reduction of the Webster Credit Line.

Previous wording

For the nine months ended September 30, 2024, net cash provided by operating activities was approximately $4,005,000, compared to approximately $4,137,000 for the nine months ended September 30, 2023. The decrease in net cash provided by operating activities primarily resulted from the increase in interest and other fees receivable on loans and the decrease in deferred origination fees, partially offset by the increase in net income.

Current wording

For the three months ended March 31, 2025, net cash provided by operating activities was approximately $1,181,000, compared to approximately $1,141,000 for the three months ended March 31, 2024. The increase in net cash provided by operating activities was primarily due to a smaller increase in interest and other fees receivable on loans compared to the prior period, partially offset by the decrease in net income.

Previous wording

For the nine months ended September 30, 2024, net cash provided by investing activities was approximately $4,383,000, compared to approximately $3,697,000 for the nine months ended September 30, 2023. Net cash provided by investing activities for the nine months ended September 30, 2024 mainly consisted of the collection of our commercial loans of approximately $33,750,000 (not including a $50,000 holdback), offset by the issuance of commercial loans of approximately $29,363,000. Net cash provided by investing activities for the nine months ended September 30, 2023, mainly consisted of the collection of our commercial loans of approximately $44,513,000, offset by the issuance of commercial loans of approximately $40,811,000.

Current wording

For the three months ended March 31, 2025, net cash provided by investing activities was approximately $1,758,000, compared to approximately $565,000 for the three months ended March 31, 2024. Net cash provided by investing activities for the three months ended March 31, 2025 consisted of the collection of our commercial loans of approximately $12,698,000, offset by the issuance of commercial loans of approximately $10,940,000. Net cash provided by investing activities for the three months ended March 31, 2024 consisted of the collection of our commercial loans of approximately $10,103,000, offset by the issuance of commercial loans of $9,538,000.

Previous wording

For the nine months ended September 30, 2024, net cash used in financing activities was $9,912,000, compared to approximately $7,805,000 for the nine months ended September 30, 2023. Net cash used in financing activities for the nine months ended September 30, 2024 reflects the partial repayment of the Webster Credit Line of approximately $5,982,000, dividend payments of approximately $3,918,000, repurchase of treasury shares of approximately $10,000 and deferred financing costs of approximately $2,000. Net cash used in financing activities for the nine months ended September 30, 2023 reflects the partial repayment of the Webster Credit Line of approximately $3,561,000, dividend payments of approximately $4,019,000, repurchase of treasury shares of approximately $186,000 and deferred financing costs of approximately $38,000.

Current wording

For the three months ended March 31, 2025, net cash used in financing activities was approximately $2,918,000, compared to approximately $2,999,000 for the three months ended March 31, 2024. Net cash used in financing activities for the three months ended March 31, 2025 reflects the repayment of the Webster Credit Line of approximately $1,602,000 and a dividend payment of approximately $1,315,000. Net cash used in financing activities for the three months ended March 31, 2024 reflects the repayment of the Webster Credit Line of approximately $1,702,000, a dividend payment of approximately $1,287,000 and the purchase of treasury shares of approximately $10,000.

Previous wording

Our Amended and Restated Credit and Security Agreement with Webster, Flushing Bank and Mizrahi provides for the Webster Credit Line. Currently, the Webster Credit Line provides us with a credit line of $32.5 million in the aggregate until February 28, 2026, secured by assignments of mortgages and other collateral. The interest rates relating to the Webster Credit Line equal (i) SOFR plus a premium, which rate aggregated approximately 8.4%, including a 0.5% agency fee, as of September 30, 2024, or (ii) a Base Rate (as defined in the Amended and Restated Credit Agreement) plus 2.00% and a 0.5% agency fee, as chosen by the Company for each drawdown.

Current wording

Our Amended and Restated Credit and Security Agreement with Webster, Flushing Bank and Mizrahi provides for the Webster Credit Line. Currently, the Webster Credit Line provides us with a credit line of $32.5 million in the aggregate until February 28, 2026, secured by assignments of mortgages and other collateral. The interest rates relating to the Webster Credit Line equal (i) SOFR plus a premium, which rate aggregated approximately 7.9%, including a 0.5% agency fee, as of March 31, 2025, or (ii) a Base Rate (as defined in the Amended and Restated Credit Agreement) plus 2.00% and a 0.5% agency fee, as chosen by the Company for each drawdown.

Previous wording

The Webster Credit Line contains various covenants and restrictions including covenants limiting the amount that the Company can borrow relative to the value of the underlying collateral, maintaining various financial ratios and limitations on the terms of loans the Company makes to its customers, limiting the Company’s ability to pay dividends under certain circumstances, and limiting the Company’s ability to repurchase its common shares, sell assets, engage in mergers or consolidations, grant liens, and enter into transactions with affiliates. In addition, the Webster Credit Line contains a cross default provision which will deem any default under any indebtedness owed by us or our subsidiary, MBC Funding II, as a default under the credit line. Under the Amended and Restated Credit Agreement, the Company may repurchase, redeem or otherwise retire its equity securities in an amount not to exceed ten percent of our annual net income from the prior fiscal year. Further, the Company may issue up to $20 million in bonds through its subsidiary, of which not more than $10 million of such bonds may be secured by mortgage notes receivable, and provided that the terms and conditions of such bonds are approved by Webster, subject to its reasonable discretion. In addition, the terms of the personal guaranty provided by Mr. Ran were amended such that the potential sums owed under such guaranty will not exceed the sum of $1,000,000 plus any costs relating to the enforcement of the personal guaranty.

Current wording

The Webster Credit Line contains various covenants and restrictions including covenants limiting the amount that the Company can borrow relative to the value of the underlying collateral, maintaining various financial ratios and limitations on the terms of loans the Company makes to its customers, limiting the Company’s ability to pay dividends under certain circumstances, and limiting the Company’s ability to repurchase its common shares, sell assets, engage in mergers or consolidations, grant liens, and enter into transactions with affiliates. In addition, the Webster Credit Line contains a cross default provision which will deem any default under any indebtedness owed by us or our subsidiary, MBC Funding II, as a default under the credit line. Under the Amended and Restated Credit Agreement, the Company may repurchase, redeem or otherwise retire its equity securities in an amount not to exceed ten percent of our annual net income from the prior fiscal year. Further, the Company may issue up to $20 million in bonds through its subsidiary, of which not more than $10 million of such bonds may be secured by mortgage notes receivable, and provided that the terms and conditions of such bonds are approved by Webster, subject to its reasonable discretion. In addition, Mr. Ran has provided a personal guaranty of the potential amounts owed under the Webster Credit Line, with such guaranty not to exceed the sum of $1,000,000 plus any costs relating to the enforcement of the personal guaranty.

Previous wording

We were in compliance with all covenants of the Webster Credit Line, as amended, as of September 30, 2024. At September 30, 2024, the outstanding amount under the Amended and Restated Credit Agreement was $19,170,268. The interest rate on the amount outstanding fluctuates daily. The rate, including a 0.5% agency fee, was approximately 8.4% as of September 30, 2024.

Current wording

We were in compliance with all covenants of the Webster Credit Line, as amended, as of March 31, 2025. At March 31, 2025, the outstanding amount under the Amended and Restated Credit Agreement was $14,825,735. The interest rate on the amount outstanding fluctuates daily. The rate, including a 0.5% agency fee, was approximately 7.9% as of March 31, 2025.

Previous wording

We anticipate that our current cash balances and the Amended and Restated Credit Agreement, as described above, together with our cash flows from operations will be sufficient to fund our operations for the next 12 months. In addition, from time to time, we receive short-term unsecured loans from our executive officers and others in order to provide us with the flexibility necessary to maintain a steady deployment of capital. However, we expect our working capital requirements to increase over the next 12 months as we continue to strive for growth at the right conditions.

Current wording

We expect that our current cash balances, the Amended and Restated Credit Agreement, as described above, and cash flows from operations will be sufficient to fund our operations over the next 12 months. We currently do not believe there will be any issues in extending the Webster Credit Line or securing a similar line from another bank before its expiration, and we plan to refinance the Notes prior to their maturity, though we cannot assure that we will be successful in doing so on favorable terms or at all. From time to time, we also receive short-term unsecured loans from our executive officers and others, providing us with the flexibility needed for the steady deployment of capital. However, we anticipate that our working capital requirements will increase in the coming 12 months as we continue to pursue growth under favorable conditions.