The Albuquerque Journal wrote two stories about medical marijuana in New Mexico and former Arizona medical marijuana bad boy Duke Rodriguez. The stories are:
Here are some quotes from the first story:
“Duke Rodriguez, the principal of Ultra Health, also expresses pride in the facility, where he grows 450 marijuana plants at a time, the maximum allowed under state Department of Health regulations. But Ultra Health is not one of the state’s 35 licensed nonprofit producers authorized by the New Mexico Department of Health to grow and sell medical marijuana. . . . Ultra Health is unusual, if not unique, among the state’s marijuana producers in that it is not a New Mexico-based entity. Ultra Health is a limited liability corporation based in Scottsdale, Arizona”
Quotes from the second story:
“Duke Rodriguez, principal of Ultra Health LLC, first became involved in the medical cannabis industry around 2013 in Arizona. He purchased the 11-acre marijuana-growing facility in Bernalillo in August 2014 on behalf of an Arizona corporation called Zoned Properties Inc. . . .
Ultra Health became the sole owner of the Bernalillo property as a result of a settlement reached in a lawsuit filed last year.
In March 2015, Zoned Properties filed suit in Arizona Superior Court against Rodriguez and Ultra Health in a dispute over business interests in Gilbert, Ariz., according to public records filed by the company.
In a settlement reached in July, Zoned Properties transferred ownership of the $2.7 million Bernalillo property to Rodriguez and Ultra Health, a company disclosure statement said.
Under the settlement, Rodriguez transferred ownership of a 48-acre property and growing facility in Chino Valley, Ariz., to Zoned Properties. Rodriguez also relinquished his ownership stake in Zoned Properties.
Zoned Properties, Inc., published a quarterly consolidated financial statement for the nine months ending 1, 2015 that sheds light on Duke’s statements about his settlement with Zoned Properties, Inc.
On January 29, 2014, the Company entered into a purchase and consulting agreement (the “Ultra Agreement”) with Ultra Health, LLC., a related party due to common ownership and investments made by beneficial stockholders of the Company (“Ultra Health”), pursuant to which the Company was to acquire a 1,536 square foot modular building to be delivered and erected on the purchased land for total cash payments of $675,000. Subsequent to the purchase of this land and building, these real estate assets were transferred to Gilbert Property, LLC, a wholly-owned subsidiary of the Company. In connection with the 1,536 square foot modular building discussed above, on April 10, 2015, the Company became a party to a certain case pending in the Superior Court of the State of Arizona in and for Maricopa County, Arizona styled, Zoned Properties, Inc. v. Duke Rodriguez, Ultra Health, LLC and Cumbre Investment, LLC (“The Defendants”), Case No. CV-2015-004225, wherein the Company alleges, among other things, that the Defendants, alone or in collusion with one another, breached a certain contract for the construction of the Gilbert building, and made material misrepresentations or had negligently misrepresented certain material elements upon which the Company relied, in purchasing the land upon which that building was to be constructed, which the Defendants failed to perform. The Company reviews it rental properties for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Based on this review, on December 31, 2014, the Company determined that the Gilbert building carrying value of $675,000 was not recoverable and recorded an impairment loss – related party of $675,000. On July 9, 2015 and effective August 1, 2015, the Company entered into a settlement agreement with the Defendants that, among other things, settles the pending claims and grants mutual general releases. . . .
Zoned Properties, Inc. v. Duke Rodriguez, Ultra Health, LLC and Cumbre Investment, LLC On April 10, 2015, the Company became a party to a certain case pending in the Superior Court of the State of Arizona in and for Maricopa County, Arizona styled, Zoned Properties, Inc. v. Duke Rodriguez, Ultra Health, LLC and Cumbre Investment, LLC (“The Defendants”), Case No. CV-2015-004225, wherein the Company alleges, among other things, that the Defendants, alone or in collusion with one another, breached a certain contract for the construction of the Gilbert building, and had made material misrepresentations or had negligently misrepresented certain material elements upon which the Company relied in purchasing the land upon which that building was to be constructed, which the Defendants failed to deliver (See Note 3). On June 8, 2015, the Company filed a motion to dismiss the counterclaim. The motion to dismiss has been fully-briefed and was set for oral argument on August 7, 2015. On July 9, 2015 and effective August 1, 2015, the Company entered into a settlement agreement with the Defendants that, among other things, settles the pending claims and grants mutual general releases. Under the terms of the settlement:
1. On August 1, 2015, the Company transferred title to its Bernalillo, New Mexico property to Defendants. At June 30, 2015 and December 31, 2014, the carrying value of this property was $2,719,658 and $2,737,863, respectively. In connection with such property, the Company forfeited quarterly straight-lined rental revenue of approximately of $287,000 through September 2024. For the six months ended June 30, 2015, rental revenues from this property amounted to $120,000. The Company did not have rental revenue from this property in the comparable 2014 periods.
2. The Defendants returned 2,496,054 shares of common stock to the Company and the Company cancelled such shares. On the Settlement Date, such shares were valued at $1,406,603 or $0.5635 per common share which represents the cost of the treasury shares purchased and retired.
3. The Defendants effectuated the transfer of four parcels of property in Chino Valley, Arizona to the Company which consists of approximately 48 Acres of land and the Company acquired an additional parcel in Chino Valley for $200,000 in cash. Based on an independent appraisal, on the Settlement Date, the fair value of property obtained, consisting of land, buildings and improvements, amounted to approximately $1,528,000.
4. The Company shall obtain water rights associated with property in Chino Valley, Arizona.
In connection with the settlement, on the Settlement Date, the Company did not record any settlement gain or loss.
Zone Properties’ financial statement contains some interesting line items for a publicly traded company:
- $297,695 revenue excluding revenue from related parties
- $1,011,008 professional fees
- $(976,579) loss from operations
- $(1,145,170) net loss