GENERATION INCOME PROPERTIES, INC. 10-K

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to make disclosures under this item. 45 ITEM 8. FINANICAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 206 ) 47 Consolidated Balance Sheets as of December 31, 2021 and 2020 48 Consolidated Statements of Operations for the years ended December 31, 2021 and 2020 49 Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2021 and 2020 50 Consolidated Statements of Cash Flows for the years December 31, 2021 and 2020 51 Notes to the Consolidated Financial Statements 52 46 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of Generation Income Properties, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Generation Income Properties, Inc. and its subsidiaries (collectively, the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ MaloneBailey, LLP www.malonebailey.com We have served as the Company's auditor since 2015. Houston, Texas March 18, 2022 47 Generation Income Properties, Inc. Consolidated Balance Sheets As of December 31, As of December 31, 2021 2020 Assets Investment in real estate Property $ 41,025,309 $ 37,352,447 Tenant improvements 482,701 482,701 Acquired lease intangible assets 3,304,014 3,014,149 Less accumulated depreciation and amortization ( 3,512,343 ) ( 2,317,454 ) Total investments 41,299,681 38,531,843 Investment in tenancy-in-common 725,082 — Cash and cash equivalents 10,589,576 937,564 Restricted cash 34,500 184,800 Deferred rent asset 156,842 126,655 Prepaid expenses 237,592 134,165 Deferred financing costs — 614,088 Accounts receivable 88,661 75,794 Escrow deposit and other assets 288,782 75,831 Total Assets $ 53,420,716 $ 40,680,740 Liabilities and Stockholders' Equity Liabilities Accounts payable $ 201,627 $ 118,462 Accounts payable - related party 100 — Accrued expenses 134,816 406,125 Acquired lease intangible liability, net 577,388 415,648 Insurance payable 33,359 40,869 Deferred rent liability 228,938 188,595 Note Payable - related party — 1,100,000 Mortgage loans, net of unamortized discount of $ 637,693 and $ 689,190 at December 31, 2021 and December 31, 2020, respectively 28,969,295 28,356,571 Total liabilities 30,145,523 30,626,270 Redeemable Non-Controlling Interests 9,621,159 8,684,431 Stockholders' Equity Common stock, $ 0.01 par value, 100,000,000 shares authorized; 2,172,950 shares issued and outstanding at December 31, 2021 and 576,918 issued and outstanding at December 31, 2020 21,729 5,770 Additional paid-in capital 19,051,929 5,541,411 Accumulated deficit ( 5,419,624 ) ( 4,177,142 ) Total Generation Income Properties, Inc. stockholders' equity 13,654,034 1,370,039 Total Liabilities and Stockholders' Equity $ 53,420,716 $ 40,680,740 The accompanying notes are an integral part of these consolidated financial statements. 48 Generation Income Properties, Inc. Consolidated Statements of Operations Twelve Months ended December 31, 2021 2020 Revenue Rental income $ 3,854,846 $ 3,520,376 Other income 45,250 - Total Revenue $ 3,900,096 $ 3,520,376 Expenses General, administrative and organizational costs 1,111,029 817,671 Building expenses 768,182 711,446 Depreciation and amortization 1,508,340 1,452,556 Interest expense, net 1,310,950 1,400,129 Compensation costs 849,701 483,189 Total expenses 5,548,202 4,864,991 Operating loss ( 1,648,106 ) ( 1,344,615 ) Gain on investment in tenancy-in-common 12,495 - Gain on disposal of property 923,178 - Net Loss $ ( 712,433 ) $ ( 1,344,615 ) Less: Net income attributable to non-controlling interest 530,049 487,038 Net Loss attributable to Generation Income Properties, Inc. $ ( 1,242,482 ) $ ( 1,831,653 ) Total Weighted Average Shares of Common Stock Outstanding – Basic 1,067,599 532,281 Total Weighted Average Shares of Common Stock Outstanding – Diluted 1,067,599 532,281 Basic Loss Per Share Attributable to Common Stockholders $ ( 1.16 ) $ ( 3.44 ) Diluted Loss Per Share Attributable to Common Stockholders $ ( 1.16 ) $ ( 3.44 ) The accompanying notes are an integral part of these consolidated financial statements. 49 Generation Income Properties, Inc. Consolidated Statements of Changes in Stockholders’ Equity Common Stock Shares Common Stock Amount Additional Paid-In- Capital Accumulated Deficit Generation Income Properties, Inc. Stockholders' Equity Redeemable Non- Controlling Interest Balance - December 31, 2019 525,250 $ 5,253 $ 4,773,639 $ ( 2,345,489 ) $ 2,433,403 $ 8,198,251 Restricted stock unit compensation 1,668 17 101,628 — 101,645 — Issuance of Redeemable Operating Partnership Units for property acquisition — — — — — 486,180 Common stock issued for cash 50,000 500 999,500 1,000,000 — Distribution on Redeemable Non-Controlling Interest ( 487,038 ) Dividends paid on Common Stock ( 333,356 ) ( 333,356 ) — Net income (loss) for the year ( 1,831,653 ) ( 1,831,653 ) 487,038 Balance - December 31, 2020 576,918 $ 5,770 $ 5,541,411 $ ( 4,177,142 ) $ 1,370,039 $ 8,684,431 Restricted stock unit compensation 28,582 285 201,405 — 201,690 — Common stock issued for services 14,950 149 123,283 — 123,432 — Issuance of equity securities for cash, net of issuance costs 1,665,000 16,650 13,745,119 — 13,761,769 — Redemption of common stock ( 112,500 ) ( 1,125 ) 1,025 — ( 100 ) — Issuances of Redeemable Non-Controlling Interests for property acquisitions — — — — — 2,100,000 Redemption of Redeemable Non-Controlling Interest — — — — — ( 1,200,000 ) Distribution on Redeemable Non-Controlling Interest — — — — — ( 493,321 ) Dividends paid on Common Stock — — ( 560,314 ) — ( 560,314 ) — Net income (loss) for the year — — — ( 1,242,482 ) ( 1,242,482 ) 530,049 Balance - December 31, 2021 2,172,950 $ 21,729 $ 19,051,929 $ ( 5,419,624 ) $ 13,654,034 $ 9,621,159 The accompanying notes are an integral part of these consolidated financial statements. 50 Generation Income Properties, Inc. Consolidated Statements of Cash Flows Twelve Months Ended December 31, 2021 2020 CASHFLOWS FROM OPERATING ACTIVITIES Net loss $ ( 712,433 ) $ ( 1,344,615 ) Adjustments to reconcile net loss to cash (used) provided by operating activities: Depreciation 1,078,854 1,041,222 Amortization of acquired lease intangible assets 429,486 411,334 Amortization of debt issuance costs 120,343 134,898 Amortization of below market leases ( 147,228 ) ( 109,496 ) Common stock issued for services 112,432 - Restricted stock unit compensation 201,690 101,645 Equity in earnings on investment in tenancy-in-common ( 12,495 ) - Gain on sale of property ( 923,178 ) - Changes in operating assets and liabilities: Accounts receivable ( 12,867 ) ( 1,946 ) Other assets ( 37,951 ) ( 65,224 ) Deferred rent asset ( 30,187 ) ( 61,553 ) Prepaid expenses ( 103,427 ) ( 56,157 ) Accounts payable 83,165 35,525 Accrued expenses ( 260,309 ) 72,030 Deferred rent liability 40,343 98,996 Net cash (used) provided by operating activities ( 173,762 ) 256,659 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of land, buildings, other tangible and intangible assets ( 8,288,954 ) ( 272,849 ) Escrow deposit for purchase of properties ( 175,000 ) - Distribution from tenancy-in-common 12,243 - Investment in tenancy-in-common ( 724,830 ) - Proceeds from sale of land, buildings, other tangible and intangible assets 5,245,856 - Net cash used in investing activities ( 3,930,685 ) ( 272,849 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of equity securities, net 14,375,857 1,000,000 Proceeds from issuance of redeemable interest 2,100,000 - Mortgage loan repayments - related party ( 1,100,000 ) ( 800,000 ) Redemption of redeemable non-controlling interests ( 1,200,000 ) - Mortgage loan borrowings 4,475,000 11,287,500 Mortgage loan repayments ( 3,913,773 ) ( 10,108,205 ) Deferred financing costs paid in cash - ( 215,248 ) Debt issuance costs paid in cash ( 69,780 ) ( 589,133 ) Insurance financing borrowings 277,059 189,153 Insurance financing repayments ( 284,569 ) ( 203,484 ) Distribution on redeemable non-controlling interests ( 493,321 ) ( 487,038 ) Dividends paid on common stock ( 560,314 ) ( 333,356 ) Net cash generated from (used in) financing activities 13,606,159 ( 259,811 ) Net increase (decrease) in cash and cash equivalents 9,501,712 ( 276,001 ) Cash and cash equivalents and restricted cash - beginning of period 1,122,364 1,398,365 Cash and cash equivalents and restricted cash - end of period $ 10,624,076 $ 1,122,364 CASH TRANSACTIONS Interest Paid $ 1,192,251 $ 1,245,012 NON-CASH TRANSACTIONS Stock issued for accrued liabilities 11,000 - Deferred financing costs incurred on account - 224,000 Deferred distribution on redeemable non-controlling interests 36,729 - Debt assumed related to asset acquisition - 486,180 Operating partnership units issued for property acquisition - - Accounts payable - related party for redemption of common stock shares - 1,286,664 The accompanying notes are an integral part of these consolidated financial statements. 51 GENERATION INCOME PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 – Nature of Operations Generation Income Properties, Inc. (the “Company”) was formed as a Maryland corporation on September 19, 2015 . 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. The Company formed Generation Income Properties L.P. (the “Operating Partnership”) in October 2015 . Substantially all of the Company’s assets are held by, and operations are conducted through the Operating Partnership. The Company is the general partner of the Operating Partnership and as of December 31, 2021 owned 85.3 % of the outstanding common units of the Operating Partnership. The Company formed a Maryland entity GIP REIT OP Limited LLC in 2018 that owns 0.002 % of the Operating Partnership. The Company places each property in a separate entity which may have a Redeemable Non-Controlling interest as a member. As of December 31, 2021, the Company, the Operating Partnership, and their controlled subsidiaries on a consolidated basis owned 9 properties and held partial interests in one additional property through a tenancy-in-common investment. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The preparation of the consolidated financial statements in conformity with U.S. GAAP. The Company adopted the calendar year as its basis of reporting. Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations. The Company generally rounds to the nearest hundred in the footnotes. Consolidation The accompanying 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 of the Operating Partnership and the Company’s subsidiaries. All significant inter-company balances and transactions have been eliminated in the consolidated financial statements. The consolidated financial statements include the accounts of all entities in which the Company has a controlling interest. The ownership interests of other investors in these entities are recorded as non-controlling interests or redeemable non-controlling interest. Non-controlling interests are adjusted each period for additional contributions, distributions, and the allocation of net income or loss attributable to the non-controlling interests. Investments in entities for which the Company has the ability to exercise significant influence over, but does not have financial or operating control, are accounted for using the equity method of accounting. Accordingly, the Company’s share of the earnings (or losses) of these entities are included in consolidated net income or loss. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of commitments and contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. It is possible that the estimates and assumptions that have been utilized in the preparation of the consolidated financial statements could change significantly if economic conditions were to weaken. Cash The Company considers all demand deposits, cashier’s checks and money market accounts to be cash equivalents. Amounts included in restricted cash represent funds held by the Company related to tenant escrow reimbursements and immediate repair reserve. The following table provides a reconciliation of the Company’s cash and cash equivalents and restricted cash that sums to the total of those amounts at the end of the periods presented on the Company’s accompanying Consolidated Statements of Cash Flows: 52 December 31, December 31, 2021 2020 Cash and cash equivalents $ 10,589,576 $ 937,564 Restricted cash 34,500 184,800 Total cash and cash equivalents and restricted cash $ 10,624,076 $ 1,122,364 Revenue Recognition We have determined that all of our leases should be accounted for as operating leases. The Company leases real estate to its tenants under long-term net leases which we account for as operating leases. Under this method, leases that have fixed and determinable rent increases are recognized on a straight-line basis over the lease term. Certain leases also provide for additional rent based on tenants’ sales volumes. These rents are recognized when determinable after the tenant exceeds a sales breakpoint. Recognizing rent escalations on a straight-line method results in rental revenue in the early years of a lease being higher than actual cash received, creating a straight-line rent asset. Conversely, when actual cash collected is greater than the amount recognized on a straight-line basis, the difference is recognized as a liability. To the extent any of the tenants under these leases become unable to pay their contractual cash rents, the Company may be required to write down the straight-line rent receivable from those tenants, which would reduce rental income. Deferred rent asset as of December 31, 2021 and December 31, 2020 was approximately $ 156,800 and $ 126,700 , respectively. Deferred rent liability as of December 31, 2021 and December 31, 2020 was approximately $ 228,900 and $ 188,600 , respectively, of which $ 188,000 and $ 165,800 respectively related to prepaid rent. The Company reviews the collectability of charges under its tenant operating leases on a regular basis, taking into consideration changes in factors such as the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area where the property is located. In the event that collectability exists with respect to any tenant changes, the Company recognizes an adjustment to rental income. The Company’s review of collectability of charges under its operating leases includes any accrued rental revenues related to the straight-line method of reporting rental revenue. There were no allowances for receivables recorded for the year ended December 31, 2021 or 2020. The Company’s leases provide for reimbursement from tenants for common area maintenance (“CAM”), insurance, real estate taxes and other operating expenses. A portion of our operating cost reimbursement revenue is estimated each period and is recognized as rental income in the period the recoverable costs are incurred and accrued. The Company often recognizes above- and below-market lease intangibles in connection with acquisitions of real estate. The capitalized above- and below-market lease intangibles are amortized over the remaining term of the related leases. Other Income The Company earned an acquisition fee equal to one percent of the sale price of $ 4,525,000 upon the closing of the purchase of the property in Rockford, IL which is reported as other income. The property is held as an investment in common. Refer to Note 11 for more information. Stock-Based Compensation The Company records all equity-based incentive grants to employees and non-employee members of the Company’s Board of Directors in compensation costs in the Company’s Consolidated Statements of Operations based on their fair values determined on the date of grant. Stock-based compensation expense, reduced for estimated forfeitures, is recognized on a straight-line basis over the requisite service period of the award, which is generally the vesting term of the outstanding equity awards. Real Estate Acquisitions of real estate are recorded at cost. 53 Real Estate Purchase Price Assignment The Company assigns the purchase price of real estate to tangible and intangible assets and liabilities based on fair value. Tangible assets consist of land, buildings and tenant improvements. Intangible assets and liabilities consist of the value of in-place leases and above or below market leases assumed with the acquisition. The Company assessed whether the purchase of the building falls within the definition of a business under ASC 805 and concluded that all asset transactions were an asset acquisition, therefore it was recorded at the purchase price, including capitalized acquisition costs, which is allocated to land, building, tenant improvements and intangible assets and liabilities based upon their relative fair values at the date of acquisition. The fair value of the in-place lease is the estimated cost to replace the leases (including loss of rent, estimated commissions and legal fees paid in similar leases). The capitalized in-place leases are amortized over the remaining team of the leases as amortization expense. The fair value of the above or below market lease is the present value of the difference between the contractual amount to be paid pursuant to the in-place lease and the estimated current market lease rate expected over the remaining non-cancelable life of the lease. The capitalized above or below market lease values are amortized as a decrease or increase to rental income over the remaining term of the lease. For additional information, see Note 4 - Acquired Lease Intangible Asset, net and Note 5 - Acquired Lease Intangible Liability, net. Depreciation Expense Real estate and related assets are stated net of accumulated depreciation. Renovations, replacements and other expenditures that improve or extend the life of assets are capitalized and depreciated over their estimated useful lives. Expenditures for ordinary maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful life of the buildings, which are generally between 26 and 50 years , tenant improvements, which are generally between 2 and 10 years . Depreciation expense for the year ended December 31, 2021 and 2020 was approximately $ 1,078,900 and $ 1,041,200 , respectively. Income Taxes 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 (“Code”), commencing with our taxable year ending December 31, 2021. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its taxable income to its stockholders. As a REIT, the Company generally will not be subject to federal corporate income tax on that portion of its taxable income that is currently distributed to stockholders. We account for deferred income taxes using the asset and liability method and recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financial statements or tax returns. Under this method, we determine deferred tax assets and liabilities based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Any increase or decrease in the deferred tax liability that results from a change in circumstances, and that causes us to change our judgment about expected future tax consequences of events, is included in the tax provision when such changes occur. Deferred income taxes also reflect the impact of operating loss and tax credit carryforwards. A valuation allowance is provided if we believe it is more likely than not that all or some portion of the deferred tax asset will not be realized. Any increase or decrease in the valuation allowance that results from a change in circumstances, and that causes us to change our judgment about the realizability of the related deferred tax asset, is included in the tax provision when such changes occur. The Company also recognizes liabilities for unrecognized tax benefits which are recognized if the weight of available evidence indicates that it is not more-likely-than-not that the positions will be sustained on examination, including resolution of the related processes, if any. As of each balance sheet date, unrecognized benefits are reassessed and adjusted if the Company’s judgement changes as a result of new information. Earnings per Share In accordance with ASC 260, basic earnings/loss per share (“EPS”) is computed by dividing net loss attributable to the Company that is available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of warrants), and convertible debt, using the if-converted method. Diluted EPS excludes all potentially dilutive securities such as warrants, options, restricted stock, and restricted stock units if their effect is anti-dilutive. As of December 31, 2021 and December 31, 2020, all potentially dilutive securities were excluded because the effect was anti-dilutive. 54 Impairments The Company reviews real estate investments and related lease intangibles, for possible impairment when certain events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable though operations plus estimated disposition proceeds. Events or changes in circumstances that may occur include, but are not limited to, significant changes in real estate market conditions, estimated residual values, and an expectation to sell assets before the end of the previously estimated life. Impairments are measured to the extent the current book value exceeds the estimated fair value of the asset less disposition costs for any assets classified as held for sale. There were no impairments during the year ended December 31, 2021 or 2020. The valuation of impaired assets is determined using valuation techniques including discounted cash flow analysis, analysis of recent comparable sales transactions, and purchase offers received from third parties, which are Level 3 inputs. The Company may consider a single valuation technique or multiple valuation techniques, as appropriate, when estimating the fair value of its real estate. Estimating future cash flows is highly subjective and estimates can differ materially from actual results. Deferred Financing Costs Since inception the Company incurred approximately $ 1,279,800 of costs associated with the Company’s public equity raise that closed on September 8, 2021. These deferred offering costs were reclassified to additional paid in capital in connection with the successful offering during the year ended December 31,2021. Recent Accounting Pronouncements In July 2021, the Financial Accounting Standards Board (FASB) issued ASU 2021-05 establishing Topic 842, Lessors – Certain Leases with Variable Lease Payments . The amendments in this update affect lessor lease classification. Lessors should classify and account for a lease as an operating lease if both of the following criteria are met: (1) have variable lease payments that do not depend on a reference index or a rate and (2) would have resulted in the recognition of a selling loss at lease commencement if classified as sales-type or direct financing. This update should result in similar treatment under the current Topic 842 as under the previous Topic 840 and is effective for fiscal years beginning after December 15, 2021. The adoption of this standard will not have a material impact to the Company's financial condition, results of operations, cash flows or related footnote disclosures as the Company's customary lease terms do not result in sales-type or direct financing classification, although future leases may. Note 3 – Investments in Real Estate Acquisitions: During the year ended December 31, 2021, the Company acquired three properties. Manteo, NC Plant City, FL Grand Junction, CO Total Property $ 2,149,015 $ 1,635,824 $ 4,400,452 $ 8,185,291 Acquired lease intangible assets 100,379 121,509 354,603 576,491 Total investments 2,249,394 1,757,333 4,755,055 8,761,782 Less acquired lease intangible liability 511,620 — — 511,620 Total investments $ 1,737,774 $ 1,757,333 $ 4,755,055 $ 8,250,162 The first property is located in Manteo, NC and was purchased on February 11, 2021 using a $ 500,000 cash capital contribution through the issuance of a redeemable non-controlling interest and debt of $ 1,275,000 . The second property is located in Plant City, FL and was purchased on April 21, 2021 using a $ 950,000 cash capital contribution through the issuance of a redeemable non-controlling interest and debt of $ 850,000 . The third property is located in Grand Junction, CO and was purchased on December 28, 2021 using cash on hand of approximately $ 2,405,000 and debt of $ 2,350,000 . The acquisitions are accounted for as asset acquisitions under ASC 805-50, Business Combinations. The purchase price of the asset acquisitions were allocated to land, building, and acquired lease intangible assets and liabilities based on management’s estimate. 55 During the year ended December 31, 2020, the Company acquired one property. Tampa, FL Property $ 1,662,904 Acquired lease intangible assets 184,767 Total investments $ 1,847,671 The property is located in Tampa, FL and was purchased on November 30, 2020 from a related party for 24,309 common units in the Operating Partnership at a $ 20.00 per unit price valued in total for approximately $ 486,200 , $ 1,000 in cash and the assumption of approximately $ 1,286,700 in existing debt. The Company’s president owns 10 % of the related party. The acquisition is accounted for as asset acquisition under ASC 805-50, Business Combinations. The purchase price of the asset acquisition was allocated to land, building, and acquired lease intangible assets based on management’s estimate. Dispositions: During the year ended December 31, 2021, the Company sold one property. Cocoa, FL Property $ 4,539,617 Acquired lease intangible assets 298,230 Total investments 4,837,847 Less accumulated depreciation and amortization ( 313,447 ) Less acquired lease intangible liability, net ( 202,650 ) Net book value of property upon sale $ 4,321,750 The property was located in Cocoa, FL and was sold on August 31, 2021 for approximately $ 5,245,900 and recognized a gain of approximately $ 923,200 . Note 4 – Acquired Lease Intangible Assets, net Intangible assets, net is comprised of the following: December 31, December 31, 2021 2020 Acquired lease intangible assets $ 3,304,014 $ 3,014,149 Accumulated amortization ( 994,857 ) ( 624,106 ) Acquired lease intangible assets, net $ 2,309,157 $ 2,390,043 The amortization for lease intangible assets for the year ended December 31, 2021 and 2020 was approximately $ 429,500 and $ 411,300 , respectively. The future amortization for intangible assets is listed below: As of December 31, 2021 2022 $ 346,000 2023 339,700 2024 339,700 2025 306,600 2026 296,200 Thereafter 681,000 $ 2,309,200 56 Note 5 – Acquired Lease Intangible Liabilities, net Acquired lease intangible liability is comprised of the following: December 31, December 31, 2021 2020 Acquired lease intangible liability $ 845,063 $ 585,792 Less: recognized rental income ( 267,675 ) ( 170,144 ) Total below market lease, net $ 577,388 $ 415,648 The amortization for below market leases for the year ended December 31 2021 and 2020 was approximately $147,200 and $109,500 , respectively. The future amortization for intangible liabilities is listed below: As of December 31, 2021 2022 $ 86,700 2023 86,700 2024 86,700 2025 86,700 2026 76,200 Thereafter 154,400 $ 577,400 57 Note 6 – Redeemable Non-Controlling Interests The following table reflects our Redeemable Non-Controlling Interests: Brown Family Trust Irby Prop Partners Hornstrom GIP Fund I Greenwal L.C. Riverside Crossing L.C. Total Balance, December 31, 2019 $ 1,200,000 $ — $ — $ — $ 4,965,000 $ 2,033,251 $ 8,198,251 Issuance of Redeemable Operating Partnership Units for property acquisition — — — 486,180 — — 486,180 Distribution on Redeemable Non-Controlling Interest ( 119,630 ) — — — ( 260,663 ) ( 106,745 ) ( 487,038 ) Net income for the year 119,630 — — — 260,663 106,745 487,038 Balance, December 31, 2020 $ 1,200,000 $ — $ — $ 486,180 $ 4,965,000 $ 2,033,251 $ 8,684,431 Issuances of Redeemable Non-Controlling Interests for property acquisitions 500,000 950,000 650,000 — — — 2,100,000 Redemption of Redeemable Non-Controlling Interest for property disposition ( 1,200,000 ) — — — — — ( 1,200,000 ) Distribution on Redeemable Non-Controlling Interest ( 120,971 ) ( 53,511 ) ( 19,945 ) ( 14,584 ) ( 82,550 ) ( 201,760 ) ( 493,321 ) Net income for the year 120,971 80,267 29,917 14,584 82,550 201,760 530,049 Balance, December 31, 2021 $ 500,000 $ 976,756 $ 659,972 $ 486,180 $ 4,965,000 $ 2,033,251 $ 9,621,159 As part of the Company’s acquisition of a building for approximately $ 4,578,800 in Cocoa, FL, one of the Company’s operating subsidiaries entered into a preferred equity agreement with Brown Family Trust on September 11, 2019 pursuant to which the Company’s subsidiary received a capital contribution of $ 1,200,000 . Pursuant to the agreement, the Company was required to pay the preferred equity member a 10 % internal rate of return (“IRR”) on a monthly basis and redeem the entire amount due after 24 months at the option of the preferred equity member. The Operating Partnership, Generation Income Properties, LP, was the general manager of the subsidiary while Brown Family Trust was a preferred member. Because of the redemption right, the non-controlling interest was presented as temporary equity at redemption value. The Company redeemed the Brown Family Trust $ 1,200,000 Redeemable Non-Controlling Interest upon the sale property in August 2021. As part of the Company’s acquisition of a building for approximately $ 1,737,800 in Manteo, NC, one of the Company’s operating subsidiaries entered into a preferred equity agreement with Brown Family Trust on February 11, 2021 pursuant to which the Company’s subsidiary received a capital contribution of $ 500,000 . Pursuant to the agreement, the Company will pay the preferred equity member a 9 % IRR on a monthly basis and redeem the entire amount due after 24 months at the option of the preferred equity member. The Operating Partnership, Generation Income Properties, LP, is the general manager of the subsidiary while Brown Family Trust is a preferred member. Because of the redemption right, the non-controlling interest in presented as temporary equity at redemption value. The current redemption amount is $ 500,000 . Distributable operating funds are distributed first to Brown Family Trust until the unpaid preferred return is paid off and then to the Company. For the year ended December 31, 2021 and 2020, the Company paid these Redeemable Interests approximately $ 121,000 and $ 119,600 , respectively in preferred distributions for these two agreements with Brown Family Trust. As part of the Company’s acquisition of a building for approximately $ 1,757,300 in Plant City, FL, one of the Company’s operating subsidiaries entered into a preferred equity agreement with preferred equity partners (Irby Prop Partners) on April 21, 2021 pursuant to which the Company’s subsidiary received a capital contribution of $ 950,000 . Pursuant to the agreement, the Company will pay the preferred equity member a 12 % total IRR with an 8 % IRR paid on a monthly basis and the deferred IRR will be paid at the end of 24 months along with the entire $ 950,000 amount due after 24 months at the option of the preferred equity member. The Operating Partnership, Generation Income Properties, LP, is the general manager of the subsidiary. Because of the redemption right, the non-controlling interest in presented as temporary equity at redemption value. The current redemption amount is approximately $ 976,800 . Distributable operating funds are distributed first to the preferred equity partners until the unpaid preferred return is paid off and then to the Company. For the year ended December 31, 2021, the Company paid these Redeemable Interests approximately $ 53,500 in distributions and accrued $ 26,700 of the deferred IRR. As part of the Company’s investment in a tenant in common entity for $ 0.7 million in Rockford, IL, one of the Company’s operating subsidiaries entered into a preferred equity agreement with preferred equity partner (Mr. Hornstrom) on August 2, 2021 pursuant to 58 which the Company’s subsidiary received a capital contribution of $ 650,000 . Pursuant to the agreement, the Company will pay the preferred equity member a 12 % total IRR with an 8 % IRR paid on a monthly basis and the deferred IRR will be paid at the end of 24 months along with the entire $ 650,000 amount due after 24 months at the option of the preferred equity member. The Operating Partnership, Generation Income Properties, LP, is the general manager of the subsidiary. Because of the redemption right, the non-controlling interest in presented as temporary equity at redemption value. The current redemption amount is approximately $ 660,000 . Distributable operating funds are distributed first to the preferred equity partners until the unpaid preferred return is paid off and then to the Company. Each of the Preferred Members described above may redeem their interest on or after the Redemption date (second year anniversary of the Closing), at the discretion of such Preferred Member, as applicable, all or a portion thereof, of such Preferred Member’s pro-rata share of the Redemption Price in the form of GIPLP UNITS. Such GIPLP UNITS shall be subject to all such restrictions, such as with respect to transferability, as reasonably imposed by GIPLP. The number of GIPLP UNITS issued to any Preferred Member shall be determined by dividing the total amount of the Redemption Price that such Preferred Member shall receive in GIPLP UNITS by a 15 % discount of the average 30-day market price of Generation Income Properties, Inc. Units shall then be convertible into common stock of Generation Income Properties, Inc. on a 1:1 basis in accordance with the Partnership Agreement of Generation Income Properties, L.P . For the year ended December 31, 2021, the Company paid these Redeemable Interests approximately $ 19,900 in distributions accrued $ 10,000 of the deferred IRR. As part of the Company’s acquisition of two buildings on September 30, 2019 for $ 19.1 million in Norfolk, VA, the Operating Partnership entered into contribution agreements with two entities (Greenwal, LC and Riverside Crossing, L.C.) that resulted in the issuance of 349,913 common units in Operating Partnership at $ 20.00 per share for a total value of $ 6,998,251 or as of December 31, 2021 a 13.8 % interest in our Operating Partnership. The contribution agreement allows for the two investors to require the Operating Partnership to redeem, all or a portion of its units for either (i) the Redemption Amount (within the meaning of the Partnership Agreement), or (ii) until forty-nine (49) months from date of Closing, cash in an agreed-upon Value (within the meaning of the Partnership Agreement) of $ 20.00 per share of common stock of the Company, as set forth on the Notice of Redemption. As such, the Company has determined their equity should be classified as a Redeemable Non-Controlling Interest. As part of the Company’s acquisition of one building on November 30, 2020 for $ 1.8 million in Tampa, FL, the Operating Partnership entered into a contribution agreement with one entity (GIP Fund I) that resulted in the issuance of 24,309 common units in Operating Partnership at $ 20.00 per share for a total value of $ 486,180 or as of December 31, 2021 a 1.0 % interest in our Operating Partnership. The Company’s President owns 10 % of GIP Fund I. The contribution agreement allows for the two investors to require the Operating Partnership to redeem, all or a portion of its units for either (i) the Redemption Amount (within the meaning of the Partnership Agreement), or (ii) until forty nine (49) months from date of Closing, cash in an agreed-upon Value (within the meaning of the Partnership Agreement) of $ 20.00 per share of common stock of the Company, as set forth on the Notice of Redemption. As such, the Company has determined their equity should be classified as a Redeemable Non-Controlling Interest. For the year ended December 31, 2021 and 2020, the Company paid these three Redeemable Interests of approximately $ 298,900 and $ 367,400 , respectively in distributions. Note 7 – Equity Authorized Equity The Company is authorized to issue up to 100,000,000 shares of common stock and 10,000,000 of undesignated preferred stock. No preferred shares have been issued as of the date of this report. Holders of the Company’s common stock are entitled to receive dividends when authorized by the Company’s Board of Directors. Issuance of Equity Securities for Cash On November 13, 2020, the Company raised $ 1,000,000 by issuing 50,000 Units with each Unit being comprised of one share of its Common Stock, and one warrant to purchase one share of its Common Stock. Each Unit was sold for a price of $ 20.00 per Unit. The shares of the Company’s Common Stock and warrants included in the Units, were offered together, but the securities included in the Units are issued separately. The warrants are exercisable at a price of $ 20.00 per share of Common Stock, subject to adjustment in certain circumstances, and will expire seven years from the date of issuance. On September 8, 2021, the Company issued and sold, in an underwritten public offering (the “Public Offering”), 1,500,000 Units, with each unit consisting of one share of Common Stock, and one warrant to purchase one share of Common Stock (the “Investor Warrants”). 59 On September 30, 2021, the Company issued and sold as part of the underwriter’s Over-Allotment Option an additional 165,000 Units. The units were sold to the public at the price of $10.00 per unit and generated net proceeds of $ 13.8 million, net of underwriter discounts and other financing costs incurred since inception. The Investor Warrants issued in the offering entitle the holder to purchase one share of Common Stock at a price equal to $ 10.00 for a period of five years . As part of the Public Offering, on September 8, 2021, the Company entered into an agreement with the CEO to redeem 112,500 shares of common stock for $ 100 which is recorded in accounts payable – related party at December 31, 2021. As of December 31, 2021, these shares had been physically returned to our transfer agent and cancelled. In addition, the Company issued to Maxim Group LLC (or its designee) warrants to purchase an aggregate of 149,850 shares of Common Stock, which is equal to an aggregate of 9 % of the number of shares of Common Stock sold in the offering (the “Representative’s Warrants”). The Representative’s Warrants have an exercise price equal to $ 12.50 , may be exercised on a cashless basis and will be exercisable six months following the closing date and until September 2, 2026 . For the year ended December 31, 2021, the Company moved approximately $ 1,279,800 of deferred financing costs into additional paid in capital of which approximately $ 614,100 had been incurred as of December 31, 2020. Warrants The Investor Warrants may be exercised on a cashless basis if there is no effective registration statement available for the resale of the shares of common stock underlying such warrants. In addition, after 120 days after the Investor Warrants are issued, any Investor Warrant may be exercised on a cashless basis for 10 % of the shares of Common Stock underlying the Investor Warrant if the volume-weighted average trading price of the Company’s shares of Common Stock on Nasdaq is below the then-effective exercise price of the Investor Warrant for 10 consecutive trading days. The Company has 1,914,850 and 100,000 warrants outstanding as of December 31, 2021 and 2020, respectively, which will expire five to seven years from the date of issuance. Investor Warrants issued on September 8 and 28, 2021 became exercisable on a cashless basis on January 6 and 28, 2022, respectively. See Note 13 Subsequent Events for Investor Warrants exercised after December 31, 2021. Issue Date Warrants Issued April 25, 2019 exercise price of $20.00 50,000 November 13, 2020 exercise price of $20.00 50,000 September 8, 2021 exercise price of $10.00 1,500,000 September 8, 2021 exercise price of $12.50 135,000 September 30, 2021 exercise price of $10.00 165,000 September 30, 2021 exercise price of $12.50 14,850 The following is a summary of warrants outstanding as of December 31: 2021 2020 Number of Warrants Weighted Average Price Weighted Average Remaining Life Number of Warrants Weighted Average Price Weighted Average Remaining Life Beginning of the year 100,000 $ 20.00 6.1 50,000 $ 20.00 6.3 Issuance 1,814,850 $ 10.21 — 50,000 20.00 Ending balance 1,914,850 $ 10.72 4.7 100,000 $ 20.00 6.1 Warrants exercisable 1,765,000 $ 10.57 4.7 100,000 20.00 6.1 The intrinsic value of the warrants as of December 31, 2021 and 2020 was $ 0 and $ 0 , respectively. Stock Compensation Restricted Common Shares issued to the Board and Employees On July 15, 2019, the board of directors granted 2,500 restricted shares to each of the two independent directors that vest every 12 months on an annual basis over 36 months. The award is valued at $ 50,000 for each grant and was based on the equity pricing issuance of $ 20.00 per share. The pro-rated vested share restriction will be removed upon the annual anniversary of the award. The 60 1,668 and 1,666 restricted shares were issued to the two directors in September 2020 and September 2021, respectively and another 1,666 restricted shares were issued to the two directors in September 2021. On February 3, 2020, the board of directors granted 2,500 restricted shares to two new independent directors that vest every 12 months on an annual basis over 36 months. The award is valued at $ 50,000 for each grant and was based on the equity pricing issuance of $ 20.00 per share. The pro-rated vested share restrictions will be removed upon the annual anniversary of the award. The 1,666 unrestricted shares were issued to the two directors in February 2021 and another 3,334 restricted shares were issued to the two directors in September 2021. The board granted 14,000 restricted shares to directors, officers and employees effective January 1, 2021 valued at $ 20.00 per share that vest annually over 3 years. The pro-rated vested share restrictions are removed upon the annual anniversary of the award. The 14,000 restricted shares were issued to the directors, officers and employees in September 2021. On February 3, 2020, the board of directors granted 6,250 restricted shares to its former chief financial officer that vested every 12 months on an annual basis over 36 months. The award is valued at $ 125,000 and was based on the equity pricing issuance of $ 20.00 per share. The pro-rated vested share restrictions are removed upon the annual anniversary of the award. The 2,083 unrestricted shares were issued to the chief financial officer in February 2021 and another 4,167 restricted shares were issued to the chief financial officer in September 2021. The following is a summary of restricted shares issued as of December 31: 2021 2020 Number of Shares Outstanding at beginning of the period 14,582 5,000 Restricted Shares Issued 14,000 11,250 Restricted Shares Vested ( 5,415 ) ( 1,668 ) Number of Restricted Shares Outstanding at end of the period 23,167 14,582 Compensation expense $ 201,690 $ 101,645 Common stock issued for services Pursuant to an amended employment agreement in which the former chief financial officer waived his right to cash compensation in lieu of being awarded 550 restricted shares of common stock each month until the closing of an initial underwritten public offering, we issued the former chief financial officer 2,200 shares of stock in March 2021 representing four months of compensation from December 2020 to March 2021 and another 2,750 shares of stock were issued in October 2021 representing four months of compensation from April 2021 to August 2021. The Company issued 10,000 shares in December 2021 to the former chief financial officer as a bonus for the equity offering. The company recognized $ 112,432 in compensation expense for common stock issued for services for the year ended December 31, 2021. These shares are accrued as compensation expense until issued by the Company. Generation Income Properties, Inc. 2020 Omnibus Incentive Plan In connection with the Public Offering, the Company board has adopted, and stockholders have approved, the Generation Income Properties, Inc. 2020 Omnibus Incentive Plan (the “ Omnibus Incentive Plan ”), which became effective upon the completion of the Public Offering. The Omnibus Incentive Plan reserves 2.0 million shares of Common Stock upon the award of grant stock options, stock appreciation rights, performance shares, performance units, shares of common stock, restricted stock, restricted stock units, cash incentive awards, dividend equivalent units, or any other type of award permitted under the Omnibus Incentive Plan. As of December 31, 2021, 10,000 shares had been granted under the Omnibus Incentive Plan. 61 Common Shareholders Cash Distributions The following is a summary of distributions to common shareholders and operating partnership unit holders for the years ended December 31, 2021 and 2020: Board of Directors Authorized Date Record Date Per Share or Per Unit Cash Distributions to Common Shareholders and Operating Partnership Unit Holders October 5, 2021 December 15, 2021 $ 0.054 October 5, 2021 November 15, 2021 $ 0.054 October 5, 2021 October 15, 2021 $ 0.054 August 25, 2021 August 31, 2021 $ 0.325 February 26, 2021 March 15, 2021 $ 0.325 October 30, 2020 November 17, 2020 $ 0.350 June 23, 2020 July 2, 2020 $ 0.350 January 31, 2020 February 28, 2020 $ 0.350 * Our president and chairman waived his right to receive a distribution for all of these periods mentioned above. While we are under no obligation to do so, we expect to declare and pay distributions to our stockholders. The issuance of a distribution will be determined by our board of directors based on our financial condition and such other factors as our board of directors deems relevant. We have not established a minimum distribution, and our charter does not require that we issue distributions to our stockholders other than as necessary to meet IRS REIT qualification standards. Note 8 – Leases Future Minimum Rents For the year ended December 31, 2021 and 2020, we had four tenants that each account for more than 10% of our rental revenue as indicated below: 2021 2020 Pratt and Whitney – Huntsville, AL property 17.8 % 21.0 % General Services Administration – Walmer Ave. Norfolk, VA property 22.9 % 25.3 % Maersk Shipping – Walmer Ave. Norfolk, VA property 9.7 % 10.7 % PRA Holding – Corporate Blvd. Norfolk, VA property 18.9 % 21.8 % Future Minimum Rents The following table presents future minimum rental cash payments due to the Company over the next five calendar years and thereafter as of December 31, 2021: Future Minimum Rent Payments 2022 $ 3,796,000 2023 3,427,000 2024 3,432,000 2025 3,296,000 2026 3,211,000 Thereafter 6,298,000 $ 23,460,000 62 Note 9 – Promissory Notes The Company had the following promissory notes outstanding as of December 31, 2021 and 2020, respectively: As of December 31, As of December 31, Interest Rate Maturity Date 2021 2020 Promissory note issued for $ 3,407,391 by a financial institution. Note was issued on September 11, 2019 and prepaid without penalty upon the sale of the Walgreen-Cocoa, Florida property on August 31, 2021 which was securing the note. 30-day LIBOR plus 225 basis points 9/11/2021 $ — $ 3,407,391 Promissory note issued for $ 1,286,664 by a financial institution, interest only due monthly of approximately $ 3,800 until December 2023. Note was originally issued on January 15, 2015 and assumed and modified on November 30, 2020 and can be prepaid at any time without penalty. Secured by out Tampa Sherwin-Williams property. 3.72% fixed rate after using SWAP whereas the loan is LIBOR plus 2.75% 8/10/2028 1,286,664 1,286,664 Promissory note issued for $ 1,275,000 by a financial institution. Note was issued on February 4, 2021 and can be prepaid at any time without penalty. Secured by our GSA-Manteo, North Carolina property. Wall Street Journal Prime Rate with minimum of 3.25% 2/4/2023 1,275,000 — Promissory note issued for $ 850,000 by a financial institution. Note was issued on April 21, 2021 and can be prepaid at any time without penalty. Secured by our Irby - Plant City, FL property. Wall Street Journal Prime Rate minus 0.5% with minimum of 3.0% for the first 24 months; thereafter, weekly average yield on U.S. Treasury Securities adjusted to a constant maturity of three years on April 21, 2023, plus 2.75% with a minimum of 3.25% 12/31/2024 850,000 — Promissory note issued for $ 2,350,000 by a financial institution. Note was issued on December 28, 2021 and can be prepaid at any time without penalty. Secured by our Best Buy - Grand Junction, CO property. Wall Street Journal Prime Rate with minimum of 3.25% 12/28/2023 2,350,000 — Promissory note issued for $ 8,260,000 by a financial institution, interest and principal payments due monthly of approximately $ 41,500 . Note was issued on September 30, 2019 and can be prepaid at any time without penalty. Secured by our GSA/ Maersk - Norfolk, Virginia property. The interest rate was reduced in March 2021 from 4.25 % to 3.5 %. 3.50 % 9/30/2024 7,805,524 8,022,271 Promissory note issued for $ 5,216,749 by a financial institution, interest and principal payments due monthly of approximately $ 27,400 . Note was originally issued on October 23, 2017 and modified on September 30, 2019 and can be prepaid at any time without penalty. Secured by our PRA - Norfolk, Virginia property. The interest rate was reduced in March 2021 from 4.25 % to 3.5 %. 3.50 % 10/23/2024 4,889,670 5,041,935 Promissory note issued for $ 1,900,000 to a Clearlake Preferred Member, secured by all of the personal and fixture property of the Operating Partnership, interest payments due monthly. Note was issued on December 16, 2019 and was prepaid without penalty on September 30, 2021. 10.00 % 12/16/2021 — 1,100,000 Promissory note issued for $ 11,287,500 by a financial institution, interest only payment is approximately $ 39,000 and starting April 6, 2021, interest and principal payments due monthly of approximately $ 55,000 . Note was issued on February 11, 2020. Secured by our Washington, DC, Tampa, FL and Huntsville, AL properties. It cannot be prepaid without a penalty. 4.17 % 3/6/2030 11,150,130 11,287,500 Less: debt issuance costs, net ( 637,693 ) ( 689,190 ) $ 28,969,295 $ 29,456,571 The Company amortized debt issuance costs during the year ended December 31, 2021 and 2020 to interest expense of approximately $ 120,300 and $ 134,900 , respectively. The Company paid debt issuance costs for the year ended December 31, 2021 and 2020 of approximately $ 69,800 and $ 589,100 , respectively. As of December 31, 2021, we had one promissory note totaling approximately $ 2.4 million requiring Debt Service Coverage Ratios (also known as “DSCR”) of 1.50 :1.0, one promissory note totaling $ 1.3 million requiring DSCR of 1.30 :1.0, three promissory note totaling $ 23.8 million requiring DSCR of 1.25 :1.0, one promissory note totaling $ 1.3 million requiring DSCR of 1.20 :1.0, one promissory note totaling $ 0.9 million requiring DSCR of 1.15 :1.0. We were in compliance with all covenants as of December 31, 2021. As of December 31, 2021, the Company’s President has personally guaranteed the repayment of the $ 11.1 million due under the DC/Tampa/Huntsville loan, the $ 1.3 million loan secured by our Tampa Sherwin Williams property, the $ 0.9 million loan secured by our Irby property, the $ 1.3 million loan secured by our GSA Manteo NC property and the $ 2.4 million loan secured by our Best Buy Grand Junction, CO property. The aggregate guaranteed principal amount of these loans total approximately $ 16.9 million. The Company’s President has also provided a guaranty of the Borrower’s nonrecourse carveout liabilities and obligations in favor of the lender for the Norfolk, Virginia property loans (the “Bayport loans”), with an aggregate principal amount of approximately $ 12.7 million. 63 The Company modified the Bayport loans in February 2021 for no fees and reduced the associated interest rate from 4.25 % to 3.5 %. The Company determined that the debt modification was not substantial under ASC 470-50. Minimum required principal payments on the Company’s debt as of December 31, 2021 are as follows: As of December 31, 2021 2022 $ 580,740 2023 4,240,446 2024 12,981,450 2025 251,011 2026 261,675 2027 and beyond 11,291,666 $ 29,606,988 On October 26, 2021, the Operating Partnership entered into a Commitment Letter with American Momentum Bank (the “Lender”) for a $ 25 million master credit facility (the “Facility”) to be used for the acquisition of income producing real estate properties. Borrowings under the Facility will accrue interest at a variable rate equal to the Wall Street Journal Prime rate, adjusted monthly, subject to a floor interest rate of 3.25 % per annum. At each loan closing under the Facility, the borrower shall pay the Lender a commitment fee equal to 0.50 % of the applicable loan amount. Each loan will have an interest-only payment term for twenty-four months from the applicable loan closing date and all interest and principal outstanding shall be due and payable in full two years from the applicable loan closing date. Each loan will be secured by the real estate property acquired and the associated rental income and payment will be guaranteed by the Operating Partnership. David Sobelman, the Company’s Chairman, President and Chief Executive Officer, will be required to execute a non-recourse guarantee in connection with each loan that is subject to standard “bad-boy” carve out provisions. Each loan agreement under the Facility will require the borrower to maintain a debt service coverage ratio of not less than 1.50 to 1.00 over the term of the loan and will contain customary affirmative covenants, negative covenants and events of default. Should any event of default occur, the loan commitments under the Facility may be terminated and any outstanding borrowings, together with accrued interest, could be declared immediately due and payable. All loans under the Facility must close before October 26, 2023, two years after the closing date of the initial loan. The Facility is voidable at the option of the Lender in specified circumstances, including a material adverse change in the Company’s financial condition and upon any changes in management of the Company that are unacceptable to the Lender. As of December 31, 2021, the Company has borrowed approximately $ 2.4 million under the facility. Note 10 – Related Party The Company had previously engaged 3 Properties (a brokerage and asset manager company) that was owned 100 % by the Company’s President, when it purchased properties and to manage properties. This agreement was terminated effective August 31, 2020 . For the year ended December 31, 2020, the Company paid 3 Properties approximately $ 40,135 for asset management services under this agreement. On November 30, 2020, the Company acquired an approximately 3,500 -square-foot building from GIP Fund 1, LLC a related party that is owned 10 % by the President and Chairman of the Company. The retail single-tenant property (occupied by The Sherwin-Williams Company) in Tampa, Florida was acquired for approximately $ 1.8 million and was funded with approximately $ 1.3 million of debt from Valley National Bank and the issuance of 24,309 partnership units in Generation Income Properties LP valued at $ 20.00 per unit for purposes of the contribution. Note 11 – Tenant in Common Investment On August 13, 2021, the Company entered into a tenancy-in-common (“TIC”) structure whereby the TIC acquired a 15,288 square foot single tenant building in Rockford, IL for total consideration of approximately $ 4.5 million. The Company acquired a 36.8 % interest in the TIC acquisition with Sunny Ridge HHP, LLC (“Sunny Ridge”) holding the remaining TIC interest. Funding for the Company’s interest was primarily funded through a Redeemable Non-Controlling Interest Contribution from Mr. Hornstrom to one of our subsidiaries for $ 650,000 . The remainder of the purchase price of the property was funded by Sunny Ridge of $ 1.2 million and debt financing of approximately $ 2.7 million. Mr. Hornstorm owns 50 % of Sunny Ridge and also contributed $ 600,000 of $ 950,000 Redeemable Non-Controlling Interest contribution for the Plant City, FL property. The tenancy-in-common investment was accounted for under the equity method and as of December 31, 2021 it had a carrying value of approximately $ 725,100 . 64 The acquisition of this property was financed in part through the issuance of a Promissory note for $ 2,715,000 by a financial institution. The Note was issued on August 13, 2021 and can be prepaid at any time without penalty and is secured by the Lazy Boy–- Rockford, IL property. The Company’s share of this debt is approximately $ 1.0 million. The Company’s President has personally guaranteed the repayment of the $ 2.7 million loan. The loan has normal covenants which includes DSCR 1.50 :1.0. The condensed income statement for the year ended December 31, 2021 for the Tenant in Common Investment is as follows: Total Company Portion Revenue $ 141,906 $ 52,278 Total operating expenses 107,988 39,783 Operating income $ 33,918 $ 12,495 The condensed balance sheet as of December 31, 2021 for the Tenant in Common Investment is as follows: December 31, 2021 Prepaid expenses $ 522 Deferred rent asset 2,108 Property, net of depreciation 4,341,285 Acquired lease intangible asset, net of amortization 279,850 Due from tenant-in-common 47,350 Total assets $ 4,671,115 Accounts payable $ 845 Accounts payable - related party 13,696 Accrued expenses 4,751 Acquired lease intangible liability, net of amortization 42,993 Mortgage payable net of unamortized debt issuance costs 2,677,446 Equity, GIP Inc. Tenant-in-common 725,082 Equity, Sunny Ridge Tenant-in-common 1,206,302 Total liabilities and equity $ 4,671,115 Note 12 – Income Taxes The Company performs an evaluation of the realizability of its deferred tax assets on a semi-annual basis. The Company considers all positive and negative evidence available in determining the potential of realizing deferred tax assets, including the scheduled reversal of temporary differences, recent and projected future taxable income and prudent and feasible tax planning strategies. The estimates and assumptions used by the Company in computing the income taxes reflected in the accompanying consolidated financial statements could differ from the actual results reflected in the income tax returns filed during the subsequent year. Adjustments are recorded based on filed returns when finalized or the related adjustments are identified. Under ASC 740-10-30-5, Income Taxes , deferred tax assets should be reduced by a valuation allowance if, based on the weight of available evidence, it is more-likely-than-not (i.e., a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized. The Company considers all positive and negative evidence available in determining the potential realization of deferred tax assets including, primarily, the recent history of taxable earnings or losses. Based on operating losses reported by the Company during 2021, 2020, 2019, 2018, 2017 and 2016, the Company concluded there was not sufficient positive evidence to overcome this recent operating history. As a result, the Company believes that a valuation allowance is necessary based on the more-likely-than-not threshold noted above. The Company recorded a valuation allowance of approximately of $ 1,681,700 as of December 31, 2021 and approximately $ 1,396,900 as of December 31, 2020 equal to its deferred tax asset at that time. The valuation allowance reflects the decrease in deferred tax assets resulting from the Tax Cuts and Jobs Act of 2017. The Company’s net operating losses carryforward as of December 31, 2021 and 2020 were approximately $ 4,623,000 and $ 3,349,000 , respectively, and can be carried forward indefinitely. 65 Significant components of the tax expense (benefit) recognized in the accompanying consolidated statements of operations for the period December 31, 2021 and December 31, 2020 are as follows: Year Ended Year Ended December 31, 2021 December 31, 2020 Current tax benefit Federal $ ( 247,762 ) $ ( 466,975 ) State ( 50,904 ) ( 96,630 ) Total current tax benefit ( 298,666 ) ( 563,605 ) Deferred tax expense 144,541 266,357 Rate change adjustment ( 2,844 ) 3,937 Valuation allowance 156,969 293,311 Income tax benefit $ - $ - The reconciliation of the income tax computed at the combined federal and state statutory rate of 12.6 % as of December 31, 2021 and 17.1 % as of December 31, 2020 to the income tax benefit is as follows: Year Ended Year Ended December 31, 2021 December 31, 2020 Benefit on net loss ( 156,142 ) 12.6 % ( 313,001 ) 17.1 % Nondeductible expenses 2,017 - 0.3 % 15,753 - 1.0 % Rate change adjustment ( 2,844 ) 0.2 % 3,937 - 0.2 % Valuation allowance 156,969 - 12.5 % 293,311 - 15.9 % Tax benefit/effective rate - 0.0 % - 0.0 % The significant components of the Company’s deferred tax liabilities and assets as of December 31, 2021 and December 31, 2020 are as follows: As of December 31, 2021 As of December 31, 2020 Deferred tax assets: Tax expense for debt issuance costs $ 157,926 $ 170,241 Loss carryforwards 1,464,345 1,161,562 Organizational costs 59,394 65,050 Total deferred tax asset 1,681,665 1,396,853 Valuation allowance ( 1,681,665 ) ( 1,396,853 ) Net deferred tax asset $ - $ - The Company’s federal and state tax returns for the 2017 through 2020 tax years generally remain subject to examination by U.S. and various state authorities. 66 Note 13 – Subsequent Events On January 7, 2022 , we acquired a 10,900 square-foot single -tenant retail building in Chicago, Illinois for total consideration of approximately $ 3.1 million. This property was funded by a combination of approximately $ 1.6 million of debt and cash. The building is occupied by Fresenius Medical Care with approximately 5 years remaining on their primary lease term and annualized base rent of approximately $ 224,000 . On January 14, 2022, we acquired a 2,600 square-foot single -tenant retail building in Tampa, Florida for total consideration of approximately $ 2.2 million. This property was funded by a combination of the issuance of approximately $ 1.1 million of operating partnership units of Generation Income Properties LP and debt of approximately $ 1.1 million. The building is occupied by Starbucks with approximately 5 years remaining on their lease term and annualized base rent of approximately $ 135,000 . On March 9, 2022, we acquired a leasehold interest in a ground lease and corresponding assignment of an 88,700 square-foot single -tenant retail building in Tucson, Arizona for total consideration of approximately $ 7.3 million. The acquisition of this property was funded by a combination of debt of approximately $ 3.7 million and cash. The building is occupied by Kohl’s with approximately 8 years remaining on their first extension lease term and annualized base rent of approximately $ 824,000 . As part of this transaction, the Company also assumed the land lease for the underlying property. This ground lease has approximately 7 years remaining on the original lease term with 11 available renewal options through 2084 and requires us to pay annualized base rent of approximately $ 233,000 . On January 3, 2022, we announced that our Board of Directors authorized a distribution of $ 0.054 per share monthly cash distribution for shareholders of record of our common stock as of January 15, 2021 , February 15, 2021 and March 15, 2021 . January and February distributions were paid on January 24, 2022 and February 22, 2022 , respectively, and we expect to pay March distributions on or about March 30, 2022 . David Sobelman, the Company’s president and founder, waived his right to receive these distributions for this period. The Company also announced that it was also paying its GIP LP unit holders held by third parties a similar $ 0.054 per unit cash distribution. In March 2022, 268,360 Investor Warrants were exercised on a cashless basis for 10 % of the shares of Common Stock underlying the Investor Warrant as the volume-weighted average trading price of the Company’s shares of Common Stock on Nasdaq was below the then-effective exercise price of the Investor Warrant for 10 consecutive trading days as of the date the Investor Warrants became exercisable. As such, 26,836 shares of common stock were issued upon exercise . 67 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANICAL DISCLOSURE None.