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Zoned Properties, Inc. (OTCQX:ZDPY), a strategic real estate development firm whose primary mission is to identify, develop and lease sophisticated, safe and sustainable properties in emerging industries, including the licensed medical marijuana industry, today announced its financial results for the three and six-month periods ended June 30, 2018.

The second quarter represented the first earnings cycle under the Company’s new business model, which is designed to better align the Company’s interests with its tenants and clients, positioning Zoned Properties to benefit from the growth of the medical marijuana industry. Accordingly:

— Zoned Properties has leased the entirety of its licensed medical marijuana facilities located in Arizona at Chino Valley, Green Valley, Tempe and Kingman to its primary tenant and client, Hana Meds, with plans to continue expanding the developments as market demands increase.

— Lease terms have been extended through the year 2040.

— Base Rent rates have been modified to be in line with industry averages beginning May 1, 2018.

— Zoned Properties and Hana Meds have entered into a long-term strategic advisory relationship, under which Zoned Properties will assist Hana Meds in all aspects of building and facility performance, aiming to increase efficiency, sustainability and profitability. Zoned Properties will receive an advisory fee equal to 10% of gross revenues, paid monthly beginning January, 2019

“During the second quarter of 2018 we began the process of transitioning our growth strategy and revenue mix towards a model that includes not only fixed lease payments, but also variable, percentage-based advisory fees,” commented Bryan McLaren, Chief Executive Officer. “Effective May 1, our lease agreements were restructured in coordination with a set of Confidential Advisory Services Agreements. The new lease agreements include updated lease terms and a new set of base rental rates, adjusted to be more in-line with average commercial and industrial real estate rates. While these adjustments have resulted in a decrease to the Company’s 2018 cash flow due to the lower base rental rates, the upside of our new revenue mix and growth strategy including variable, percentage-based advisory fees could produce significantly higher cash flows than our previous leasing model. Zoned Properties will focus much of its resources on continuing to build the relationship with our primary tenant and client in Arizona, Hana Meds and as a commitment to that relationship, we have leased the entirety of our licensed medical marijuana facilities in Arizona to them with terms extended through the year 2040.”

“Once we begin recognizing the variable, percentage-based advisory fees starting in 2019 and reflected in our financial results for the first quarter of 2019, we expect revenue to likely exceed the revenue under our prior business model,” added Mr. McLaren. “More importantly, we can now grow with our tenants and clients as they grow, positioning Zoned Properties to benefit from the expansion of the licensed marijuana industry. The Arizona Medical Marijuana market has been projected to gross over $500 Million in revenues and Hana Meds is well positioned to capture market share that will translate into revenue for Zoned Properties through our variable, percentage-based advisory fee structure. The robust and repeatable model for property development that we have developed for the medical marijuana space is garnering attention from across the country and in Canada as the push for widespread legalization continues and industry stakeholders look for proven, sustainable solutions.”

“As expected, revenues were lower this quarter than they have been historically as a result of our business transition and the renegotiation of rental payments and advisory fees that became effective on May 1,” added McLaren. “The impact to revenue was partially offset by lower operating expenses as a result of our efforts to continue systemizing a lean administrative process. The results also include a write-off of deferred rent receivable resulting in a one-time non-cash charge of approximately $1.9 million. While it is difficult to estimate the exact revenue to be realized from the upcoming variable, percentage-based advisory fees in 2019, we are confident that this restructuring will best position Zoned Properties to realize greater value for our shareholders moving forward. We expect similar financial results for the remainder of 2018, with minimal impact to cash flow from operations, as our business transition progresses and we position for the recognition of advisory fee revenue beginning in January 2019. Strategically, with a strong balance sheet, no debt tied to any of our properties and minimal corporate-level liabilities, we are now strategically poised to grow as this rapidly expanding industry grows, with highly valued properties positioned in close proximity to advancing markets in California, Nevada and Colorado. I have never been more excited about the opportunities in front of Zoned Properties.”

Letter to Shareholders

Management today published a shareholder letter, designed to further elaborate on the Company’s strategy and recent progress. Interested parties may view this letter here.

Second Quarter 2018 Financial Results

— Revenues were $179,000, compared to $505,000 for the second quarter of 2017, reflecting the company’s transition to a new business model.

— Operating expenses, including a one-time non-cash write-off of $1.9 million related to deferred rent receivables, were $2.2 million, up 510.9% compared to $355,000 for the second quarter of 2017.

— Excluding the one-time write-off, operating expenses of $316,000 were 11.1% lower than the second quarter of 2017.

— Net loss, including the aforementioned write-off, was $2.0 million, or ($0.12) per basic and diluted share, compared to net income of $118,000, or $0.01 per basic and diluted share, for the second quarter of 2017.

— Excluding the one-time write-off, the net loss was $165,000 or ($0.01) per basic and diluted share.

— Cash provided by operating activities was $206,000 for the first six months of 2018 compared to cash used by operating activities of $121,000 for the first six months of 2017.

— As of June 30, 2018, the Company had cash of $762,000, compared to $824,000 as of December 31, 2017.

About Zoned Properties, Inc. (ZDPY):

Zoned Properties is a strategic real estate development firm whose primary mission is to identify, develop, and lease sophisticated, safe, and sustainable properties in emerging industries, including the licensed medical marijuana industry. Zoned Properties is an accredited member of the Better Business Bureau, the Forbes Real Estate Council, and the U.S. Green Building Council. The Company focuses on the strategic development of commercial properties that face unique zoning challenges; identifying solutions that could potentially have a major impact on cash flow and property value. Zoned Properties targets commercial properties that can be acquired and re-zoned or permitted for specific purposes. Zoned Properties does not grow, harvest, sell or distribute cannabis or any substances regulated under United States law such as the Controlled Substances Act.

Use of Non-GAAP Financial Information

The Company measures its performance primarily through growth in revenue and operating profit. In addition to the consolidated financial statements presented in accordance with GAAP, management uses certain non-GAAP measures to measure its operating performance, including operating expenses, exclusive of a one-time non-cash write-off related to deferred rent receivables. A definition of the components of operating expenses, exclusive of a one-time non-cash write-off related to deferred rent receivables, and a reconciliation to the most directly comparable GAAP financial measure has been provided.

During the second quarter of 2018, the Company incurred a one-time non-cash write-off of $1.9 million related to deferred rent receivables. Operating expenses, exclusive of this one-time non-cash write-off related to deferred rent receivables, is presented to enhance an understanding of the operating results and is not intended to represent operating expenses or results of operations. The use of operating expenses, exclusive of the one-time non-cash write-off related to deferred rent receivables, provides a clearer understanding of normal, recurring operating results of the Company.

This non-GAAP measure is not in accordance with, and should not be used as an alternative to, measures prepared in accordance with GAAP. In addition, non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP. Non-GAAP measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this press release are forward-looking statements. In some cases, forward-looking statements can be identified by words such as “believe,” “expect,” “anticipate,” “plan,” “potential,” “continue” or similar expressions. Such forward-looking statements include risks and uncertainties, and there are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors, risks and uncertainties are discussed in the Company’s filings with the Securities and Exchange Commission. Investors should not place any undue reliance on forward-looking statements since they involve known and unknown, uncertainties and other factors which are, in some cases, beyond the Company’s control which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects the Company’s current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to operations, results of operations, growth strategy and liquidity. The Company assumes no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Tables Follow

ZONED PROPERTIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS                                                                                                                                                                                                  As of                      As of                                                                                                                                                                                                  June 30,                   December 31,                                                                                                                                                                                                  2018                       2017                                                                                                                                                                                                  (Unaudited)                (Audited)ASSETS         Cash                                                                                                                                                                                     $                 762,109  $               824,240         Rental properties, net                                                                                                                                                                   7,314,993                  7,170,322         Deferred rent receivable - related parties                                                                                                                                               -                          1,708,734         Note receivable - related party                                                                                                                                                          92,160                     182,365         Prepaid expenses and other current assets                                                                                                                                                83,768                     127,902         Property and equipment, net                                                                                                                                                              32,231                     35,768         Security deposits                                                                                                                                                                        600                        2,890Total Assets                                                                                                                                                                                      $              8,285,861   $          10,052,221LIABILITIES AND STOCKHOLDERS' EQUITYLIABILITIES:         Convertible notes payable - related parties                                                                                                                                              $              2,020,000   $            2,020,000         Accounts payable                                                                                                                                                                         5,062                      8,896         Accrued expenses                                                                                                                                                                         61,737                     48,468         Accrued expenses - related parties                                                                                                                                                       34,200                     33,600         Deferred revenues                                                                                                                                                                        53,250                     28,750         Security deposits payable - related parties                                                                                                                                              71,800                     71,800         Security deposits payable                                                                                                                                                                5,864                      5,864Total Liabilities                                                                                                                                                                                 2,251,913                  2,217,378Commitments and ContingenciesSTOCKHOLDERS' EQUITY:         Preferred stock, $0.001 par value, 5,000,000 shares authorized; 2,000,000 shares issued and outstanding at June 30, 2018 and December 31, 2017 ($1.00 per share liquidation preference)  2,000                      2,000         Common stock: $0.001 par value, 100,000,000 shares authorized; 17,434,052 and 17,345,497 issued and outstanding at June 30, 2018 and December 31, 2017, respectively                     17,434                     17,345         Additional paid-in capital                                                                                                                                                               20,725,726                 20,630,649         Accumulated deficit                                                                                                                                                                      (14,711,212)               (12,815,151)Total Stockholders' Equity                                                                                                                                                                        6,033,948                  7,834,843Total Liabilities and Stockholders' Equity                                                                                                                                                        $              8,285,861   $          10,052,221
ZONED PROPERTIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)                                                         For the Three Months Ended        For the Six Months Ended                                                         June 30,                          June 30,                                                         2018                2017          2018             2017REVENUES:Rental revenues                                          $         12,216    $      4,629  $      24,403    $    54,702Rental revenues - related parties                        166,425             500,312       687,499          990,506                   Total revenues                        178,641             504,941       711,902          1,045,208OPERATING EXPENSES:Compensation and benefits                                95,523              119,935       254,982          338,228Professional fees                                        85,874              82,143        157,499          120,621General and administrative expenses                      37,661              41,207        77,526           86,581Depreciation and amortization                            63,485              49,505        126,904          108,185Property operating expenses                              11,007              41,086        36,299           62,359Real estate taxes                                        22,040              21,206        44,294           45,282Write-off of deferred rent receivable - related parties  1,853,539           -             1,853,539        -                   Total operating expenses              2,169,129           355,082       2,551,043        761,256(LOSS) INCOME FROM OPERATIONS                            (1,990,488)         149,859       (1,839,141)      283,952OTHER (EXPENSES) INCOME:Interest expenses                                        -                   (1,944)       -                (42,983)Interest expenses - related parties                      (30,300)            (32,245)      (60,600)         (68,688)Gain on sale of property and equipment                   -                   -             -                831,753Interest income                                          1,951               2,483         3,680            2,786                   Total other (expenses) income,  net   (28,349)            (31,706)      (56,920)         722,868(LOSS) INCOME BEFORE INCOME TAXES                        (2,018,837)         118,153       (1,896,061)      1,006,820PROVISION FOR INCOME TAXES                               -                   -             -                -NET (LOSS) INCOME                                        $  (2,018,837)      $  118,153    $(1,896,061)     $1,006,820NET (LOSS) INCOME PER COMMON SHARE:Basic                                                    $           (0.12)  $        0.01 $        (0.11)  $        0.05Diluted                                                  $           (0.12)  $        0.01 $        (0.11)  $        0.05WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:Basic                                                    17,433,667          17,312,655    17,414,977       17,290,422Diluted                                                  17,433,667          17,924,989    17,414,977       18,132,734
ZONED PROPERTIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)                                                                                                                                       For the Six Months Ended                                                                                                                                       June 30,                                                                                                                                       2018                  2017CASH FLOWS FROM OPERATING ACTIVITIES                                    Net (loss) income                                                                                  $ (1,896,061)         $    1,006,820                                    Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:                                    Depreciation and amortization expense                                                              126,904               108,185                                    Stock-based compensation                                                                           79,408                184,925                                    Stock option expense                                                                               15,758                (6,881)                                    Gain from sale of property and equipment                                                           -                     (831,753)                                    Write-off of deferred rent receivable - related parties                                            1,853,539             -                                    Change in operating assets and liabilities:                                    Deferred rent receivable - related parties                                                         (144,805)             (352,967)                                    Real estate tax escrow                                                                             -                     39,487                                    Note receivable                                                                                    90,205                (176,647)                                    Prepaid expenses and other assets                                                                  44,134                49,305                                    Security deposits                                                                                  2,290                 5,268                                    Accounts payable                                                                                   (3,834)               (72,542)                                    Accrued expenses                                                                                   13,269                (6,491)                                    Accrued expenses  - related parties                                                                600                   (52,241)                                    Deferred revenues                                                                                  24,500                (500)                                    Deferred revenues                                                                                  -                     1,841                                    Security deposits payable - related party                                                          -                     1,800                                    Security deposits payable                                                                          -                     (18,600)NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                                                                    205,907               (120,991)CASH FLOWS FROM INVESTING ACTIVITIES                                    Acquisition of buildings and improvements                                                          (268,038)             (211,801)                                    Cash received from sale of property and equipment                                                  -                     1,984,188                                    Acquisition of property and equipment                                                              -                     (2,586)NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES                                                                                    (268,038)             1,769,801CASH FLOWS FROM FINANCING ACTIVITIES                                    Proceeds from convertible debt - related parties                                                   -                     2,020,000                                    Repayment of convertible note - related party                                                      -                     (500,000)                                    Repayment of convertible note                                                                      -                     (500,000)                                    Repayment of mortgage payable                                                                      -                     (2,100,000)NET CASH USED IN FINANCING ACTIVITIES                                                                                                  -                     (1,080,000)NET (DECREASE) INCREASE IN CASH                                                                                                        (62,131)              568,810CASH, beginning of period                                                                                                              824,240               366,024CASH, end of period                                                                                                                    $       762,109       $       934,834SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                    Interest paid                                                                                      $        60,000       $      164,788SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:                                    Common stock issued for accrued settlement payable                                                 $                  -  $         21,875

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SOURCE Zoned Properties, Inc.

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