On May 18, 2018, Bryan McLaren, CEO of Zoned Properties Inc. (OOTQX:ZDPY) spoke with GeoInvesting analyst Christopher Irons for an Executive Casts interview that covered an array of topics, most notably one in which Mr. McLaren broke down the decision to pivot to a more sustainable and scalable strategy in the leasing of properties licensed to grow marijuana for use in the medical markets. By Bryan’s estimates, although the balance of 2018 will see a downtrend in top line revenues, investors should start to see the new business model take hold in 2019, when the crux of the strategy starts to kick in. Below, you can listen to the conversation and read the transcript of the entire episode. To briefly summarize, some of the main discussion points include:
- The significance of Zoned Properties’ pivot in its real estate development growth strategy by implementing a new Lease and Strategic Advisor model for its tenants and clients operating in the licensed medical marijuana industry.
- How Zoned Properties will be taking a more active role in the advisement of how the company’s tenants and clients operate their facilities.
- The general effect of the company’s new strategy on fixed and variable revenue generation and cash flow in the short term and in the future.
- Recent congressional events aimed at prohibiting the funding of prosecution of marijuana operators in states where it has become legalized, and the congressional position on pending applications for medical marijuana research.
- A comparison of U.S. and Canadian marijuana markets and how M&A and conglomeration can drive the marijuana market in the future.
- A comparison between Zoned Properties and peers that operates in the marijuana real estate business.
- McLaren’s view on the right way to communicate with prospective investors and how he differentiates Zoned Properties from other publicly traded companies that operate in the marijuana market.
Chris Irons: All right! Welcome to GEO Investing Executive Casts. I am here with Bryan McLaren who is the chairman and the CEO of Zoned Properties. Bryan, great to have you on with us again!
Bryan McLaren: Thanks, guys! Always good to chat with the GEO team and give the people some updates.
Chris: Yeah! That’s what we’re hoping we can accomplish here. We know a lot has happened since the last time we’ve spoken to you guys. Namely, you guys are taking the business in a little bit of a different direction, you’ve had announced a big pivot in your business strategy. So, I thought it would be nice to start off by talking a little bit about that and especially for people that are unfamiliar with the company as a whole, if somebody’s listening for the first time today as well, why don’t you talk a little bit about where the business has been and how your strategy has changed with relation to these leases and pretty much everything. Just give us a pretty nice birds-eye overview of the pivot you’re making here.
Bryan: Great! Yeah! So, for any new listeners or anyone unfamiliar with Zoned Properties, we’re at strategic real estate development firm. We focused primarily on three areas: identifying, developing, and then leasing properties with a focus on sustainable development, sophisticated systems, and we have a very heavy focus currently on the licensed medical marijuana industry.
So, our team goes into medical marijuana marketplaces, we do marketplace analysis of what properties can be developed and operated as licensed medical marijuana facilities. There’s a lot of regulations, zoning, permitting on local Municipal legal legislative regulations that go into determining which property is in a specific area can actually be licensed, permitted in and operated as a medical marijuana facility. So, we are the strategic partner in that process for our tenants and clients.
In some scenarios, we will use Capital to invest and acquire the properties, develop those properties within our property portfolio, and then lease them out on investment grade, triple net leasing over a long multi-decade period. In other scenarios, we will look to not directly invest Capital but act as a third-party strategic advisor for clients that are looking to develop licensed medical marijuana facilities.
Over the past few months, we have been formulating quite a significant business pivot for the way we approach the real estate development in this industry. As of May 1st, we have formally sent successfully negotiated and updated a bunch of our contracts. So, our business pivot is focused around playing a more significant role not only in developing and leasing licensed medical marijuana facilities but also in the ongoing operational efficiency and production of these facilities.
So, we are still not, in any way, directly involved in the cultivation, distribution, or sale of the medical marijuana, but we are acting as a hands-on strategic advisor and how our tenants and clients operate these facilities. That can include anything from the implementation of new standard operating protocols to technology or goods and materials used in the cultivation of medical marijuana with the goal being for our tenants and clients to drastically decrease the costs that they incur in producing medical marijuana and the efficiency of these facilities.
The most material financial piece of this business pivot is that in what we get in return for participating with our tenants and clients in that is we are charging a percentage fee based on their top line gross revenue. So, with our primary tenant and client here in the Arizona medical market space, Hana Meds, we are charging them not only a base-fixed rent to lease the facilities which Zoned Properties owns in our portfolio, but we are additionally going to be charging them 10% of their gross revenues in their organization as on behalf of the strategic advising process we are going to be participating in with them.
Chris: That’s really interesting! That’s similar…that reminds me of a lot of Mall properties and Retail properties that have similar type models where they take a piece of the company’s top line as well.
Chris: It also said in your press release that it can be a very powerful model if your tenant list starts to grow as well. It says in your press release that lease terms have been extended through 2040 and that base-rent rates have been modified to be in line with the industry averages. So, I’m assuming that that means that the base-rent rates went up as well and the lease term for people that are just reading this for the first time was extended from when to 2040?
Bryan: Right! So, let me clarify a couple of things there. So, adjusting the base-rent to industry averages actually has decreased the amount of fixed revenue that comes into Zoned Properties through these leases. So, let me unpack that a bit for you.
Bryan: So, our previous business model identified that these properties that we lease to the licensed medical marijuana operators were an extreme premium commodity if you will. These properties are often pretty rare – it’s very difficult to get them permitted and identified under ownership basically secured to be used as a medical marijuana facility. It’s in very high demand, very low supply. So, we were able to charge, usually on average, between six and eight times what you would charge rent to someone outside of the medical marijuana industry. It’s a typical supply and demand situation.
So, by shifting this business and adding the percent fee on the strategic advising, what we’ve done is taken a fixed revenue model and broken it into hybridized fixed and variable revenue model. On the base-rent, we’ve actually made industry-average just in the commercial real estate industry. So, for example, if these clients were for any reason to stop or leave the property, we would re-lease these properties to any operator in any commercial space at about the same base-rates. The benefit to Zoned Properties is that the difference in fixed rental payments from the premium down to this industry average will likely be far greater in cash flow as a result of this 10% of gross revenues payment to the strategic advisory process. Within the lease agreements, the strategic advisory portion is an absolute required component of that lease.
So, in the lease model, there is no scenario under the current contract where the tenant could terminate the strategic advisor piece and only keep the fixed piece. They go hand-in-hand.
I really like the comparison you made to what used to happen with malls across the country. A percentage-based commercial lease, often-times triple-net, and when I say triple-net what I mean is we as the landlord are passing on three of our biggest costs to the tenant: the cost of insurance, the cost of property tax, and the cost of sales tax. So, these mall leases that were so popular were percentage-based commercial leases where the owner of the mall said there are so many people, customers, shopping in these malls I can make way more money by taking 10% of this store at Dillard’s or Macy’s, taking 10% of their revenue…and they made lots of money.
Obviously, one of the challenges with malls is anytime you have a decreasing market of consumers, you jeopardize that variable percentage. So, the medical marijuana industry is the exact opposite. We’re at the infancy of this market that is just emerging and from every projection, we’ve been able to look and analyze massive growth over the next, at least, several decades if not beyond.
So, by taking that variable percentage commercial lease approach and strategy, we’re going to be able to take 10% of Hana Meds revenues as the larger Arizona market continues to grow. Our best estimates are that in 2017, the total Arizona market which sold just under 90,000 lb of medical marijuana to patients, that’s roughly around somewhere below 300 million dollars in total revenue. New projections based on new frontier, data analytics and some of these other groups that look at consumer and patient data across the country, project Arizona to be about 529 million in top-line revenue for 2018.
So, by adopting this new strategy and business pivot, we can assist our clients and tenants in capturing the most market share they can of that total state revenue and take our percentage portion as a part of that rather than our previous business model. Even though it was a six to eight times premium on the lease rate, it was fixed. So, we had a feeling of where we could… even with annual escalators…the total overall market was growing so much larger than that fixed lease rate could have brought us in revenue. So, I think it’s a really great pivot and timing. We’re able to take and negotiate with our primary clients and tenants here in Arizona and when we’re going to aggressively look to replicate another marketplaces.
Chris: It’s interesting! That model of sharing the top line has worked for decades for retailers. It’s just of recent that retail properties have started to lose tenants a little bit, talking about your traditional brick-and-mortar retail malls and also, apparently, what’s been happening is that people that are returning product that they purchased online to stores are being deducted from store’s top line. So, landlords are having an impact on that or are being negatively impacted by that as well. So, what do you say to somebody that asks a question about that? Those two things obviously probably don’t have an impact on your model, right? Because the sales need to take place in person and not online, obviously, and it’s a burgeoning industry as opposed to one that has a large presence online. Is that correct?
Bryan: Right! Correct! And I didn’t address in your earlier question as well as the length of the leases, but I think that ties into this question here. So, I think that point is absolutely correct. There’s a big challenge with the virtual marketplace if you will, and a lot of these percentage-based commercial leases that I’m familiar with in brick-and-mortar were tied directly to the brick-and-mortar rather than to the company.
So, one of the strategies we have taken is we’ve tied our top line percentage base revenue fees to the entity itself. So, of course, we have strong confidence that an improvement of the physical facilities that allow our tenants and clients to manufacture and grow and cultivate their products and then distribute them to patients in the medical market, but if at any time over the length of the lease which now all for leases in Arizona go to the year 2040, if there are regulatory openings that allow our clients to start doing online or virtual prescribing, or telemedicine-related prescriptions to their patients, we still participate in that.
So, the old business model had our retail properties that were leased, those leases ended in the middle of the next decade, 2024 and 2025, and the cultivation leases we had at our two largest properties in Arizona ended near the 2030. So, all of these new leases extend to 2040, they’re all in the same form, and one of the main material points is that we’ve leased 100% of the developed or developing areas of our properties to this single Arizona operator. So, the Hana Meds operator in the Arizona medical marketplace – they now can leverage these facilities to best capture market share and serve the patient population in the states. They have two of the largest cultivation facilities to really great retail sites to connect in their network to best serve patients. And again, there’s about, as of current data, there’s about a hundred and seventy thousand patients in the state of Arizona that are projected to do about 530 million in gross revenue in 2018.
Chris: Great! So, if you’re a shareholder of the company one of the things you’re probably wondering is from a cost perspective. I imagine shareholders or prospective shareholders want to know whether or not there will be a certain period of increased costs in order to implement your new model. Is there anything that’s going to kind of, even if it’s just temporarily, make costs a little bit lumpier here? Is the transition going to be mostly smooth?
Bryan: Yeah! I think pretty smooth. We likely would not have made the transition if we would have had a bumpy or jeopardizing transition. There’s two key material financial points in this. One is that the 10% advisory fees from the gross revenue for the Arizona client don’t kick in until January of 2019. So, we will see a lower top-line revenue throughout the rest of 2018. From general financial analysis, I think we will see over the life of these leases quite a bit higher revenue compared to the fixed lease raises from before.
So, I’m confident that the lower cash flow we will have from this period of time until the 10% strategic advisory fees kick in – I don’t think they will really affect us that much and we are actually going to see a decrease in costs. So, part of the negotiation in the updated leases was leasing a hundred percent of the developed or developing areas of the properties to this tenant. Under a triple net lease where the tenant is responsible for insurance payments, property taxes, and sales taxes associated with the rental revenue, we are actually decreasing our costs because prior we were paying property tax insurance on the vacant areas that were developed or developing.
So, actually, you’re going to see a decent amount of decrease in our monthly costs and cash flow commitment as a result of this. But again, material points that additional variable revenue 10% stream doesn’t kick in until January 2019 and we are going to see, throughout the remainder of 2018, a decrease in total cash flow for the company. However, our operations to date that have been positive cash flow and profitable are more than enough going to be able to allow us to the grow the company in new markets where we’re building relationships with prospective strategic advisory client.
Chris: Okay. So, if you can zoom out for me a little bit, now that you’ve addressed kind of what the short-term impact will be and talk a little bit about what the long-term impact will be in terms of the company’s fundamentals over the course of the long run – profitability, growth potential – from a birds-eye perspective and a longer view, talk about how this pivot is ultimately going to help you guys and what your vision was?
Bryan: Yeah! I think the immediate material point that comes to mind from a ten thousand foot level, macro-level view, that I think the billion-dollar question on most prospective investors’ minds, is the difference between the medical marijuana market and the recreational marijuana market or adult use.
So, Zoned Properties has always been focused on the medical marijuana market. It’s the space we have the most expertise in. I think we are a very risk-aware organization, so, I track quite closely regulatory changes on the local state and federal levels. I’m no judicial or legislative expert, but I do pay attention to trends and different metrics in the regulatory process. So, this new structure and these new lease agreements allow Zoned to participate in the recreational market if and only if and when it becomes legally allowed to do so.
So, if our clients and tenants decide only when they are legally allowed to do so to shift their operations from a medical to a recreational focus or a hybrid model of both, we still retain the 10% revenue fee and we still get the fixed-base rent as part of our model. Now, extrapolating that out two different states’ new market, as we’re building relationships with new prospective clients in new marketplaces – we can use that as a precedent and foundation that is appealing, I think, to them. And the conversations I’m having have let Zoned Properties become a long-term partner, your real estate development advisor or in some cases an acquisition partner and investor and developer in the property itself, where the client becomes our tenant. That gives the tenant and the client the flexibility to adjust in the marketplace. Whereas before, we had very tight restrictions where the properties were only to be used for medical marijuana.
There was actually, I may be kind of getting ahead here with where we’re moving the conversation, but I think it’s a good transition. Just yesterday, May 17th, there were two quite significant Federal level Congressional events that took place, both in the appropriations committees. Basically, one of the biggest challenges, I think, a lot of companies have, whether they’re licensed operators in the medical or recreational markets or whether they’re ancillary, is when the Cole Memo was rescinded by Jeff Sessions, the Cole memo used to be the Department of Justice’s federal guidelines that said states where licensed marijuana industries were operating and states that have passed legislation allowing marijuana operations, here are some guidelines you had to abide by to not run into Federal issues.
So, basically, this was the national level telling the states we’re not going to interfere as long as these things are happening. There were things like don’t cross state lines, don’t sell the children, no mixing product and acquiring product illegally from the black market and then selling it on the licensed market. So, that Cole memo was rescinded and replaced earlier in 2018 by Attorney General Jeff Sessions and his memo has become kind of adopted as the Sessions Memo.
Basically, it was a very short memo, anyone can read it, go online and search it and find it through the justice department that said, “I’m rescinding all previous guidance from the executive branch and the judicial branch on this matter and we will be proceeding as appropriate for federal prosecutors under my direction. In essence, all the guidelines the Feds have given the States before is gone and I’ll be putting new things in place.” So, that’s what we talked about last time we sat down with the GEO team.
What happened yesterday, May 17th is that amendments were included in the Department of Justice’s spending bill that specifically restricts the Department of Justice from funding prosecutions of marijuana operators in states where it has become legalized. I think this is right when the sessions memo passed everyone was nervous and freaking out, “Okay. What has he done? This keeps back all the progress.
In reality what it did, from my perspective, is that was the executive branch looking over at Congress and saying, “Hey! It’s time for the legislative branch to take some action. If you think marijuana should be legalized, why don’t we pass some bills on it?” Let’s not give guidance from the executive branch that can be changed, let’s pass formal permanent bills. Now, I think we’re seeing the results of that. We’re starting to see members of Congress relying upon the electorate. I think there are the poll numbers – they were quoted in a Forbes article this morning – 92% of Americans polled a favor or approve of medical marijuana. That’s a pretty huge number for any Congress representative who was looking to get re-elected.
Chris: Sure. Yup, absolutely! So, it’s safe to say that you feel confident about the longer term for regulation?
Bryan: Yeah! I would say my confidence level is, especially for the medical marijuana market, is extremely high. And nationally a lot of things are happening in Canada. A lot of things are happening in countries around the world that are re-examining this – not only from a legitimizing perspective, there is potential real advocacy here in the medical properties of this plant and medicines that can be served to patients.
So, one of the actually, I just didn’t mention, one of the other amendments that was passed yesterday on May 17th urged the Federal bodies to accept pending applications for medical marijuana research on the federal level. So, whether that means it’s going to happen or not, time will tell the tale. But let’s say that’s a huge sign, from my perspective, of something I’ll follow for confidence levels. To answer your question, that makes sense to me. If we think there’s a real possibility here, let’s study it and let’s take the handcuffs off our best researchers in the country and in the world from not being allowed to study it.
Chris: Sure. Yeah, for somebody that’s-
Bryan: Hard to know what that means for the adult use recreational market. I think that’s just, for now, going to be a matter of the lobbies and new federal administrations in Congress to deal with that, but from the medical side, yeah, I’m extremely confident.
Chris: Let’s just talk about from the perspective of somebody that isn’t too familiar with marijuana regulation. Can you give an overview to maybe a prospective investor or maybe even a current shareholder as to kind of where the US, and you mentioned this briefly, where the US and Canada are kind of comparatively one versus the other in terms of Regulation? Which country is a little bit further ahead? Which one’s a little bit further behind?
Bryan: Sure! Yeah! I’ll do my best to put it in the perspective of who’s ahead and who’s behind, but they’re definitely in different cycles of the process. It might be tough to say which ones winning the race, for example.
Bryan: The Canadian market, and I’m actually originally from Eastern Canada, so, I speak to family and friends about it all the time. Under Prime Minister Justin Trudeau he campaigned and has, I think, followed up quite well on his promise to legalize marijuana. Canada has had a very robust and well operating medical marijuana market and now this is what he’s pushing for and trying to get through legalization for recreational or adult use. There’s a lot of activity from investment perspective if you look at the number of dollars raised there’s been billions of dollars of investor money around the world put into the Canadian market as the legalization process has happened. Then, I certainly look at that as a foreshadowing for the US market. The population of Canada has about 10% of the US. So, generally speaking, the consumer market potential for recreational marijuana in the US is massive and the patient market for medical marijuana is also massive.
A lot of those Canadian entities that are growing in size and raising dollars are now…we have seen started to complete fairly large M&A transactions to combine forces, to try and capture larger chunks of market share. We’ve seen from the bunch of the different states in the US and provinces in Canada, those who control the strategic real estate and the strategically-located facilities have the most leverage to capture the most market share.
So, we can bring that full circle back to Zoned Properties. What we’ve done in the renegotiating updated leases, released all four of these facilities basically in their entirety of development to a single operator to allow them to leverage, to capture the most market share in the Arizona marketplace as we participate in their revenue from that process. So, that US market, I think, has made some significant strides medically. Now, we now see 29 States and the District of Columbia with medical programs, nine states with recreational programs, again 92% of all Americans approving medical marijuana. Clearly, the momentum and the trend is pushing forward.
Where I would go from then – to make the comparison is to make the analogy of the “where do you want to invest in a gold mine?” If you have 10 gold mines to invest in, certainly, you could pick one or two and, hopefully, you get lucky, they strike gold, you make a lot of money. Or you could invest in the picks and axes, you can invest in all the equipment needed for every single one of those gold mines and maybe not make a significant return, but you certainly take a much lower risk investment but still pretty large upside potential. So, companies that are working on technology, companies that are working on providing materials and goods, companies that control the real estate. And I think the real estate’s key because it’s a hard asset, especially when located in the right strategic areas that I believe is only going to increase in value as this market continues to grow.
Chris: Sure! Yeah! Thank you for that! So, my next couple of questions are just involving the company’s valuation and the stock price. I just want to talk turkey here a little bit for your investors. One of the things that we notice here and one of the things that sticks out to me is your company’s valuation versus one of its peers. We did an analysis of ZDPY versus IIPR, which we think is probably one of the closest peers, from every multiple standpoint, if you’re looking at EV/sales, your company trades at five and a half times EV/sales. IIPR trades at an EV/sales of 16, they traded an EV/ adjusted Ebitda of a little over 36; you trade with an EV/adjusted Ebitda of 10; they trade with a PE of 110, you trade with a PE of 13. Can you talk a little bit about why you think the market is either placing too high of a multiple on your peers or too low of a multiple on your company? What you can do to kind of unlock some value if the story is that your company is just being undervalued by the market?
Bryan: Right! Yeah! That’s a great question and I think that’s a good comp to use. Have had quite a few conversations with the team at IIPR and I love their model. I think the biggest difference when you look at that comp is obviously that they are a formal Real Estate Investment Trust. So, they’re going to be distributing revenues in the form of dividends to their investors. They’re taxed differently. I think, it’s a really great strategy. Another material difference certainly between Zoned Properties and Innovative Industrial Properties – they’ve raised about 20 times the capital we’ve raised.
I think it is a really, from my belief from my perspective, I certainly do not believe that they are overvalued. I would say the comparison would go much more realistically to Zoned Properties being undervalued. Even if you just look at where we trade and, I think those are important metrics that you’ve listed already, one of the other important metrics is certainly just market cap. We trade at basically and have been trading recently basically the cost basis of our assets. Over the next few months, we’ll be getting updated property appraisals and portfolio appraisals that factor in our new updated lease agreements and financials. So, we’ll be able to share those with the public when we have them.
My belief is that our trading valuations and public market activities are the results of, basically, my unwillingness to promote our company, do anything close to any type of pumping or puffery. If you look at the vast number of companies that operate on the bulletin board or pink sheets, there’s now more companies that trade on the QX like ZDPY which I think is a positive thing. I love to see new companies going up to that level of sophistication that participate in marijuana marketplaces and add legitimacy. But still the vast majority of companies are participating in the types of press releases and promotion and pumping and puffing to the marketplace with no legitimacy.
So, I’m just unwilling to do that and not only am I unwilling to do it, I’m unwilling to do anything that comes close to it. So, I constantly have the battle with our investor relations team that Hayden and I are and I love these guys that they’re probably really frustrated with me. I even shoot down adjectives in our press releases that I think are not transparent descriptions of our operations. We just, this morning, had a debate over the word…what is the word limitless mean? What is limitless revenue? Well, there’s only a certain population of people in the country. So, certainly, there’s going to be a limit.
Chris: I can tell you what a lawyer thinks it would mean.
Bryan: Exactly! And we’ve had those conversations and I will almost always side with the attorneys over the public relations I already got. I hope that’s not a cop-out answer, but anyone who is familiar with me, with our company, with our, certainly our cycle of press releases and disclosure in our SEC filings, we have worked really hard to establish a reputation as a real company, with real operations, real assets real revenue. I’m trying to grow the business like a real business, not like an entity that distributes its equity solely for the ability to dilute other shareholders.
Chris: Right! And I can sp-
Bryan: Again, I love IIPR because I think they’re a real company as well. I mean they put their capital to work, I’ve seen them bring real projects online with, obviously, their targeted cap rates for their properties and we’re just growing in a different way. We’re trying to take our profits and revenues and reinvest them in our company whereas obviously, as a reach, they’re required to distribute the majority of those to their shareholders.
Chris: Well, I can I can speak to you on behalf of IR representatives because I used to work as one. So, I understand the consistent battle that IR reps sometimes have. Mostly with lawyers, mostly with attorneys and attorneys do wind up winning those battles. I can also speak to you from the perspective of a value investor or a lot of people that we reach out to who are interested in the micro-cap space, they’re interested in smaller cap names, they’re interested in the types of companies that do fly under the radar.
One of the reasons that, I mean, throughout our experiences as value investors and micro-cap investors, one of the things that we notice is companies do sometimes tend to fly under the radar and go unnoticed because management teams refuse to go out and pump these names. Ultimately, while it may be a battle that you’re having with your IR team right now about it, over the course of the longer-term, if you execute on the fundamentals of your business and the company generates a profit and that generates cash, somebody’s going to notice eventually. And when they do, you don’t want them to be able to look back and point at a bunch of, like you’re saying, a bunch of fluff. You want them to be able to point back and say, “look these guys have just been executing. They’ve just been flying under the radar.”
So, I don’t think you’re going to get any push back on taking that conservative approach from any type of micro-cap investor, any type of small-cap investor. Hopefully, you wouldn’t. Certainly, I wouldn’t personally give you any, but it does explain things.
So, one of the other questions I have written down here because I was taking my notes to write your questions the other day, was you know it looks like the stock’s off a little bit and I wanted to ask you about whether or not you’ll have to issue equity. But then today the stock is actually up 35 and a half percent. So, I don’t want to leave out that question by saying well the stock is down because it’s not down today. Certainly, you guys are still closer to the bottom of your 52-week range for the stock. Can you talk a little bit about whether or not you’re going to have to go to the market and issue equity? I’m sure it’s probably the biggest concern of existing shareholders right now.
Bryan: Yeah! I think that’s a very valid concern for both existing shareholders and prospective investors that are looking to become shareholders. I don’t believe that we are in a position where we need to necessarily take on any kind of toxic capital where we need to dilute shareholders. It has been a focus of mine for my entire tenure as the chairman and CEO of Zoned Properties. I’m not taking on toxic debt, which is another thing a lot of the other companies in the industry have done and they’ve had to do it because they haven’t had real operations.
So, we’ve been able to achieve an increase in profitability, increase in cash flows, again that we can reinvest into our company and that allow us to operate the administrative side of our company with a nice cushion. We have created a really lean operating administrative side of our company. Even only on the fixed-base rent from our clients in Arizona, we can easily continue to operate and grow our company. So, I don’t see us taking any kind of toxic debt, I don’t see us heavily diluting our shareholders. If there’s an opportunity to sell equity at a price that I believe is competitive for what I believe is the real value of Zoned Properties, which is certainly higher than where it is trading at currently from an equity sale perspective, then, we may do so. But in the meantime, we’ll continue to build relationships with new prospective clients. We built quite a few relationships with larger fund investors that are looking to invest in lower risk real companies that interface with the medical marijuana industry and continue to do that. I think one of the biggest foundational points of that is that we are shareholders as well. So, I’m not looking to do anything that’s going to negatively dilute myself as a co-owner alongside other shareholders in the company.
Chris: And I’m sure that is music to the ears of people that own shares alongside of you and prospective investors as well. So, listen Bryan-
Chris: Go ahead!
Bryan: The only last point I would make on that is coming full circle back to the business pivot. Really one of the real reasons we did that…I work for the shareholders and I certainly recognize that if our stock price is under-performing where management believes it should be or we believe the market could take it, we need to act on that to the benefit of the shareholders. So, in the business pivot bringing on a floor-fixed revenue stream, with lower risk, with a higher risk variable revenue stream based on a percentage commercial lease strategy, we are now able to participate far more in the rapid growth of the industry than we were previously. My hope and expectation is that will be a business pivot that will reward shareholders in the short, medium and long-term.
Chris: Great! Well, listen. Is there anything else at all that you might want to just put out there for prospective shareholders or current shareholders before we call it a day?
Bryan: I think we’ve discussed most of the current material points and look forward to continuing to provide updates and working with the GEO team to help tell the story and communicate company activity to our shareholders and appreciate the time!
Chris: Sure and just for people that are clients of the GEO team and people that visit our website regularly, we’re going to continue to update with Zoned Properties developments as they occur. Of course, we’ll be providing our analysis and future Executive Cast updates at the same time. So, we really look forward to speaking to you guys as well and best of luck with everything in the short-term and hopefully we catch up not too much longer down the road.
Bryan: Sounds great, guys! All right! Have a great weekend!
Chris: Thank you so much, Bryan! You too! Take care!