Generation me Properties(GIPR) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited consolidated financial statements for June 30, 2025, reflect decreased assets, an equity deficit, increased net loss, negative operating cash flow, and a going concern warning Consolidated Balance Sheets As of June 30, 2025, total assets slightly decreased, liabilities remained stable, and stockholders' equity shifted to a deficit due to increased accumulated deficit Consolidated Balance Sheet Summary (unaudited) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $104,962,278 | $106,563,790 | | Net real estate investments | $94,498,835 | $91,362,786 | | Cash and cash equivalents | $356,130 | $612,939 | | Held for sale assets | $2,657,414 | $6,732,001 | | Total Liabilities | $73,996,772 | $73,710,451 | | Mortgage loans, net | $54,787,093 | $58,340,234 | | Redeemable Non-Controlling Interests | $31,931,200 | $26,664,545 | | Total Equity | ($965,694) | $6,188,794 | | Accumulated deficit | ($30,432,033) | ($23,277,545) | Consolidated Statements of Operations For the periods ended June 30, 2025, total revenues modestly increased, but significantly higher expenses, particularly interest, led to a substantially larger net loss and increased loss per share Consolidated Statements of Operations Highlights (unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $2,432,270 | $2,259,235 | $4,813,865 | $4,692,408 | | Total Expenses | $4,805,285 | $3,729,846 | $8,662,661 | $7,363,671 | | Interest expense, net | $2,084,751 | $1,023,140 | $3,267,018 | $2,043,881 | | Net Loss | ($3,466,521) | ($1,461,488) | ($5,263,981) | ($3,340,584) | | Net loss attributable to common shareholders | ($4,422,628) | ($2,261,722) | ($7,154,487) | ($5,181,942) | | Basic & Diluted Loss Per Share | ($0.81) | ($0.42) | ($1.31) | ($1.05) | Consolidated Statements of Cash Flows For the six months ended June 30, 2025, operating cash flow turned negative, investing activities provided cash from property sales, financing activities used cash, resulting in a net decrease in cash and cash equivalents Consolidated Statements of Cash Flows Summary (unaudited) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($519,833) | $226,605 | | Net cash provided by investing activities | $10,333,595 | $0 | | Net cash used in financing activities | ($10,070,571) | ($790,817) | | Net decrease in cash and cash equivalents | ($256,809) | ($564,212) | | Cash and cash equivalents - end of period | $390,630 | $2,587,734 | Notes to Unaudited Consolidated Financial Statements Notes detail the company's REIT operations, disclose a going concern uncertainty due to recurring losses and negative cash flow, and cover major tenants, debt covenants, related-party transactions, and subsequent events - Management has identified substantial doubt about the Company's ability to continue as a going concern due to recurring losses, negative operating cash flow of $519,833 for the six months ended June 30, 2025, and its current liquidity position[23][24] - As of June 30, 2025, the company owned 28 properties Major tenants accounting for over 10% of rental revenue include the General Services Administration (16%), Dollar General (13%), Pre-K San Antonio (10%), Kohl's (10%), and exp U.S. Services (10%)[22][60] - Subsequent to the quarter end, on August 7, 2025, the company extended the mandatory redemption date for the LC2 preferred equity to August 10, 2026, which increased the preferred return rate from 15.5% to 18% per annum[136] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion covers the company's highly leased portfolio, analyzes operations highlighting increased net loss due to higher interest expense, reiterates going concern doubt, and reconciles net loss to negative non-GAAP FFO and AFFO Our Investments As of June 30, 2025, the company's property portfolio was 98.6% leased, with approximately 60% of annualized base rent from investment-grade tenants and 92% of leases having contractual rent increases - The portfolio is 98.6% leased and occupied as of June 30, 2025[144] - Approximately 60% of the portfolio's annualized base rent (ABR) comes from tenants with investment-grade credit ratings (BBB- or better)[144] - The largest tenants (General Service Administration, Dollar General, EXP Services, Kohl’s, City of San Antonio) account for approximately 59% of the portfolio's ABR[144] Recent Developments Recent developments include the sale of two properties for $10.65 million, securing short-term promissory notes including a $610,000 CEO loan for transaction costs, and obtaining a new $1.1 million mortgage loan - On May 29, 2025, the company sold its Starbucks-occupied building in Tampa, FL for $3.45 million and its Auburn University-occupied building in Huntsville, AL for $7.2 million[150][151] - The company entered into several promissory notes to cover transaction costs, including a $610,000 loan from CEO David Sobelman with a 5.75% interest rate, due August 31, 2025[155] - On June 13, 2025, the company secured a new $1.1 million mortgage loan from Valley National Bank on its 7-Eleven property in Washington, D.C., with a fixed interest rate of 6.50%[156] Results of Operations For the six months ended June 30, 2025, total revenue increased, but operating expenses, driven by a significant rise in interest expense, led to a widened net loss attributable to shareholders Change in Operating Expenses (Six Months Ended June 30) | Expense Category | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | General and administrative | $1,058,271 | $1,054,453 | $3,818 | | Building expenses | $1,339,343 | $1,338,294 | $1,049 | | Depreciation and amortization | $2,557,342 | $2,406,837 | $150,505 | | Interest expense, net | $3,267,018 | $2,043,881 | $1,223,137 | | Compensation costs | $440,687 | $520,206 | ($79,519) | | Total expenses | $8,662,661 | $7,363,671 | $1,298,990 | Liquidity and Capital Resources The company's critical liquidity position, with limited cash and reliance on external capital, leads management to express substantial doubt about its going concern ability, despite compliance with debt covenants - The company explicitly states that "substantial doubt exists about the Company's ability to continue as a going concern" due to recurring losses, projected cash needs, and current liquidity[180] - As of June 30, 2025, the company had a total cash balance of $390,630 and outstanding mortgage loans with a principal balance of $56.0 million[167] - The company is in compliance with all mortgage loan covenants as of June 30, 2025, which include maintaining specific debt service coverage ratios (DSCR) and loan-to-value ratios[186] Non-GAAP Financial Measures The company's non-GAAP financial measures, FFO and Core AFFO, were negative for the six months ended June 30, 2025, reflecting increased net loss and higher interest-related costs Reconciliation of Net Loss to FFO and Core AFFO (Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net loss | ($5,263,981) | ($3,340,584) | | Depreciation and amortization | $2,557,342 | $2,406,837 | | Funds From Operations (FFO) | ($2,290,528) | ($1,359,293) | | Adjusted Funds From Operations (AFFO) | ($1,998,441) | ($37,886) | | Core Adjusted Funds From Operations (Core AFFO) | ($757,930) | $187,857 | Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is exempt from providing disclosures regarding market risk - As a smaller reporting company, the company is not required to make disclosures under this item[208] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[210] - No material changes to internal control over financial reporting occurred during the three months ended June 30, 2025[211] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reports no material legal proceedings requiring disclosure in this quarterly report - There are no material legal proceedings to be disclosed[213] Item 1A. Risk Factors A new material risk factor highlights the potential delisting of the company's common stock and warrants from Nasdaq due to non-compliance with minimum stockholders' equity and bid price requirements - The company is at risk of being delisted from Nasdaq for failing to meet continued listing requirements[215] - As of June 30, 2025, the company's reported stockholders' equity is below the $2.5 million minimum required by Nasdaq[215] - The company's common stock bid price has recently fallen below the $1.00 per share minimum requirement, which could trigger a deficiency notice from Nasdaq if it persists for 30 consecutive business days[216] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period - There were no unregistered sales of equity securities[218] Item 5. Other Information No directors or officers adopted, terminated, or modified Rule 10b5-1 trading arrangements during the second quarter of 2025 - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[220]