Generation Income Properties, Inc. (NASDAQ:GIPR) Q1 2022 Earnings Conference Call May 13, 2022 9:00 AM ET Company Participants Mary Jensen - Investor Relations David Sobelman - Chief Executive Officer Allison Davies - Chief Financial Officer Conference Call Participants Michael Diana - Maxim Group Operator Good morning, ladies and gentlemen and welcome to the Generation Income Properties First Quarter 2022 Earnings Conference Call. At this time, all lines have been placed in a listen-only mode. Please note ...

Generation Income Properties, Inc. (NASDAQ:GIPR) Q4 2021 Results Conference Call March 18, 2022 9:00 AM ET Company Participants Mary Jensen - Investor Relations Representative David Sobelman - Chief Executive Officer Allison Davies - Chief Financial Officer Conference Call Participants Michael Diana - Maxim Group Operator Good morning, ladies and gentlemen, welcome to the Generation Income Properties Fourth Quarter and Fiscal Year 2021 Earnings Call. At this time, all lines have been placed in a list only m ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) Generation Income Properties (GIPR) is a REIT focused on acquiring and managing single-tenant net-leased retail, office, and industrial properties in major U.S. markets - The company focuses on acquiring and managing income-producing retail, office, and industrial properties net leased to high-quality tenants in major U.S. markets[17](index=17&type=chunk) - GIPR utilizes an Umbrella Partnership Real Estate Investment Trust (UPREIT) structure, which allows property sellers to defer taxable gains by exchanging property for common units in the Operating Partnership. As of December 31, 2021, the company owned **85.3%** of the outstanding common units[22](index=22&type=chunk) Portfolio Overview as of December 31, 2021 | Property Type | Location | Rentable Square Feet | Tenant(s) | S&P Credit Rating | Annualized Base Rent | % of Total Base Rent | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Retail | Washington, DC | 3,000 | 7-Eleven Corporation | A | $129,804 | 3.4% | | Retail | Tampa, FL | 2,200 | Starbucks | BBB+ | $182,500 | 4.8% | | Industrial | Huntsville, AL | 59,091 | Pratt & Whitney Automation, Inc. | A- | $684,996 | 18.1% | | Office | Norfolk, VA | 49,902 | General Services Administration | AA+ | $882,476 | 23.3% | | Office | Norfolk, VA | 22,247 | Maersk Line, Limited | BBB | $386,795 | 10.2% | | Office | Norfolk, VA | 34,847 | PRA Holdings, Inc. | BB+ | $742,850 | 19.6% | | Retail | Tampa, FL | 3,500 | Sherwin-Williams | BBB | $120,750 | 3.2% | | Office | Manteo, NC | 7,543 | General Services Administration | AA+ | $161,346 | 4.3% | | Office | Tampa, FL | 7,826 | Irby Construction Company | BBB- | $148,200 | 3.9% | | Retail | Boulder Springs, CO | 30,701 | BestBuy | BBB+ | $353,061 | 9.3% | | **Total** | | **220,857** | | | **$3,792,778** | **100.0%** | - In September 2021, the company closed an underwritten public offering, generating net proceeds of approximately **$13.8 million**. Its common stock and warrants began trading on the Nasdaq Capital Market under symbols "GIPR" and "GIPRW"[34](index=34&type=chunk) - Subsequent to year-end 2021, the company acquired three additional properties: a medical building leased to Fresenius Medical Care in Chicago, a Starbucks in Tampa, and a Kohl's in Tucson[42](index=42&type=chunk) - On August 31, 2021, the company sold a Walgreens property in Cocoa, Florida for net consideration of approximately **$5.2 million**[43](index=43&type=chunk) [Risk Factors](index=12&type=page&id=Item%201A.%20Risk%20Factors) The company faces significant risks including limited operating history, tenant dependency, net losses, debt financing, REIT compliance, and stock price volatility [Risks Related to Our Business and Properties](index=12&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Properties) Risks include limited operating history, small portfolio size, dependence on single tenants, cumulative net losses, and unsustainable distribution funding - The company has a limited operating history and owned only **twelve properties** as of March 9, 2022, making the loss of any single tenant a material risk[63](index=63&type=chunk)[65](index=65&type=chunk) - From inception through December 31, 2021, the company had a cumulative net loss of approximately **$5.4 million**, attributed to start-up costs, high administrative expenses relative to portfolio size, and acquisition-related costs[67](index=67&type=chunk) - Many properties depend on a single tenant, making the company's financial condition susceptible to tenant bankruptcy, business downturns, or lease terminations[66](index=66&type=chunk) - Distributions have been and may continue to be paid from offering proceeds, not cash flow from operations. This reduces funds available for property acquisitions and may reduce overall investor return[82](index=82&type=chunk)[83](index=83&type=chunk) [General Risks Related to Investments in Real Estate](index=15&type=section&id=General%20Risks%20Related%20to%20Investments%20in%20Real%20Estate) Real estate investment risks include economic downturns, tenant bankruptcies, competition, geographic and tenant concentration, and environmental liabilities - The bankruptcy of a major tenant could significantly impact financial condition. As of March 9, 2022, four tenants (Pratt and Whitney, GSA, PRA Holding, and Kohl's) each account for more than **10%** of annualized rent[92](index=92&type=chunk) - The portfolio has geographic concentration, with properties located primarily in Virginia and Florida. An adverse event in these areas could have a magnified negative effect[94](index=94&type=chunk) - The company faces competition from other real estate investors, including REITs and private equity funds with greater financial resources, which may increase acquisition prices and reduce profitability[120](index=120&type=chunk) - The company could be exposed to significant environmental liabilities, as federal, state, and local laws can impose cleanup costs on property owners regardless of fault[114](index=114&type=chunk)[122](index=122&type=chunk) [Risks Associated with Debt Financing](index=23&type=section&id=Risks%20Associated%20with%20Debt%20Financing) Debt financing risks include increased expenses, foreclosure risk, restrictive covenants, interest rate fluctuations, and potential impact on cash flow and distributions - As of December 31, 2021, the company had approximately **$29.0 million** in outstanding debt against properties with a cost basis of **$44.0 million**[139](index=139&type=chunk) - The company's loan agreements contain financial covenants, including Debt Service Coverage Ratios (DSCRs) ranging from **1.15:1.0 to 1.50:1.0**, which could inhibit financial flexibility[145](index=145&type=chunk)[151](index=151&type=chunk) - High mortgage rates or the unavailability of financing could reduce the number of properties the company can acquire and hinder its ability to refinance existing debt on favorable terms[149](index=149&type=chunk) [Federal Income Tax Risks](index=27&type=section&id=Federal%20Income%20Tax%20Risks) Risks include failing to qualify or maintain REIT status, liquidity challenges from distribution requirements, and liabilities from tax protection agreements - The company intends to elect to be taxed as a REIT for the year ending December 31, 2021. Failure to qualify would subject it to federal income tax at corporate rates and reduce net earnings available for distribution[168](index=168&type=chunk)[169](index=169&type=chunk) - The requirement to distribute at least **90%** of REIT taxable income annually could adversely affect liquidity, potentially forcing the company to borrow funds or sell assets to meet distribution requirements[173](index=173&type=chunk) - Tax protection agreements related to two properties contributed in 2019 limit the company's ability to sell them in a taxable transaction before the seventh anniversary of their contribution, creating a potential material liability[177](index=177&type=chunk) [Risks Related to our Securities](index=29&type=section&id=Risks%20Related%20to%20our%20Securities) Securities risks include stock price volatility, potential delisting, shareholder dilution, reduced disclosure as an emerging growth company, and anti-takeover provisions - The market price of the company's common stock may be volatile, and there is no assurance it will not decline significantly[183](index=183&type=chunk) - The company has **100 million** authorized shares of common stock and **10 million** of preferred stock, allowing management to issue additional shares that could dilute existing shareholders[187](index=187&type=chunk) - The company is an emerging growth company and has elected to use the extended transition period for new accounting standards, which may make its financial statements not comparable to other public companies[192](index=192&type=chunk)[193](index=193&type=chunk) - The company's charter limits stock ownership to **9.8%** to preserve its REIT status, which may delay or prevent a change in control[195](index=195&type=chunk) [Unresolved Staff Comments](index=32&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[200](index=200&type=chunk) [Properties](index=32&type=section&id=Item%202.%20Properties) The company's 2021 portfolio comprised nine 100% occupied properties, concentrated geographically and by key tenants, with most leases expiring after 2026 Geographic Diversification as of December 31, 2021 | State | Number of Properties | Aggregate Square Feet | % of Square Feet | Aggregate Annual Rent | % of Aggregate Annual Rent | | :--- | :--- | :--- | :--- | :--- | :--- | | Alabama | 1 | 59,091 | 26.8% | $684,996 | 18.1% | | Florida | 3 | 13,526 | 6.1% | $451,450 | 11.9% | | Colorado | 1 | 30,701 | 13.9% | $353,061 | 9.3% | | North Carolina | 1 | 7,543 | 3.4% | $161,346 | 4.3% | | Virginia | 2 | 106,996 | 48.4% | $2,012,121 | 53.0% | | District of Columbia | 1 | 3,000 | 1.4% | $129,804 | 3.4% | | **Total** | **9** | **220,857** | **100%** | **$3,792,778** | **100.0%** | Top Tenants by Annualized Base Rent as of December 31, 2021 | Tenant | Number of Leases | Annualized Base Rent | % of Total Annualized Base Rent | | :--- | :--- | :--- | :--- | | General Services Administration | 2 | $1,043,822 | 28% | | PRA Holdings Inc. | 1 | $742,850 | 20% | | Pratt & Whitney | 1 | $684,996 | 18% | | Maersk Line Limited | 1 | $386,795 | 10% | | BestBuy | 1 | $353,061 | 9% | Lease Expiration Schedule as of December 31, 2021 | Expiration Year | Number of Leases Expiring | Square Footage | Annualized Base Rent | % of Total Annualized Base Rent | | :--- | :--- | :--- | :--- | :--- | | 2022 | 1 | 22,247 | $386,795 | 10% | | 2023 | - | — | — | — | | 2024 | 1 | 7,826 | $148,200 | 4% | | 2025 | - | — | — | — | | 2026 | 1 | 3,000 | $129,804 | 3% | | Thereafter | 7 | 187,784 | $3,127,979 | 82% | | **Total** | **10** | **220,857** | **$3,792,778** | **100%** | - All properties have maintained **100% occupancy** during the company's ownership[207](index=207&type=chunk) [Legal Proceedings](index=34&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings - The company is not currently a party to any material legal proceedings[210](index=210&type=chunk) [Mine Safety Disclosures](index=34&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[211](index=211&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=34&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) GIPR common stock and warrants began trading on Nasdaq in October 2021 after a public offering, with distributions funded from offering proceeds - The company's common stock and warrants commenced trading on The Nasdaq Capital Market under the symbols "GIPR" and "GIPRW," respectively, on **October 4, 2021**[213](index=213&type=chunk) - In September 2021, the company completed a public offering of **1,665,000 units** at **$10.00 per unit**, raising total net proceeds of approximately **$13.8 million** after expenses[214](index=214&type=chunk) - From inception through December 31, 2021, the company distributed approximately **$1,299,000** to common stockholders. Because the company has not yet generated a cumulative profit, these distributions were made from proceeds of prior capital raises[221](index=221&type=chunk)[219](index=219&type=chunk) - As part of the public offering, the company redeemed **112,500 shares** of common stock from the CEO for **$100** on September 8, 2021[223](index=223&type=chunk) [Reserved](index=36&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue increased in 2021 due to acquisitions, net loss decreased due to a property sale gain, and liquidity is sufficient with new credit facility [Results of Operations](index=39&type=section&id=Results%20of%20Operations%20For%20The%20Years%20Ended%20December%2031%2C%202021%20and%202020) Total revenue increased in 2021 due to acquisitions, while a property sale gain significantly reduced the net loss compared to 2020 Comparison of Operating Results (in thousands) | | 2021 | 2020 | | :--- | :--- | :--- | | **Total Revenue** | **$3,900** | **$3,520** | | General, administrative and organizational costs | $1,111 | $818 | | Building expenses | $768 | $711 | | Depreciation and amortization | $1,508 | $1,453 | | Interest expense, net | $1,311 | $1,400 | | Compensation costs | $850 | $483 | | **Total Expenses** | **$5,548** | **$4,865** | | Gain on disposal of property | $923 | $0 | | **Net Loss** | **($712)** | **($1,345)** | | Net Loss attributable to Shareholders | ($1,242) | ($1,832) | - Revenue increased by **$380,000** in 2021 primarily due to the acquisition of three additional properties[236](index=236&type=chunk) - The company recognized a gain of **$923,000** on the sale of its Walgreens property in Cocoa, Florida, which was a key factor in reducing the net loss for 2021[242](index=242&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 2021, the company had $10.6 million cash and $29.0 million debt, with liquidity boosted by a public offering and new credit facility Financial Position Summary | Metric | As of Dec 31, 2021 | | :--- | :--- | | Total Cash (unrestricted and restricted) | ~$10.6 million | | Properties Cost Basis | $44.0 million | | Outstanding Debt | ~$29.0 million | - In October 2021, the company entered into a **$25 million** master commitment credit facility with American Momentum Bank to fund future property acquisitions[249](index=249&type=chunk)[256](index=256&type=chunk) - The Company's President has personally guaranteed approximately **$16.9 million** of the company's outstanding debt as of December 31, 2021[255](index=255&type=chunk) Debt Maturity Schedule as of December 31, 2021 | Year | Minimum Principal Payments | | :--- | :--- | | 2022 | $580,740 | | 2023 | $4,240,446 | | 2024 | $12,981,450 | | 2025 | $251,011 | | 2026 | $261,675 | | 2027 and beyond | $11,291,666 | | **Total** | **$29,606,988** | [Non-GAAP Financial Measures](index=44&type=section&id=Non-GAAP%20Financial%20Measures) The company uses FFO and AFFO as non-GAAP measures, with Core FFO and Core AFFO decreasing in 2021 compared to 2020 Reconciliation of Net Loss to FFO and AFFO (in thousands) | | Twelve Months Ended Dec 31, 2021 | Twelve Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net Loss | $(712) | $(1,345) | | Gain on disposal of property | $(923) | - | | Depreciation and amortization | $1,508 | $1,453 | | **Funds From Operations (FFO)** | **$(127)** | **$108** | | Adjustments for Core FFO | $434 | $297 | | **Core Funds From Operations** | **$307** | **$404** | | Adjustments for AFFO | $431 | $1,368 | | **Adjusted Funds From Operations (AFFO)** | **$(154)** | **$133** | | Adjustments for Core AFFO | $314 | $162 | | **Core Adjusted Funds From Operations** | **$160** | **$295** | - The company computes FFO in accordance with the NAREIT definition and further adjusts it to derive Core FFO, AFFO, and Core AFFO to provide what it believes are useful supplemental measures of operating performance[276](index=276&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is not required to provide disclosures under this item as a smaller reporting company - The company is not required to make disclosures under this item as it qualifies as a smaller reporting company[287](index=287&type=chunk) [Financial Statements and Supplementary Data](index=46&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the auditor's report and consolidated financial statements for 2021 and 2020, including balance sheets, operations, equity, cash flows, and notes Consolidated Balance Sheet Highlights (in thousands) | | As of Dec 31, 2021 | As of Dec 31, 2020 | | :--- | :--- | :--- | | Total Investments, net | $41,300 | $38,532 | | Cash and cash equivalents | $10,590 | $938 | | **Total Assets** | **$53,421** | **$40,681** | | Mortgage loans, net | $28,969 | $28,357 | | Total Liabilities | $30,146 | $30,626 | | Redeemable Non-Controlling Interests | $9,621 | $8,684 | | Total Stockholders' Equity | $13,654 | $1,370 | | **Total Liabilities and Stockholders' Equity** | **$53,421** | **$40,681** | Consolidated Statement of Operations Highlights (in thousands) | | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Total Revenue | $3,900 | $3,520 | | Total Expenses | $5,548 | $4,865 | | Operating Loss | $(1,648) | $(1,345) | | Gain on disposal of property | $923 | $0 | | **Net Loss** | **$(712)** | **$(1,345)** | [Notes to the Consolidated Financial Statements](index=52&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Notes detail accounting policies, real estate investments, debt, equity, and related-party transactions, including 2021 acquisitions, sales, and tax loss carryforwards - In 2021, the company acquired three properties for a total cost of approximately **$8.2 million** and sold one property for net proceeds of approximately **$5.2 million**, recognizing a gain of **$923,178**[337](index=337&type=chunk)[344](index=344&type=chunk) - As of December 31, 2021, the company had Redeemable Non-Controlling Interests totaling **$9.6 million**, which includes preferred equity with redemption rights and specified rates of return, as well as common units in the Operating Partnership with redemption features[349](index=349&type=chunk) - As of December 31, 2021, the company had **1,914,850 warrants** outstanding with exercise prices ranging from **$10.00 to $20.00**[370](index=370&type=chunk) - The company's net operating loss carryforwards were approximately **$4.6 million** as of December 31, 2021. A full valuation allowance of **$1.7 million** has been recorded against the deferred tax assets, resulting in no recognized tax benefit[397](index=397&type=chunk)[400](index=400&type=chunk) - Subsequent to year-end, the company acquired three properties for a total consideration of approximately **$12.6 million** and announced monthly cash distributions of **$0.054 per share** for the first quarter of 2022[402](index=402&type=chunk)[403](index=403&type=chunk)[404](index=404&type=chunk)[405](index=405&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=72&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes or disagreements with its accountants regarding accounting and financial disclosure - None[408](index=408&type=chunk) [Controls and Procedures](index=72&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of December 31, 2021, with no material changes to internal controls identified - Based on an evaluation, the chief executive officer and chief financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[409](index=409&type=chunk) - The annual report does not include a report of management's assessment regarding internal control over financial reporting, as permitted for newly public companies[410](index=410&type=chunk) - There were no changes in internal control over financial reporting during the fourth quarter of 2021 that materially affected, or are reasonably likely to materially affect, internal controls[411](index=411&type=chunk) [Other Information](index=72&type=section&id=Item%209B.%20Other%20Information) The company reports no other information under this item - None[412](index=412&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=72&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[413](index=413&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=73&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 proxy statement - Information is incorporated by reference from the company's proxy statement for its 2022 annual meeting of stockholders[415](index=415&type=chunk) [Executive Compensation](index=73&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive compensation is incorporated by reference from the 2022 proxy statement - Information is incorporated by reference from the company's proxy statement for its 2022 annual meeting of stockholders[416](index=416&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=73&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership of beneficial owners and management is incorporated by reference from the 2022 proxy statement - Information is incorporated by reference from the company's proxy statement for its 2022 annual meeting of stockholders[417](index=417&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=73&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the 2022 proxy statement - Information is incorporated by reference from the company's proxy statement for its 2022 annual meeting of stockholders[418](index=418&type=chunk) [Principal Accountant Fees and Services](index=73&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services is incorporated by reference from the 2022 proxy statement - Information is incorporated by reference from the company's proxy statement for its 2022 annual meeting of stockholders[419](index=419&type=chunk) Part IV [Exhibit and Financial Statement Schedules](index=73&type=section&id=Item%2015.%20Exhibit%20and%20Financial%20Statement%20Schedules) This section lists financial statements and exhibits filed with the Form 10-K, with all financial schedules omitted as inapplicable - This section lists the financial statements and exhibits filed as part of the annual report. All financial statement schedules are omitted as inapplicable or otherwise included in the consolidated financial statements[420](index=420&type=chunk)[421](index=421&type=chunk)[422](index=422&type=chunk) [Form 10-K Summary](index=77&type=section&id=Item%2016.%20Form%2010-K%20Summary) No summary is provided under this item - None[426](index=426&type=chunk)

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited consolidated financial statements for the period ended September 30, 2021 [Consolidated Balance Sheets](index=3&type=section&id=Generation%20Income%20Properties%2C%20Inc.%20Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (Unaudited) | Metric | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | **$52,408,808** | **$40,680,740** | | Total investments | $36,885,038 | $38,531,843 | | Cash and cash equivalents | $14,194,639 | $937,564 | | **Total Liabilities** | **$28,094,698** | **$30,626,270** | | Mortgage loans, net | $26,765,781 | $28,356,571 | | **Total Stockholders' Equity** | **$14,709,082** | **$1,370,039** | - The significant increase in cash and cash equivalents from **$0.9 million to $14.2 million** is primarily due to the proceeds from the public offering in September 2021[9](index=9&type=chunk) [Consolidated Statements of Operations](index=4&type=section&id=Generation%20Income%20Properties%2C%20Inc.%20Consolidated%20Statements%20of%20Operations) Consolidated Statements of Operations Summary (Unaudited) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **$1,033,494** | **$871,825** | **$2,958,572** | **$2,630,067** | | Total Expenses | $1,305,594 | $1,275,028 | $3,870,040 | $3,627,182 | | Gain on disposal of property | $923,178 | - | $923,178 | - | | **Net Income (Loss)** | **$655,828** | **($403,203)** | **$16,460** | **($997,115)** | | Net Income (Loss) Attributable to GIP | $456,112 | ($555,226) | ($393,230) | ($1,331,833) | | **Basic EPS** | **$0.49** | **($1.06)** | **($0.56)** | **($2.54)** | - The company reported a **net income of $656k for Q3 2021**, a significant turnaround from a net loss of $403k in Q3 2020, largely driven by a **$923k gain on the disposal of a property**[10](index=10&type=chunk) [Consolidated Statements of Cash Flows](index=5&type=section&id=Generation%20Income%20Properties%2C%20Inc.%20Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows Summary (Unaudited, Nine Months Ended) | Metric | September 30, 2021 | September 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $172,678 | $176,699 | | Net cash provided by (used in) investing activities | $1,002,462 | ($196,016) | | Net cash generated from (used in) financing activities | $11,931,635 | ($756,293) | | **Net increase (decrease) in cash** | **$13,106,775** | **($775,610)** | - Financing activities generated **$11.9 million in cash** for the nine months ended Sep 30, 2021, primarily from the issuance of stock and warrants ($14.4 million), a major reversal from the cash used in financing activities in the same period of 2020[13](index=13&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) - The Company is an internally managed real estate investment company focused on acquiring and managing income-producing retail, office, and industrial properties net leased to high-quality tenants[18](index=18&type=chunk) - During the nine months ended September 30, 2021, the Company acquired two properties in Manteo, NC and Plant City, FL for a total investment of approximately **$3.5 million**[44](index=44&type=chunk)[45](index=45&type=chunk) - On August 31, 2021, the Company sold its property in Cocoa Beach, FL for **$5.2 million**, recognizing a **gain of $923 thousand**[48](index=48&type=chunk) - In September 2021, the Company completed an underwritten public offering, issuing 1,665,000 units (stock and warrants) and generating **net proceeds of approximately $14.4 million** after including the over-allotment option[66](index=66&type=chunk)[68](index=68&type=chunk) - Subsequent to the quarter end, the Company entered into agreements to acquire four properties/portfolios in Colorado, Illinois, Florida, and Texas for a combined total consideration of approximately **$18 million**[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk) - On October 26, 2021, the Operating Partnership secured a Commitment Letter for a **$25 million master credit facility** from American Momentum Bank to fund future property acquisitions[100](index=100&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes financial condition, operational results, liquidity, and non-GAAP measures for the period [Overview and Portfolio](index=22&type=section&id=Overview%20and%20Portfolio) - In September 2021, the company closed an underwritten public offering of 1,665,000 units, generating **net proceeds of $14.4 million** and its common stock and warrants began trading on the Nasdaq under symbols "GIPR" and "GIPRW"[106](index=106&type=chunk) - As of September 30, 2021, the company's property portfolio was **100% occupied**[107](index=107&type=chunk) - Approximately **78% of the portfolio's annualized rent** is derived from tenants with an investment-grade credit rating of 'BBB-' or better[107](index=107&type=chunk) Property Portfolio Overview as of September 30, 2021 | Property Type | Location | Tenant(s) | S&P Credit Rating | Annualized Base Rent | % of Total Base Rent | | :--- | :--- | :--- | :--- | :--- | :--- | | Office | Norfolk, VA | General Services Admin. | AA+ | $882,476 | 25.6% | | Office | Norfolk, VA | PRA Holdings, Inc. | BB+ | $742,850 | 21.7% | | Industrial | Huntsville, AL | Pratt & Whitney | A- | $684,996 | 20.0% | | Office | Norfolk, VA | Maersk Line, Limited | BBB | $375,588 | 11.0% | | *Other Properties* | *Various* | *Various* | *Various* | *$742,800* | *21.7%* | [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Revenue Comparison | Period | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | **Three Months Ended Sep 30** | $1,033k | $872k | +$162k | | **Nine Months Ended Sep 30** | $2,959k | $2,630k | +$329k | - The increase in revenue for both the three and nine-month periods was primarily due to three additional properties acquired in November 2020, February 2021, and April 2021[113](index=113&type=chunk)[125](index=125&type=chunk) - A **gain of $923k** was recognized on the sale of the Walgreens property in Cocoa, Florida on August 31, 2021, which was a key driver of net income for the third quarter[119](index=119&type=chunk)[131](index=131&type=chunk) Net Income (Loss) Attributable to Shareholders Comparison | Period | 2021 | 2020 | | :--- | :--- | :--- | | **Three Months Ended Sep 30** | $456k | ($555k) | | **Nine Months Ended Sep 30** | ($393k) | ($1,332k) | [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 30, 2021, the company had **total cash of approximately $14.2 million** and **outstanding debt of approximately $26.8 million**[137](index=137&type=chunk) - The company significantly improved its liquidity through a September 2021 public offering that generated **net proceeds of $14.4 million**[138](index=138&type=chunk) - Subsequent to the quarter, the company secured a commitment for a **$25 million master credit facility** to be used for acquiring income-producing real estate[138](index=138&type=chunk)[148](index=148&type=chunk) - The Company's President has personally guaranteed approximately **$14.6 million in loans** and provided nonrecourse carveout guarantees for another **$12.8 million**[145](index=145&type=chunk)[146](index=146&type=chunk) [Non-GAAP Financial Measures](index=29&type=section&id=Non-GAAP%20Financial%20Measures) - The company uses non-GAAP measures such as Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) to evaluate operating performance[159](index=159&type=chunk) Reconciliation of Net Income (Loss) to FFO and Core AFFO (Unaudited) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | **Net Income (Loss)** | **$655,828** | **($403,203)** | **$16,460** | **($997,115)** | | Gain on disposal of property | ($923,178) | - | ($923,178) | - | | Depreciation and amortization | $388,141 | $363,898 | $1,164,838 | $1,083,917 | | **Funds From Operations (FFO)** | **$120,791** | **($39,305)** | **$258,120** | **$86,802** | | **Core Adjusted Funds From Operations (Core AFFO)** | **$165,027** | **$9,051** | **$423,435** | **$235,227** | [Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exempt from market risk disclosures as a smaller reporting company - The company is not required to make disclosures under this item as it qualifies as a smaller reporting company[168](index=168&type=chunk) [Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirms the effectiveness of disclosure controls and procedures with no material changes - Based on an evaluation as of September 30, 2021, the company's management, including the CEO and CFO, concluded that **disclosure controls and procedures were effective**[170](index=170&type=chunk) - **No changes in internal control over financial reporting** occurred during the quarter ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, internal controls[171](index=171&type=chunk) [PART II. OTHER INFORMATION](index=32&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material legal proceedings for the period - There are **no material legal proceedings** to be disclosed[174](index=174&type=chunk) [Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) No material changes to previously disclosed risk factors are reported - There have been **no material changes** from the risk factors previously disclosed in the company's S-11 registration statement[175](index=175&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details the use of proceeds from the September 2021 public offering - The company completed a public offering in September 2021, which, including the partial exercise of the over-allotment option, resulted in **total net proceeds of approximately $14.4 million**[177](index=177&type=chunk) - As of October 31, 2021, the company has used **$1.1 million of the proceeds** from the public offering to repay related party debt[180](index=180&type=chunk) [Defaults Upon Senior Securities](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - None reported[181](index=181&type=chunk) [Mine Safety Disclosures](index=33&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - None reported, as this section is not applicable[182](index=182&type=chunk) [Other Information](index=33&type=section&id=Item%205.%20Other%20Information) No other information is reported for the period - None reported[183](index=183&type=chunk) [Exhibits](index=34&type=section&id=Item%206.%20Exhibits) Lists all documents filed as exhibits with the quarterly report - The report includes various exhibits, such as the Representative's Warrant, Form of Investor Warrant, Certifications by the CEO and CFO, and Inline XBRL documents[188](index=188&type=chunk)