The accompanying financial statements are unaudited and include the accounts of the Company. The accompanying financial statements have been prepared in accordance with GAAP and the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the accompanying financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended December 31, 2016. In the opinion of management, all adjustments of a normal and recurring nature necessary for a fair presentation of the financial statements for the interim periods have been made.

 

The accompanying consolidated financial statements include the accounts of the Company, including the Operating Partnership and its wholly-owned subsidiaries, and the interests in the Operating Partnership held by the LTIP unit holders, which the Operating Partnership has control over and therefore consolidates. These LTIP units represent “noncontrolling interests” and have no value as of March 31, 2017 as they have not been converted into OP units and therefore did not participate in the Company’s consolidated net loss. At the time when there is value associated with the noncontrolling interests, the Company will classify such interests as a component of consolidated equity, separate from the Company’s total stockholder’s equity on its Consolidated Balance Sheets. Additionally, net income or loss will be allocated to noncontrolling interests based on their respective ownership percentage of the Operating Partnership. All material intercompany balances and transactions between the Company and its subsidiaries have been eliminated.

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and footnotes. Actual results could differ from those estimates.

 

 

The restricted cash balance as of March 31, 2017 and December 31, 2016 was $1,773,909 and $941,344, respectively, an increase of $832,565. The restricted cash balance as of March 31, 2017, consisted of $85,686 of cash required by a third party lender to be held by the Company as a reserve for debt service, $1,391,375 in security deposits received from facility tenants at the inception of their leases, and $296,848 in funds held by the Company from certain of its tenants that the Company collected to pay specific tenant expenses, such as real estate taxes and in some cases insurance, on the tenant’s behalf. The restricted cash balance as of December 31, 2016 consisted of $383,265 of cash required by a third party lender to be held by the Company as a reserve for debt service, $319,500 in a security deposit received from the Plano Facility tenant at the inception of its lease, and $238,579 in funds held by the Company from certain of its tenants that the Company collected to pay specific tenant expenses. The $832,565 increase during the three months ended March 31, 2017 resulted from an aggregate increase of $1,130,144 in tenant security deposits derived from acquisitions during the current quarter and funds held by the Company to pay specific tenant expenses, partially offset by a decrease of $297,579 in funds required to be held by the Company by a third party lender.

The tenant receivable balance as of March 31, 2017 and December 31, 2016 was $347,110 and $212,435, respectively, an increase of $134,675. The balance as of March 31, 2017 consisted of $133,959 in funds owed from the Company’s tenants for rent that the Company has earned but not received, $29,834 in other tenant related receivables, and $183,317 in funds owed by certain of the Company’s tenants for amounts the Company collects to pay specific tenant expenses, such as real estate taxes and in some cases insurance, on the tenants’ behalf. The balance as of December 31, 2016 consisted of $28,599 in funds owed from the Company’s tenants for rent that the Company has earned but not received, $22,323 in other tenant related receivables, and $161,513 in funds owed by certain of the Company’s tenants for amounts the Company collects to pay specific tenant expenses, such as real estate taxes and in some cases insurance, on the tenants’ behalf.

 

Escrow deposits include funds held in escrow to be used for the acquisition of properties in the future and for the payment of taxes, insurance, and other amounts as stipulated by the Company’s Cantor Loan, as hereinafter defined. The escrow balance as of March 31, 2017 and December 31, 2016 was $2,528,996 and $1,212,177, respectively, an increase of $1,316,819. This increase resulted from $1,308,324 of funds added to the escrow account to be used to acquire facilities in the future and from an increase of $8,495 in deposits that were required to be held in escrow related to the Cantor Loan.

The deferred assets balance as of March 31, 2017 and December 31, 2016 was $1,087,148 and $704,537, respectively, an increase of $382,611. These amounts represent the Company’s deferred rent receivable balance resulting from the straight lining of revenue recognized for applicable tenant leases. The increase results from the facilities that were acquired during the three months ended March 31, 2017 that had leases that required the straight lining of revenue.

 

 

Costs that are incurred prior to the completion of an acquisition are capitalized if all of the following conditions are met: (a) the costs are directly identifiable with the specific property, (b) the costs would be capitalized if the property were already acquired, and (c) acquisition of the property is probable. These costs are included with the value of the acquired property upon completion of the acquisition. The costs will be charged to expense when it is probable that the acquisition will not be completed. The balance in this account was $11,484 and $140,374 as of March 31, 2017 and December 31, 2016, respectively, a decrease of $128,890. This decrease during the three months ended March 31, 2017 resulted from $254,249 of costs that were reclassified to the asset value of facilities when the respective acquisitions were completed and $3,150 of costs charged to expense when it was probable that an acquisition would not be completed, partially offset by an increase resulting from additional capitalized costs incurred of $128,509.