Generation me Properties(GIPR) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents unaudited consolidated financial statements, management's discussion and analysis of financial condition and results of operations, market risk disclosures, and controls and procedures Item 1. Financial Statements This item provides core unaudited consolidated financial statements, including balance sheets, statements of operations, changes in equity, cash flows, and comprehensive notes on accounting policies, investments, and debt Consolidated Balance Sheets Consolidated Balance Sheet Highlights | Metric | June 30, 2022 | December 31, 2021 | Change | | :--------------------------------- | :-------------- | :---------------- | :------------- | | Total Assets | $65,299,243 | $53,420,716 | +$11,878,527 | | Net real estate investments | $53,356,152 | $41,299,681 | +$12,056,471 | | Right of use asset, net | $6,275,398 | $- | +$6,275,398 | | Cash and cash equivalents | $3,649,084 | $10,589,576 | -$6,940,492 | | Total Liabilities | $43,391,177 | $30,145,523 | +$13,245,654 | | Mortgage loans, net | $35,455,512 | $28,969,295 | +$6,486,217 | | Right of use liability, net | $6,327,851 | $- | +$6,327,851 | | Total Stockholders' equity | $11,582,048 | $13,670,502 | -$2,088,454 | Consolidated Statements of Operations Consolidated Statements of Operations Highlights (Three Months Ended June 30) | Metric | 2022 | 2021 (As corrected) | Change | | :----------------------------------------- | :----------- | :------------------ | :----------- | | Total revenue | $1,379,103 | $988,190 | +$390,913 | | Total expenses | $2,042,938 | $1,305,855 | +$737,083 | | Operating loss | $(663,835) | $(317,665) | -$346,170 | | Net loss | $(916,697) | $(317,665) | -$599,032 | | Net loss attributable to GIP, Inc. | $(1,046,878) | $(369,989) | -$676,889 | | Basic & Diluted Loss Per Share | $(0.46) | $(0.63) | +$0.17 | Consolidated Statements of Operations Highlights (Six Months Ended June 30) | Metric | 2022 | 2021 (As corrected) | Change | | :----------------------------------------- | :----------- | :------------------ | :----------- | | Total revenue | $2,561,038 | $1,925,078 | +$635,960 | | Total expenses | $3,678,938 | $2,564,446 | +$1,114,492 | | Operating loss | $(1,117,900) | $(639,368) | -$478,532 | | Net loss | $(1,362,210) | $(639,368) | -$722,842 | | Net loss attributable to GIP, Inc. | $(1,622,354) | $(837,872) | -$784,482 | | Basic & Diluted Loss Per Share | $(0.73) | $(1.44) | +$0.71 | Consolidated Statements of Changes in Equity Consolidated Statements of Changes in Equity Highlights | Metric | June 30, 2022 | December 31, 2021 (As corrected) | Change | | :------------------------------------- | :------------ | :------------------------------- | :------------- | | Total Stockholders' equity | $11,582,048 | $13,670,502 | -$2,088,454 | | Accumulated deficit | $(7,025,510) | $(5,403,156) | -$1,622,354 | | Common stock issued and outstanding | 2,257,787 | 2,172,950 | +84,837 | | Restricted stock unit compensation (6 months) | $218,044 | N/A | N/A | | Dividends paid on common stock (6 months) | $(678,053) | $(114,373) | -$563,680 | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30) | Metric | 2022 | 2021 | Change | | :----------------------------------------- | :----------- | :----------- | :----------- | | Net cash used in operating activities | $(127,247) | $(38,238) | -$89,009 | | Net cash used in investing activities | $(13,161,569) | $(3,530,810) | -$9,630,759 | | Net cash generated from financing activities | $6,348,405 | $3,055,476 | +$3,292,929 | | Net decrease in cash and cash equivalents | $(6,940,411) | $(513,572) | -$6,426,839 | | Cash and cash equivalents and restricted cash - end of period | $3,683,665 | $608,792 | +$3,074,873 | - Key Non-Cash Transactions (Six Months Ended June 30, 2022): * Right of use asset and liability for ground lease related to property acquisition: $6,304,334 * Redemption of redeemable non-controlling interests accrued: $203,326[15] Notes to Unaudited Consolidated Financial Statements These notes detail explanations and breakdowns of financial statement figures, covering operations, accounting policies, investments, intangible assets/liabilities, equity structure, debt obligations, related party transactions, and subsequent events - As of June 30, 2022, the Company owned 12 properties and held partial interests in one additional property through a tenancy-in-common investment[19] Note 1 – Nature of Operations - Generation Income Properties, Inc. was formed as a Maryland corporation on September 19, 2015[17] - 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 in major markets throughout the United States[17] - As of June 30, 2022, the Company owned 83% of the outstanding common units of the Operating Partnership[18] Note 2 – Summary of Significant Accounting Policies - The Company adopted the calendar year as its basis of reporting[21] - An immaterial error in classifying the partnership interest of GIP Fund 1, LLC as Redeemable Non-Controlling Interests rather than Non-Controlling Interest within Equity was identified and corrected[22] - The Company intends to operate and be taxed as a real estate investment trust ("REIT") under Section 856 through 860 of the Internal Revenue Code, commencing with the Company's taxable year ending December 31, 2021[44] Basis of Presentation - The information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not misleading[20] - These financial statements should be read in conjunction with the audited financial statements and footnotes included in the Company's Annual Report on Form 10-K filed with the SEC on March 18, 2022[20] Immaterial Correction of Previously Issued Consolidated Financial Statements - Management identified an error in classifying the partnership interest of GIP Fund 1, LLC as Redeemable Non-Controlling Interests rather than Non-Controlling Interest within Equity[22] - The effect of the error was determined to be immaterial to the Company's previously issued consolidated financial statements[22] - Corrections were applied to condensed balance sheets, income statements, and statements of equity for various periods from December 31, 2020, to March 31, 2022[24][25][27][28] Consolidation - The consolidated financial statements include the accounts of Generation Income Properties, Inc. and the Operating Partnership and all of the direct and indirect wholly-owned subsidiaries[29] - All significant inter-company balances and transactions have been eliminated[29] Cash - The Company considers all demand deposits, cashier's checks and money market accounts to be cash equivalents[31] - Restricted cash represents funds related to tenant escrow reimbursements and immediate capital repair reserve[31] Cash and Restricted Cash | Metric | June 30, 2022 | December 31, 2021 | | :------------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $3,649,084 | $10,589,576 | | Restricted cash | $34,581 | $34,500 | | Total Cash and cash equivalents and restricted cash | $3,683,665 | $10,624,076 | Revenue Recognition - Rental income from long-term net leases is recognized on a straight-line basis over the lease term[33] - Deferred rent liability includes approximately $236,800 of prepaid rent as of June 30, 2022[33] - No allowances for receivables were recorded for the six months ended June 30, 2022 or 2021[34] Stock-Based Compensation - Equity-based incentive grants to employees and non-employee directors are recorded in compensation costs based on their fair values determined on the date of grant[37] - Stock-based compensation expense is recognized on a straight-line basis over the requisite service period of the award[37] Investments in Real Estate - Acquisitions of real estate are recorded at cost, with the purchase price assigned to tangible and intangible assets and liabilities based on fair value[38] - All asset transactions to date have been concluded as asset acquisitions, not business acquisitions[38] - The fair value of in-place leases and above/below market leases are amortized over their remaining terms as amortization expense or adjustments to rental income, respectively[39] Depreciation Expense - Depreciation is computed using the straight-line method over the estimated useful life of the assets[41] - Estimated useful lives: buildings (15-50 years), site improvements (5 years), tenant improvements (2-10 years)[41] Lease Obligations - The Company has one property on land subject to a ground lease with a third party, classified as an operating lease[42] - Under ASC 842, the Company recognizes Lease liabilities and corresponding Right of use assets for its ground lease[43] Income Taxes - The Company intends to operate and be taxed as a REIT, commencing with the taxable year ending December 31, 2021[44] - As a REIT, the Company generally will not be subject to federal corporate income tax on distributed taxable income[44] - Deferred income taxes are accounted for using the asset and liability method, with a valuation allowance provided if realization is unlikely[45] Earnings per Share - Basic EPS is computed by dividing net loss attributable to the Company by the weighted average number of common shares outstanding[47] - Diluted EPS excludes all potentially dilutive securities if their effect is anti-dilutive, which was the case for the six months ended June 30, 2022 and 2021[47] Impairments - The Company reviews investments in real estate and related lease intangibles for possible impairment when certain events or changes in circumstances indicate that the carrying amount may not be recoverable[48] - No impairments were recorded in the Company's investments in real estate or tenancy-in-common during the six months ended June 30, 2022 or 2021[49][51] Note 3 – Investments in Real Estate - On January 7, 2022, the Company acquired a medical-retail property in Chicago, IL (Fresenius Medical Care) financed with a $1,550,000 promissory note and cash[52] - On January 14, 2022, the Company acquired a retail property in Tampa, FL (Starbucks Coffee) financed with a $1,109,570 redeemable non-controlling interest, $1,050,000 debt, and cash[53] Properties Acquired (Three and Six Months Ended June 30, 2022) | Property | Total real estate investments | Right of use asset | Less Acquired lease intangible liabilities | Less Right of use liability | Total real estate investments, net | | :-------------------- | :---------------------------- | :----------------- | :--------------------------------------- | :-------------------------- | :--------------------------------- | | Fresenius - Chicago, IL | $3,216,786 | $- | $(19,864) | $- | $3,196,922 | | Starbucks - Tampa, FL | $2,277,455 | $- | $(13,497) | $- | $2,263,958 | | Kohl's - Tucson, AZ | $7,483,747 | $6,304,334 | $(131,999) | $(6,304,334) | $7,351,748 | | Total | $12,977,988 | $6,304,334 | $(165,360) | $(6,304,334) | $12,812,628 | Note 4 – Acquired Lease Intangible Assets, net Acquired Lease Intangible Assets, net | Metric | June 30, 2022 | December 31, 2021 | | :-------------------------------- | :------------ | :---------------- | | Acquired lease intangible assets | $4,677,928 | $3,304,014 | | Accumulated amortization | $(1,246,874) | $(994,857) | | Acquired lease intangible assets, net | $3,431,054 | $2,309,157 | - Future amortization for Acquired Lease Intangible Assets, net for the remaining six months of 2022 is $275,520, and $542,954 for 2023 and 2024 each[57] Note 5 – Acquired Lease Intangible Liabilities, net Acquired Lessor Lease Intangible Liabilities, net | Metric | June 30, 2022 | December 31, 2021 | | :---------------------------------------- | :------------ | :---------------- | | Acquired lessor lease intangible liabilities | $965,216 | $845,063 | | Accumulated accretion to Rental income | $(317,630) | $(267,675) | | Acquired lessor lease intangible liabilities, net | $647,586 | $577,388 | Acquired Lessee Lease Intangible Liabilities, net | Metric | June 30, 2022 | December 31, 2021 | | :---------------------------------------- | :------------ | :---------------- | | Acquired lessee lease intangible liabilities | $45,207 | $- | | Accumulated amortization to offset Building expenses | $(226) | $- | | Acquired lessee lease intangible liabilities, net | $44,981 | $- | - Future amortization for Acquired Lessor Lease Intangible Liabilities, net for the remaining six months of 2022 is $52,594[58] Note 6 – Lessee Accounting - The Company acquired one property on March 9, 2022, that is subject to a non-cancelable, long-term ground lease expiring through the year 2084[59] - Operating lease expense was approximately $125,015 for the six months ended June 30, 2022[59] Ground Lease Liability Summary (As of June 30, 2022) | Metric | Amount | | :-------------------------- | :------------- | | Total undiscounted liability | $23,149,053 | | Present value discount | $(16,821,202) | | Right of use liability | $6,327,851 | | Discount rate | 4.58% | | Term | 62 years | Note 7 – Non-Controlling Interests - As of June 30, 2022, the Company owned 83% of the common units in the Operating Partnership and outside investors owned 17%[70] Redeemable Non-Controlling Interests (Temporary Equity) - Redeemable Non-Controlling Interests are presented as temporary equity at redemption value due to redemption rights[62][63][64][65][67][68] - Includes preferred equity agreements for property acquisitions in Manteo, NC ($500,000), Plant City, FL (approx. $995,600), and Rockford, IL (approx. $672,900)[63][64][65][71] - Redemption of Operating Partnership common units occurred in March and April 2022, totaling $406,652[67][71] Non-Controlling Interest (Permanent Equity) - Non-Controlling Interest arises from a contribution agreement with GIP Fund 1, LLC, for a Tampa, FL property acquisition in November 2020[69] - The total value of units issued to GIP Fund 1, LLC was $486,180[69] - Former members of GIP Fund 1, LLC can require the Operating Partnership to redeem their units for common stock of the Company[69] Note 8 – Equity - The Company is authorized to issue up to 100,000,000 shares of common stock and 10,000,000 of undesignated preferred stock[72] - In September 2021, the Company issued and sold 1,665,000 units (common stock and warrants) in a public offering, generating net proceeds of $13.8 million[75][76] - During the six months ended June 30, 2022, 373,380 warrants were exercised on a cashless basis, resulting in the issuance of 37,338 shares of common stock[78] Authorized Equity - Authorized common stock: 100,000,000 shares[72] - Authorized undesignated preferred stock: 10,000,000 shares (none issued)[72] Equity Issuances - Public offerings in April 2019, November 2020, and September 2021 involved issuing units of common stock and warrants[73][74][75][76] - The September 2021 Public Offering generated net proceeds of $13.8 million from 1,665,000 units sold at $10.00 per unit[75][76] - Approximately $87,000 of stock issuance costs were recorded to Deferred Financing Costs during the six months ended June 30, 2022[77] Warrants Warrants Outstanding (As of June 30, 2022) | Issue Date | Exercise Price | Number of Warrants | | :--------------------------------- | :------------- | :----------------- | | April 25, 2019 | $20.00 | 50,000 | | November 13, 2020 | $20.00 | 50,000 | | September 8, 2021 | $10.00 | 1,126,620 | | September 8, 2021 | $12.50 | 135,000 | | September 30, 2021 | $10.00 | 165,000 | | September 30, 2021 | $12.50 | 14,850 | | Total | | 1,541,470 | - During the six months ended June 30, 2022, 373,380 warrants were exercised on a cashless basis, resulting in the issuance of 37,338 shares of common stock[78] - There was no intrinsic value for the warrants as of June 30, 2022 or December 31, 2021[81] Stock Compensation - The Generation Income Properties, Inc. 2020 Omnibus Incentive Plan reserves 2.0 million shares of common stock for various equity awards[82] - As of June 30, 2022, 76,449 shares had been granted under the Omnibus Incentive Plan[82] - Stock based compensation expense was $218,044 for the six months ended June 30, 2022, compared to $99,749 in 2021[84] Restricted Common Shares issued to the Board and Employees Restricted Shares Summary | Metric | 2022 | 2021 | | :-------------------------- | :----- | :----- | | Number of Shares Outstanding (beginning) | 23,167 | 14,582 | | Restricted Shares Issued | 47,499 | 14,000 | | Restricted Shares Vested | (10,500) | (3,749) | | Number of Shares Outstanding (end) | 60,166 | 24,833 | - On January 6, 2022, 47,142 restricted shares were granted to directors, officers and employees[85] - On April 12, 2022, 357 restricted shares were granted to a non-employee for chaplain services[85] Common stock issued for services - In March 2021, the Company issued 2,200 shares of stock to its former chief financial officer for compensation from December 2020 to March 2021[85] - These shares are valued at $20.00 per share[86] Common Shareholders Cash Distributions - The Company expects to continue to declare and pay distributions to its stockholders for the foreseeable future, though it is not obligated to do so other than as necessary to meet REIT qualification standards[87] - Monthly cash distributions of $0.054 per share/unit were authorized for July, August, and September 2022[88] - The Company's CEO waived his right to receive distributions with respect to the shares held by him as of the completion of the Public Offering through June 2022[88] Note 9 – Leases - During the six months ended June 30, 2022, four tenants each accounted for more than 10% of rental revenue: General Services Administration (21%), PRA Holdings, Inc. (15%), Pratt & Whitney Automation, Inc. (14%), and Kohl's Corporation (11%)[89] Future Minimum Base Rental Cash Payments (As of June 30, 2022) | Year | Amount | | :--------- | :------------- | | 2022 | $2,517,849 | | 2023 | $4,628,195 | | 2024 | $4,674,729 | | 2025 | $4,547,481 | | 2026 | $4,425,322 | | Thereafter | $8,987,943 | | Total | $29,781,519 | Note 10 – Mortgage Loans Mortgage Loans Outstanding (Net of Debt Issuance Costs) | Date | Amount | | :---------------- | :------------- | | June 30, 2022 | $35,455,512 | | December 31, 2021 | $28,969,295 | - On April 1, 2022, the Company entered into two loan agreements with an aggregate balance of $13.5 million to refinance seven properties[90] - During the three months ended June 30, 2022, the Company incurred a loss on debt extinguishment of $144,029 related to the write off of unamortized debt issuance costs and a prepayment penalty of $21,000[91] - The Company was in compliance with all debt covenants as of June 30, 2022[93] Minimum Required Principal Payments on Debt (As of June 30, 2022) | Year | Amount | | :--------- | :------------- | | 2022 | $291,328 | | 2023 | $785,524 | | 2024 | $12,427,090 | | 2025 | $546,280 | | 2026 | $568,514 | | Thereafter | $21,623,266 | | Total | $36,242,002 | Note 11 – Related Party - On November 30, 2020, the Company acquired a property from GIP Fund 1, LLC, a related party that was 11% owned by the CEO[97] - Following the dissolution of GIP Fund 1, LLC, the CEO's ownership in GIP LP was reduced to 0.09% as of June 30, 2022[97] Note 12 – Tenant in Common Investment - On August 13, 2021, the Company acquired a 36.8% interest in a tenancy-in-common (TIC) structure for a property in Rockford, IL[98] - On April 1, 2022, the Company contributed $455,889 to the TIC, increasing its ownership to 50%[100] - The TIC debt was refinanced to $2.1 million with an interest rate of 3.85%[99] - The investment is accounted for under the equity method and had a value of $1,188,061 as of June 30, 2022[100] Note 13 – Subsequent Events - On June 27, 2022, the Board authorized a monthly cash distribution of $0.054 per share for July, August, and September 2022[102] - Subsequent to June 30, 2022, 32,110 Investor Warrants were exercised on a cashless basis, resulting in 3,211 shares of common stock issued[103] - On August 9, 2022, a Redemption Agreement was entered into with an Operating Partnership common unit holder for 205,615 units, involving cash and common stock issuance, with redemptions scheduled through December 2024[104] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial performance, condition, strategy as an internally managed REIT, impact of acquisitions, liquidity, capital resources, and reconciliation of GAAP net loss to non-GAAP measures - The Company is an internally managed, Maryland corporation focused on acquiring retail, office and industrial real estate located in major U.S. markets[107] - In September 2021, the Company closed an underwritten public offering, generating net proceeds of $13.8 million and listing its common stock and warrants on Nasdaq[108] - As of June 30, 2022, approximately 85% of the portfolio's annualized base rent was derived from investment-grade tenants, and 92% of leases provide for contractual rent increases[110] Cautionary Note Regarding Forward‑Looking Statements - This report contains 'forward-looking statements' subject to risks and uncertainties that could cause actual results to differ materially[105] - Readers should be aware of important factors that could affect actual results, including risk factors listed in the Company's Annual Report on Form 10-K for the year ended December 31, 2021[105] Overview - The Company is an internally managed, Maryland corporation focused on acquiring retail, office and industrial real estate in major U.S. markets[107] - The Company intends to elect to be taxed as a REIT for federal income tax purposes commencing with its taxable year ending December 31, 2021[107] - As of June 30, 2022, the Company owned 83% of the outstanding common units of the Operating Partnership[107] Public Offering and Nasdaq Listing - In September 2021, the Company closed an underwritten public offering of 1,665,000 units at $10 per unit[108] - The offering generated net proceeds of $13.8 million[108] - The common stock (GIPR) and warrants (GIPRW) trade on the Nasdaq Capital Market[108] Our Investments - As of June 30, 2022, the Company's portfolio is 100% leased and occupied, consisting of twelve assets and a 50% tenancy in common interest in one property[110][111] - Approximately 85% of the portfolio's annualized base rent (ABR) is derived from tenants with an investment grade credit rating (BBB- or better)[110] - Approximately 92% of the leases in the current portfolio provide for increases in contractual base rent during future years[110] Distributions - From inception through June 30, 2022, the Company distributed approximately $1,976,893 to common stockholders[112] Recent Developments - On July 20, 2022, an Operating Partnership common unit holder issued a notice of redemption for 25,000 units[113] - On August 9, 2022, a Redemption Agreement was entered into, outlining the redemption of 205,615 units through a combination of cash and common stock issuance, with tranches extending through December 2024[114] Results of Operations - Total revenue increased due to the acquisition of five additional properties[115][124] - Total expenses increased significantly across all categories, including general, administrative, building, depreciation, interest, and compensation costs[116][125] - The Company incurred dead deal expense of $107,371 and a loss on debt extinguishment of $144,029 in 2022[119][120][129] Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021 - Total revenue increased by $390,913 (39.6%) to $1,379,103[115] - Total expenses increased by $737,083 (56.4%) to $2,042,938[116] - Net loss increased by $599,032 (188.6%) to $916,697[121] Revenue - Total revenue for Q2 2022 was $1,379,103, an increase of $390,913 from Q2 2021 ($988,190)[115] - Revenue increase was primarily from the acquisition of five additional properties, partially offset by revenue from one property sold in August 2021[115] Expenses Expense Changes (Three Months Ended June 30) | Expense Category | 2022 | 2021 | Change | | :------------------------------------ | :--------- | :--------- | :--------- | | General, administrative and organizational costs | $472,736 | $251,825 | +$220,911 | | Building expenses | $325,201 | $163,722 | +$161,479 | | Depreciation and amortization | $558,676 | $397,186 | +$161,490 | | Interest expense, net | $375,627 | $337,432 | +$38,195 | | Compensation costs | $310,698 | $155,690 | +$155,008 | | Total expenses | $2,042,938 | $1,305,855 | +$737,083 | Income Tax Benefit - No income tax benefit was recorded for Q2 2022 or Q2 2021 due to a cumulative net loss situation and a valuation allowance[117] Loss on investment in tenancy-in-common - The Company's share of earnings on its tenancy-in-common investment generated a loss of $1,462 for Q2 2022[118] Other expenses - Incurred $107,371 in dead deal expense related to abandoned acquisition pursuits[119] - Incurred a loss on debt extinguishment of $144,029, including a $21,000 prepayment penalty, from refinanced mortgage loans[120] Net Loss - Net loss for Q2 2022 was $916,697, compared to $317,665 for Q2 2021[121] Net Income Attributable to Non-controlling Interests - Net income attributable to non-controlling interests was $130,181 for Q2 2022, up from $52,434 in Q2 2021[122] - The variance is attributable to an increase from additional redeemable non-controlling interests issued to finance property acquisitions[122] Net Loss Attributable to Shareholders - Net loss attributable to Generation Income Properties, Inc. shareholders was $1,046,878 for Q2 2022, compared to $369,989 for Q2 2021[123] Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021 - Total revenue increased by $635,960 (33.0%) to $2,561,038[124] - Total expenses increased by $1,114,492 (43.5%) to $3,678,938[125] - Net loss increased by $722,842 (113.0%) to $1,362,210[129] Revenue - Total revenue for H1 2022 was $2,561,038, an increase of $635,960 from H1 2021 ($1,925,078)[124] - Revenue increase was primarily from the acquisition of five additional properties, partially offset by revenue from one property sold in August 2021[124] Expenses Expense Changes (Six Months Ended June 30) | Expense Category | 2022 | 2021 | Change | | :------------------------------------ | :--------- | :--------- | :--------- | | General, administrative and organizational costs | $814,416 | $440,242 | +$374,174 | | Building expenses | $578,592 | $344,275 | +$234,317 | | Depreciation and amortization | $989,569 | $776,697 | +$212,872 | | Interest expense, net | $705,921 | $692,421 | +$13,500 | | Compensation costs | $590,440 | $310,811 | +$279,629 | | Total expenses | $3,678,938 | $2,564,446 | +$1,114,492 | Income Tax Benefit - No income tax benefit was recorded for H1 2022 or H1 2021 due to a cumulative net loss situation and a valuation allowance[127] Income on investment in tenancy-in-common - The Company's share of earnings on its tenancy-in-common investment generated income of $7,090 for H1 2022[128] Other expenses - Incurred $107,371 in dead deal expense related to abandoned acquisition pursuits[129] - Incurred a loss on debt extinguishment of $144,029, including a $21,000 prepayment penalty, from refinanced mortgage loans[129] Net Loss - Net loss for H1 2022 was $1,362,210, compared to $639,368 for H1 2021[129] Net Income Attributable to Non-controlling Interests - Net income attributable to non-controlling interests was $260,144 for H1 2022, up from $198,504 in H1 2021[130] - The variance is attributable to an increase from additional redeemable non-controlling interests issued to finance property acquisitions[130] Net Loss Attributable to Shareholders - Net loss attributable to Generation Income Properties, Inc. shareholders was $1,622,354 for H1 2022, compared to $837,872 for H1 2021[131] Liquidity and Capital Resources - As of June 30, 2022, the Company had total cash of $3,683,665, properties with a cost basis of $56,847,641, and outstanding debt of $36,242,002[132] - The $25 million master credit facility was increased to $50 million in May 2022, contingent upon the Company completing a future capital raise of $25.0 million or more[135] - Net cash used in operating activities was $127,247 for H1 2022, an increase from $38,238 in H1 2021[144] - Net cash used in investing activities was $13,161,569 for H1 2022, primarily due to property acquisitions[145] - Net cash generated from financing activities was $6,348,405 for H1 2022, primarily due to an increase in net Mortgage loan borrowings[147] Off-Balance Sheet Arrangements - The Company does not have any material off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, revenues, or liquidity[148] Non-GAAP Financial Measures - The Company discloses Funds From Operations (FFO), Adjusted Funds From Operations (AFFO), Core Funds From Operations (Core FFO), and Core Adjusted Funds of Operations (Core AFFO) as non-GAAP financial measures[149] - These non-GAAP measures are useful for comparing operating performance of REITs but should not be considered alternatives to GAAP net income or cash flows from operations[149][150][152] Non-GAAP Financial Measures (Three Months Ended June 30) | Metric | 2022 | 2021 | | :--------------------------------- | :----------- | :----------- | | Net Loss (GAAP) | $(916,697) | $(317,665) | | Funds From Operations (FFO) | $(358,021) | $79,521 | | Core Funds From Operations (Core FFO) | $(205,970) | $162,618 | | Adjusted Funds From Operations (AFFO) | $(339,225) | $57,638 | | Core Adjusted Funds From Operations (Core AFFO) | $36,293 | $107,916 | Non-GAAP Financial Measures (Six Months Ended June 30) | Metric | 2022 | 2021 | | :--------------------------------- | :----------- | :----------- | | Net Loss (GAAP) | $(1,362,210) | $(639,368) | | Funds From Operations (FFO) | $(372,641) | $137,329 | | Core Funds From Operations (Core FFO) | $(92,991) | $334,000 | | Adjusted Funds From Operations (AFFO) | $(345,156) | $97,670 | | Core Adjusted Funds From Operations (Core AFFO) | $124,288 | $230,419 | Critical Accounting Policies - The Company's financial statements are affected by the accounting policies used and the estimates and assumptions made by management[156] - A summary of significant accounting policies is included in the audited consolidated financial statements[156] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Generation Income Properties, Inc. is not required to provide disclosures under this item - As a smaller reporting company, the registrant is not required to make disclosures under this item[157] Item 4. Controls and Procedures Management, with CEO and CFO participation, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2022, concluding they were effective, with no material changes in internal control over financial reporting - Management, with the participation of the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2022[159] - There were no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the three months ended June 30, 2022[160] Evaluation of disclosure controls and procedures - Management, with the participation of the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2022[158] - Based on that evaluation, management concluded that disclosure controls and procedures were effective as of June 30, 2022[159] Changes in internal control over financial reporting - There were no changes in internal control over financial reporting that occurred during the three months ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[160] PART II. OTHER INFORMATION This section covers various non-financial disclosures, including legal proceedings, risk factors, unregistered sales of equity securities, defaults upon senior securities, mine safety disclosures, other information, and a list of exhibits Item 1. Legal Proceedings There are no material legal proceedings that require disclosure in this Quarterly Report on Form 10-Q - There are no material legal proceedings that are required to be disclosed[163] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 - There have been no material changes from the risk factors previously disclosed in Item 1A. Risk Factors of the Company's Annual Report on Form 10-K for the year ended December 31, 2021[164] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company had no unregistered sales of equity securities and detailed the use of proceeds from its September 2021 public offering, with no material change in planned use - No unregistered sales of equity securities[165] - The September 2021 Public Offering generated total net proceeds of approximately $13.8 million[166] - As of June 30, 2022, $1.1 million of proceeds from the Public Offering has been used for repayment of related party debt[169] Item 3. Defaults Upon Senior Securities The Company reports no defaults upon senior securities - No defaults upon senior securities[171] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Not applicable[172] Item 5. Other Information An Operating Partnership unit holder issued a redemption notice for 25,000 units, followed by a Redemption Agreement for 205,615 units, involving cash and common stock issuance through December 2024 - On July 20, 2022, an Operating Partnership common unit holder, Thomas E. Robinson, issued a notice of redemption for 25,000 units[173] - On August 9, 2022, a Redemption Agreement was entered into, outlining the redemption of 205,615 units through a combination of cash and common stock issuance, with tranches extending through December 2024[173] Item 6. Exhibits This item lists all documents filed as part of the report or incorporated by reference, including articles of incorporation, bylaws, partnership agreements, warrants, and various certifications - The section lists all documents filed as a part of this report or incorporated herein by reference[175][176] - Exhibits include Articles of Amendment, Bylaws, Warrant Agreements, and various certifications[176] SIGNATURES The report is duly signed on behalf of Generation Income Properties, Inc. by David Sobelman, CEO and Chair of the Board, and Allison Davies, CFO, on August 15, 2022 - The report is signed by David Sobelman, Chief Executive Officer and Chair of the Board[179] - The report is signed by Allison Davies, Chief Financial Officer[179] - The signing date for the report is August 15, 2022[179]