Q2 2025 Results (Post 3) Sale of Land LeaseOn November 5, 2024 Progressive Planet Solutions issued a news release that contained this disclosure:
In October 2024, Progressive Planet also closed the sale of a long-term lease of an industrial
property, which was previously used for storage. The gross proceeds of sale were $1.23 million,
and following the payment of commissions, the Company received a net amount of $1.195 million.
Today the Company released its Q2 2025 financial statements which includes the impact of the transaction disclosed above. Additional information is now provided in Note 13:
Effective October 30, 2024, the Company sold a leased property, and the associated building, for gross proceeds of $1,230,000 . This lease for a 2.7 acres of industrial property in Kamloops, B.C. was expiring September 30 , 2058 (approximately 34 years remaining at July 31, 20 24). Prior to sale, the leased land and building were used by the Company for inventory and equipment storage. In addition, a portion of the building was leased to a third- party.
At the date of sale, the lease liability recognized by the Company in relation to this lease was $825,836 and the corresponding right-of-use asset value (capitalized in Leased assets) was $762,679 . On disposition of the leased property, the Company eliminated both the lease liability and the right-of-use asset, with difference of $63,157 being reported as a gain on settlement of lease liability (included in Other expenses – see Note 20 ).
Firstly, Note 20 reports the gain on settlement of lease liability as $52,189, a figure $10,968 less than the $63,157 noted above. What is the explanation for the $10,968 difference? I am sure there is a logical explanation why the two numbers are not the same.
Secondly, based on the newly released information, I would suggest that the November 6th news release was in retrospect very poorly worded. PLAN did not in reality "close the sale of a long term lease" with "gross proceeds of $1.23 million". Instead, it appears the remaining obligations under the lease (with a current net present value of $762,679) being taken over by the land owner (or perhaps an interested third party) as part of the negotiated "settlement of lease liability".
While PLAN did not own the land, it did own the building and equipment that were located on the 2.7 acre leased site. Having given up the lease it appears they were able to negotiate the favourable sale of the on-site building and equipment to the land owner or perhaps the new tenant (the note does not disclose who paid the $1.23 million in gross proceeds). While not specifically referenced, Note 7 appears to disclose the value of the building and equipment that were sold:
Original Cost Acc Depreciation Net Book Value
Building $392,553 $152,982 $239,571
Equipment $267,234 $134,984 $132,250
Total value $659,787 $287,966 $371,821
All this makes sense so far.
However, returning to the proceeds of disposition $1,195,000 ($1,230,000 less $35,000 selling commission), if you deduct the net book value of the assets sold of $371,821 you get a gain on sale of building and equipment of $823,179. This gain on sale is shown in Note 20 as being $205,678, a difference of $617,501. Where did the $617,501 gain go to?
Looking again at the figures in Note 7 there is a Disposition of Land in Q2 2025 with an attributed cost of $707,000. I can find no reference to the sale of any of the land owned by PLAN in Q1 or Q2 2025. Note 13 lists the various land LEASES the Company has entered into, including the one for 2.7 acres of Tk'emlups te Secwepemc First Nation land upon which the Company owned warehouse and equipment were located. There could be no Company owned land at this site as this is all First Nation reservation community owned property .
As far as I have been able to accertain, all the land that is owned by PLAN (valued at $7,911,000) is related to the various mining claims and mineral exploration sites where deleopment expenditures are duly records. Which of these properties valued at $707,000 have been disposed of, and why were they rolled into the settlement of lease transaction?
All this begs the question of what land with an original cost of $707,000 was disposed of in Q2, and what was the selling price?
If one uses the figures provided in the Q2 financial statements, property, plant and equipment with a net book value of $1,078,821 was disposed of, and a net gain of $205,678 realized. That calculates to a net proceeds of disposition of $1,284,499. This is the figure that is disclosed in the Statement of Cash Flows - it all seems to reconcile, if $707,000 of land has been sold. I would just like to be able to confirm which land is no longer owned by the Company as of October 31, 2024.