Commitments, Contingencies, Concentrations and Related parties

12 Months Ended

Dec. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments, Contingencies, Concentrations and Related parties

6. Commitments, Contingencies, Concentrations and Related parties

A) Related Parties

1) Executive Employment Agreements

Nickolas W. Jekogian III – On January 6, 2017, as part of the First Capital transaction Mr. Jekogian entered into a Cancellation and Release Agreement for the cancellation of all stock options and warrants held by Mr. Jekogian as of such date, termination of his Employment Agreement effective as of such date and forgiveness of accrued compensation of $709,745 owed. As a result, the accrued salary which was forgiven was recorded as a component of additional paid in capital during the year ended December 31, 2017. Mr. Jekogian will continue as an employee of the Company in his capacity as Chairman and Chief Executive Officer on a month-to-month basis until such time as otherwise determined by the Company in its sole discretion. Mr. Jekogian has not received any salary for the years ended December 31, 2020, 2019, 2018 and 2017 or do we anticipate paying him any salary in 2021.

Alexander Ludwig - On January 8, 2014, the Company and Mr. Alexander Ludwig, a Director, President, Chief Operating Officer and Principal Financial Officer of the Company entered into an amendment to Mr. Ludwig’s employment agreement dated November 8, 2011. The amendment provided for (i) the extension of the employment term from May 3, 2013 to December 31, 2015, (ii) continuation of Mr. Ludwig’s base salary through the balance of the term at the rate of $225,000 per annum, (iii) removal of the $200,000 cap on the amount of any annual bonus that might be awarded Mr. Ludwig, (iv) the issuance of a “Transaction Warrant” to Mr. Ludwig upon the occurrence of a Capital Event, and (v) an increase in severance benefits from three months to six months in the event of a termination of Mr. Ludwig’s employment following a change of control or a termination for “good reason” as defined in the employment agreement.

Mr. Ludwig’s employment agreement, as amended, expired on December 31, 2015 but the board agreed to continue Mr. Ludwig’s employment on the same terms as the agreement until otherwise terminated by the board.

On January 6, 2017 as part of the First Capital transaction the Company and Mr. Ludwig our President and Chief Operating Officer, entered into a Cancellation and Release Agreement for the cancellation of all stock options and warrants held by Mr. Ludwig as of such date in consideration for the issuance of (x) 450,000 shares of Class B common stock of the Company and (y) an option to purchase an additional 550,000 shares of Class B common stock of the Company. The exercise of such option is subject to certain conditions, including that the Company has consummated an equity offering, capital raise or such other offering such that the issuance of any shares of Class B common stock of the Company covered by Mr. Ludwig’s option would not be deemed “Excess Shares” as that term is defined in the certificate of incorporation of the Company. The exercise price is $0.00. The Company has not recognized any share-based compensation associated with this award based on the contingent performance condition which is not probable of occurring.

In June of 2017, the Board of Directors notified Mr. Ludwig that due to financial constraints on the company that he would no longer be receiving his salary.

2) Property Management Agreement

On November 8, 2011, the Company and Signature Community Management LLC (“Signature”), (an entity owned by our CEO) entered into a Property Management Agreement pursuant to which the Company retained Signature as the exclusive, managing and leasing agent for the Company’s Mapletree Property. Signature receives compensation of 5% of monthly rental income actually received from tenants at the Mapletree Property. The Property Management Agreement renewed for a one-year term on November 8, 2020 and will automatically renew for one-year terms until it is terminated by either party upon written notice. The Company incurred management fees of $40,291, $41,982, $38,187, and $37,342 for the years ended December 31, 2020, 2019, 2018 and 2017, respectively.

The balance unpaid to Signature at December 31, 2020, 2019, 2018 and 2017 for management fees was $47,170, $38,861, $5,625 and $3,714, respectively.

3) Asset Management Agreement

On November 8, 2011, the Company entered into an Asset Management Agreement with Signature Community Investment Group LLC (“SCIG”), (an entity owned by our CEO) pursuant to which the Company engaged SCIG to oversee the Mapletree Property. SCIG receives an asset management fee of 1.5% of the monthly gross rental revenues collected for the Mapletree Property. The Asset Management Agreement renewed for a one-year term on November 8, 2020 and will automatically renew for one-year terms until it is terminated by either party upon written notice. The Company incurred asset management fees of $12,090, $12,594, $11,225, and $11,203 for the years ended December 31, 2020, 2019, 2018 and 2017, respectively.

The balance unpaid to SCIG at December 31, 2020, 2019, 2018 and 2017 for asset management fees was $24,482, $20,787, $1,687 and $1,114, respectively.

4) Sublease

On September 22, 2016 the Company signed a new sublease for their executive office space under a month to month lease with Nexelus for a monthly rental payment of $1,500 or $18,000 per year. The lease was terminated November 30, 2017.

The Company incurred total rent of $16,500 for the year ended December 31, 2017.

B) Legal Proceedings

In the ordinary course of business, we may be subject to litigation from time to time. Except as discussed below, there is no current, pending or, to our knowledge, threatened litigation or administrative action to which we are a party or of which our property is the subject (including litigation or actions involving our officers, directors, affiliates, or other key personnel, or holders of record or beneficially of more than 5% of any class of our voting securities, or any associate of such party) which in our opinion has, or is expected to have, a material adverse effect upon our business, prospects, financial condition or operations.

There is pending in the Supreme Court of the state of New York county of New York (Index No. 656191/2017) an action entitled MLF3 NWJ LLC filed in October of 2017, against Nickolas W. Jekogian, III, Presidential Realty Corporation, Presidential Realty Operating Partnership LP, First Capital Real Estate Trust Incorporated, First Capital Real Estate Operating Partnership, Nickolas W. Jekogian, JR. as trustee of The BBJ Family Irrevocable Trust, Alexander Ludwig, Signature Group Advisors LLC, Richard Brandt, Marjorie Feder as Executrix of the Estate of Robert Feder, Jeffrey F. Joseph, Jeffrey Rogers.

The litigation is related to actions taken by Mr. Jekogian individually on a real estate project and personal guarantee that predated his involvement with the Company.  The Plaintiff had received a judgment against Mr. Jekogian for approximately $1,500,000, in addition to attorneys’ fees, and had filed a lien on assets owned individually by Mr. Jekogian including certain options and warrants to purchase stock in the Company.   When the Company entered into the Contribution Agreement with FC REIT in January of 2017, Mr. Jekogian surrendered these options and warrants to purchase stock in the Company as part of the transaction.    The Plaintiff is arguing that they had a lien on Mr. Jekogian’s options and warrants in the Company and that the actions taken by the Company, its Officers and Directors, in entering into the Contribution Agreement with FC REIT fraudulently conveyed their interests in the options and warrants owned by Mr. Jekogian and damaged their position.    The Company, its Officers and Directors, named in this action had no involvement in this personal matter relating to Mr. Jekogian and answered the complaint in February of 2018 stating that it had no merit.   Since that time, the Company has received no additional notification that the action against the Company, its Officers and Directors is moving forward.   The Company believes that as to the Company, Officers and Directors, the claims have no merit.

C) Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash.

Three customers accounted for approximately 12%, 19% and 24% of the Company’s accounts receivable as of December 31, 2020.

Three customers accounted for approximately 11%, 19% and 30% of the Company’s accounts receivable as of December 31, 2019.

Two customers accounted for approximately 14% and 44% of the Company’s accounts receivable as of December 31, 2018.

One customer accounted for approximately 82% of the Company’s accounts receivable as of December 31, 2017.

The Company generally maintains its cash in money market funds with financial institutions. Although the Company may maintain balances at these institutions in excess of the FDIC insurance limit, the Company does not anticipate and has not experienced any losses.

D) Other

In December 2019, the Novel Corona Virus, COVID-19 was reported to have emerged in Wuhan, China. In March 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak a global pandemic. The extent of the impact of the pandemic on the Company’s business, financial condition, liquidity, result of operations will depend on future developments, which are highly uncertain and cannot be predicted.