Cover
Cover - shares | 3 Months Ended | |
Mar. 31, 2024 | May 14, 2024 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity Interactive Data Current | Yes | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2024 | |
Document Fiscal Year Focus | 2024 | |
Document Fiscal Period Focus | Q1 | |
Entity Information [Line Items] | ||
Entity Registrant Name | ZONED PROPERTIES, INC. | |
Entity Central Index Key | 0001279620 | |
Entity File Number | 000-51640 | |
Entity Tax Identification Number | 46-5198242 | |
Entity Incorporation, State or Country Code | NV | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Shell Company | false | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Contact Personnel [Line Items] | ||
Entity Address, Address Line One | 8360 E. Raintree Drive | |
Entity Address, Address Line Two | #230 | |
Entity Address, City or Town | Scottsdale | |
Entity Address, State or Province | AZ | |
Entity Address, Postal Zip Code | 85260 | |
Entity Phone Fax Numbers [Line Items] | ||
City Area Code | (877) | |
Local Phone Number | 360-8839 | |
Entity Listings [Line Items] | ||
Title of 12(b) Security | N/A | |
No Trading Symbol Flag | true | |
Security Exchange Name | NONE | |
Entity Common Stock, Shares Outstanding | 12,101,548 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
ASSETS | ||
Cash | $ 1,519,903 | $ 3,099,795 |
Accounts receivable | 179,480 | 136,572 |
Deferred rent | 459,520 | 371,472 |
Lease incentive receivable | 442,661 | 449,541 |
Rental properties, net | 11,538,316 | 10,040,524 |
Prepaid expenses and other assets | 29,930 | 27,476 |
Escrow deposits | 278,716 | 177,048 |
Capitalized permit costs | 94,306 | 38,016 |
Property and equipment, net | 12,619 | 7,699 |
Operating lease right of use asset, net | 23,606 | 32,213 |
Investment in unconsolidated joint ventures | 4,923 | 4,923 |
Investment in equity securities | 50,000 | 50,000 |
Interest rate swap asset | 2,724 | |
Security deposits | 2,272 | 2,272 |
Total Assets | 14,638,976 | 14,437,551 |
LIABILITIES: | ||
Convertible note payable | 2,000,000 | 2,000,000 |
Notes payable, net | 6,094,523 | 6,111,702 |
Accounts payable | 174,972 | 116,947 |
Accrued expenses | 304,876 | 176,837 |
Lease liability | 24,081 | 32,867 |
Contract liabilities | 369,684 | 346,176 |
Derivative liability - interest rate swap, at fair value | 122,879 | |
Security deposits payable | 318,190 | 290,460 |
Total Liabilities | 9,286,326 | 9,197,868 |
Commitments and Contingencies (Note 11) | ||
STOCKHOLDERS’ EQUITY: | ||
Preferred stock, $0.001 par value, 5,000,000 shares authorized; 2,000,000 shares issued and outstanding on March 31, 2024 and December 31, 2023 ($1.00 per share liquidation preference or $2,000,000) | 2,000 | 2,000 |
Common stock: $0.001 par value, 100,000,000 shares authorized; 12,201,548 shares issued on March 31, 2024 and December 31, 2023, and 12,101,548 shares outstanding on March 31, 2024 and December 31, 2023, respectively | 12,202 | 12,202 |
Additional paid-in capital | 21,470,455 | 21,453,961 |
Treasury stock, at cost (100,000 shares on March 31, 2024 and December 31, 2023, respectively) | (15,000) | (15,000) |
Accumulated deficit | (16,117,007) | (16,213,480) |
Total Stockholders’ Equity | 5,352,650 | 5,239,683 |
Total Liabilities and Stockholders’ Equity | $ 14,638,976 | $ 14,437,551 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parentheticals) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 2,000,000 | 2,000,000 |
Preferred stock, shares outstanding | 2,000,000 | 2,000,000 |
Preferred stock, liquidation preference per share (in Dollars per share) | $ 1 | $ 1 |
Preferred stock, liquidation preference value (in Dollars) | $ 2,000,000 | $ 2,000,000 |
Common stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 12,201,548 | 12,201,548 |
Common stock, shares outstanding | 12,101,548 | 12,101,548 |
Treasury stock, at cost | 100,000 | 100,000 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
REVENUES: | ||
Property investment portfolio revenues | $ 691,292 | $ 610,474 |
Real estate services revenues | 145,760 | 77,550 |
Total revenues | 837,052 | 688,024 |
OPERATING EXPENSES: | ||
Compensation and benefits | 265,164 | 345,495 |
Professional fees | 122,270 | 142,662 |
Brokerage fees | 103,330 | |
General and administrative expenses | 78,776 | 78,923 |
Depreciation and amortization | 89,647 | 97,582 |
Real estate taxes | 27,356 | 31,748 |
Property portfolio business development costs | 21,600 | 15,000 |
Total operating expenses, net | 708,143 | 711,410 |
INCOME (LOSS) FROM OPERATIONS | 128,909 | (23,386) |
OTHER INCOME (EXPENSES): | ||
Interest expenses | (158,039) | (154,500) |
Income (loss) from derivative - interest rate swap | 125,603 | (130,293) |
Total other income (expenses), net | (32,436) | (284,793) |
INCOME (LOSS) BEFORE EQUITY METHOD LOSSES | 96,473 | (308,179) |
EQUITY METHOD LOSS: | ||
Equity method loss from unconsolidated joint ventures | (1,469) | |
Total equity method loss | (1,469) | |
NET INCOME (LOSS) | $ 96,473 | $ (309,648) |
NET INCOME (LOSS) PER COMMON SHARE: | ||
Basic (in Dollars per share) | $ 0.01 | $ (0.03) |
Diluted (in Dollars per share) | $ 0.01 | $ (0.03) |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||
Basic (in Shares) | 12,101,548 | 12,201,548 |
Diluted (in Shares) | 12,501,548 | 12,201,548 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) | Preferred Stock | Common Stock | Additional Paid-in Capital | Treasury Stock | Accumulated Deficit | Total |
Balance at Dec. 31, 2022 | $ 2,000 | $ 12,202 | $ 21,337,318 | $ (15,673,222) | $ 5,678,298 | |
Balance (in Shares) at Dec. 31, 2022 | 2,000,000 | 12,201,548 | ||||
Accretion of stock based compensation related to stock options issued | 43,262 | 43,262 | ||||
Net loss | (309,648) | (309,648) | ||||
Balance at Mar. 31, 2023 | $ 2,000 | $ 12,202 | 21,380,580 | (15,982,870) | 5,411,912 | |
Balance (in Shares) at Mar. 31, 2023 | 2,000,000 | 12,201,548 | ||||
Balance at Dec. 31, 2023 | $ 2,000 | $ 12,202 | 21,453,961 | $ (15,000) | (16,213,480) | 5,239,683 |
Balance (in Shares) at Dec. 31, 2023 | 2,000,000 | 12,201,548 | 100,000 | |||
Accretion of stock based compensation related to stock options issued | 16,494 | 16,494 | ||||
Net loss | 96,473 | 96,473 | ||||
Balance at Mar. 31, 2024 | $ 2,000 | $ 12,202 | $ 21,470,455 | $ (15,000) | $ (16,117,007) | $ 5,352,650 |
Balance (in Shares) at Mar. 31, 2024 | 2,000,000 | 12,201,548 | 100,000 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income (loss) | $ 96,473 | $ (309,648) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation expense | 89,647 | 97,582 |
Amortization of debt discount | 4,615 | 4,615 |
Stock option expense | 16,494 | 43,262 |
Loss on forfeited escrow deposit | 21,600 | 15,000 |
Lease costs | (179) | 42 |
Loss from unconsolidated joint ventures | 1,469 | |
(Income) loss from interest rate swap | (125,603) | 130,293 |
Change in operating assets and liabilities: | ||
Accounts receivable | (42,908) | 20,500 |
Deferred rent receivable | (88,048) | (102,327) |
Lease incentive receivable | 6,880 | 6,881 |
Prepaid expenses and other assets | (2,454) | 7,502 |
Security deposit | ||
Accounts payable | 58,025 | 11,880 |
Accrued expenses | 128,038 | (29,262) |
Contract liabilities | 23,508 | 49,700 |
Security deposits payable | 27,730 | 56,100 |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 213,818 | 3,589 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Lease incentive provided to tenant | ||
Purchases of rental properties and improvements | (1,585,878) | (992,214) |
Purchases of property and equipment | (6,480) | |
Proceeds from sale of property and equipment | ||
Increase in capitalized permit costs | (56,290) | (6,242) |
Increase in escrow deposits | (123,268) | (73,000) |
NET CASH USED IN INVESTING ACTIVITIES | (1,771,916) | (1,071,456) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Repayment of notes payable | (21,794) | (20,258) |
NET CASH USED IN FINANCING ACTIVITIES | (21,794) | (20,258) |
NET DECREASE IN CASH | (1,579,892) | (1,088,125) |
CASH, beginning of period | 3,099,795 | 4,335,840 |
CASH, end of period | 1,519,903 | 3,247,715 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||
Interest paid | 154,766 | 172,253 |
NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Acquisition of rental properties financed through note payable | 430,000 | |
Reclassification of escrow deposits for acquisition of rental properties | $ 590,000 |
Organization and Nature of Oper
Organization and Nature of Operations | 3 Months Ended |
Mar. 31, 2024 | |
Organization and Nature of Operations [Abstract] | |
ORGANIZATION AND NATURE OF OPERATIONS | NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS Zoned Properties, Inc. (“Zoned Properties” or the “Company”) was incorporated in the State of Nevada on August 25, 2003. In October 2013, the Company changed its name to Zoned Properties, Inc. and in April 2014, the Company shifted its business model to address commercial real estate in the regulated cannabis industry. Zoned Properties is a technology-driven property investment company focused on acquiring value-add real estate within the regulated cannabis industry in the United States. The Company aspires to innovate within the real estate development sector, focusing on direct-to-consumer real estate that is leased to the best-in-class cannabis retailers. Headquartered in Scottsdale, Arizona, Zoned Properties is redefining the approach to commercial real estate investment through its standardized investment model backed by its proprietary property technology. Zoned Properties has developed a national ecosystem of real estate services to support its real estate development model, including a commercial real estate brokerage and a real estate advisory practice. The Company operates in two organized segments; (1) the operations, leasing and management of its commercial properties, herein known as the “Property Investment Portfolio” segment, and (2) the advisory, brokerage and technology services related to commercial properties, herein known as the “Real Estate Services” segment. The Company targets commercial properties that face unique zoning or development challenges, identifies solutions that can potentially have a major impact on their commercial value, and then works to acquire the properties while securing long-term, absolute-net leases. The Company does not grow, harvest, sell or distribute cannabis or any substances regulated under United States law such as the Controlled Substance Act of 1970, as amended (the “CSA”). The Company has the following wholly owned subsidiaries: ● Chino Valley Properties, LLC (“Chino Valley”) was organized in the State of Arizona on April 15, 2014. ● Kingman Property Group, LLC (“Kingman”) was organized in the State of Arizona on April 15, 2014. ● Green Valley Group, LLC (“Green Valley”) organized in the State of Arizona on April 15, 2014. ● Zoned Arizona Properties, LLC (“Zoned Arizona”) was organized in the State of Arizona on June 2, 2017. ● Zoned Advisory Services, LLC (“Zoned Advisory”) was organized in the State of Arizona on July 27, 2018. ● Zoned Properties Brokerage, LLC (“Arizona Brokerage”) was organized in the State of Arizona on March 17, 2021. ● ZP Data Platform 1, LLC (“ZP Data 1”) was organized in the State of Arizona on April 14, 2021 (inactive). ● ZP Data Platform 2, LLC (“ZP Data 2”) was organized in the State of Arizona on June 21, 2022. ● ZP RE Holdings, LLC (“ZPRE Holdings”) was organized in the State of Arizona on September 20, 2022. ● ZP Brokerage MS, LLC (“Mississippi Brokerage”) was organized in the State of Mississippi on October 4, 2022 (inactive). ● ZP Brokerage FL, LLC (“Florida Brokerage”) was organized in the State of Florida on October 20, 2022. ● ZP Brokerage AL, LLC (“Alabama Brokerage”) was organized in the State of Alabama on October 20, 2022 (inactive). ● ZP RE MI Woodward, LLC (“ZP Woodward”) was organized in the State of Michigan on November 22, 2022 ● ZP Brokerage MO, LLC (“Missouri Brokerage”) was organized in the State of Missouri on November 30, 2022. ● ZP RE IL Ashland, LLC (“ZP Ashland”) was organized in the State of Illinois on February 14, 2024. The Company also maintains a 50% equity interest in two joint ventures (see Note 5). During 2023, the Company dissolved the following wholly owned subsidiary: ● ZP RE AZ Stone, LLC (“ZP Stone”) was organized in the State of Arizona on October 19, 2022. This subsidiary was dissolved on March 28, 2023. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2024 | |
Summary of Significant Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation and principles of consolidation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation. The unaudited consolidated financial statements for the three months ended March 31, 2024 and 2023 have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, all adjustments necessary to present fairly our consolidated financial position, results of operations, and cash flows as of March 31, 2024 and 2023, and for the periods then ended, have been made. Those adjustments consist of normal and recurring adjustments. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. Accordingly, the unaudited consolidated financial statements do not include all the information and notes necessary for a comprehensive presentation of our financial position and results of operations and should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2023 included in our Annual Report on Form 10-K filed with the SEC on March 26, 2024. Liquidity As reflected in the accompanying unaudited consolidated financial statements, the Company generated net income of $96,473 and cash provided by operations of $207,218 during the three months ended March 31, 2024. Additionally, as of March 31, 2024, the Company had cash of $1,519,903 and stockholders’ equity of $5,352,650. The cash balance and positive net cash provided by operating activities serves to mitigate the conditions that historically raised substantial doubt about the Company’s ability to continue as a going concern. The Company believes that the Company has sufficient cash and positive cash flows to meet its obligations for a minimum of twelve months from the date of this filing. Use of estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates for the three months ended March 31, 2024 and 2023 include the collectability of accounts receivable, valuation of investment in equity securities, the useful life of rental properties and property and equipment, assumptions used in assessing impairment of long-term assets including rental property and investment in unconsolidated joint ventures, valuation allowances for deferred tax assets, the fair value of derivative asset or liability related to interest rate swap, and the fair value of non-cash equity transactions, including options and stock-based compensation. Risks and uncertainties The Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure. The Company conducts a significant portion of its business in states that have legalized and regulated cannabis. Additionally, the Company’s tenants operate in the state-legalized and state-regulated cannabis industry. Consequently, any significant economic downturn in the state markets in which the Company operates or any changes in the federal government’s enforcement of current federal laws or changes in state laws could potentially have a negative effect on the Company’s business, results of operations and financial condition. Additionally, substantially all of the Company’s real estate properties are leased under triple-net leases to tenants (each, a “Significant Tenant” and collectively, the “Significant Tenants”). For the three months ended March 31, 2024 and 2023, revenues associated with Significant Tenants amounted to $596,707 and $592,848, respectively, which represents 71.3% and 86.1% of the Company’s total revenues, respectively (see Note 3). Fair value of financial instruments The carrying amounts reported in the unaudited consolidated balance sheets for cash, accounts receivable, prepaid expenses and other assets, capitalized permit costs, escrow deposits, accounts payable, accrued expenses, and other payables approximate their fair market value based on the short-term maturity of these instruments. The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement The guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories: ● Level 1: Quoted market prices in active markets for identical assets or liabilities. ● Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. ● Level 3: Unobservable inputs that are not corroborated by market data. Other than the interest rate swap, the Company did not identify any other assets or liabilities that are required to be presented on the balance sheets at fair value, on a recurring basis, in accordance with ASC Topic 820. The following table represents the Company’s fair value hierarchy of its financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023. March 31, 2024 December 31, 2023 Description Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Interest rate swap asset (liability) $ — $ 2,724 $ — $ — $ (122,879 ) $ — Interest rate swap In connection with a bank loan executed in 2022, the Company entered into an interest rate swap agreement to manage interest rate risk related to debt that accrues interest at variable rates. The Company accounts for its interest rate swap agreement in accordance with the guidance related to derivatives and hedging activities. The Company is exposed to market risk from changes in interest rates. The Company agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed upon notional principal amount. Interest payments receivable and payable under the terms of the interest rate swap agreement are accrued over the period to which the payment relates and the net difference is treated as an adjustment of interest expense related to the underlying liability. Because the variable interest rates used to calculate payments under the terms of the swap agreement are calculated using different benchmarks than those included in the Company’s variable rate debt agreement, the swap agreement is not considered an effective cash flow hedge. Accordingly, changes in the underlying market value of the remaining swap payments are recognized into income as an increase or decrease to other income (expense) each reporting period. In accordance with ASC 820, Fair Value Measurements and Disclosures The estimated fair value of the interest rate swap agreement is determined by the Counterparty based on market data used by Counterparty and is reflected as a derivative asset or liability on the accompanying unaudited consolidated balance sheet with changes in the fair value reflected in change in fair value of interest rate swap on the accompanying unaudited consolidated statements of operations. The Company uses derivative financial instruments only to manage interest rate risks and not as investment vehicles. Information regarding the interest rate swap is as follows: Description Notional Interest Maturity Fair Value of Fair Value of December 7, 2022 interest rate swap $ 4,450,642 7.65 % December 10, 2032 $ 2,724 $ 122,879 Cash Cash is carried at cost and represents cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. The Company had no cash equivalents on March 31, 2024 and December 31, 2023. The Company’s cash is held at major commercial banks, which may at times exceed the Federal Deposit Insurance Corporation (“FDIC”) limit. To date, the Company has not experienced any losses on its invested cash. On March 31, 2024 and December 31, 2023, the Company had approximately $993,000 and $2,555,000, respectively, of cash in excess of FDIC limits of $250,000. Any loss incurred or a lack of access to such funds above the FDIC limit could have a significant adverse impact on the Company’s financial condition, results of operations and cash flows. Accounts receivable The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries under the current expected credit loss method. The allowance is based on an analysis of historical bad debt experience, current receivables aging and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. On January 1, 2023, the Company adopted ASC 326, “Financial Instruments - Credit Losses”. In accordance with ASC 326, an allowance is maintained for estimated forward-looking losses resulting from the possible inability of customers to make required payments (current expected losses). The amount of the allowance is determined principally on the basis of past collection experience and known financial factors regarding specific customers. The expense associated with the allowance for doubtful accounts on accounts receivable is recognized in general and administrative expenses. Investment in unconsolidated joint ventures The Company has equity investments in various privately held entities. The Company accounts for these investments either under the equity method or cost method of accounting depending on the Company’s ownership interest and level of influence. Investments accounted for under the equity method are recorded based upon the amount of the Company’s investment and adjusted each period for its share of the investee’s income or loss. Investments are reviewed for changes in circumstance or the occurrence of events that suggest an other than temporary event where our investment may not be recoverable. The Company evaluates its investments in these entities for consolidation. It considers its percentage interest in the joint venture, evaluation of control and whether a variable interest entity exists when determining whether or not the investment qualifies for consolidation or if it should be accounted for as an unconsolidated investment under the equity method of accounting. If an investment qualifies for the equity method of accounting, the Company’s investment is recorded initially at cost, and subsequently adjusted for equity in net income (loss) and cash contributions and distributions. The net income or loss of an unconsolidated investment is allocated to its investors in accordance with the provisions of the operating agreement of the entity. The allocation provisions in these agreements may differ from the ownership interest held by each investor. Differences, if any, between the carrying amount of our investment in the respective joint venture and the Company’s share of the underlying equity of such unconsolidated entity are amortized over the respective lives of the underlying assets as applicable. These items are reported as a single line item in the statements of operations as income or loss from investments in unconsolidated affiliated entities. Long-term investments Long-term investments include investments in equity securities of entities over which the Company does not have a controlling financial interest or significant influence and are accounted for at fair value. Equity investments without readily determinable fair values are measured at cost with adjustments for observable changes in price or impairments (referred to as the “measurement alternative”). In applying the measurement alternative, the Company performs a qualitative assessment on a quarterly basis and recognizes an impairment if there are sufficient indicators that the fair value of the equity investments is less than carrying values. Changes in value are recorded in non-operating income (loss). On March 31, 2024 and December 31, 2023, long-term investments consisted of an investment in convertible preferred stock that does not have a readily determinable fair value (see Note 5). Rental properties Rental properties are carried at cost, less accumulated depreciation and amortization. Betterments, major renovations and certain costs directly related to the improvement of rental properties are capitalized. Maintenance and repair expenses are charged to expense as incurred. Depreciation is recognized on a straight-line basis over estimated useful lives of the assets, which range from 5 to 39 years. Tenant improvements paid for by the Company are amortized on a straight-line basis over the lives of the related leases, which approximate the useful lives of the assets. Upon the acquisition of real estate, the Company assesses the fair value of acquired assets (including land, buildings and improvements, identified intangibles, such as acquired above-market leases and acquired in-place leases) and acquired liabilities (such as acquired below-market leases) and allocates the purchase price based on these assessments. The Company assesses fair value based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known trends, and market/economic conditions. The Company’s rental properties are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis. An impairment loss is measured based on the excess of the property’s carrying amount over its estimated fair value. Impairment analyses are based on our current plans, intended holding periods and available market information at the time the analyses are prepared. If the Company’s estimates of the projected future cash flows, anticipated holding periods, or market conditions change, the Company’s evaluation of impairment losses may be different and such differences could be material to its consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results. For the three months ended March 31, 2024 and 2023, the Company did not record any impairment losses. The Company has land which is not subject to depreciation. Escrow deposits The Company is in the business of pursuing real estate acquisitions and investments that may include various contractual instruments to secure a property, such as an Option Agreement or a Purchase and Sale Agreement. These agreements often include the requirement to make escrow deposits. Escrow deposits include cash deposits made by the Company for the future acquisition of properties or for the option to acquire a property. In most cases, upon closing of the acquisition of a property, the escrow deposit will be applied to the purchase price. In some cases, the Company may discontinue pursuit of an acquisition of a property and therefore terminate an existing agreement, which can cause forfeiture of escrow deposits if those deposits are non-refundable. During the three months ended March 31, 2024 and 2023, the Company forfeited escrow deposits of $21,600 and $15,000, respectively, which is reflected in operating expenses as part of property portfolio business development costs on the accompanying unaudited consolidated statements of operations. On March 31, 2024 and December 31, 2023, escrow deposits amounted to $278,716 and $177,048, respectively. Property and equipment Property and equipment is stated at cost, less accumulated depreciation. Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful lives. The Company uses a five-year life for office equipment, seven years for furniture and fixtures, and five to ten years for vehicles. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations. The Company examines the possibility of decreases in the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. Revenue recognition Property Investment Portfolio Revenues Rental income is accounted for pursuant to ASC Topic 842 “Leases” and includes base rents that each tenant pays in accordance with the terms of its respective lease and is reported on a straight-line basis over the non-cancellable term of the lease, which includes the effects of rent abatements under the leases. The Company commences rental revenue recognition when the tenant takes possession of the leased space or controls the physical use of the leased space and the leased space is substantially ready for its intended use. If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that can be taken in the form of cash or a credit against the tenant’s rent) that is funded by the Company is treated as a lease incentive receivable and amortized as a reduction of revenue over the lease term. Currently, the Company’s leases provide for payments with fixed monthly base rents over the term of the leases or annual percentage increases in base rent over the term of the lease. The leases also require the tenant to remit estimated monthly payments to the Company for property taxes and common area maintenance. These payments are recorded as rental income and the related property tax expense is reflected separately on the accompanying unaudited consolidated statements of operations. Real Estate Services Revenues The Company follows ASC Topic 606, Revenue from Contracts with Customers Revenues from advisory services is recognized when the Company performs services pursuant to its agreements with clients and collectability is probable. Brokerage revenues primarily consist of real estate sales commissions and are recognized upon the successful completion of all required services which is likely to occur upon a lease commencement, when escrow closes on the sale of a property, or as otherwise negotiated between the Brokerage and its clients. In accordance with the guidelines established for reporting revenue gross as a principal versus net as an agent in ASC Topic 606, the Company records commission revenues and expenses on a gross basis. Of the criteria listed in ASC Topic 606, the Company is the primary obligor in the transaction, does not have inventory risk, performs all or part of the service, has credit risk, and has wide latitude in establishing the price of services rendered and discretion in selection of agents and determination of service specifications. Brokerage revenues that are payable upon payment of rent or other events beyond the Company’s control are recognized upon the occurrence of such events. Contract liabilities Contract liabilities include advisory fees received in advance that are deferred and recognized when the services are complete or over the actual or expected contract term, rental revenue received in advance, and other deferred revenue for when the Company receives consideration from an agreement before certain criteria have been met for revenue to be recognized in conformity with GAAP. During the three months ended March 31, 2024 and 2023, contract liabilities activities were as follows: Three Months Three Months Balance at beginning of period $ 346,176 $ 303,315 Rental payments received in advance 82,650 56,506 Accretion of contract liabilities to revenue (59,142 ) (4,306 ) Customer refund - (2,500 ) Balance at end of period $ 369,684 $ 353,015 Lease accounting The FASB’s ASC Topic 842, “Leases” For leases entered into on or after the effective date, where the Company is the lessor, at the inception of the contract, the Company assesses whether the contract is a sales-type, direct financing or operating lease by reviewing the terms of the lease and determining if the lessee obtains control of the underlying asset implicitly or explicitly. If a change to a pre-existing lease occurs, the Company evaluates if the modification results in a separate new lease or a modified lease. A new lease results when a modification provides additional right of use. The new lease or modified lease is then reassessed to determine its classification based on the modified terms. As disclosed in Note 3, on January 24, 2022 and effective on March 1, 2022, the Chino Valley lease was amended and the monthly base rent was increased to $87,581 due to additional space of 30,000 square feet being leased to the lessee, increasing the premises to a total of 97,312 square feet of operational space. In connection with this lease amendment, the Company paid $500,000 to the tenant as a tenant improvement allowance or lease incentive for investment into the premises, which was capitalized as a lease incentive receivable and is recognized on a straight-line basis over the remaining lease term as a reduction to the lease income. The increase in monthly rent was commensurate with the additional space being leased; therefore, this modification qualifies as a separate contract under ASC 842 which does not require lease classification reassessment. The Company excludes short-term leases having initial terms of 12-months or less as an accounting policy election and recognizes rent expense on a straight-lines basis over the lease term. The Company records revenues from rental properties for its operating leases where it is the lessor on a straight-line basis. Any revenue on the straight-line basis exceeding the monthly payment amount required on the operating lease is reflected as deferred rent. In 2020, the Company amended its leases for which it is the lessor on its Chino Valley, Tempe, Kingman and Green Valley properties. The amendments resulted in an abatement of rent for the months of June and July 2020. Additionally, in connection with an operating lease on the Company’s Michigan property acquired in December 2022, the Company abated certain lease payments for the period from December 2022 to March 2023, and in connection with an operating lease on the Company’s Chicago property acquired in January 2024, the Company abated certain lease payments for the period from January 2024 to August 2024. These rent abatements and the effect of recording rent on a straight-line basis resulted in aggregate deferred rent as of March 31, 2024 and December 31, 2023 of $459,520 and $371,472, respectively (see Note 3). Additionally, if the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that can be taken in the form of cash or a credit against the tenant’s rent) that is funded is treated as a lease incentive receivable and amortized as a reduction of revenue over the lease term. For contracts entered into on or after the effective date, where the Company is the lessee, at the inception of a contract, the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right to direct the use of the asset. The Company allocates the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. For leases where the Company is a lessee, primarily for the Company’s administrative office lease, the Company analyzed if it would be required to record a lease liability and a right of use asset on its consolidated balance sheets at fair value upon adoption of ASC 842. Operating lease right of use asset represents the right to use the leased asset for the lease term and operating lease liability is recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company used its incremental borrowing rate of 6% based on the information available at the adoption date or execution of a lease agreement in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the unaudited consolidated statements of operations. Basic and diluted loss per share Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period using the treasury stock method and as-if converted method. Potentially dilutive common shares and participating securities are excluded from the computation of diluted shares outstanding if they would have an anti-dilutive impact on the Company’s net losses. The Company’s preferred stock is considered a participating security since the preferred shares are entitled to dividends equal to common share dividends and accordingly, are included in the computation of earnings per share pursuant to the two-class method. The two-class method of computing (loss) income per share is an earnings allocation formula that determines (loss) income per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. The following table presents a reconciliation of basic and diluted net income (loss) per common share: Three Months Ended 2024 2023 Net income (loss) per common share - basic: Net income (loss) allocated to common stockholders $ 96,473 $ (309,648 ) Weighted average common shares outstanding – basic 12,101,548 12,201,548 Net income (loss) per common share – basic $ 0.01 $ (0.03 ) Net income (loss) per common share - diluted: Net income (loss) allocated to common shareholders – basic $ 96,473 $ (309,648 ) Add: interest of convertible debt 30,000 - Numerator for income (loss) per common share – basic $ 126,473 $ (309,648 ) Weighted average common shares outstanding – diluted 12,101,548 12,201,548 Add: dilutive shares related to: Stock options - - Convertible debt 400,000 - Weighted average common shares outstanding – diluted 12,501,548 12,201,548 Net income (loss) per common share – diluted $ 0.01 $ (0.03 ) The following potentially dilutive shares have been excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive for the three months ended March 31, 2024 and 2023. March 31, 2024 2023 Convertible debt - 400,000 Stock options 2,262,500 2,352,500 2,262,500 2,752,500 Segment reporting The Company operates in two reportable segments which consist of (1) the operations, leasing and management of its leased commercial properties, herein known as the “Property Investment Portfolio” segment, and (2) advisory and brokerage services related to commercial properties, herein known as the “Real Estate Services” segment. The Company has determined that these reportable segments were strategic business units that offered different products. Currently, these reportable segments are being managed separately based on the fundamental differences in their operations. Income tax Deferred income tax assets and liabilities arise from temporary differences between the financial statements and tax basis of assets and liabilities, as measured by the enacted tax rates, which are expected to be in effect when these differences reverse. Deferred tax assets and liabilities are classified as current or non-current, depending upon the classification of the asset or liabilities to which they relate. Deferred tax assets and liabilities not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company follows the provisions of FASB ASC 740-10, “Uncertainty in Income Taxes”. Certain recognition thresholds must be met before a tax position is recognized in the financial statements. An entity may only recognize or continue to recognize tax positions that meet a “more-likely-than-not” threshold. The Company does not believe it has any uncertain tax positions as of March 31, 2024 and December 31, 2023 that would require either recognition or disclosure in the accompanying unaudited consolidated financial statements. Stock-based compensation Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation – Stock Compensation Improvements to Employee Share-Based Payment Accounting. Recently issued accounting pronouncements Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying unaudited consolidated financial statements. |
Concentrations and Risks
Concentrations and Risks | 3 Months Ended |
Mar. 31, 2024 | |
Concentrations and Risks [Abstract] | |
CONCENTRATIONS AND RISKS | NOTE 3 – CONCENTRATIONS AND RISKS Lease Agreements with Significant Tenants Our property located in Chino Valley is leased by Broken Arrow Herbal Center, Inc. (“Broken Arrow”), doing business as Hana Dispensaries. Our property located in Green Valley is leased by Broken Arrow, doing business as Hana Dispensaries. Our property located in Kingman is leased by CJK, Inc. (“CJK”), and subleased by Helping Camo LLC, doing business as Story Cannabis. Our property located in Tempe is leased by VSM, LLC (“VSM”), doing business as Green Dot Labs. Our property located in Pleasant Ridge is leased by Rapid Fish, LLC (“Rapid Fish”), doing business as NOXX Cannabis. Our property located in Chicago is leased by JG IL LLC (“Justice Grown”), doing business as Justice Cannabis Co. The Company considers a tenant whose annual base rent exceeds over 10% of the Company’s annual rental income to be a significant tenant. The Tempe Lease (leased by VSM), the Chino Valley Lease and Green Valley Lease (leased by Broken Arrow), and the Woodward Lease (leased by Rapid Fish) are considered significant and the tenants are referred to as the Significant Tenants. Chino Valley, AZ On May 1, 2018, Chino Valley and Broken Arrow entered into a Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Chino Valley and Broken Arrow (the “2018 Chino Valley Lease”), with a term of 22 years, expiring April 30, 2040, and the abatement of rent that would otherwise have been due for the month of April 2018 under the prior Chino Valley Lease. The 2018 Chino Valley Lease provided for payment by Broken Arrow of a fixed monthly base rent of $35,000, as well as real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed against Chino Valley. In addition, pursuant to the terms of the 2018 Chino Valley Lease, Broken Arrow agreed to maintain insurance in full force during the term of the 2018 Chino Valley Lease and any other period of occupancy of the premises by Broken Arrow. On January 1, 2019, Chino Valley and Broken Arrow entered into that the First Amendment to the 2018 Chino Valley Lease, pursuant to which the monthly base rent was increased from $35,000 to $40,000. Except for the increase in base rent, the terms of the 2018 Chino Valley Lease remain in full force and effect. On May 29, 2020, Chino Valley and Broken Arrow entered into a Second Amendment to the 2018 Chino Valley Lease, as amended (the “2020 Chino Valley Amendment”), effective May 31, 2020 (“Effective Date”). Pursuant to the terms of the 2020 Chino Valley Amendment, among other things, the base rent was adjusted to $32,800 per month, and the base rent was abated from June 1, 2020 to July 31, 2020. Any increase in the rentable area of the leased premises will result in an increase in all amounts calculated based on the same, including, without limitation, base rent. Pursuant to the terms of the 2020 Chino Valley Amendment, the parties agreed that if there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially and adversely affected as mutually and reasonably determined by Chino Valley and Broken Arrow, Broken Arrow may terminate the 2018 Chino Valley Lease, as amended, by delivering written notice to Chino Valley, together with a termination payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5% of the base rent which would have been earned after termination for the balance of the term. In addition, the parties agreed that from the period from the Effective Date to June 30, 2022 (the “Improvement Period”), Broken Arrow will and/or Broken Arrow will cause its affiliate, CJK, to invest a combined total of at least $8,000,000 of improvements (“Investment by Tenants”) in and to the property that is the subject of the Chino Valley Lease and the property that is the subject of the Tempe Lease (discussed below, and collectively referred to as the “Facilities”). The Company’s Significant Tenants completed the Investment by Tenants to the Facilities totaling in excess of $8,000,000 and have satisfied the contractual obligations related to the same. On August 23, 2021, Chino Valley and Broken Arrow entered into the Third Amendment (the “Third Chino Valley Amendment”) to the 2018 Chino Valley Lease, as amended (the “Chino Valley Lease”), effective September 1, 2021. The parties previously agreed that the base rental payments under the Chino Valley Lease would increase commensurate to any and all expanded and operational square footage on the premises by calculating the fixed rate of $0.82 per square foot per month by the new operational square footage. Accordingly, in the Third Chino Valley Amendment, the parties agreed that, as of September 1, 2021, the rental payment is increased to $55,195 per month base rental payment, plus additional rental payments, as a result of the increase in the square footage to 67,312 square feet of operational space. This lease modification qualified as a separate contract as the modification grants the tenant additional right of use not included in the original lease, as amended, and the increase in monthly rent payments is commensurate with the standalone price for the additional square footage being leased. On January 24, 2022 and effective on March 1, 2022, Chino Valley and Broken Arrow entered into the Fourth Amendment (the “Fourth Chino Valley Amendment”) to the Chino Valley Lease, as amended. Pursuant to the terms of the Fourth Chino Valley Amendment, the parties acknowledge that an additional 30,000 square feet have become operational, increasing the premises to a total of 97,312 square feet of operational space. In connection with the Fourth Chino Valley Amendment, the Company paid $500,000 to Tenant as a tenant improvement allowance or lease incentive for investment into the premises, which was capitalized as a lease incentive receivable and is recognized on a straight-line basis over the remaining lease term as a reduction to the lease income. Pursuant to the terms of the Fourth Chino Valley Amendment, effective March 1, 2022, the monthly base rent was increased to $87,581, representing an increase from $0.82 per square foot to $0.90 per square foot, for all current and future operational square footage that may be developed as the premises continues to expand. Green Valley, AZ On May 1, 2018, Green Valley and Broken Arrow entered into a Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Green Valley and Broken Arrow (the “Green Valley Lease”), with a term of 22 years, expiring April 30, 2040, and the abatement of rent that would otherwise have been due for the month of April 2018 under the prior Green Valley Lease. The Green Valley Lease provided for payment by Broken Arrow of a fixed monthly base rent of $3,500, as well as real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed against Chino Valley. In addition, pursuant to the terms of the Green Valley Lease, Broken Arrow agreed to maintain insurance in full force during the term of the Green Valley Lease and any other period of occupancy of the premises by Broken Arrow. On May 29, 2020, Green Valley and Broken Arrow entered into the First Amendment (the “Green Valley Amendment”) to the Green Valley Lease, effective May 31, 2020. Pursuant to the terms of the Green Valley Amendment, among other things, the parties agreed to abate the fixed base rent of $3,500 from June 1, 2020 to July 31, 2020. In addition, the Green Valley Amendment provides that any increase in the rentable area of the leases premises will result in an increase in all amounts calculated based on the same, including, without limitation, base rent. The parties also agreed that if there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially and adversely affected as mutually and reasonably determined by Green Valley and Broken Arrow, Broken Arrow may terminate the Green Valley Lease by delivering written notice to Green Valley, together with a termination payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5% of the base rent which would have been earned after termination for the balance of the term. Tempe, AZ On May 1, 2018, Zoned Arizona and CJK entered into that certain Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Zoned Arizona and CJK (the “Tempe Lease”), with a term of 22 years, expiring April 30, 2040, and the abatement of rent that would otherwise have been due for the month of April 2018 under the prior Tempe Leases. The Tempe Lease provided for payment by CJK of a fixed monthly base rent of $33,500, as well as real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed against Zoned Arizona. In addition, pursuant to the terms of the Tempe Lease, CJK agreed to maintain insurance in full force during the term of the Tempe Lease and any other period of occupancy of the premises by CJK. On May 29, 2020, Zoned Arizona and CJK entered into the First Amendment (the “Tempe Amendment”) to the Tempe Lease, effective May 31, 2020. Pursuant to the terms of the Tempe Amendment, among other things, the base rent was increased to $49,200 per month, and the base rent was abated from June 1, 2020 to July 31, 2020. Any increase in the rentable area of the leased premises will result in an increase in all amounts calculated based on the same, including, without limitation, base rent. Pursuant to the terms of the Tempe Amendment, the parties agreed that if there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially and adversely affected as mutually and reasonably determined by Zoned Arizona and CJK, CJK may terminate the Tempe Lease by delivering written notice to Zoned Arizona, together with a termination payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5% of the base rent which would have been earned after termination for the balance of the term. In addition, under the Tempe Amendment the parties agreed to an Investment by Tenant (as defined above in the subheading Chino Valley In connection with a promissory note (See Note 8), on July 11, 2022 and reaffirmed on December 7, 2022, the Company entered into a Deed of Trust Agreement that secures the Company’s performance under the promissory note. The Deed of Trust Agreement transfers and assigns to the lender the right to sell the assets of Tempe and rights to rental income in case of default under the promissory note. On November 30, 2022, Zoned Arizona, CJK, and VSM entered into that Second Amendment (the “Tempe Second Amendment”) to the Tempe Lease, as amended. Concurrently with the execution of the Tempe Second Amendment: (i) CJK assigned all its interest in the Tempe Lease to VSM (the “Assignment”), and (ii) VSM subleased a portion of the Premises (as defined in the Tempe Lease), pursuant to that certain Sublease dated November 30, 2022 between VSM, as sublessor, and CJK, as sublessee. Pursuant to the terms of the Tempe Second Amendment, among other things, and in consideration of Zoned Arizona’s agreement to enter into the Tempe Second Amendment: (i) VSM paid Zoned Arizona $300,000 (the “Assignment Fee”), (ii) VSM agreed to commit at least $3,000,000 to be spent toward capital improvements to the Premises within two years after the effective date of the Tempe Second Amendment (the “Capital Commitment”), (iii) VSM agreed to deposit an additional security deposit (the “Additional Security Deposit”) of $147,600 to be held by Zoned Arizona per the terms of the Tempe Lease, and (iv) VSM agreed to cause its affiliate, GDL Inc. (doing business as Green Dot Labs) (“GDL”) to execute and deliver to Zoned Arizona that Guaranty of Payment and Performance dated on the same date as the Tempe Amendment, which Guaranty of Payment and Performance requires GDL to guarantee and be liable for VSM’s compliance with and performance under the Tempe Lease. The Guaranty of Payment and Performance was entered into on November 30, 2022. If VSM fails to deliver to Zoned Arizona invoices or other documentation acceptable to Zoned Arizona showing the Capital Commitment has been satisfied in a timely manner, VSM will be in default under the Tempe Lease. No other terms of the Tempe Lease were modified. Therefore, the Company’s accounting for the lease remained unchanged subsequent to the Tempe Second Amendment and Assignment. Pursuant to ASC 842-10-25, the lease modification was not accounted for as a separate contract and the Company shall account for the modification as if it were a termination of the existing lease and the creation of a new lease that commenced on the effective date of the modification. Accordingly, the Company recorded the $300,000 as a contract liability and will amortize the $300,000 Assignment Fees into rental revenue on a straight-line basis over the remaining term of the lease through April 2040. On March 31, 2024 and December 31, 2023, contract liability related to this lease modification amounted to $277,033 and $281,340, respectively, which has been included in contract liabilities on the accompanying unaudited consolidated balance sheets. Additionally, on the Tempe property, the Company leases parking lot space for an antenna location to a third party. Kingman, AZ On May 1, 2018, Kingman and CJK entered into a Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Kingman and CJK (the “Kingman Lease”), with a term of 22 years, expiring April 30, 2040, and the abatement of rent that would otherwise have been due for the month of April 2018 under the Prior Kingman Lease. The Kingman Lease provides for payment by CJK of a fixed monthly base rent of $4,000, as well as real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed against Kingman. In addition, pursuant to the terms of the Kingman Lease, CJK agreed to maintain insurance in full force during the term of the Kingman Lease and any other period of occupancy of the premises by CJK. On May 29, 2020, Kingman and CJK entered into the First Amendment (the “Kingman Amendment”) to the Kingman Lease, effective May 31, 2020. Pursuant to the terms of the Kingman Amendment, among other things, the parties agreed to abate the $4,000 base rent from June 1, 2020 to July 31, 2020. In addition, the Kingman Amendment provides that any increase in the rentable area of the leases premises will result in an increase in all amounts calculated based on the same, including, without limitation, base rent. The parties also agreed that if there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially and adversely affected as mutually and reasonably determined by Kingman and CJK, CJK may terminate the Kingman Lease by delivering written notice to Kingman, together with a termination payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5% of the base rent which would have been earned after termination for the balance of the term. On November 30, 2022, Kingman and CJK entered into the Second Amendment (the “Kingman Second Amendment”) to the Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Kingman and CJK. Pursuant to the terms of the Kingman Second Amendment, CJK agreed to grant Kingman a right to terminate the Kingman Lease upon 15 days’ prior written notice in Kingman’s sole discretion, without any obligation to do so, provided that Kingman may not exercise this right to terminate if CJK is operating its business as a going concern at the premises which is the subject of the Kingman Lease. On August 2, 2023, the Company entered into a Sublease Agreement (the “Sublease”) with CJK and a subtenant in connection with the Company’s Kingman property. Pursuant to the Sublease, the Sublease shall be effective on August 2, 2023 and end on the one year anniversary, or (ii) the last day of the Term of the Master Lease (whether due to expiration or termination thereof by the Company, whichever is earlier (the “Sublease Expiration Date”), such period being referred to herein as the “Sublease Term”, unless terminated earlier pursuant to the terms of this Sublease or otherwise by consent of the Company, CJK and Subtenant. The subtenant shall have two options to extend the Sublease Term by one-year periods each (each a “Sublease Term Extension” and collectively the “Sublease Term Extensions”), which shall be exercisable by Subtenant no later than 90 days prior to the expiration of the Sublease Term, as may be extended. Pursuant to the Kingman Lease, if pursuant to any assignment or sublease, CJK receives rent, either initially or over the Term of the assignment or sublease, in excess of the Rent called for hereunder, or in the case of this sublease of a portion of the Premises in excess of such Rent fairly allocable to such portion, after appropriate adjustments to assure that all other payments called for hereunder are appropriately taken into account, CJK shall pay to the Company, as Additional Rent hereunder, 50% of the excess of each such payment of rent received by CJK. Accordingly, the Company receives additional rent of $3,500 per month during the term of the sublease. Additionally, the subtenant paid a security deposit of $22,000 per the terms of the sublease. The Company and CJK have agreed to split the Security Deposit at 68% (the Company received $14,960 of the $22,000 Security Deposit, which $14,960 is included in security deposits payable on the accompanying unaudited consolidated balance sheet). Pleasant Ridge, MI On November 29, 2022, ZP Woodward, as landlord, entered into a Licensed Cannabis Facility Absolute Net Lease Agreement (the “Woodward Lease”) with Rapid Fish 2 LLC, as tenant (“Woodward Tenant”), whereby ZP Woodward leased the Woodward Property located in Pleasant Ridge, Michigan to the Woodward Tenant. The Woodward Lease commenced on December 1, 2022 and has a term of 14 years and 4 months through March 1, 2037, with two 5-year options to extend the term, exercisable by the Woodward Tenant pursuant to the terms and conditions of the Woodward Lease. The Woodward Lease contains customary obligations of the Woodward Tenant consistent with an absolute triple net lease agreement, including (i) the payment of real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes), (ii) payment of insurance premiums and operating costs of ZP Woodward related to the operation of the Woodward Property, and (iii) maintenance and repair obligations to maintain the Woodward Property in first-class retail condition. The Woodward Lease includes a Guaranty of Payment and Performance by Ammar Kattoula and Thomas Nafso. The Woodward Lease contains an abatement of the full or partial rent that would otherwise have been due for the months from December 2022 to March 2023. Subsequent to the abatement period, the Woodward Lease provides for payment by the tenant of monthly base rent beginning at $40,319 per month and increasing by 3% per year over the term of the lease, as well as real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed against the Company. In addition, pursuant to the terms of the Woodward Lease, the Woodward Tenant agreed to maintain insurance in full force during the term of the Woodward Lease and any other period of occupancy of the premises by the tenant. The tenant shall have the option, exercisable by written notice to ZP Woodward given not later than 180 days prior to the expiration of the then current term, to extend the term for two further terms of five years each on the same terms and conditions as provided in this Lease. On May 14, 2023, ZP Woodward entered into an Assignment and Assumption of Lease (“Assignment”) whereby the Woodward Lease was assigned from Rapid Fish 2 LLC (“Old Tenant”) to Rapid Fish LLC (“New Tenant”). Old Tenant and New Tenant share common ownership. The assignment of the Woodward Lease is conditioned upon issuance by the City of Pleasant Ridge, Michigan of a final cannabis business license to New Tenant and ZP Woodward’s receipt of a fully executed Reaffirmation of Guaranty from the guarantors of the Woodward Lease. The Assignment contains other terms as are customary for a document of this type. Chicago, IL On January 18, 2024, ZPRE Holdings entered into a Licensed Cannabis Facility Absolute Net Lease Agreement (the “Justice Grown Lease”), with a commencement date of January 19, 2024, by and between ZPRE Holdings, as landlord, and JG IL LLC (“Justice Grown”), as tenant. Pursuant to the terms of the Lease, ZPRE Holdings agreed to lease the Ashland Avenue Property located in Chicago, IL to Justice Grown for use as a licensed recreational adult-use (and, if permitted, medical) cannabis dispensary in accordance with Illinois law. The Justice Grown Lease has a term of 15 years, with four five-year renewal terms. Summary As of March 31, 2024 and December 31, 2023, security deposits payable to the collective Significant Tenants amounted to $290,460 and $290,460, respectively. Future minimum lease payments primarily consist of minimum base rent payments from the collective Significant Tenants. Future minimum lease payments to be received, on all leased properties, for each of the five succeeding calendar years and thereafter as of March 31, 2024, consists of the following: Future annual base rent: Amount 2024 (remainder of year) $ 1,797,018 2025 2,487,172 2026 2,497,793 2027 2,512,350 2028 2,535,780 2029 2,559,913 Thereafter 25,263,418 Total $ 39,653,444 Revenues – Significant Tenants For the three months ended March 31, 2024 and 2023, revenues associated with Significant Tenant leases described above are summarized as follows: For the Three % of For the Three % of Broken Arrow $ 280,108 33.5 % $ 280,108 40.7 % VSM 164,184 19.6 % 164,184 23.8 % Rapid Fish 152,415 18.2 % 148,556 21.6 % Total $ 596,707 71.3 % $ 592,848 86.1 % Further, as of March 31, 2024 and December 31, 2023, deferred rent of $459,520 and $371,472 is due collectively from the tenants due to the abatement of rent under the lease agreements discussed above, respectively, and as of March 31, 2024 and December 31, 2023, a lease incentive receivable of $442,661 and $449,541 is due from one of the Significant Tenants, respectively, in connection with the $500,000 tenant improvement allowance provided to tenant pursuant to the Chino Valley amendment executed during the year ended December 31, 2022 (see above). Additionally, as discussed above, VSM paid Zoned Arizona the $300,000 Assignment Price. The Company considers the assignment fee paid as a part of the lease payments for the modified lease and shall amortize the $300,000 assignment fees into rental revenue on a straight-line basis over the remaining term of the modified lease through April 2040. On March 31, 2024 and December 31, 2023, deferred revenue related to this lease modification amounted to $277,033 and $281,340, respectively, and is included in contract liabilities on the accompanying unaudited consolidated balance sheets. Asset concentration The Company’s real estate properties are leased to Significant Tenants under absolute-net and triple-net leases that terminate through March 2037 and April 2040, respectively. The Company monitors the credit of all tenants to stay abreast of any material changes in credit quality. The Company monitors tenant credit by (1) reviewing financial statements and related metrics and information that are publicly available or that are provided to us upon request, and (2) monitoring the timeliness of rent collections. As of March 31, 2024 and December 31, 2023, the Company had an asset concentration related to the Significant Tenants. As of March 31, 2024 and December 31, 2023, the Significant Tenants collectively leased approximately 73.6% and 69.4% of the Company’s total assets, respectively. Through March 31, 2024, all rental payments have been made on a timely basis. Industry risk Downturns relating to certain industries or business sectors or the financial stability of the Company’s significant tenants may have a significant adverse impact on the Company’s assets and its ability to pay its operating expenses or pay dividends than if the Company had a diversified property portfolio and service offerings. The Company’s total assets are concentrated into a limited number of tenants who were considered significant tenants. To the extent that the Company’s total assets are concentrated in a limited number of tenants that are in the regulated cannabis industry, downturns relating generally to such industry or business sector, or a decline in the financial stability of the Company’s Significant Tenants may result in defaults on all of the Company’s leases within a short time period, which may reduce the Company’s net income and the value of the Company’s common stock and accordingly, limit the Company’s ability to pay our operating expenses or pay dividends to its stockholders. If the Company’s tenants are prohibited from operating or cannot pay their rent, the Company may not have enough working capital to support its operations and the Company would need to consider seeking out new tenants at rental rates per square foot that may be less than its current rate per square foot. |
Rental Properties
Rental Properties | 3 Months Ended |
Mar. 31, 2024 | |
Rental Properties [Abstract] | |
RENTAL PROPERTIES | NOTE 4 – RENTAL PROPERTIES On March 31, 2024 and December 31, 2023, rental properties, net consisted of the following: Description Useful Life March 31, December 31, Building and building improvements 5-39 $ 10,332,213 $ 9,258,431 Construction in progress - 18,976 18,976 Land - 3,865,474 3,353,378 Rental properties, at cost 14,216,663 12,630,785 Less: accumulated depreciation (2,678,347 ) (2,590,261 ) Rental properties, net $ 11,538,316 $ 10,040,524 Agreement Regarding Purchase and Sale Contract – Ashland Property Pursuant to the terms of the Agreement Regarding Purchase and Sale Contract (See Note 11), ZPRE Holdings agreed to deposit the following amounts into escrow: (i) $40,000, representing reimbursement to Keystone or its designee for the earnest money deposit paid under the terms of the Original PSA, (ii) an assignment fees of $185,000, and (iii) $1,210,000, representing the Purchase Price less the $40,000 earnest money payment. On January 19, 2024, the Company paid these funds in the aggregate amount $1,435,000. On January 19, 2024, ZPRE Holdings and Keystone entered into that certain Assignment and Assumption Agreement, dated as of January 19, 2024, by and between Keystone and ZP Holdings (the “Assignment Agreement”). Pursuant to the terms of the Assignment Agreement, Keystone assigned to ZP Holdings all of Keystone’s right, title and interest in and to the Original PSA to purchase the Ashland Avenue Property for $185,000, as discussed above. On January 19, 2024, the transactions contemplated by the Agreement and Assignment and Assumption Agreement closed and ZPE Holdings completed the acquisition of the Ashland Avenue Property under the Original PSA, as assigned. The completed transactions were subject to closing costs, commissions, and fees customary to the acquisition of real estate of $71,244, which includes a $65,000 commission expense, a $79,634 sponsor fee, and other costs of $6,244. For the three months ended March 31, 2024 and 2023, depreciation of rental properties amounted to $88,086 and $96,291, respectively. |
Investment in Unconsolidated Jo
Investment in Unconsolidated Joint Ventures and Equity Securities | 3 Months Ended |
Mar. 31, 2024 | |
Investment in Unconsolidated Joint Ventures and Equity Securities [Abstract] | |
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES AND EQUITY SECURITIES | NOTE 5 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES AND EQUITY SECURITIES Investment in unconsolidated joint ventures On March 31, 2024 and December 31, 2023, the Company held investments with aggregate carrying values of $4,923 and $4,923, respectively. The entities listed below are partially owned by the Company. The Company accounts for these investments under the equity method of accounting as the Company exercises significant influence but does not exercise financial and operating control over these entities. Investments are reviewed for changes in circumstance or the occurrence of events that suggest an other than temporary event where the Company’s investment may not be recoverable. A summary of the Company’s original investments in the unconsolidated affiliated entities and net carrying value amount is as follows: Original Net Carrying Value Entity Date Acquired Ownership Investment March 31, December 31, Zoneomics Green, LLC (the “Zoneomics Green Joint Venture”) May 1, 2021 50.0 % 90,000 4,923 4,923 Total investments in unconsolidated joint venture entities $ 176,000 $ 4,923 $ 4,923 On May 1, 2021, the Company entered into a Limited Liability Company Operating Agreement (the “Zoneomics Green Operating Agreement”) with a non-affiliated joint venture partner in connection with the formation of Zoneomics Green, LLC (“Zoneomics Green”), a Delaware limited liability company formed on May 1, 2021. Zoneomics Green’s goal is to utilize advanced property technology to provide solutions for property identification in regulated industries such as regulated cannabis. Pursuant to the Zoneomics Green Operating Agreement, the Company purchased 50 units of Zoneomics Green for a capital contribution of $90,000, which represents 50% of the membership interests of Zoneomics Green and the other joint venture partner received 50% of the membership interests for the contribution of its intellectual property and a number of non-monetary contributions. identified in the Zoneomics Green Operation Agreement but provided no capital contributions. Each unit represents, with respect to any member, such member’s: (i) interest in Zoneomics Green’s capital, (ii) share of Zoneomics Green’s net profits and net losses (and specially allocated items of income, gain, and deduction), and the right to receive distributions of net cash flow from Zoneomics Green, (iii) right to inspect Zoneomics Green’s books and records, and (iv) right to participate in the management of and vote on matters coming before the members as provided in the Zoneomics Green Operating Agreement. The transactions discussed above resulted in a joint venture, in accordance with ASC 323-10 – Investments- Equity and Joint Ventures, The following represents summarized financial information derived from the financial statements of the Zoneomics Green Joint Venture, as of March 31, 2024 and for the three months ended March 31, 2024. Balance sheets (Unaudited): Zoneomics Current assets: Cash $ 9,847 Total assets $ 9,847 Liabilities $ - Equity 9,847 Total liabilities and equity $ 9,847 Statement of operations (Unaudited) Zoneomics Net sales $ - Operating recovery (expenses) - Net income (loss) $ - Company’s share of income (loss) from unconsolidated joint ventures $ - During the three months ended March 31, 2024 and 2023, the Company recorded a loss from unconsolidated joint ventures of $0 Investment in equity securities On June 24, 2022, the Company’s wholly-owned subsidiary, ZP Data Platform 2 LLC, purchased 875 shares of Series A convertible preferred stock of Anami Technology, Inc., a California corporation, for $50,000, or $57.14 per share. The Company’s ownership percentage is less than 20% and it does not have the ability to exercise significant influence as described in ASC 323-10-15-6. This equity instrument does not have a readily determinable fair value. Accordingly, the Company elected to measure this equity security at its cost minus impairment, if any. If the Company identifies observable price changes in orderly transactions for the identical or a similar investment of the same issuer, the Company shall measure the equity security at fair value as of the date that the observable transaction occurred. If the Company subsequently elects to measure this equity security at fair value, the Company shall measure all identical or similar investments of the same issuer, including future purchases of identical or similar investments of the same issuer, at fair value. The election to measure this equity security at fair value shall be irrevocable. Any resulting gains or losses on the securities for which that election is made shall be recorded in earnings at the time of the election. On March 31, 2024 and December 31, 2023, investment in equity securities amounted to $50,000. |
Notes Payable
Notes Payable | 3 Months Ended |
Mar. 31, 2024 | |
Notes Payable [Abstract] | |
NOTES PAYABLE | NOTE 6 – NOTES PAYABLE On March 31, 2024 and December 31, 2023, notes payable consisted of the following: March 31, December 31, Note payable - East West Bank $ 4,436,449 $ 4,447,068 Notes payable - Woodward Properties 1,818,057 1,829,232 Total principal due on notes payable 6,254,506 6,276,300 Less: debt discount (159,983 ) (164,598 ) Notes payable, net $ 6,094,523 $ 6,111,702 East West Bank Swap note On July 11, 2022, Zoned Arizona entered into a Loan Agreement (the “Loan Agreement”), dated as of July 11, 2022, by and between Zoned Arizona and East West Bank (the “Bank”). Pursuant to the terms of the Loan Agreement, subject to and upon the satisfaction of the terms and conditions of the Loan Agreement, Zoned Arizona could request advances under a multiple access loan (“MAL”) during the term of the MAL. On July 11, 2022, in connection with the Loan Agreement, Zoned Arizona paid loan and other fees of $176,472, and in connection with the First Amendment to the Loan Agreement discussed below, paid additional fees of $8,124. These loan and other fees aggregating $184,596 were reflected as a debt discount and are being amortized ratably and charged to interest expense over the term of the related debt. At any time before July 11, 2023, Zoned Arizona may elect to commence paying principal together with interest on the MAL (the “Early Amortization Election”) in accordance with the repayment terms set forth in the variable rate note initially evidencing the MAL, executed by Zoned Arizona in favor of the Bank (the “Note”). If Zoned Arizona makes the Early Amortization Election, then (i) Zoned Arizona will not be entitled to any further advances under the MAL, and (ii) the 25-year amortization schedule referenced in the Note will be from the date Zoned Arizona makes the Early Amortization Election. The Loan Agreement contains representations, warranties and covenants customary for a transaction of this type. Among other things, the Loan Agreement provides as follows: (a) upon the occurrence of an event of default, the outstanding principal balance of the MAL will not at any time exceed 65% of the Property’s most recent appraised value; (b) upon the occurrence of an event of default, Zoned Arizona will maintain a minimum Non-Cannabis Debt Service Coverage Ratio (as hereinafter defined) of 1.40 to 1.00; (c) Zoned Arizona will at all times maintain a minimum debt service coverage ratio of 1.50 to 1.0; and (d) Zoned Arizona and the Company, collectively, will maintain at all times, liquid assets of at least the sum of all tenant securities deposits under leases, plus $350,000 in operating reserves. On December 7, 2022, Zoned Arizona and the Bank entered into a First Amendment to Loan Agreement (the “First Amendment”). Pursuant to the terms of the First Amendment, Zoned Arizona has elected to make its Early Amortization Election (defined in the First Amendment and Loan Agreement), which election requires Zoned Arizona to commence paying principal and interest on the MAL as set forth in the Amended Note (defined below). Except as provided in the First Amendment, the terms of the Loan Agreement remain in full force and effect. Pursuant to the terms of the Loan Agreement and First Amendment, on December 7, 2022, Zoned Arizona issued an Amended and Restated Promissory Note (the “Amended Note”) to the Bank. The Amended Note has an original principal amount of $4,500,000, a 50% loan-to-value as determined by the bank-ordered appraisal completed on the Tempe Property. The Amended Note requires Zoned Arizona to pay monthly principal and interest payments to the Bank at an interest rate equal to the prime rate plus 0.75% (9.25% as of March 31, 2024 and December 31, 2023). The Amended Note matures 10 years after its effective date and payments are calculated based on a 30-year amortization schedule. In connection with the Amended Note, in 2022, Zoned Arizona received gross proceeds of $4,500,000 and paid fees of $184,596. Zoned Arizona may prepay the outstanding principal under the Swap Note, at any time, subject to the provisions of the Swap Note. Also as previously disclosed, on July 11, 2022 and pursuant to the terms of the Loan Agreement, the Company executed a Guaranty (the “Guaranty”) in favor of the Bank, pursuant to which the Company agreed to guarantee all indebtedness of Zoned Arizona to the Bank arising under or in connection with the MAL or any of the loan documents. On December 7, 2022, the Company executed an Acknowledgement of Amendment and Reaffirmation of Guaranty (the “Reaffirmation”) in favor of the Bank. The Reaffirmation reaffirms the Guaranty and provides the Company’s consent to the First Amendment and Swap Note. On December 7, 2022, Zoned Arizona and the Bank entered into an Interest Rate Swap Transaction Confirmation (the “Confirmation”). The Confirmation incorporates by reference the 2002 ISDA Master Agreement as published by the International Swaps and Derivatives Association, Inc. as if the parties to the Confirmation executed such agreement in such form. The Confirmation provides the terms and conditions governing the interest rate swap transaction afforded to Zoned Arizona, including a fixed interest rate of 7.65%. The Company recorded the swap at fair value in the unaudited consolidated balance sheets with changes in fair value recorded contemporaneously in earnings. The Company has entered into an interest rate swap to mitigate variability in interest payments on its variable-rate debt. During the three months ended March 31, 2024 and 2023, amortization of debt discount amounted to $4,615 and $4,615, respectively, which is included in interest expense on the accompanying unaudited consolidated statements of operations. On March 31, 2024, principal and interest due on the East West Bank Swap Note amounted to $4,436,449 and $7,520, respectively. On December 31, 2023, principal and interest due on the East West Bank Swap Note amounted to $4,447,068 and $8,861, respectively. 23616 Land Contract Note Payable On December 5, 2022, in connection with the acquisition of the Woodward Property located in Pleasant Ridge, Michigan, the Company entered into a land contract note in the amount of $1,425,000 (the “23616 Land Contract Note Payable”). The 23616 Land Contract Note Payable bears interest at 9% per annum and is due in full as follows: 1) 60 monthly payments of principal and interest of $12,821 beginning on January 1, 2023, and 2) A balloon payment of $1,274,117 including the remaining principal and interest on or before December 1, 2028. On March 31, 2024, principal and interest due on the 23616 Land Contract Note Payable amounted to $1,402,071 and $0, On December 31, 2023, principal and interest due on the 23616 Land Contract Note Payable amounted to $1,408,962 and $0, respectively. 23634 Land Contract Note Payable On February 24, 2023, in connection with the 23634 Land Contract dated February 24, 2023 (see Note 4), the Company entered into a land contract note payable of $430,000 (the “23634 Land Contract Note Payable”). The 23634 Land Contract Note Payable accrues interest at the rate of 7% and is payable in 48 monthly installments of $3,865, beginning April 1, 2023, until the purchase price and interest are fully paid, provided that such purchase price and all interest will be fully paid on or before March 31, 2027. On March 31, 2024, principal and interest due on the 23634 Land Contract Note Payable amounted to $415,986 and $0, respectively. On December 31, 2023, principal and interest due on the 23634 Land Contract Note Payable amounted to $420,270 and $0, respectively. On March 31, 2024, future principal payments under the above notes payable are as follows: Years ending March 31, Amount 2025 $ 114,171 2026 107,252 2027 475,255 2028 1,370,206 2029 72,911 Thereafter 4,114,711 Total principal payments due on March 31, 2024 $ 6,254,506 |
Convertible Note Payable
Convertible Note Payable | 3 Months Ended |
Mar. 31, 2024 | |
Convertible Note Payable [Abstract] | |
CONVERTIBLE NOTE PAYABLE | NOTE 7 – CONVERTIBLE NOTE PAYABLE On January 9, 2017, the Company issued a convertible debenture (the “Abrams Debenture”) in the aggregate principal amount of $2,000,000 in favor of Mr. Alan Abrams. The Abrams Debenture accrues interest at the rate of 6% per annum payable quarterly by the 1 st The Company may prepay the Abrams Debenture at any point after nine months, in whole or in part. Pursuant to the terms of the Abrams Debenture, Mr. Abrams is entitled to convert all or a portion of the principal balance and all accrued and unpaid interest due under the Abrams Debenture into shares of the Company’s common stock at a conversion price of $5.00 per share. If the Company defaults on payment, Mr. Abrams may at his option, extend all conversion rights, through and including the date the Company tenders or attempts to tender payment in full of all amounts due under the Abrams Debenture. Any amount of principal or interest, which is not paid when due shall bear interest at the rate of 12% per annum. Upon an Event of Default (as defined in the Abrams Debenture), Mr. Abrams may (i) declare the entire principal amount and all accrued and unpaid interest under the Abrams Debenture immediately due and payable, and (ii) exercise any and all rights, powers and remedies available to Mr. Abrams at law or in equity or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in the Abrams Debenture and proceed to enforce the payment thereof or any other legal or equitable right of Mr. Abrams. As of March 31, 2024 and December 31, 2023, the principal balance due under the Abrams Debenture is $2,000,000. As of March 31, 2024 and December 31, 2023, accrued interest payable due under the Abrams Debenture amounted to $30,000, which is included in accrued expenses on the accompanying unaudited consolidated balance sheets. For the three months ended March 31, 2024 and 2023, interest expense related to the Abrams Debenture amounted to $30,000 and $30,000, respectively. |
Related Party Transaction
Related Party Transaction | 3 Months Ended |
Mar. 31, 2024 | |
Related Party Transaction [Abstract] | |
RELATED PARTY TRANSACTION | NOTE 8 – RELATED PARTY TRANSACTION Indemnification agreements On August 23, 2021, the Company entered into indemnification agreements with each of its directors and executive officers. In general, these indemnification agreements require the Company to indemnify a director and officer to the fullest extent permitted by law against liabilities that may arise in connection with that director’s service as a director and officer for the Company. Additionally, the Company shall advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. In August 2021, the Company did not renew its officers and directors insurance. |
Stockholders_ Equity
Stockholders’ Equity | 3 Months Ended |
Mar. 31, 2024 | |
Stockholders’ Equity [Abstract] | |
STOCKHOLDERS' EQUITY | NOTE 9 – STOCKHOLDERS’ EQUITY (A) Preferred Stock On December 13, 2013, the Board of Directors of the Company authorized and approved the creation of a new class of Preferred Stock consisting of 5,000,000 shares authorized, $.001 par value. The preferred stock is not convertible into any other class or series of stock. The holders of the preferred stock are entitled to fifty (50) votes for each share held. Voting rights are not subject to adjustment for splits that increase or decrease the common shares outstanding. Upon liquidation, the holders of the shares will be entitled to receive $1.00 per share plus redemption provision before assets distributed to other shareholders. The holders of the shares are entitled to dividends equal to common share dividends. As of March 31, 2024 and December 31, 2023, there were 2,000,000 shares of preferred stock outstanding. Once any shares of Preferred Stock are outstanding, at least 51% of the total number of shares of Preferred Stock outstanding must approve the following transactions: a. Alter or change the rights, preferences or privileges of the Preferred Stock. b. Create any new class of stock having preferences over the Preferred Stock. c. Repurchase any of our common stock. d. Merge or consolidate with any other company, except our wholly owned subsidiaries. e. Sell, convey or otherwise dispose of, or create or incur any mortgage, lien, or charge or encumbrance or security interest in or pledge of, or sell and leaseback, in all or substantially all our property or business. f. Incur, assume or guarantee any indebtedness maturing more than 18 months after the date on which it is incurred, assumed or guaranteed by us, except for operating leases and obligations assumed as part of the purchase price of property. (B) Common stock redemption On October 10, 2023, the Company entered into a Stock Redemption Agreement, whereby the Company purchased 100,000 shares of its common stock from a shareholder for $15,000, or $0.15 per share, which as of March 31, 2024 and December 31, 2023, is reflected as treasury stock on the unaudited consolidated balance sheet until such time as the shares are cancelled. (C) Equity incentive plans On August 9, 2016, the Company’s Board of Directors authorized the 2016 Equity Incentive Plan (the “2016 Plan”) and reserved 10,000,000 shares of common stock for issuance thereunder. The 2016 Plan was approved by shareholders on November 21, 2016. The 2016 Plan’s purpose is to encourage ownership in the Company by employees, officers, directors and consultants whose long-term service the Company considers essential to its continued progress and, thereby, encourage recipients to act in the stockholders’ interest and share in the Company’s success. The 2016 Plan authorizes the grant of awards in the form of options intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended, options that do not qualify (non-statutory stock options) and grants of restricted shares of common stock. Restricted shares granted pursuant to the 2016 Plan are amortized to expense over the vesting period. Options vest and expire over a period not to exceed seven years. If any share of common stock underlying a stock option that has been granted ceases to be subject to a stock option, or if any shares of common stock that are subject to any other stock-based award granted are forfeited or terminate, such shares shall again be available for distribution in connection with future grants and awards under the 2016 Plan. As of March 31, 2024, 1,012,500 stock option awards are outstanding and 646,250 options are exercisable under the 2016 Plan. As of December 31, 2023, 1,012,500 stock option awards are outstanding and 585,000 options are exercisable under the 2016 Plan. As of March 31, 2024 and December 31, 2023, 8,987,500 and 8,987,500 shares, respectively, were available for future issuance. The Company also continues to maintain its 2014 Equity Compensation Plan (the “2014 Plan”), pursuant to which 1,250,000 previously awarded stock options are outstanding. The 2014 Plan has been superseded by the 2016 Plan. Accordingly, no additional shares subject to the existing 2014 Plan will be issued and the 1,250,000 shares issuable upon exercise of stock options will be issued pursuant to the 2014 Plan, if exercised. As of March 31, 2024, options to purchase 1,250,000 shares of common stock are outstanding and 1,225,000 options are exercisable pursuant to the 2014 Plan. As of December 31, 2023, options to purchase 1,250,000 shares of common stock are outstanding and 1,225,000 options are exercisable pursuant to the 2014 Plan. (D) Stock options For the year ended December 31, 2023 and 2022, in connection with the accretion of stock-based option expense, the Company recorded stock option expense over the vesting period of $116,643 and $336,755, respectively. As of December 31, 2023, there were 2,262,500 options outstanding and 1,810,000 options vested and exercisable. As of December 31, 2023, there was $100,181 of unvested stock-based compensation expense to be recognized through September 2031. The aggregate intrinsic value on December 31, 2023 was $0 and was calculated based on the difference between the quoted share price on December 31, 2023 of $0.50 and the exercise price of the underlying options. On October 1, 2023, the Company cancelled 90,000 non-vested stock options that were forfeited due to the resignation of an executive officer of the Company. Stock option activities for the three months ended March 31, 2024 are summarized as follows: Number of Weighted Weighted Average Aggregate Balance Outstanding December 31, 2023 2,262,500 $ 0.94 4.34 $ - Forfeited - - - Balance Outstanding March 31, 2024 2,262,500 $ 0.94 4.09 $ - Exercisable, March 31, 2024 1,871,250 $ 0.95 3.45 $ - Balance non-vested on December 31, 2023 452,500 $ 0.91 7.47 $ - Forfeited during the period - - - - Vested during the period (61,250 ) 0.84 - - Balance non-vested on March 31, 2024 391,250 $ 0.93 7.16 $ - |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2024 | |
Commitments and Contingencies [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 10 – COMMITMENTS AND CONTINGENCIES Legal matters From time to time, the Company may be involved in litigation related to claims arising out of its operations in the normal course of business. As of March 31, 2024, the Company is not involved in any pending or threatened legal proceedings that it believes could reasonably be expected to have a material adverse effect on its financial condition, results of operations, or cash flows. Employment and Related Golden Parachute Agreement On May 23, 2018, the Company and Mr. McLaren, the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors, agreed to replace Mr. McLaren’s 2014 employment agreement with a new employment agreement dated May 23, 2018 (the “2018 Employment Agreement”). Pursuant to the terms of the 2018 Employment Agreement, the Company agreed to continue to pay Mr. McLaren his then-current base annual salary of $215,000, and to award Mr. McLaren with an annual and/or quarterly bonus payable in either cash and/or equity of no less than 2% of the Company’s net income for the associated period. The 2018 Employment Agreement has a term of 10 years. The term and Mr. McLaren’s employment will terminate (a “Termination”) in any of the following circumstances: (i) immediately, if Mr. McLaren dies; (ii) immediately, if Mr. McLaren receives benefits under the long-term disability insurance coverage then provided by the Company or, if no such insurance is in effect, upon Mr. McLaren’s disability; (iii) on the expiration date, as the same may be extended by the parties by written amendment to the 2018 Employment Agreement prior to the occasion thereof; (iv) at the option of the Company for Cause (as defined in the 2018 Employment Agreement) upon the Company’s provision of written notice to Mr. McLaren of the basis for such Termination; (v) at the option of the Company, without Cause; (vi) by Mr. McLaren at any time with Good Reason (as defined in the 2018 Employment Agreement), upon 30 days’ prior written notice to the Company delivered not later than within 90 days of the existence of the condition therefor; or (vii) by Mr. McLaren at any time without Good Reason, upon not less than three months’ prior written notice to the Company. In the event of a Termination for any reason or for no reason whatsoever, or upon the expiration date of the 2018 Employment Agreement, whichever comes first, all rights and obligations under the 2018 Employment Agreement shall cease (i) as to the Company, except for the Company’s obligations for the payment of applicable severance benefits thereunder, and for indemnification thereunder, and (ii) as to Mr. McLaren, except for his obligation under the restrictive covenants in the 2018 Employment Agreement. The Company and Mr. McLaren also entered into a Golden Parachute Agreement (the “Golden Parachute Agreement”) on May 23, 2018. No benefits shall be payable under the Golden Parachute Agreement unless there shall have been a change in control of the Company, as set forth below. For purposes of the Golden Parachute Agreement, amongst other terms in the Golden Parachute Agreement, a “change in control of the Company” shall mean a change of control of a nature that would be required to be reported in response to Item 6 of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended. For purposes of the Golden Parachute Agreement, “Cause” means termination upon (a) the willful and continued failure to substantially perform duties with the Company after a written demand for substantial performance is delivered by the Board, which demand specifically identifies the manner in which the Board believes that duties have not substantially been performed, or (b) the willful engaging in conduct, which is demonstrably and materially injurious to the Company, monetarily or otherwise. For purposes of the Golden Parachute Agreement, “Good Reason” means, without express written consent, the occurrence after a change in control of the Company of any of the following circumstances unless, such circumstances are fully corrected prior to the date of Termination specified in the notice of Termination: (a) a material diminution in Mr. McLaren’s authority, duties or responsibility from those in effect immediately prior to the change in control of the Company; (b) a material diminution in Mr. McLaren’s base compensation; (c) a material change in the geographic location at which Mr. McLaren performs his duties; (d) a material diminution in the authority, duties, or responsibilities of the supervisor to whom Mr. McLaren is required to report, including a requirement that Mr. McLaren report to a corporate officer or employee instead of reporting directly to the Board; (e) a material diminution in the budget over which Mr. McLaren retains authority; (f) a material breach under any agreement with the Company to continue in effect any bonus to which Mr. McLaren was entitled, or any compensation plan in which Mr. McLaren participates immediately prior to the change in control of the Company which is material to Mr. McLaren’s total compensation; (g) a material breach under any agreement with the Company to provide Mr. McLaren benefits substantially similar to those enjoyed by him under any of the Company’s life insurance, medical, health and accident, or disability plans in which he was participating at the time of the change in control of the Company, the failure to continue to provide Mr. McLaren with a Company automobile or allowance in lieu of it, if Mr. McLaren was provided with such an automobile or allowance in lieu of it at the time of the change of control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive him of any material fringe benefit enjoyed by him at the time of the change in control of the Company, or the failure by the Company to provide him with the number of paid vacation days to which he is entitled on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of the change in control of the Company; Following a change in control of the Company, upon termination of Mr. McLaren’s employment or during a period of disability, Mr. McLaren will be entitled to the following benefits: (i) During any period that he fails to perform his full-time duties with the Company as a result of incapacity due to physical or mental illness, Mr. McLaren will continue to receive his base salary at the rate in effect at the commencement of any such period, together with all amounts payable to him under any compensation plan of the Company during such period, until the Golden Parachute Agreement is terminated. (ii) If Mr. McLaren’s employment is terminated by the Company for Cause or by Mr. McLaren other than for Good Reason, disability, death or retirement, the Company will pay Mr. McLaren his full base salary through the date of Termination at the rate in effect at the time notice of Termination is given, plus all other amounts and benefits to which he is entitled under any compensation plan of the Company at the time such payments are due. (iii) If employment by the Company shall be terminated (a) by the Company other than for Cause, death or disability or (b) by Mr. McLaren for Good Reason, Mr. McLaren will be entitled to benefits provided below: a. The Company will pay Mr. McLaren his full base salary through the date of Termination at the rate in effect at the time notice of Termination is given, plus all other amounts and benefits to which he is entitled under any compensation plan of the Company. b. In lieu of any further salary payments to Mr. McLaren for periods subsequent to the date of Termination, the Company will pay as severance pay to Mr. McLaren a lump sum severance payment (together with the payments provided in clause I(c) and (d) below) equal to five times the sum of his annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the notice of Termination given in respect of them. c. The Company will pay to Mr. McLaren any deferred compensation allocated or credited to him or his account as of the date of Termination. d. In lieu of shares of common stock of the Company issuable upon exercise of outstanding options, if any, granted to Mr. McLaren under the Company’s stock option plans (which options shall be cancelled upon the making of the payment referred to below), Mr. McLaren will receive an amount in cash equal to the product of (i) the excess of the closing price of the Company’s common stock as reported on or nearest the date of Termination (or, if not so reported, on the basis of the average of the lowest asked and highest bid prices on or nearest the date of Termination), over the per share exercise price of each option held by Mr. McLaren (whether or not then fully exercisable) plus the amount of any applicable cash appreciation rights, times (ii) the number of the Company’s common stock covered by each such option. e. The Company will also pay to Mr. McLaren all legal fees and expenses incurred by him as a result of such Termination. On July 23, 2022, the Board of Directors of the Company appointed Berekk Blackwell, the Company’s Chief Operating Officer, as President of the Company, effective immediately. On July 26, 2022, the Company entered into an employment agreement, effective July 1, 2022, with Mr. Blackwell (the “Blackwell Employment Agreement”). Pursuant to the terms of the Blackwell Employment Agreement, the Company agreed to pay Mr. Blackwell a base annual salary of $150,000 for his services as President and Chief Operating Officer. The Company may also award Mr. Blackwell discretionary cash and/or equity bonuses. The Blackwell Employment Agreement had a term of one year, expiring on July 1, 2023. During the initial term, neither party may terminate the Blackwell Employment Agreement except for Cause (as defined in the Blackwell Employment Agreement). After the initial term that expired July 1, 2023, the Blackwell Employment Agreement continued to be in full force and effect, unaffected by the expiration, except that either party may terminate the Blackwell Employment Agreement for any reason upon 30 days’ written notice to the other party. 401(k) Plan On September 29, 2021, the Company’s board of directors adopted the Zoned Properties 401(k) Plan (the “Plan”) effective January 1, 2021. The Company contributes a matching contribution to the Plan for each employee in an amount equal to 100% of the matched employee contributions that are not in excess of 4% of the employee’s plan compensation. For the three months ended March 31, 2024 and 2023, the Company contributed $5,697 and $7,885 to the Plan, respectively. Purchase and Sale Agreement and Joint Escrow – Surprise Property On February 23, 2024, ZPRE Holdings provided an approval notice to the Seller (as hereinafter defined) of the Surprise Property (as hereinafter defined), related to the Company’s intent to consummate the purchase of the Surprise Property, following notice from the City of Surprise that the Company had received final approvals of its cannabis entitlements, after satisfaction of the appeal period (the “Cannabis Approvals”), related to a use-permit for a cannabis retail dispensary to be developed at the Surprise Property. As used herein, the “Surprise Property” refers to that certain property commonly known as Bella Fiesta Pad B in Surprise, Arizona, which property is a certain tract or parcel of land containing approximately 1.114 acres, together with all improvements, buildings, leases, rights, easements, and appurtenances pertaining thereto. Previously, on January 23, 2023, ZPRE Holdings entered into a Purchase and Sale Agreement and Joint Escrow Instructions, by and between NWC Dysart & Bell LLC (the “Seller”) and ZPRE Holdings as the buyer. Such agreement was subsequently amended on May 12, 2023, October 25, 2023, and December 20, 2023 (as amended, the “Agreement”). Pursuant to the terms of the Agreement, the Seller agreed to sell to ZPRE Holdings, and ZPRE Holdings agreed to purchase, the Surprise Property in exchange for a purchase price of $1,100,000 (the “Purchase Price”). Pursuant to the terms of the Agreement, the Seller also agreed to complete a number of on-site and off-site improvements to the Surprise Property (the “Seller’s Work”) in exchange for ZPRE Holdings’ reimbursement of up to $250,000 for the off-site work and reimbursement of up to $350,000 for the on-site work (collectively, the “Reimbursements”). The obligation to complete the Reimbursements is conditioned upon the closing of the sale of the Surprise Property to ZPRE Holdings. Pursuant to the terms of the Agreement, as of March 31, 2024 and December 31, 2023, ZPRE Holdings deposited the following amounts into escrow: (i) $50,000, for the initial earnest money deposit, and (ii) $47,500, for additional earnest money deposited related to extensions to the Agreement (collectively, the “Earnest Money”). The Earnest Money will be applied as a credit upon closing. The closing of the transactions contemplated by the Agreement is subject to several conditions, including the successful receipt of the Cannabis Approvals, and the successful completion of the Seller’s Work. In addition, ZPRE Holdings has the right to conduct inspections on the Surprise Property. Pursuant to the terms of the Agreement, if, during the inspection period, ZPRE Holdings determines, in its sole and absolute discretion, that the Surprise Property is not suitable for ZPRE Holdings’ purchase and use for any reason or no reason, ZPRE Holdings may terminate the Agreement. |
Segment Reporting
Segment Reporting | 3 Months Ended |
Mar. 31, 2024 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING | NOTE 11 – SEGMENT REPORTING The Company operates in two reportable segments which consists of (1) the operations, leasing and management of its leased commercial properties, herein known as the “Property Investment Portfolio” segment, and (2) advisory and brokerage services related to commercial properties, herein known as the “Real Estate Services” segment. The Company has determined that these reportable segments were strategic business units that offer different products. Currently, these reportable segments are being managed separately based on the fundamental differences in their operations. Information with respect to these reportable business segments for the three months ended March 31, 2024 and 2023 was as follows: For the Three Months Ended 2024 2023 Revenues: Property investment portfolio $ 691,292 $ 610,474 Real estate services 145,760 77,550 837,052 688,024 Depreciation and amortization: Property investment portfolio 89,647 97,582 Real estate services - - 89,647 97,582 Interest expense: Property investment portfolio 158,039 154,500 Real estate services - - 158,039 154,500 Loss from unconsolidated joint ventures: Property investment portfolio - 1,469 Real estate services - - - 1,469 Net income (loss): Property investment portfolio (a) 120,079 (175,805 ) Real estate services (23,606 ) (133,843 ) $ 96,473 $ (309,648 ) March 31, December 31, Identifiable long-lived tangible assets on March 31, 2024 and December 31, 2023 by segment: Property investment portfolio $ 11,550,935 $ 10,048,223 Real estate services - - $ 11,550,935 $ 10,048,223 (a) Operating expenses and other expenses of the Company’s holding company that were not allocated to the real estate services segment are included in the property investment portfolio segment. |
Operating Lease Right-of-Use (_
Operating Lease Right-of-Use (“Rou”) Assets and Operating Lease Liability | 3 Months Ended |
Mar. 31, 2024 | |
Operating Lease Right-of-Use (“Rou”) Assets and Operating Lease Liability [Abstract] | |
OPERATING LEASE RIGHT-OF-USE (“ROU”) ASSETS AND OPERATING LEASE LIABILITY | NOTE 12 – OPERATING LEASE RIGHT-OF-USE (“ROU”) ASSETS AND OPERATING LEASE LIABILITY On March 15, 2022, the Company entered to an Assumption of Lease and Consent Agreement with a landlord, whereby the landlord consented to the assignment of an office lease, as amended, from the original tenant to the Company. The lease term shall begin on March 15, 2022 and expire on November 30, 2024, provided the Company has the option to extend the lease for an additional five years. The monthly base rent shall be $2,932 per month through November 30, 2021, $3,005 from December 1, 2022 through November 30, 2023, and $3,078 from December 1, 2023 through November 30, 2024. In adopting ASC Topic 842, Leases (Topic 842) on January 1, 2019, the Company had elected the ‘package of practical expedients’, which permitted it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs (see Note 2). In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 months or less. Since the terms of the Company’s operating lease for its office space prior to March 15, 2022 was 12 months or less on the date of adoption, pursuant to ASC 842, the Company determined that the lease met the definition of a short-term lease, and the Company did not recognize the right-of use asset and lease liability arising from this lease. Upon signing of the Assumption of Lease and Consent Agreement on March 15, 2022, the Company analyzed the new lease and determined it is required to record a lease liability and a right of use asset on its consolidated balance sheet, at fair value. For the three months ended March 31, 2024 and 2023, in connection with its operating leases, the Company recorded rent expense of $9,264 and $9,259, respectively, which is included in operating expenses on the accompanying unaudited consolidated statements of operations. The significant assumption used to determine the present value of the lease liability in March 2022 was a discount rate of 6% which was based on the Company’s incremental borrowing rate. On March 31, 2024 and December 31, 2023, right-of-use asset (“ROU”) is summarized as follows: March 31, December 31, Office lease right of use asset $ 90,710 $ 90,710 Less: accumulated amortization (67,104 ) (58,497 ) Balance of ROU assets $ 23,606 $ 32,213 On March 31, 2024, future minimum base lease payments due under a non-cancelable operating lease are as follows: Year ended March 31, Amount 2025 $ 24,626 Total minimum non-cancelable operating lease payments 24,626 Less: discount to fair value (545 ) Total lease liability on March 31, 2024 $ 24,081 |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2024 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 13 – SUBSEQUENT EVENTS On May 1, 2024, ZP Woodward and Rapid Fish, LLC (the “Parties”), with individual Guarantors, Thomas Nafso and Ammar Kattoula (the “Guarantors”), entered into a First Amendment to the Absolute Net Lease Agreement (the “First Amendment”) pertaining to premises located at 23600-23634 Woodward Ave, Pleasant Ridge MI 48069 (See Note 3). The Parties also agreed to a fully executed Reaffirmation of Guaranty from the Guarantors. According to the terms of the First Amendment, the following changes have been agreed to by the Parties: Amended Rental Payment Schedule The First Amendment provides that as long as the Company’s Conditions, as outlined in this First Amendment, are satisfied including a Renovation Completion Commitment, the Rental Payment Schedule of the Lease will be amended to the schedule set forth in the First Amendment. Capital Commitment The First Amendment provides for the inclusion of the Capital Commitment as follows: Tenant shall cause a total of at least $850,000 to be spent toward capital improvements to the Premises (the “Commitment Improvements” and/or the “Capital Commitment”). Any such Commitment Improvements shall be made in accordance with the Lease as amended. Commitment Improvements to be counted toward satisfying the Capital Commitment shall include capital improvements to the Premises and any part thereof, as well as other improvements approved in advance in writing by the Company, and shall exclude soft costs, permit, design, architectural and engineering fees, and legal fees. Tenant acknowledges that the Capital Commitment is material to the Company and the Company would not have agreed to enter into this First Amendment but for Tenant’s obligations in this paragraph. If the Capital Commitment is not completed in the prescribed time period, as evidenced by invoices or similar documentation reasonably acceptable to the Company, Tenant’s failure shall constitute an Event of Default under the Lease. Renovation Completion Commitment The First Amendment provides for the inclusion of the Renovation Completion Commitment as follows: Tenant shall cause its Capital Commitment at the Premises (the “Renovation Completion Commitment”) to be completed within three (3) months after the First Amendment Effective Date (the “Renovation Completion Commitment Date”). In order to satisfy the Renovation Completion Commitment, Tenant must satisfy the following prior to the Renovation Completion Commitment Date (i) deliver to the Company the appropriate deliverables evidencing renovation completion (the “Renovation Completion Deliverables”) (as defined below) (ii) open for business to the public for its intended Use of the Premises (the “Store Opening”), (iii) and complete its first bona fide sale to the public. The Renovation Completion Deliverables include the following: (x) Tenant has furnished to the Company a copy of a commercially reasonably detailed final cost breakdown for Tenant’s Work and the Company has inspected the Premises to confirm that Tenant’s Work has been completed in a good and workmanlike manner according to the Tenant’s Approved Plans; (y) Tenant has furnished to the Company commercially reasonable final affidavits and final lien releases from Tenant’s general contractor, if any, all subcontractors and all material suppliers for all labor and materials performed or supplied as part of Tenant’s Work (whether or not the Allowance is applicable thereto); (z) a copy of the certificate of occupancy from the governmental authority having jurisdiction has been delivered to the Company. Tenant acknowledges that the Renovation Completion Commitment is material to the Company and the Company would not have agreed to enter into this First Amendment but for Tenant’s obligations in this paragraph. If the Renovation Completion Commitment is not completed in the prescribed time period, Tenant’s failure shall constitute an Event of Default under the Lease. the Company shall grant Tenant up to two (2) additional 30-day extension upon request, so long as at the time of the extension the site is conducting inspections toward certificate of occupancy. North Lot The First Amendment also provides that if within 18 months of the date of this First Amendment, Tenant is able to complete all of the following related to 23634 Woodward Ave, Pleasant Ridge MI 48069 with an APN of 25-27-181-003 (the “North Lot”): (i) obtain authorization from all required jurisdictions (including the City of Pleasant Ridge) that the use of the North Lot parking spaces is no longer required and releases the Company from all obligations related to the North Lot under the Declaration of Restrictions and Parking Easement (the “Parking Agreement”), and (ii) confirm that the Tenant is able to continue to use the lot for purposes of ingress and egress, and (iii) Tenant is able to arrange a deal with the seller of the North Lot, which is currently under a Land Contract with outstanding installment payments, that (x) provides the Company with indemnity from Tenant that completely releases the Company of any operational obligations or liabilities related to the North Lot, (y) provides the Company with indemnity from Tenant that completely release the Company of any financial obligations or liabilities related to the North Lot, and (z) does not cause any encumbrance or legal liability to the remaining properties at the Premises; then within 30 days of the Company’s receipt of written confirmation from all appropriate parties that all requirements noted above have been satisfied, at the Company sole discretion, the Company agrees that the parties shall enter into a Lease Amendment acknowledging the same and modifying Tenant’s lease base rental rate to be reduced by $3,846 for the Lease. Reaffirmation of Guarantee In consideration of the First Amendment, the Guarantors executed and delivered a Reaffirmation of Guaranty, attached to the First Amendment as Addendum B (the “Reaffirmation of Guaranty”) effective as of the First Amendment Effective Date, May 3, 2024. Related to the Guaranty and the Original Guarantors, The Company agrees, that so long as there are no uncured Events of Default and Tenant remains in good standing under the Lease, then the Original Guarantors shall be released of their guarantees following the original lease term of fourteen and a half (14.5) years. The Company also agrees that, provided the Company has given written approval, at its discretion, which shall not be unreasonably withheld, then the Original Guarantors may be permitted to transfer the obligations under their Guarantees in the event of a Permitted Transfer, on to a new Guarantor(s) that are of at least equal or greater credit than the Original Guarantors, to be determined by the Company in its discretion, which shall not be unreasonably withheld. |
Pay vs Performance Disclosure
Pay vs Performance Disclosure - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Pay vs Performance Disclosure | ||
Net Income (Loss) | $ 96,473 | $ (309,648) |
Insider Trading Arrangements
Insider Trading Arrangements | 3 Months Ended |
Mar. 31, 2024 | |
Trading Arrangements, by Individual | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
Accounting Policies, by Policy
Accounting Policies, by Policy (Policies) | 3 Months Ended |
Mar. 31, 2024 | |
Summary of Significant Accounting Policies [Abstract] | |
Basis of presentation and principles of consolidation | Basis of presentation and principles of consolidation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation. The unaudited consolidated financial statements for the three months ended March 31, 2024 and 2023 have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, all adjustments necessary to present fairly our consolidated financial position, results of operations, and cash flows as of March 31, 2024 and 2023, and for the periods then ended, have been made. Those adjustments consist of normal and recurring adjustments. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. Accordingly, the unaudited consolidated financial statements do not include all the information and notes necessary for a comprehensive presentation of our financial position and results of operations and should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2023 included in our Annual Report on Form 10-K filed with the SEC on March 26, 2024. |
Liquidity | Liquidity As reflected in the accompanying unaudited consolidated financial statements, the Company generated net income of $96,473 and cash provided by operations of $207,218 during the three months ended March 31, 2024. Additionally, as of March 31, 2024, the Company had cash of $1,519,903 and stockholders’ equity of $5,352,650. The cash balance and positive net cash provided by operating activities serves to mitigate the conditions that historically raised substantial doubt about the Company’s ability to continue as a going concern. The Company believes that the Company has sufficient cash and positive cash flows to meet its obligations for a minimum of twelve months from the date of this filing. |
Use of estimates | Use of estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates for the three months ended March 31, 2024 and 2023 include the collectability of accounts receivable, valuation of investment in equity securities, the useful life of rental properties and property and equipment, assumptions used in assessing impairment of long-term assets including rental property and investment in unconsolidated joint ventures, valuation allowances for deferred tax assets, the fair value of derivative asset or liability related to interest rate swap, and the fair value of non-cash equity transactions, including options and stock-based compensation. |
Risks and uncertainties | Risks and uncertainties The Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure. The Company conducts a significant portion of its business in states that have legalized and regulated cannabis. Additionally, the Company’s tenants operate in the state-legalized and state-regulated cannabis industry. Consequently, any significant economic downturn in the state markets in which the Company operates or any changes in the federal government’s enforcement of current federal laws or changes in state laws could potentially have a negative effect on the Company’s business, results of operations and financial condition. Additionally, substantially all of the Company’s real estate properties are leased under triple-net leases to tenants (each, a “Significant Tenant” and collectively, the “Significant Tenants”). For the three months ended March 31, 2024 and 2023, revenues associated with Significant Tenants amounted to $596,707 and $592,848, respectively, which represents 71.3% and 86.1% of the Company’s total revenues, respectively (see Note 3). |
Fair value of financial instruments | Fair value of financial instruments The carrying amounts reported in the unaudited consolidated balance sheets for cash, accounts receivable, prepaid expenses and other assets, capitalized permit costs, escrow deposits, accounts payable, accrued expenses, and other payables approximate their fair market value based on the short-term maturity of these instruments. The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement The guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories: ● Level 1: Quoted market prices in active markets for identical assets or liabilities. ● Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. ● Level 3: Unobservable inputs that are not corroborated by market data. Other than the interest rate swap, the Company did not identify any other assets or liabilities that are required to be presented on the balance sheets at fair value, on a recurring basis, in accordance with ASC Topic 820. The following table represents the Company’s fair value hierarchy of its financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023. March 31, 2024 December 31, 2023 Description Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Interest rate swap asset (liability) $ — $ 2,724 $ — $ — $ (122,879 ) $ — |
Interest rate swap | Interest rate swap In connection with a bank loan executed in 2022, the Company entered into an interest rate swap agreement to manage interest rate risk related to debt that accrues interest at variable rates. The Company accounts for its interest rate swap agreement in accordance with the guidance related to derivatives and hedging activities. The Company is exposed to market risk from changes in interest rates. The Company agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed upon notional principal amount. Interest payments receivable and payable under the terms of the interest rate swap agreement are accrued over the period to which the payment relates and the net difference is treated as an adjustment of interest expense related to the underlying liability. Because the variable interest rates used to calculate payments under the terms of the swap agreement are calculated using different benchmarks than those included in the Company’s variable rate debt agreement, the swap agreement is not considered an effective cash flow hedge. Accordingly, changes in the underlying market value of the remaining swap payments are recognized into income as an increase or decrease to other income (expense) each reporting period. In accordance with ASC 820, Fair Value Measurements and Disclosures The estimated fair value of the interest rate swap agreement is determined by the Counterparty based on market data used by Counterparty and is reflected as a derivative asset or liability on the accompanying unaudited consolidated balance sheet with changes in the fair value reflected in change in fair value of interest rate swap on the accompanying unaudited consolidated statements of operations. The Company uses derivative financial instruments only to manage interest rate risks and not as investment vehicles. Information regarding the interest rate swap is as follows: Description Notional Interest Maturity Fair Value of Fair Value of December 7, 2022 interest rate swap $ 4,450,642 7.65 % December 10, 2032 $ 2,724 $ 122,879 |
Cash | Cash Cash is carried at cost and represents cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. The Company had no cash equivalents on March 31, 2024 and December 31, 2023. The Company’s cash is held at major commercial banks, which may at times exceed the Federal Deposit Insurance Corporation (“FDIC”) limit. To date, the Company has not experienced any losses on its invested cash. On March 31, 2024 and December 31, 2023, the Company had approximately $993,000 and $2,555,000, respectively, of cash in excess of FDIC limits of $250,000. Any loss incurred or a lack of access to such funds above the FDIC limit could have a significant adverse impact on the Company’s financial condition, results of operations and cash flows. |
Accounts receivable | Accounts receivable The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries under the current expected credit loss method. The allowance is based on an analysis of historical bad debt experience, current receivables aging and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. On January 1, 2023, the Company adopted ASC 326, “Financial Instruments - Credit Losses”. In accordance with ASC 326, an allowance is maintained for estimated forward-looking losses resulting from the possible inability of customers to make required payments (current expected losses). The amount of the allowance is determined principally on the basis of past collection experience and known financial factors regarding specific customers. The expense associated with the allowance for doubtful accounts on accounts receivable is recognized in general and administrative expenses. |
Investment in unconsolidated joint ventures | Investment in unconsolidated joint ventures The Company has equity investments in various privately held entities. The Company accounts for these investments either under the equity method or cost method of accounting depending on the Company’s ownership interest and level of influence. Investments accounted for under the equity method are recorded based upon the amount of the Company’s investment and adjusted each period for its share of the investee’s income or loss. Investments are reviewed for changes in circumstance or the occurrence of events that suggest an other than temporary event where our investment may not be recoverable. The Company evaluates its investments in these entities for consolidation. It considers its percentage interest in the joint venture, evaluation of control and whether a variable interest entity exists when determining whether or not the investment qualifies for consolidation or if it should be accounted for as an unconsolidated investment under the equity method of accounting. If an investment qualifies for the equity method of accounting, the Company’s investment is recorded initially at cost, and subsequently adjusted for equity in net income (loss) and cash contributions and distributions. The net income or loss of an unconsolidated investment is allocated to its investors in accordance with the provisions of the operating agreement of the entity. The allocation provisions in these agreements may differ from the ownership interest held by each investor. Differences, if any, between the carrying amount of our investment in the respective joint venture and the Company’s share of the underlying equity of such unconsolidated entity are amortized over the respective lives of the underlying assets as applicable. These items are reported as a single line item in the statements of operations as income or loss from investments in unconsolidated affiliated entities. |
Long-term investments | Long-term investments Long-term investments include investments in equity securities of entities over which the Company does not have a controlling financial interest or significant influence and are accounted for at fair value. Equity investments without readily determinable fair values are measured at cost with adjustments for observable changes in price or impairments (referred to as the “measurement alternative”). In applying the measurement alternative, the Company performs a qualitative assessment on a quarterly basis and recognizes an impairment if there are sufficient indicators that the fair value of the equity investments is less than carrying values. Changes in value are recorded in non-operating income (loss). On March 31, 2024 and December 31, 2023, long-term investments consisted of an investment in convertible preferred stock that does not have a readily determinable fair value (see Note 5). |
Rental properties | Rental properties Rental properties are carried at cost, less accumulated depreciation and amortization. Betterments, major renovations and certain costs directly related to the improvement of rental properties are capitalized. Maintenance and repair expenses are charged to expense as incurred. Depreciation is recognized on a straight-line basis over estimated useful lives of the assets, which range from 5 to 39 years. Tenant improvements paid for by the Company are amortized on a straight-line basis over the lives of the related leases, which approximate the useful lives of the assets. Upon the acquisition of real estate, the Company assesses the fair value of acquired assets (including land, buildings and improvements, identified intangibles, such as acquired above-market leases and acquired in-place leases) and acquired liabilities (such as acquired below-market leases) and allocates the purchase price based on these assessments. The Company assesses fair value based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known trends, and market/economic conditions. The Company’s rental properties are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis. An impairment loss is measured based on the excess of the property’s carrying amount over its estimated fair value. Impairment analyses are based on our current plans, intended holding periods and available market information at the time the analyses are prepared. If the Company’s estimates of the projected future cash flows, anticipated holding periods, or market conditions change, the Company’s evaluation of impairment losses may be different and such differences could be material to its consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results. For the three months ended March 31, 2024 and 2023, the Company did not record any impairment losses. The Company has land which is not subject to depreciation. |
Escrow deposits | Escrow deposits The Company is in the business of pursuing real estate acquisitions and investments that may include various contractual instruments to secure a property, such as an Option Agreement or a Purchase and Sale Agreement. These agreements often include the requirement to make escrow deposits. Escrow deposits include cash deposits made by the Company for the future acquisition of properties or for the option to acquire a property. In most cases, upon closing of the acquisition of a property, the escrow deposit will be applied to the purchase price. In some cases, the Company may discontinue pursuit of an acquisition of a property and therefore terminate an existing agreement, which can cause forfeiture of escrow deposits if those deposits are non-refundable. During the three months ended March 31, 2024 and 2023, the Company forfeited escrow deposits of $21,600 and $15,000, respectively, which is reflected in operating expenses as part of property portfolio business development costs on the accompanying unaudited consolidated statements of operations. On March 31, 2024 and December 31, 2023, escrow deposits amounted to $278,716 and $177,048, respectively. |
Property and equipment | Property and equipment Property and equipment is stated at cost, less accumulated depreciation. Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful lives. The Company uses a five-year life for office equipment, seven years for furniture and fixtures, and five to ten years for vehicles. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations. The Company examines the possibility of decreases in the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. |
Revenue recognition | Revenue recognition Property Investment Portfolio Revenues Rental income is accounted for pursuant to ASC Topic 842 “Leases” and includes base rents that each tenant pays in accordance with the terms of its respective lease and is reported on a straight-line basis over the non-cancellable term of the lease, which includes the effects of rent abatements under the leases. The Company commences rental revenue recognition when the tenant takes possession of the leased space or controls the physical use of the leased space and the leased space is substantially ready for its intended use. If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that can be taken in the form of cash or a credit against the tenant’s rent) that is funded by the Company is treated as a lease incentive receivable and amortized as a reduction of revenue over the lease term. Currently, the Company’s leases provide for payments with fixed monthly base rents over the term of the leases or annual percentage increases in base rent over the term of the lease. The leases also require the tenant to remit estimated monthly payments to the Company for property taxes and common area maintenance. These payments are recorded as rental income and the related property tax expense is reflected separately on the accompanying unaudited consolidated statements of operations. Real Estate Services Revenues The Company follows ASC Topic 606, Revenue from Contracts with Customers Revenues from advisory services is recognized when the Company performs services pursuant to its agreements with clients and collectability is probable. Brokerage revenues primarily consist of real estate sales commissions and are recognized upon the successful completion of all required services which is likely to occur upon a lease commencement, when escrow closes on the sale of a property, or as otherwise negotiated between the Brokerage and its clients. In accordance with the guidelines established for reporting revenue gross as a principal versus net as an agent in ASC Topic 606, the Company records commission revenues and expenses on a gross basis. Of the criteria listed in ASC Topic 606, the Company is the primary obligor in the transaction, does not have inventory risk, performs all or part of the service, has credit risk, and has wide latitude in establishing the price of services rendered and discretion in selection of agents and determination of service specifications. Brokerage revenues that are payable upon payment of rent or other events beyond the Company’s control are recognized upon the occurrence of such events. |
Contract Liabilities | Contract liabilities Contract liabilities include advisory fees received in advance that are deferred and recognized when the services are complete or over the actual or expected contract term, rental revenue received in advance, and other deferred revenue for when the Company receives consideration from an agreement before certain criteria have been met for revenue to be recognized in conformity with GAAP. During the three months ended March 31, 2024 and 2023, contract liabilities activities were as follows: Three Months Three Months Balance at beginning of period $ 346,176 $ 303,315 Rental payments received in advance 82,650 56,506 Accretion of contract liabilities to revenue (59,142 ) (4,306 ) Customer refund - (2,500 ) Balance at end of period $ 369,684 $ 353,015 |
Lease accounting | Lease accounting The FASB’s ASC Topic 842, “Leases” For leases entered into on or after the effective date, where the Company is the lessor, at the inception of the contract, the Company assesses whether the contract is a sales-type, direct financing or operating lease by reviewing the terms of the lease and determining if the lessee obtains control of the underlying asset implicitly or explicitly. If a change to a pre-existing lease occurs, the Company evaluates if the modification results in a separate new lease or a modified lease. A new lease results when a modification provides additional right of use. The new lease or modified lease is then reassessed to determine its classification based on the modified terms. As disclosed in Note 3, on January 24, 2022 and effective on March 1, 2022, the Chino Valley lease was amended and the monthly base rent was increased to $87,581 due to additional space of 30,000 square feet being leased to the lessee, increasing the premises to a total of 97,312 square feet of operational space. In connection with this lease amendment, the Company paid $500,000 to the tenant as a tenant improvement allowance or lease incentive for investment into the premises, which was capitalized as a lease incentive receivable and is recognized on a straight-line basis over the remaining lease term as a reduction to the lease income. The increase in monthly rent was commensurate with the additional space being leased; therefore, this modification qualifies as a separate contract under ASC 842 which does not require lease classification reassessment. The Company excludes short-term leases having initial terms of 12-months or less as an accounting policy election and recognizes rent expense on a straight-lines basis over the lease term. The Company records revenues from rental properties for its operating leases where it is the lessor on a straight-line basis. Any revenue on the straight-line basis exceeding the monthly payment amount required on the operating lease is reflected as deferred rent. In 2020, the Company amended its leases for which it is the lessor on its Chino Valley, Tempe, Kingman and Green Valley properties. The amendments resulted in an abatement of rent for the months of June and July 2020. Additionally, in connection with an operating lease on the Company’s Michigan property acquired in December 2022, the Company abated certain lease payments for the period from December 2022 to March 2023, and in connection with an operating lease on the Company’s Chicago property acquired in January 2024, the Company abated certain lease payments for the period from January 2024 to August 2024. These rent abatements and the effect of recording rent on a straight-line basis resulted in aggregate deferred rent as of March 31, 2024 and December 31, 2023 of $459,520 and $371,472, respectively (see Note 3). Additionally, if the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that can be taken in the form of cash or a credit against the tenant’s rent) that is funded is treated as a lease incentive receivable and amortized as a reduction of revenue over the lease term. For contracts entered into on or after the effective date, where the Company is the lessee, at the inception of a contract, the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right to direct the use of the asset. The Company allocates the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. For leases where the Company is a lessee, primarily for the Company’s administrative office lease, the Company analyzed if it would be required to record a lease liability and a right of use asset on its consolidated balance sheets at fair value upon adoption of ASC 842. Operating lease right of use asset represents the right to use the leased asset for the lease term and operating lease liability is recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company used its incremental borrowing rate of 6% based on the information available at the adoption date or execution of a lease agreement in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the unaudited consolidated statements of operations. |
Basic and diluted loss per share | Basic and diluted loss per share Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period using the treasury stock method and as-if converted method. Potentially dilutive common shares and participating securities are excluded from the computation of diluted shares outstanding if they would have an anti-dilutive impact on the Company’s net losses. The Company’s preferred stock is considered a participating security since the preferred shares are entitled to dividends equal to common share dividends and accordingly, are included in the computation of earnings per share pursuant to the two-class method. The two-class method of computing (loss) income per share is an earnings allocation formula that determines (loss) income per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. The following table presents a reconciliation of basic and diluted net income (loss) per common share: Three Months Ended 2024 2023 Net income (loss) per common share - basic: Net income (loss) allocated to common stockholders $ 96,473 $ (309,648 ) Weighted average common shares outstanding – basic 12,101,548 12,201,548 Net income (loss) per common share – basic $ 0.01 $ (0.03 ) Net income (loss) per common share - diluted: Net income (loss) allocated to common shareholders – basic $ 96,473 $ (309,648 ) Add: interest of convertible debt 30,000 - Numerator for income (loss) per common share – basic $ 126,473 $ (309,648 ) Weighted average common shares outstanding – diluted 12,101,548 12,201,548 Add: dilutive shares related to: Stock options - - Convertible debt 400,000 - Weighted average common shares outstanding – diluted 12,501,548 12,201,548 Net income (loss) per common share – diluted $ 0.01 $ (0.03 ) The following potentially dilutive shares have been excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive for the three months ended March 31, 2024 and 2023. March 31, 2024 2023 Convertible debt - 400,000 Stock options 2,262,500 2,352,500 2,262,500 2,752,500 |
Segment reporting | Segment reporting The Company operates in two reportable segments which consist of (1) the operations, leasing and management of its leased commercial properties, herein known as the “Property Investment Portfolio” segment, and (2) advisory and brokerage services related to commercial properties, herein known as the “Real Estate Services” segment. The Company has determined that these reportable segments were strategic business units that offered different products. Currently, these reportable segments are being managed separately based on the fundamental differences in their operations. |
Income tax | Income tax Deferred income tax assets and liabilities arise from temporary differences between the financial statements and tax basis of assets and liabilities, as measured by the enacted tax rates, which are expected to be in effect when these differences reverse. Deferred tax assets and liabilities are classified as current or non-current, depending upon the classification of the asset or liabilities to which they relate. Deferred tax assets and liabilities not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company follows the provisions of FASB ASC 740-10, “Uncertainty in Income Taxes”. Certain recognition thresholds must be met before a tax position is recognized in the financial statements. An entity may only recognize or continue to recognize tax positions that meet a “more-likely-than-not” threshold. The Company does not believe it has any uncertain tax positions as of March 31, 2024 and December 31, 2023 that would require either recognition or disclosure in the accompanying unaudited consolidated financial statements. |
Stock-based compensation | Stock-based compensation Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation – Stock Compensation Improvements to Employee Share-Based Payment Accounting. |
Recently issued accounting pronouncements | Recently issued accounting pronouncements Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying unaudited consolidated financial statements. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Summary of Significant Accounting Policies [Abstract] | |
Schedule of Fair Value Hierarchy | The following table represents the Company’s fair value hierarchy of its financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023. March 31, 2024 December 31, 2023 Description Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Interest rate swap asset (liability) $ — $ 2,724 $ — $ — $ (122,879 ) $ — |
Schedule of Information Regarding the Interest Rate Swap | Information regarding the interest rate swap is as follows: Description Notional Interest Maturity Fair Value of Fair Value of December 7, 2022 interest rate swap $ 4,450,642 7.65 % December 10, 2032 $ 2,724 $ 122,879 |
Schedule of Contract Liabilities Activities | During the three months ended March 31, 2024 and 2023, contract liabilities activities were as follows: Three Months Three Months Balance at beginning of period $ 346,176 $ 303,315 Rental payments received in advance 82,650 56,506 Accretion of contract liabilities to revenue (59,142 ) (4,306 ) Customer refund - (2,500 ) Balance at end of period $ 369,684 $ 353,015 |
Schedule of Basic and Diluted Net Income (Loss) Per Common Share | The following table presents a reconciliation of basic and diluted net income (loss) per common share: Three Months Ended 2024 2023 Net income (loss) per common share - basic: Net income (loss) allocated to common stockholders $ 96,473 $ (309,648 ) Weighted average common shares outstanding – basic 12,101,548 12,201,548 Net income (loss) per common share – basic $ 0.01 $ (0.03 ) Net income (loss) per common share - diluted: Net income (loss) allocated to common shareholders – basic $ 96,473 $ (309,648 ) Add: interest of convertible debt 30,000 - Numerator for income (loss) per common share – basic $ 126,473 $ (309,648 ) Weighted average common shares outstanding – diluted 12,101,548 12,201,548 Add: dilutive shares related to: Stock options - - Convertible debt 400,000 - Weighted average common shares outstanding – diluted 12,501,548 12,201,548 Net income (loss) per common share – diluted $ 0.01 $ (0.03 ) |
Schedule of Diluted Net Loss Per Share as their Effect would be Anti-Dilutive Net Loss Per Share | The following potentially dilutive shares have been excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive for the three months ended March 31, 2024 and 2023. March 31, 2024 2023 Convertible debt - 400,000 Stock options 2,262,500 2,352,500 2,262,500 2,752,500 |
Concentrations and Risks (Table
Concentrations and Risks (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Concentrations and Risks [Abstract] | |
Schedule of Future Minimum Lease Payments | Future minimum lease payments to be received, on all leased properties, for each of the five succeeding calendar years and thereafter as of March 31, 2024, consists of the following: Future annual base rent: Amount 2024 (remainder of year) $ 1,797,018 2025 2,487,172 2026 2,497,793 2027 2,512,350 2028 2,535,780 2029 2,559,913 Thereafter 25,263,418 Total $ 39,653,444 |
Schedule of Revenues Associated with Significant Tenant Leases | For the three months ended March 31, 2024 and 2023, revenues associated with Significant Tenant leases described above are summarized as follows: For the Three % of For the Three % of Broken Arrow $ 280,108 33.5 % $ 280,108 40.7 % VSM 164,184 19.6 % 164,184 23.8 % Rapid Fish 152,415 18.2 % 148,556 21.6 % Total $ 596,707 71.3 % $ 592,848 86.1 % |
Rental Properties (Tables)
Rental Properties (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Rental Properties [Abstract] | |
Schedule of Rental Properties, Net | On March 31, 2024 and December 31, 2023, rental properties, net consisted of the following: Description Useful Life March 31, December 31, Building and building improvements 5-39 $ 10,332,213 $ 9,258,431 Construction in progress - 18,976 18,976 Land - 3,865,474 3,353,378 Rental properties, at cost 14,216,663 12,630,785 Less: accumulated depreciation (2,678,347 ) (2,590,261 ) Rental properties, net $ 11,538,316 $ 10,040,524 |
Investment in Unconsolidated _2
Investment in Unconsolidated Joint Ventures and Equity Securities (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Investment in Unconsolidated Joint Ventures and Equity Securities [Abstract] | |
Schedule of Unconsolidated Affiliated Entities and Net Carrying Value Amount | A summary of the Company’s original investments in the unconsolidated affiliated entities and net carrying value amount is as follows: Original Net Carrying Value Entity Date Acquired Ownership Investment March 31, December 31, Zoneomics Green, LLC (the “Zoneomics Green Joint Venture”) May 1, 2021 50.0 % 90,000 4,923 4,923 Total investments in unconsolidated joint venture entities $ 176,000 $ 4,923 $ 4,923 |
Schedule of Derived from Financial Statements | The following represents summarized financial information derived from the financial statements of the Zoneomics Green Joint Venture, as of March 31, 2024 and for the three months ended March 31, 2024. Balance sheets (Unaudited): Zoneomics Current assets: Cash $ 9,847 Total assets $ 9,847 Liabilities $ - Equity 9,847 Total liabilities and equity $ 9,847 |
Schedule of Statement of Operations | Statement of operations (Unaudited) Zoneomics Net sales $ - Operating recovery (expenses) - Net income (loss) $ - Company’s share of income (loss) from unconsolidated joint ventures $ - |
Notes Payable (Tables)
Notes Payable (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Notes Payable [Abstract] | |
Schedule of Notes Payable | On March 31, 2024 and December 31, 2023, notes payable consisted of the following: March 31, December 31, Note payable - East West Bank $ 4,436,449 $ 4,447,068 Notes payable - Woodward Properties 1,818,057 1,829,232 Total principal due on notes payable 6,254,506 6,276,300 Less: debt discount (159,983 ) (164,598 ) Notes payable, net $ 6,094,523 $ 6,111,702 |
Schedule of Future Principal Payments Under Notes Payable | On March 31, 2024, future principal payments under the above notes payable are as follows: Years ending March 31, Amount 2025 $ 114,171 2026 107,252 2027 475,255 2028 1,370,206 2029 72,911 Thereafter 4,114,711 Total principal payments due on March 31, 2024 $ 6,254,506 |
Stockholders_ Equity (Tables)
Stockholders’ Equity (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Stockholders’ Equity [Abstract] | |
Schedule of Stock Option Activities | Stock option activities for the three months ended March 31, 2024 are summarized as follows: Number of Weighted Weighted Average Aggregate Balance Outstanding December 31, 2023 2,262,500 $ 0.94 4.34 $ - Forfeited - - - Balance Outstanding March 31, 2024 2,262,500 $ 0.94 4.09 $ - Exercisable, March 31, 2024 1,871,250 $ 0.95 3.45 $ - Balance non-vested on December 31, 2023 452,500 $ 0.91 7.47 $ - Forfeited during the period - - - - Vested during the period (61,250 ) 0.84 - - Balance non-vested on March 31, 2024 391,250 $ 0.93 7.16 $ - |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Segment Reporting [Abstract] | |
Schedule of Reportable Business Segments | Information with respect to these reportable business segments for the three months ended March 31, 2024 and 2023 was as follows: For the Three Months Ended 2024 2023 Revenues: Property investment portfolio $ 691,292 $ 610,474 Real estate services 145,760 77,550 837,052 688,024 Depreciation and amortization: Property investment portfolio 89,647 97,582 Real estate services - - 89,647 97,582 Interest expense: Property investment portfolio 158,039 154,500 Real estate services - - 158,039 154,500 Loss from unconsolidated joint ventures: Property investment portfolio - 1,469 Real estate services - - - 1,469 Net income (loss): Property investment portfolio (a) 120,079 (175,805 ) Real estate services (23,606 ) (133,843 ) $ 96,473 $ (309,648 ) (a) Operating expenses and other expenses of the Company’s holding company that were not allocated to the real estate services segment are included in the property investment portfolio segment. |
Schedule of Identifiable Long-Lived Tangible Assets | March 31, December 31, Identifiable long-lived tangible assets on March 31, 2024 and December 31, 2023 by segment: Property investment portfolio $ 11,550,935 $ 10,048,223 Real estate services - - $ 11,550,935 $ 10,048,223 |
Operating Lease Right-of-Use _2
Operating Lease Right-of-Use (“Rou”) Assets and Operating Lease Liability (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Operating Lease Right-of-Use (“Rou”) Assets and Operating Lease Liability [Abstract] | |
Schedule of Right-of-Use Asset (“ROU”) | On March 31, 2024 and December 31, 2023, right-of-use asset (“ROU”) is summarized as follows: March 31, December 31, Office lease right of use asset $ 90,710 $ 90,710 Less: accumulated amortization (67,104 ) (58,497 ) Balance of ROU assets $ 23,606 $ 32,213 |
Schedule of Future Minimum Base Lease Payments Due Under Non-Cancelable Operating Lease | On March 31, 2024, future minimum base lease payments due under a non-cancelable operating lease are as follows: Year ended March 31, Amount 2025 $ 24,626 Total minimum non-cancelable operating lease payments 24,626 Less: discount to fair value (545 ) Total lease liability on March 31, 2024 $ 24,081 |
Organization and Nature of Op_2
Organization and Nature of Operations (Details) | 3 Months Ended |
Mar. 31, 2024 | |
Organization and Nature of Operations [Line Items] | |
Incorporated date | Aug. 25, 2003 |
Two Joint Ventures [Member] | |
Organization and Nature of Operations [Line Items] | |
Equity interest rate, percentage | 50% |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) | 3 Months Ended | ||||
Mar. 01, 2022 USD ($) Squarefeet | Mar. 31, 2024 USD ($) segments | Mar. 31, 2023 USD ($) | Dec. 31, 2023 USD ($) | Dec. 31, 2022 USD ($) | |
Summary of Significant Accounting Policies [Line Items] | |||||
Net loss | $ 96,473 | $ (309,648) | |||
Cash provided by operations | 213,818 | 3,589 | |||
Stockholders' equity | 5,352,650 | 5,411,912 | $ 5,239,683 | $ 5,678,298 | |
Revenue associated with significant tenants | $ 596,707 | $ 592,848 | |||
Total revenues percentage | 71.30% | 86.10% | |||
Amount of cash excess of FDIC | $ 993,000 | 2,555,000 | |||
Federal deposit insurance corporation limits | 250,000 | ||||
Convertible notes receivable | 21,600 | $ 15,000 | |||
Escrow deposits | 278,716 | 177,048 | |||
Total office space (in Squarefeet) | Squarefeet | 97,312 | ||||
Incentive lease | 500,000 | ||||
Deferred rent | $ 459,520 | $ 371,472 | |||
Borrowing rate | 6% | ||||
Number of reportable segments (in segments) | segments | 2 | ||||
Chino Valley Lease [Member] | |||||
Summary of Significant Accounting Policies [Line Items] | |||||
Increase in monthly base rent payable | $ 87,581 | ||||
Additional space (in Squarefeet) | Squarefeet | 30,000 | ||||
Office Equipment [Member] | |||||
Summary of Significant Accounting Policies [Line Items] | |||||
Estimated useful life of assets | 5 years | ||||
Furniture and Fixtures [Member] | |||||
Summary of Significant Accounting Policies [Line Items] | |||||
Estimated useful life of assets | 7 years | ||||
Liquidity [Member] | |||||
Summary of Significant Accounting Policies [Line Items] | |||||
Net loss | $ 96,473 | ||||
Cash provided by operations | 207,218 | ||||
Restricted cash | 1,519,903 | ||||
Stockholders' equity | $ 5,352,650 | ||||
Minimum [Member] | Building and Building Improvements [Member] | |||||
Summary of Significant Accounting Policies [Line Items] | |||||
Estimated useful life of assets | 5 years | ||||
Minimum [Member] | Vehicles [Member] | |||||
Summary of Significant Accounting Policies [Line Items] | |||||
Estimated useful life of assets | 5 years | ||||
Maximum [Member] | Building and Building Improvements [Member] | |||||
Summary of Significant Accounting Policies [Line Items] | |||||
Estimated useful life of assets | 39 years | ||||
Maximum [Member] | Vehicles [Member] | |||||
Summary of Significant Accounting Policies [Line Items] | |||||
Estimated useful life of assets | 10 years |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - Schedule of Fair Value Hierarchy - Recurring [Member] - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Level 1 [Member] | ||
Summary of Significant Accounting Policies (Details) - Schedule of Fair Value Hierarchy [Line Items] | ||
Interest rate swap asset (liability) | ||
Level 2 [Member] | ||
Summary of Significant Accounting Policies (Details) - Schedule of Fair Value Hierarchy [Line Items] | ||
Interest rate swap asset (liability) | 2,724 | $ (122,879) |
Level 3 [Member] | ||
Summary of Significant Accounting Policies (Details) - Schedule of Fair Value Hierarchy [Line Items] | ||
Interest rate swap asset (liability) |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details) - Schedule of Information Regarding the Interest Rate Swap - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Dec. 31, 2023 | |
Schedule of Information Regarding the Interest Rate Swap [Abstract] | ||
Notional Amount | $ 4,450,642 | |
Interest Rate | 7.65% | |
Maturity | Dec. 10, 2032 | |
Fair Value of Asset | $ 2,724 | |
Fair Value of Liability | $ 122,879 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies (Details) - Schedule of Contract Liabilities Activities - USD ($) | Mar. 31, 2024 | Mar. 31, 2023 |
Schedule of Contract Liabilities Activities [Abstract] | ||
Rental payments received in advance | $ 82,650 | $ 56,506 |
Accretion of contract liabilities to revenue | (59,142) | (4,306) |
Customer refund | $ (2,500) |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies (Details) - Schedule of Basic and Diluted Net Income (Loss) Per Common Share - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Net income (loss) per common share - basic: | ||
Net income (loss) allocated to common stockholders (in Dollars) | $ 96,473 | $ (309,648) |
Weighted average common shares outstanding – basic | 12,101,548 | 12,201,548 |
Net income (loss) per common share – basic (in Dollars per share) | $ 0.01 | $ (0.03) |
Net income (loss) per common share - diluted: | ||
Net income (loss) allocated to common shareholders – basic (in Dollars) | $ 96,473 | $ (309,648) |
Add: interest of convertible debt (in Dollars) | 30,000 | |
Numerator for income (loss) per common share – basic (in Dollars) | $ 126,473 | $ (309,648) |
Weighted average common shares outstanding – diluted | 12,101,548 | 12,201,548 |
Add: dilutive shares related to: | ||
Stock options | ||
Convertible debt | 400,000 | |
Weighted average common shares outstanding – diluted | 12,501,548 | 12,201,548 |
Net income (loss) per common share – diluted (in Dollars per share) | $ 0.01 | $ (0.03) |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies (Details) - Schedule of Diluted Net Loss Per Share as their Effect would be Anti-Dilutive Net Loss Per Share - shares | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive shares | 2,262,500 | 2,752,500 |
Convertible debt [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive shares | 400,000 | |
Stock options [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive shares | 2,262,500 | 2,352,500 |
Concentrations and Risks (Detai
Concentrations and Risks (Details) | 3 Months Ended | 12 Months Ended | |||||||||||||
Jan. 18, 2024 | Nov. 29, 2022 USD ($) | Mar. 15, 2022 | Mar. 01, 2022 USD ($) m² | Jan. 24, 2022 USD ($) ft² | Sep. 01, 2021 USD ($) ft² | May 29, 2020 USD ($) | Jan. 01, 2019 USD ($) | May 01, 2018 USD ($) | Mar. 31, 2024 USD ($) | Dec. 31, 2023 USD ($) | Dec. 31, 2022 USD ($) | Mar. 31, 2023 USD ($) | Jun. 30, 2022 USD ($) | Aug. 23, 2021 m² | |
Concentrations and Risks [Line Items] | |||||||||||||||
Rental income percentage | 10% | ||||||||||||||
Expire date | Nov. 30, 2024 | ||||||||||||||
Percentage of base rent | 5% | ||||||||||||||
Tenants improvements | $ 8,000,000 | ||||||||||||||
Additional square feet (in Square Feet) | ft² | 30,000 | ||||||||||||||
Tenant improvement allowance | $ 500,000 | ||||||||||||||
Cost of improvements | $ 8,000,000 | ||||||||||||||
Consideration paid | 300,000 | ||||||||||||||
Capital improvements | 3,000,000 | ||||||||||||||
Security deposit | 2,272 | $ 2,272 | |||||||||||||
Contract liability | 300,000 | ||||||||||||||
Amortized assignment fees | 300,000 | ||||||||||||||
Lease modification amount | $ 369,684 | 346,176 | $ 303,315 | $ 353,015 | |||||||||||
Lease, description | The Woodward Lease commenced on December 1, 2022 and has a term of 14 years and 4 months through March 1, 2037, with two 5-year options to extend the term, exercisable by the Woodward Tenant pursuant to the terms and conditions of the Woodward Lease. | ||||||||||||||
Increasing over the term of lease | 3% | ||||||||||||||
Lease term | 15 years | ||||||||||||||
Lease incentive receivable | $ 442,661 | 449,541 | |||||||||||||
Tenant improvement allowance | $ 500,000 | ||||||||||||||
Deferred revenue | 277,033 | 281,340 | |||||||||||||
CJK [Member] | |||||||||||||||
Concentrations and Risks [Line Items] | |||||||||||||||
Security deposit | 14,960 | ||||||||||||||
Sublease deposit | $ 22,000 | ||||||||||||||
Security deposit percentage | 68% | ||||||||||||||
Tenants [Member] | |||||||||||||||
Concentrations and Risks [Line Items] | |||||||||||||||
Rental payment | $ 40,319 | ||||||||||||||
Security deposits payable | $ 290,460 | 290,460 | |||||||||||||
Deferred rent | $ 459,520 | $ 371,472 | |||||||||||||
Percentage of total assets | 73.60% | 69.40% | |||||||||||||
Minimum [Member] | |||||||||||||||
Concentrations and Risks [Line Items] | |||||||||||||||
Fixed rate per square feet | m² | 0.82 | ||||||||||||||
Minimum [Member] | CJK [Member] | |||||||||||||||
Concentrations and Risks [Line Items] | |||||||||||||||
Security deposit | $ 14,960 | ||||||||||||||
Maximum [Member] | |||||||||||||||
Concentrations and Risks [Line Items] | |||||||||||||||
Fixed rate per square feet | m² | 0.9 | ||||||||||||||
Maximum [Member] | CJK [Member] | |||||||||||||||
Concentrations and Risks [Line Items] | |||||||||||||||
Security deposit | 22,000 | ||||||||||||||
Chino Valley Lease [Member] | |||||||||||||||
Concentrations and Risks [Line Items] | |||||||||||||||
Lease term | 22 years | ||||||||||||||
Expire date | Apr. 30, 2040 | ||||||||||||||
Rental payment | $ 87,581 | $ 55,195 | $ 32,800 | $ 35,000 | |||||||||||
Percentage of base rent | 5% | ||||||||||||||
Tenants improvements | $ 8,000,000 | ||||||||||||||
Fixed rate per square feet | 97,312 | 67,312 | 0.82 | ||||||||||||
Cost of improvements | $ 8,000,000 | ||||||||||||||
Chino Valley Lease [Member] | Minimum [Member] | |||||||||||||||
Concentrations and Risks [Line Items] | |||||||||||||||
Rental payment | $ 35,000 | ||||||||||||||
Chino Valley Lease [Member] | Maximum [Member] | |||||||||||||||
Concentrations and Risks [Line Items] | |||||||||||||||
Rental payment | $ 40,000 | ||||||||||||||
Green Valley [Member] | |||||||||||||||
Concentrations and Risks [Line Items] | |||||||||||||||
Lease term | 22 years | ||||||||||||||
Expire date | Apr. 30, 2040 | ||||||||||||||
Rental payment | 3,500 | $ 3,500 | |||||||||||||
Zoned Arizona [Member] | |||||||||||||||
Concentrations and Risks [Line Items] | |||||||||||||||
Lease term | 22 years | ||||||||||||||
Expire date | Apr. 30, 2040 | ||||||||||||||
Rental payment | $ 49,200 | $ 33,500 | |||||||||||||
Percentage of base rent | 5% | ||||||||||||||
Security deposit | 147,600 | ||||||||||||||
Amortized assignment fees | 300,000 | ||||||||||||||
Assignment price | 300,000 | ||||||||||||||
Zoned Arizona [Member] | Contract Liabilities [Member] | |||||||||||||||
Concentrations and Risks [Line Items] | |||||||||||||||
Lease modification amount | $ 277,033 | $ 281,340 | |||||||||||||
Kingman Lease [Member] | |||||||||||||||
Concentrations and Risks [Line Items] | |||||||||||||||
Lease term | 22 years | ||||||||||||||
Expire date | Apr. 30, 2040 | ||||||||||||||
Rental payment | $ 4,000 | $ 4,000 | |||||||||||||
Percentage of base rent | 5% | ||||||||||||||
Additional rent percentage | 50% | ||||||||||||||
Additional rent | $ 3,500 |
Concentrations and Risks (Det_2
Concentrations and Risks (Details) - Schedule of Future Minimum Lease Payments | Mar. 31, 2024 USD ($) |
Schedule of Future Minimum Lease Payments [Abstract] | |
2024 (remainder of year) | $ 1,797,018 |
2025 | 2,487,172 |
2026 | 2,497,793 |
2027 | 2,512,350 |
2028 | 2,535,780 |
2029 | 2,559,913 |
Thereafter | 25,263,418 |
Total | $ 39,653,444 |
Concentrations and Risks (Det_3
Concentrations and Risks (Details) - Schedule of Revenues Associated with Significant Tenant Leases - USD ($) | Mar. 31, 2024 | Mar. 31, 2023 |
Schedule of Revenues Associated with Significant Tenant Leases [Line Items] | ||
Revenue amount | $ 596,707 | $ 592,848 |
Percentage of Total Revenues | 71.30% | 86.10% |
Broken Arrow [Member] | ||
Schedule of Revenues Associated with Significant Tenant Leases [Line Items] | ||
Revenue amount | $ 280,108 | $ 280,108 |
Percentage of Total Revenues | 33.50% | 40.70% |
VSM [Member] | ||
Schedule of Revenues Associated with Significant Tenant Leases [Line Items] | ||
Revenue amount | $ 164,184 | $ 164,184 |
Percentage of Total Revenues | 19.60% | 23.80% |
Rapid Fish [Member] | ||
Schedule of Revenues Associated with Significant Tenant Leases [Line Items] | ||
Revenue amount | $ 152,415 | $ 148,556 |
Percentage of Total Revenues | 18.20% | 21.60% |
Rental Properties (Details)
Rental Properties (Details) - USD ($) | 3 Months Ended | ||
Jan. 19, 2024 | Mar. 31, 2024 | Mar. 31, 2023 | |
Rental Properties [Line Items] | |||
Representing amount | $ 40,000 | ||
Cash | 40,000 | ||
Cash paid | $ 185,000 | ||
Commissions and fees | 71,244 | ||
Commission expense | 65,000 | ||
Sponsor fee | 79,634 | ||
Other costs | 6,244 | ||
Depreciation | 88,086 | $ 96,291 | |
ZP RE Holdings, LLC [Member] | |||
Rental Properties [Line Items] | |||
Assignment fees | 185,000 | ||
Aggregate amount | $ 1,435,000 | ||
ZP RE Holdings, LLC [Member] | ZP Woodward [Member] | |||
Rental Properties [Line Items] | |||
Representing amount | $ 1,210,000 |
Rental Properties (Details) - S
Rental Properties (Details) - Schedule of Rental Properties, Net - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Schedule of Rental Properties, Net [Line Items] | ||
Rental properties, at cost | $ 14,216,663 | $ 12,630,785 |
Less: accumulated depreciation | (2,678,347) | (2,590,261) |
Rental properties, net | 11,538,316 | 10,040,524 |
Building and building improvements [Member] | ||
Schedule of Rental Properties, Net [Line Items] | ||
Rental properties, at cost | $ 10,332,213 | 9,258,431 |
Construction in progress [Member] | ||
Schedule of Rental Properties, Net [Line Items] | ||
Useful Life (Years) | ||
Rental properties, at cost | $ 18,976 | 18,976 |
Land [Member] | ||
Schedule of Rental Properties, Net [Line Items] | ||
Useful Life (Years) | ||
Rental properties, at cost | $ 3,865,474 | $ 3,353,378 |
Minimum [Member] | Building and building improvements [Member] | ||
Schedule of Rental Properties, Net [Line Items] | ||
Useful Life (Years) | 5 years | |
Maximum [Member] | Building and building improvements [Member] | ||
Schedule of Rental Properties, Net [Line Items] | ||
Useful Life (Years) | 39 years |
Investment in Unconsolidated _3
Investment in Unconsolidated Joint Ventures and Equity Securities (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||||||
Dec. 31, 2023 | Jun. 24, 2022 | Jun. 30, 2021 | May 01, 2021 | Mar. 31, 2024 | Mar. 31, 2023 | Dec. 31, 2023 | Dec. 13, 2013 | |
Investment in Unconsolidated Joint Ventures and Equity Securities [Line Items] | ||||||||
Aggregate carrying value | $ 4,923 | $ 4,923 | $ 4,923 | |||||
Purchase units (in Shares) | 50 | |||||||
Capital contribution | $ 90,000 | |||||||
Equity membership percentage | 50% | |||||||
Equity method investments amount | ||||||||
Impairment loss | 45,000 | |||||||
Loss from unconsolidated joint ventures | $ 1,469 | |||||||
Convertible preferred stock (in Shares) | 875 | |||||||
Convertible preferred stock value | $ 2,000 | $ 2,000 | $ 2,000 | |||||
Convertible preferred per share (in Dollars per share) | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | ||||
Equity securities amount | $ 50,000 | $ 50,000 | ||||||
Zoneomics Green [Member] | ||||||||
Investment in Unconsolidated Joint Ventures and Equity Securities [Line Items] | ||||||||
Equity membership percentage | 50% | |||||||
Equity method investments amount | $ 90,000 | |||||||
Series A Convertible Preferred Stock [Member] | ||||||||
Investment in Unconsolidated Joint Ventures and Equity Securities [Line Items] | ||||||||
Convertible preferred stock value | $ 50,000 | |||||||
Convertible preferred per share (in Dollars per share) | $ 57.14 | |||||||
Series A Convertible Preferred Stock [Member] | Investment in Equity Securities [Member] | ||||||||
Investment in Unconsolidated Joint Ventures and Equity Securities [Line Items] | ||||||||
Ownership interest | 20% | |||||||
Investment in equity securities [Member] | Zoneomics Green [Member] | ||||||||
Investment in Unconsolidated Joint Ventures and Equity Securities [Line Items] | ||||||||
Ownership interest | 50% |
Investment in Unconsolidated _4
Investment in Unconsolidated Joint Ventures and Equity Securities (Details) - Schedule of Unconsolidated Affiliated Entities and Net Carrying Value Amount - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Dec. 31, 2023 | |
Schedule of Unconsolidated Affiliated Entities and Net Carrying Value Amount [Line Items] | ||
Original Investment Amount | $ 176,000 | |
Net Carrying Value | $ 4,923 | $ 4,923 |
Zoneomics Green, LLC (the “Zoneomics Green Joint Venture”) [Member] | ||
Schedule of Unconsolidated Affiliated Entities and Net Carrying Value Amount [Line Items] | ||
Date Acquired | May 01, 2021 | |
Ownership percentage | 50% | |
Original Investment Amount | $ 90,000 | |
Net Carrying Value | $ 4,923 | $ 4,923 |
Investment in Unconsolidated _5
Investment in Unconsolidated Joint Ventures and Equity Securities (Details) - Schedule of Derived from Financial Statements - Beakon [Member] | Mar. 31, 2024 USD ($) |
Current assets: | |
Cash | $ 9,847 |
Total assets | 9,847 |
Liabilities | |
Equity | 9,847 |
Total liabilities and equity | $ 9,847 |
Investment in Unconsolidated _6
Investment in Unconsolidated Joint Ventures and Equity Securities (Details) - Schedule of Statement of Operations - Beakon [Member] | 3 Months Ended |
Mar. 31, 2024 USD ($) | |
Schedule of Statement of Operations [Line Items] | |
Net sales | |
Operating recovery (expenses) | |
Net income (loss) | |
Company’s share of income (loss) from unconsolidated joint ventures |
Notes Payable (Details)
Notes Payable (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||||||||
Apr. 01, 2023 | Dec. 31, 2022 | Jul. 11, 2022 | Mar. 31, 2024 | Mar. 31, 2023 | Dec. 31, 2023 | Feb. 24, 2023 | Jan. 01, 2023 | Dec. 07, 2022 | Dec. 05, 2022 | |
Notes Payable [Line Items] | ||||||||||
Loan and other fees | $ 184,596 | $ 176,472 | ||||||||
Additional fees | 8,124 | |||||||||
Aggregating loan and other fees | $ 184,596 | |||||||||
Property appraised value | 65% | |||||||||
Tenant securities deposits | $ 350,000 | |||||||||
Principal amount | $ 4,500,000 | |||||||||
Percentage of loan-to-value | 50% | |||||||||
Variable prime rate plus percentage | 9.25% | 9.25% | ||||||||
Amended note matures | 10 years | |||||||||
Received gross proceeds | $ 4,500,000 | |||||||||
Fixed interest percentage | 7.65% | |||||||||
Amortization of debt discount | $ 4,615 | $ 4,615 | ||||||||
Land contact note payable | $ 430,000 | |||||||||
Note Payable accrues interest rate | 7% | |||||||||
East West Bank [Member] | ||||||||||
Notes Payable [Line Items] | ||||||||||
Principal amount | 4,436,449 | $ 4,447,068 | ||||||||
Interest due | 7,520 | 8,861 | ||||||||
Woodward Property Note Payable [Member] | ||||||||||
Notes Payable [Line Items] | ||||||||||
Principal amount | $ 1,425,000 | |||||||||
23616 Land Contract Note Payable [Member] | ||||||||||
Notes Payable [Line Items] | ||||||||||
Percentage of loan-to-value | 9% | |||||||||
Principal amount | 1,402,071 | 1,408,962 | ||||||||
Interest due | 0 | 0 | ||||||||
Principal and interest monthly payments | $ 12,821 | |||||||||
Balloon payment | 1,274,117 | |||||||||
23634 Land Contract Note Payable [Member] | ||||||||||
Notes Payable [Line Items] | ||||||||||
Principal amount | 415,986 | 420,270 | ||||||||
Interest due | $ 0 | $ 0 | ||||||||
Monthly installments | $ 3,865 | |||||||||
Maximum [Member] | ||||||||||
Notes Payable [Line Items] | ||||||||||
Debt coverage ratio | 1.40 | |||||||||
Maximum [Member] | Zoned Arizona [Member] | ||||||||||
Notes Payable [Line Items] | ||||||||||
Debt coverage ratio | 1.50 | |||||||||
Minimum [Member] | ||||||||||
Notes Payable [Line Items] | ||||||||||
Debt coverage ratio | 1.00 | |||||||||
Minimum [Member] | Zoned Arizona [Member] | ||||||||||
Notes Payable [Line Items] | ||||||||||
Debt coverage ratio | 1.0 | |||||||||
Interest Payments [Member] | ||||||||||
Notes Payable [Line Items] | ||||||||||
Variable prime rate plus percentage | 0.75% |
Notes Payable (Details) - Sched
Notes Payable (Details) - Schedule of Notes Payable - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Schedule of Notes Payable [Line Items] | ||
Total principal due on notes payable | $ 6,254,506 | $ 6,276,300 |
Less: debt discount | (159,983) | (164,598) |
Notes payable, net | 6,094,523 | 6,111,702 |
Note payable - East West Bank [Member] | ||
Schedule of Notes Payable [Line Items] | ||
Total principal due on notes payable | 4,436,449 | 4,447,068 |
Notes payable - Woodward Properties [Member] | ||
Schedule of Notes Payable [Line Items] | ||
Total principal due on notes payable | $ 1,818,057 | $ 1,829,232 |
Notes Payable (Details) - Sch_2
Notes Payable (Details) - Schedule of Future Principal Payments Under Notes Payable - Notes Payable [Member] | Mar. 31, 2024 USD ($) |
Notes Payable (Details) - Schedule of Future Principal Payments Under Notes Payable [Line Items] | |
2025 | $ 114,171 |
2026 | 107,252 |
2027 | 475,255 |
2028 | 1,370,206 |
2029 | 72,911 |
Thereafter | 4,114,711 |
Total principal payments due on March 31, 2024 | $ 6,254,506 |
Convertible Note Payable (Detai
Convertible Note Payable (Details) - USD ($) | 3 Months Ended | |||
Mar. 31, 2024 | Mar. 31, 2023 | Dec. 31, 2023 | Jan. 09, 2017 | |
Convertible Note Payable [Line Items] | ||||
Bear interest percentage | 12% | |||
Abrams Debenture [Member] | ||||
Convertible Note Payable [Line Items] | ||||
Aggregate principal amount | $ 2,000,000 | $ 2,000,000 | $ 2,000,000 | |
Debenture interest rate | 6% | |||
Common stock conversion price per share (in Dollars per share) | $ 5 | |||
Accrued interest payable | $ 30,000 | $ 30,000 | ||
Interest expense | $ 30,000 | $ 30,000 |
Stockholders_ Equity (Details)
Stockholders’ Equity (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |||||
Oct. 10, 2023 | Oct. 01, 2023 | Mar. 31, 2024 | Dec. 31, 2023 | Dec. 31, 2022 | Aug. 09, 2016 | Dec. 13, 2013 | |
Stockholders’ Equity [Line Items] | |||||||
Shares authorized | 5,000,000 | 5,000,000 | 5,000,000 | ||||
Preferred stock par value (in Dollars per share) | $ 0.001 | $ 0.001 | $ 0.001 | ||||
Preferred stock, voting rights | 50 | ||||||
Receive per share (in Dollars per share) | $ 1 | ||||||
Preferred stock shares outstanding | 2,000,000 | 2,000,000 | 2,000,000 | ||||
Outstanding percentage | 51% | ||||||
Common stock shares issued | 100,000 | ||||||
Stock shareholder (in Dollars) | $ 15,000 | ||||||
Per share (in Dollars per share) | $ 0.15 | $ 0.001 | $ 0.001 | ||||
Stock options awards shares | 1,250,000 | ||||||
Stock option expense over the vesting period (in Dollars) | $ 116,643 | $ 336,755 | |||||
Options outstanding | 2,262,500 | ||||||
Vested exercisable | 1,810,000 | ||||||
Unvested stock-based compensation expense (in Dollars) | $ 100,181 | ||||||
Share price (in Dollars per share) | $ 0 | ||||||
Exercise price of underlying options (in Dollars per share) | $ 0.5 | ||||||
Non-vested stock options | 90,000 | ||||||
Common Stock [Member] | |||||||
Stockholders’ Equity [Line Items] | |||||||
Stock options awards shares | 1,250,000 | ||||||
2016 Plan [Member] | |||||||
Stockholders’ Equity [Line Items] | |||||||
Future issuance shares | 8,987,500 | 8,987,500 | 10,000,000 | ||||
Stock options awards shares | 1,012,500 | 1,012,500 | |||||
Exercisable shares outstanding | 646,250 | 585,000 | |||||
2014 Equity Compensation Plan [Member] | |||||||
Stockholders’ Equity [Line Items] | |||||||
Stock options awards shares | 1,250,000 | 1,250,000 | |||||
Exercisable shares outstanding | 1,225,000 | 1,225,000 |
Stockholders_ Equity (Details)
Stockholders’ Equity (Details) - Schedule of Stock Option Activities | 3 Months Ended |
Mar. 31, 2024 USD ($) $ / shares shares | |
Schedule of Stock Option Activities [Abstract] | |
Number of Options, at Beginning | shares | 2,262,500 |
Weighted Average Exercise Price, at beginning | 4 years 4 months 2 days |
Weighted Average Remaining Contractual Term (Years), at beginning | $ | |
Aggregate Intrinsic Value, at beginning | $ / shares | $ 0.94 |
Number of Options, Forfeited | shares | |
Weighted Average Exercise Price, Forfeited | $ / shares | |
Aggregate Intrinsic Value, Forfeited | $ | |
Number of Options, Ending balance | shares | 2,262,500 |
Weighted Average Remaining Contractual Term (Years), Ending balance | 4 years 1 month 2 days |
Aggregate Intrinsic Value, Ending balance | $ | |
Weighted Average Exercise Price, Ending balance | $ / shares | $ 0.94 |
Number of Options, Exercisable | shares | 1,871,250 |
Weighted Average Exercise Price, Exercisable | $ / shares | $ 0.95 |
Weighted Average Remaining Contractual Term (Years), Exercisable | 3 years 5 months 12 days |
Aggregate Intrinsic Value, Exercisable | $ | |
Number of Options, non-vested, Beginning balance | shares | 452,500 |
Weighted Average Remaining Contractual Term (Years), non-vested, Beginning balance | 7 years 5 months 19 days |
Aggregate Intrinsic Value, non-vested, Beginning balance | $ | |
Weighted Average Exercise Price, non-vested, Beginning balance | $ / shares | $ 0.91 |
Number of Options, Forfeited during the period | shares | |
Weighted Average Exercise Price, Forfeited during the period | $ / shares | |
Weighted Average Remaining Contractual Term (Years), Forfeited during the period | |
Aggregate Intrinsic Value, Forfeited during the period | $ | |
Number of Options, Vested during the period | shares | (61,250) |
Weighted Average Remaining Contractual Term (Years) Vested during the period | |
Aggregate Intrinsic Value, Vested during the period | $ | |
Weighted Average Exercise Price, Vested during the period | $ / shares | $ 0.84 |
Number of Options, non-vested, Ending balance | shares | 391,250 |
Weighted Average Remaining Contractual Term (Years), non-vested, Ending balance | 7 years 1 month 28 days |
Aggregate Intrinsic Value, non-vested, Ending balance | $ | |
Weighted Average Exercise Price, non-vested, Ending balance | $ / shares | $ 0.93 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) | 3 Months Ended | ||||
Jul. 26, 2022 | Sep. 29, 2021 | May 23, 2018 | Mar. 31, 2024 | Mar. 31, 2023 | |
Commitments and Contingencies (Details) [Line Items] | |||||
Employee contributions percentage | 100% | ||||
Employee’s plan compensation | 4% | ||||
Contribution to plan | $ 5,697 | $ 7,885 | |||
Purchase price | 1,100,000 | ||||
Reimbursement of off-site work | 250,000 | ||||
Reimbursement of on-site work | 350,000 | ||||
Deposit amount | 50,000 | ||||
Assignment fees | $ 47,500 | ||||
Mr. McLaren [Member] | |||||
Commitments and Contingencies (Details) [Line Items] | |||||
Base annual salary | $ 215,000 | ||||
Percentage of annual bonus payable | 2% | ||||
Employment agreement period | 10 years | ||||
Mr. Blackwell [Member] | |||||
Commitments and Contingencies (Details) [Line Items] | |||||
Base annual salary | $ 150,000 | ||||
Employment agreement period | 1 year |
Segment Reporting (Details)
Segment Reporting (Details) | 3 Months Ended |
Mar. 31, 2024 Segments | |
Segment Reporting [Abstract] | |
Number of segments | 2 |
Segment Reporting (Details) - S
Segment Reporting (Details) - Schedule of Reportable Business Segments - USD ($) | 3 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | ||
Schedule of Reportable Business Segments [Line Items] | |||
Revenues | $ 837,052 | $ 688,024 | |
Depreciation and amortization | 89,647 | 97,582 | |
Interest expense | 158,039 | 154,500 | |
Loss from unconsolidated joint ventures | 1,469 | ||
Net income (loss) | 96,473 | (309,648) | |
Property investment portfolio [Member] | |||
Schedule of Reportable Business Segments [Line Items] | |||
Revenues | 691,292 | 610,474 | |
Depreciation and amortization | 89,647 | 97,582 | |
Interest expense | 158,039 | 154,500 | |
Loss from unconsolidated joint ventures | 1,469 | ||
Net income (loss) | [1] | 120,079 | (175,805) |
Real estate services [Member] | |||
Schedule of Reportable Business Segments [Line Items] | |||
Revenues | 145,760 | 77,550 | |
Depreciation and amortization | |||
Interest expense | |||
Loss from unconsolidated joint ventures | |||
Net income (loss) | $ (23,606) | $ (133,843) | |
[1] Operating expenses and other expenses of the Company’s holding company that were not allocated to the real estate services segment are included in the property investment portfolio segment. |
Segment Reporting (Details) -_2
Segment Reporting (Details) - Schedule of Identifiable Long-Lived Tangible Assets - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Schedule of Identifiable Long-Lived Tangible Assets [Abstract] | ||
Property investment portfolio | $ 11,550,935 | $ 10,048,223 |
Real estate services | ||
Total long-lived tangible assets | $ 11,550,935 | $ 10,048,223 |
Operating Lease Right-of-Use _3
Operating Lease Right-of-Use (“Rou”) Assets and Operating Lease Liability (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |||||
Mar. 15, 2022 | Nov. 30, 2021 | Mar. 31, 2024 | Mar. 31, 2023 | Nov. 30, 2024 | Nov. 30, 2023 | Mar. 31, 2022 | |
Operating Lease Right-of-Use (“Rou”) Assets and Operating Lease Liability [Line Items] | |||||||
Lease expiration date | Nov. 30, 2024 | ||||||
Operating Lease and rent expense | $ 9,264 | $ 9,259 | |||||
Discount rate | 6% | ||||||
Consent Agreement [Member] | |||||||
Operating Lease Right-of-Use (“Rou”) Assets and Operating Lease Liability [Line Items] | |||||||
Extend lease term | 5 years | ||||||
Monthly base rent | $ 2,932 | $ 3,005 | |||||
Forecast [Member] | |||||||
Operating Lease Right-of-Use (“Rou”) Assets and Operating Lease Liability [Line Items] | |||||||
Monthly base rent | $ 3,078 |
Operating Lease Right-of-Use _4
Operating Lease Right-of-Use (“Rou”) Assets and Operating Lease Liability (Details) - Schedule of Right-of-Use Asset (“ROU”) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Schedule of Right-of-Use Asset (“ROU”) [Abstract] | ||
Office lease right of use asset | $ 90,710 | $ 90,710 |
Less: accumulated amortization | (67,104) | (58,497) |
Balance of ROU assets | $ 23,606 | $ 32,213 |
Operating Lease Right-of-Use _5
Operating Lease Right-of-Use (“Rou”) Assets and Operating Lease Liability (Details) - Schedule of Future Minimum Base Lease Payments Due Under Non-Cancelable Operating Lease - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Schedule of Future Minimum Base Lease Payments Due Under Non-Cancelable Operating Lease [Abstract] | ||
2025 | $ 24,626 | |
Total minimum non-cancelable operating lease payments | 24,626 | |
Less: discount to fair value | (545) | |
Total lease liability on March 31, 2024 | $ 24,081 | $ 32,867 |
Subsequent Events (Details)
Subsequent Events (Details) | 3 Months Ended |
Mar. 31, 2024 USD ($) | |
Subsequent Event [Line Items] | |
Capital improvements | $ 3,000,000 |
Legal liability | 30 days |
Payment for earnest money | $ 3,846 |
Lease term | 14 years 6 months |
Capital Commitment [Member] | |
Subsequent Event [Line Items] | |
Capital improvements | $ 850,000 |