Form 10-Q Mobile Infrastructure For: Jun 30
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark one)
For the quarterly period ended
Or
For the transition period from _________ to _________
Commission File Number:
| MOBILE INFRASTRUCTURE CORPORATION |
| (Exact name of registrant as specified in its charter) |
| | | |
| (State or Other Jurisdiction of | (I.R.S. Employer | |
| Incorporation or Organization) | Identification No.) |
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, including Area Code: (
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbols(s) | Name of each exchange on which registered |
| N/A | N/A | N/A |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| | Smaller reporting company |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
As of August 11, 2022, the registrant had
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| Part I |
FINANCIAL INFORMATION |
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| Item 1. |
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| CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30 2022 (UNAUDITED) AND DECEMBER 31, 2021 |
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| NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
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| Item 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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| Item 3. |
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| Item 4. |
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| Part II |
OTHER INFORMATION |
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| Item 1. |
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| Item 1A. |
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| Item 5 |
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| Item 6. |
ITEM 1. FINANCIAL STATEMENTS
MOBILE INFRASTRUCTURE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
| As of June 30, 2022 (unaudited) | As of December 31, 2021 | |||||||
| ASSETS | ||||||||
| Investments in real estate | ||||||||
| Land and improvements | $ | $ | ||||||
| Buildings and improvements | ||||||||
| Construction in progress | ||||||||
| Intangible assets | ||||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Total investments in real estate, net | ||||||||
| Fixed Assets, net of accumulated depreciation of $ and $ as of June 30, 2022 and December 31, 2021 , respectively | ||||||||
| Cash | ||||||||
| Cash – restricted | ||||||||
| Prepaid expenses | ||||||||
| Accounts receivable, net allowance of doubtful accounts of $ million as of December 31, 2021. allowance as of June 30, 2022. | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Liabilities | ||||||||
| Notes payable and paycheck protection program loan, net | $ | $ | ||||||
| Line of credit, net | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Indemnification Liability | ||||||||
| Security deposits | ||||||||
| Deferred revenue | ||||||||
| Total liabilities | ||||||||
| Equity | ||||||||
| Mobile Infrastructure Corporation Stockholders’ Equity | ||||||||
| Preferred stock Series A, $ par value, shares authorized, shares issued and outstanding (stated liquidation value of $ as of June 30, 2022 and December 31, 2021) | ||||||||
| Preferred stock Series 1, $ par value, shares authorized, shares issued and outstanding (stated liquidation value of $ as of June 30, 2022 and December 31, 2021) | ||||||||
| Non-voting, non-participating convertible stock, $ par value, shares authorized, shares issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized, shares issued and outstanding as of June 30, 2022 and December 31, 2021 | ||||||||
| Warrants issued and outstanding – warrants as of June 30, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Mobile Infrastructure Corporation Stockholders’ Equity | ||||||||
| Non-controlling interest | ||||||||
| Total equity | ||||||||
| Total liabilities and equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
MOBILE INFRASTRUCTURE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended June 30, |
For the Six Months Ended June 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Revenues |
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| Base rent income |
$ | $ | $ | $ | ||||||||||||
| Management income |
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| Percentage rent income |
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| Total revenues |
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| Operating expenses |
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| Property taxes |
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| Property operating expense |
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| General and administrative |
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| Professional fees, net of reimbursement of insurance proceeds |
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| Organizational and offering costs |
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| Depreciation and amortization |
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| Total operating expenses |
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| Other income (expense) |
||||||||||||||||
| Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| PPP loan forgiveness |
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| Other Income |
||||||||||||||||
| Total other income (expense) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Less net loss attributable to non-controlling interest |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net loss attributable to Mobile Infrastructure Corporation’s stockholders |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Preferred stock distributions declared - Series A |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Preferred stock distributions declared - Series 1 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net loss attributable to Mobile Infrastructure Corporation’s common stockholders |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Basic and diluted loss per weighted average common share: |
||||||||||||||||
| Net loss per share attributable to Mobile Infrastructure Corporation’s common stockholders - basic and diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Weighted average common shares outstanding, basic and diluted |
||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
MOBILE INFRASTRUCTURE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE THREE AND SIX months ended JUNE 30, 2022 and 2021
(UNAUDITED)
| Preferred stock |
Common stock |
|||||||||||||||||||||||||||||||||||
| Number of Shares |
Par Value |
Number of Shares |
Par Value |
Warrants |
Additional Paid-in Capital |
Accumulated Deficit |
Non-controlling interest |
Total |
||||||||||||||||||||||||||||
| Balance, December 31, 2021 |
$ | $ | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||||||||||||
| Distributions – Series A |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Distributions – Series 1 |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Net loss |
— | — | — | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||||
| Balance, March 31, 2022 |
$ | $ | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||||||||||||
| Equity based payments |
— | — | ||||||||||||||||||||||||||||||||||
| Distributions – Series A |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Distributions – Series 1 |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Net loss |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| Balance, June 30, 2022 |
$ | $ | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||||||||||||
| Preferred stock |
Common stock |
|||||||||||||||||||||||||||||||
| Number of Shares |
Par Value |
Number of Shares |
Par Value |
Additional Paid-in Capital |
Accumulated Deficit |
Non-controlling interest |
Total |
|||||||||||||||||||||||||
| Balance, December 31, 2020 |
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||||||
| Stock Awards |
||||||||||||||||||||||||||||||||
| Distributions – Series A |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Distributions – Series 1 |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Net loss |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Balance, March 31, 2021 |
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||||||
| Distributions – Series A |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Distributions – Series 1 |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Net loss |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
| Balance, June 30, 2021 |
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
MOBILE INFRASTRUCTURE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Six Months Ended June 30, |
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| 2022 |
2021 |
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| Cash flows from operating activities: |
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| Net Loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
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| Depreciation and amortization expense |
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| Amortization of loan costs |
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| PPP Forgiveness |
( |
) | ( |
) | ||||
| Amortization of right of use lease asset |
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| Equity based payments |
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| Changes in operating assets and liabilities |
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| Due to/from related parties |
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| Construction in progress |
( |
) | ||||||
| Accounts payable |
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| Right of use lease liability |
( |
) | ||||||
| Security deposits |
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| Other assets |
( |
) | ||||||
| Deferred revenue |
( |
) | ( |
) | ||||
| Accounts receivable |
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| Prepaid expenses |
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| Net cash provided by (used in) operating activities |
( |
) | ||||||
| Cash flows from investing activities: |
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| Building improvements |
( |
) | ||||||
| Capitalized technology |
( |
) | ||||||
| Purchase of investment in real estate |
( |
) | ||||||
| Net cash used in investing activities |
( |
) | ||||||
| Cash flows from financing activities |
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| Proceeds from line of credit |
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| Proceeds from notes payable |
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| Payments on notes payable |
( |
) | ( |
) | ||||
| Loan fees |
( |
) | ( |
) | ||||
| Net cash provided by financing activities |
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| Net change in cash and cash equivalents and restricted cash |
( |
) | ( |
) | ||||
| Cash and cash equivalents and restricted cash, beginning of period |
||||||||
| Cash and cash equivalents and restricted cash, end of period |
$ | $ | ||||||
| Reconciliation of Cash and Cash Equivalents and Restricted Cash: |
||||||||
| Cash and cash equivalents at beginning of period |
$ | $ | ||||||
| Restricted cash at beginning of period |
||||||||
| Cash and cash equivalents and restricted cash at beginning of period |
$ | $ | ||||||
| Cash and cash equivalents at end of period |
$ | $ | ||||||
| Restricted cash at end of period |
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| Cash and cash equivalents and restricted cash at end of period |
$ | $ | ||||||
| Supplemental disclosures of cash flow information: |
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| Interest Paid |
$ | $ | ||||||
| Non-cash investing and financing activities: |
||||||||
| Dividends declared not yet paid |
$ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
MOBILE INFRASTRUCTURE CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(UNAUDITED)
Note A — Organization and Business Operations
Mobile Infrastructure Corporation (formerly known as The Parking REIT, Inc.) (the “Company,” “we,” “us” or “our”), is a Maryland corporation formed on May 4, 2015. The Company focuses on acquiring, owning and leasing parking facilities and related infrastructure, including parking lots, parking garages and other parking structures throughout the United States. The Company targets both parking garage and surface lot properties primarily in top 50 U.S. Metropolitan Statistical Areas (“MSAs”), with proximity to key demand drivers, such as airports, transportation hubs, educational facilities, government buildings and courthouses, sports and entertainment venues, hospital and health centers, hotels, office complexes and residences.
As of June 30, 2022, the Company owned
The Company is the sole general partner of Mobile Infra Operating Partnership, L.P., formerly known as MVP REIT II Operating Partnership, LP, a Maryland limited partnership (the “Operating Partnership”). The Company owns substantially all of its assets and conducts substantially all of its operations through the Operating Partnership, is the sole general partner of the Operating Partnership and owns approximately
The Company previously elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes and operated in a manner that allowed the Company to qualify as a REIT through December 31, 2019. As a consequence of lease modifications entered into during the COVID-19 pandemic, the Company earned income from a number of tenants that did not constitute qualifying REIT income for purposes of the annual REIT gross income tests, and, as a result, the Company was not in compliance with the annual REIT income tests for its taxable year ended December 31, 2020. Accordingly, the Company did not qualify for taxation as a REIT in 2020 and has been taxed as a C corporation beginning with its 2020 taxable year. As a C corporation, the Company is not required to distribute any amounts to its stockholders.
Recapitalization
On January 8, 2021, the Company entered into an equity purchase and contribution agreement (the “Purchase Agreement”) by and among the Company, the Operating Partnership, Vestin Realty Mortgage I, Inc., (“VRMI”) Vestin Realty Mortgage II, Inc. (“VRMII”) and Michael V. Shustek (“Mr. Shustek” and together with VRMI and VRMII, the “Former Advisor”) and Color Up (the “Purchaser”). The transactions contemplated by the Purchase Agreement are referred to herein collectively as the “Transaction.”
On August 25, 2021, the closing of the Transaction occurred (the “Closing”). As a result of the Transaction, the Company acquired three multi-level parking garages consisting of approximately
Management assessed the potential accounting treatment for the Transaction by applying Accounting Standards Codification ("ASC") 805 and determined the Transaction did not result in a change of control. As a result, the three real estate assets and the technology platform acquired, described above, were accounted for by the Company as asset acquisitions in the financial statements, resulting in the recognition of assets and liabilities, at acquired cost and reflect the capitalization of any transaction costs directly attributable to the asset acquisitions.
The following schedule sets forth how the consideration exchanged in the Transaction was allocated among the various assets acquired and liabilities acquired or settled.
| Assets acquired and liabilities assumed | ||||
| Investment in real estate | $ | |||
| Intangibles - technology | ||||
| Cash | ||||
| Long-term debt | ( | ) | ||
| Indemnification liability | ( | ) | ||
| Total assets acquired and liabilities assumed | $ | |||
| OP Units (1) | ||||
| Warrants | ||||
| Total consideration | $ |
(1) Represents the value of the
Pending Merger
On May 27, 2022, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") by and between the Company and Mobile Infrastructure Trust, a Maryland real estate investment trust ("MIT"), which is
Prior to the Merger, MIT expects to undertake an initial public offering (the "MIT IPO") of its common shares of beneficial interest, $
The Merger is expected to be accounted for as a reverse recapitalization of the Company contemporaneous with the initial public offering of the MIT Common Shares. Under this method of accounting, MIT will be treated as the “acquiree” and the Company is treated as the acquirer for financial statement reporting purposes under principles generally accepted in the United States ("GAAP"). Accordingly, for accounting purposes, the Merger will be treated as the equivalent of the Company issuing stock for the net assets of MIT, accompanied by a recapitalization with a contemporaneous initial public offering of the MIT Common Shares. The net assets of the Company will be stated at historical cost, with no incremental goodwill or other intangible assets recorded.
Note B — Summary of Significant Accounting Policies
Basis of Accounting
The accompanying condensed consolidated financial statements of the Company are prepared on the accrual basis of accounting and in accordance with GAAP for interim financial information as contained in the Financial Accounting Standards Board (“FASB”) ASC, and in conjunction with rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. The unaudited condensed consolidated financial statements include accounts and related adjustments, which are, in the opinion of management, of a normal recurring nature and necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim period. Operating results for the three and six months ended June 30, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. There were no significant changes to our significant accounting policies during the six months ended June 30, 2022, except for those disclosed below. For a full summary of our accounting policies, refer to our 2021 Annual Report on Form 10-K as originally filed with the SEC on March 30, 2022.
Consolidation
The condensed consolidated financial statements include the accounts of the Company, the Operating Partnership, each of their wholly owned subsidiaries, and all other entities in which the Company has a controlling financial interest. For entities that meet the definition of a variable interest entity (“VIE”), the Company consolidates those entities when the Company is the primary beneficiary of the entity. The Company is determined to be the primary beneficiary when it possesses both the unilateral power to direct activities that most significantly impact the economic performance of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The Company continually evaluates whether it qualifies as the primary beneficiary and reconsiders its determination of whether an entity is a VIE upon reconsideration events. All intercompany activity is eliminated in consolidation.
Equity investments in which the Company exercises significant influence but does not control and is not the primary beneficiary are accounted for using the equity method. The Company's share of its equity method investees' earnings or losses is included in other income in the accompanying condensed consolidated statements of operations.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding asset impairment and purchase price allocations to record investments in real estate, as applicable.
Concentration
The Company had
In addition, the Company had concentrations in Cincinnati (
For the six months ended June 30, 2022,
Acquisitions
All assets acquired and liabilities assumed in an acquisition of real estate accounted for as a business combination are measured at their acquisition date fair values. For acquisitions of real estate accounted for as an asset acquisition, the fair value of consideration transferred by the Company (including transaction costs) is allocated to all assets acquired and liabilities assumed on a relative fair value basis.
The Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their relative fair values. Tangible assets include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis. The Company utilizes various estimates, processes and information to determine the as-if vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other methods. Amounts allocated to land, land improvements, buildings and fixtures are based on valuations performed by independent third parties or on the Company's analysis of comparable properties in the Company's portfolio. Identifiable intangible assets include amounts allocated to acquire leases for above- and below-market lease rates, the value of in-place leases, and the value of customer relationships, as applicable. The aggregate value of intangible assets related to in-place leases is primarily the difference between the property valued with existing in-place leases adjusted to market rental rates and the property valued as if vacant. Factors considered by the Company in its analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, considering current market conditions and costs to execute similar leases. In estimating carrying costs, the Company will include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period. Estimates of costs to execute similar leases including leasing commissions, legal and other related expenses are also utilized.
Above-market and below-market in-place lease values for owned properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above-market and below-market lease intangibles are amortized as a decrease or increase, respectively, to rental income over the remaining term of the lease.
In determining the amortization period for lease intangibles, the Company initially will consider the likelihood that a lessee will execute the renewal option. The likelihood that a lessee will execute the renewal option is determined by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located.
The value of in-place leases is amortized to expense over the initial term of the respective leases. The value of intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event does the amortization period for intangible assets exceed the remaining depreciable life of the building. If a tenant terminates its lease, the unamortized portion of the in-place lease intangibles is charged to expense.
In making estimates of fair values for purposes of allocating purchase price, the Company will utilize several sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company will also consider information obtained about each property as a result of the Company's pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.
Impairment of Long-Lived Assets
When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the assets for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If impairment exists, due to the inability to recover the carrying value of a property, the property is written down to fair value and an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income.
Immaterial Correction
The Company determined that the reimbursable property tax related to certain of its properties should have been recorded on a gross basis in the Statement of Operations. An adjustment has been made to the Consolidated Statements of Operations for the three and six months ended June 30, 2021. Property taxes and rental revenue were both increased by $
Reportable Segments
Our principal business is the ownership and operation of parking facilities. We do not distinguish our principal business, or group our operations, by geography or size for purposes of measuring performance. Accordingly, we have presented our results as a single reportable segment.
Stock-based Compensation
Stock-based compensation for equity awards is based on the grant date fair value of the equity awards and is recognized over the requisite service or performance period. Forfeitures are recognized as incurred. Certain equity awards are subject to vesting based upon the satisfaction of various service, market, or performance conditions.
Note C — Commitments and Contingencies
Litigation
The nature of the Company’s business exposes our properties, the Company, the Operating Partnership and its other subsidiaries to the risk of claims and litigation in the normal course of business. Other than as noted below, or routine litigation arising out of the ordinary course of business, the Company is not presently subject to any material litigation nor, to its knowledge, is any material litigation threatened against the Company.
The Company has previously disclosed pending class action legal proceedings facing the Company and the Former Advisor and/or Mr. Shustek prior to the completion of the Transaction. As a result of the Transaction, the Settlement Agreement (as defined in the Purchase Agreement) was entered into subject to completion of Color Up’s Tender Offer (as defined in the Purchase Agreement) for up to
The Company has previously disclosed that the SEC was conducting an investigation relating to the Company. On March 11, 2021, the SEC notified the Company that they do not intend to recommend an enforcement action by the Commission against the Company.
The SEC investigation also related to the conduct of the Company’s former chairman and chief executive officer, Michael V. Shustek. On July 29, 2021, the SEC filed a civil lawsuit against Michael V. Shustek and his advisory firm Vestin Mortgage LLC, alleging violations of the securities laws (Case 2-21-civ-01416-JCM-BNW, U.S. District Court, District of Nevada). The SEC seeks disgorgement, injunctions, and bars against Mr. Shustek, and related penalties. Pursuant to the Transaction, the Company is required to indemnify Mr. Shustek for certain claims related to the SEC investigation in an amount not to exceed $
On August 25, 2021, the Company also entered into an Assignment of Claims, Causes of Action, and Proceeds Agreement, or the Assignment of Litigation Agreement, pursuant to which (i) the Company assigned to the Former Advisor all of the Company’s right, title, interest, and benefits, whether legal, equitable, or otherwise, in and to any and all of the claims and causes of action that the Company may have against certain parties and any amounts that may be recovered or awarded to the Former Advisor on such claims and (ii) the Former Advisor agreed to indemnify the Company against all liabilities in connection with the assignment.
Environmental Matters
Investments in real property create the potential for environmental liability on the part of the owner or operator of such real property. If hazardous substances are discovered on or emanating from a property, the owner or operator of the property may be held strictly liable for all costs and liabilities relating to such hazardous substances. The Company has obtained a Phase I environmental study (which involves inspection without soil sampling or ground water analysis) conducted by independent environmental consultants on each of the properties and, in certain instances, has conducted additional investigation, including a Phase II environmental assessment. Furthermore, the Company has adopted a policy of conducting a Phase I environmental study on each property acquired and any additional investigation as warranted.
The Company believes that it complies, in all material respects, with all federal, state and local ordinances and regulations regarding hazardous or toxic substances. Furthermore, as of June 30, 2022, the Company has not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on the results of operations. The Company, however, cannot predict the impact of any unforeseen environmental contingencies or new or changed laws or regulations on properties in which the Company holds an interest, or on properties that may be acquired directly or indirectly in the future.
Note D – Acquisitions and Dispositions of Investments in Real Estate
2022
The following table is a summary of the parking asset acquisitions during the six months ended June 30, 2022.
| Property | Location | Date Acquired | Property Type | # Spaces | Size / Acreage | Retail Sq. Ft. | Purchase Price | ||||||||||||
| 222 Sheridan Bricktown Garage LLC | Oklahoma City, OK | 6/7/2022 | Garage | $ | |||||||||||||||
The following table is a summary of the allocated acquisition value of the property acquired by the Company during the six months ended June 30, 2022.
| Assets | ||||||||||||||||
| Land and Improvements | Building and improvements | In-Place Lease Value | Total assets acquired | |||||||||||||
| 222 Sheridan Bricktown Garage LLC (a) | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
| a. | The in-place lease asset has a life of |
2021
The following table is a summary of the parking asset acquisitions for the year ended December 31, 2021.
| Property | Location | Date Acquired | Property Type | # Spaces | Size / Acreage | Retail Sq. Ft. | Purchase Price | ||||||||||||
| 1W7 Carpark, LLC | Cincinnati, OH | 8/25/2021 | Garage | $ | |||||||||||||||
| 222W7, LLC | Cincinnati, OH | 8/25/2021 | Garage | — | $ | ||||||||||||||
| 322 Streeter, LLC | Chicago, IL | 8/25/2021 | Garage | — | $ | ||||||||||||||
| 2nd Street, LLC | Miami, FL | 9/9/2021 | Contract | N/A | — | $ | |||||||||||||
| Denver 1725 Champa Street Garage | Denver, CO | 11/3/2021 | Garage | — | $ | ||||||||||||||
The following table is a summary of the allocated acquisition value of all properties acquired by the Company for the year ended December 31, 2021.
| Assets | ||||||||||||||||||||
| Land and Improvements | Building and improvements | In-Place Lease Value | Contract Value | Total assets acquired | ||||||||||||||||
| 1W7 Carpark (a) | $ | $ | $ | $ | - | $ | ||||||||||||||
| 222W7 | — | — | ||||||||||||||||||
| 322 Streeter | — | — | ||||||||||||||||||
| 2nd Street (a) | — | — | ||||||||||||||||||
| Denver 1725 Champa Street Garage | — | — | ||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
| a. | The value of in-place lease assets and the 2nd Street contract are included in intangible assets on the consolidated balance sheet. The life of the in-place lease at 1W7 is |
There were no dispositions of investments in real estate or properties held for sale as of June 30, 2022 and December 31, 2021.
Note E — Related Party Transactions and Arrangements
Two of the Company’s Cincinnati assets, 1W7 Carpark and 222W7, are currently operated by PCA, Inc., dba Park Place Parking. Park Place Parking is a private parking operator that is wholly owned by relatives of the Company’s CEO. The Company’s CEO is neither an owner nor beneficiary of Park Place Parking. Park Place Parking has been operating these assets for four and three years, respectively. Both assets were acquired with their management agreements in place and at the same terms under which they were operating prior to the Transaction. As of June 30, 2022, the Company recorded a balance of approximately $0 from Park Place Parking which is included in accounts receivable on the consolidated balance sheet and has been paid within terms of the lease agreement.
The Company has an investment in MVP St. Louis Cardinal Lot, DST, a Delaware Statutory Trust (“MVP St. Louis”). Pursuant to the Closing, the Former Advisor and Mr. Shustek, were replaced as manager of MVP Parking, DST, LLC, the entity that manages MVP St. Louis, by the Company's CEO.
During 2021, VRMI and VRMII acquired $
On May 27, 2022, the Company entered into the Merger Agreement by and between the Company and MIT. Pursuant to the terms of the Merger Agreement, the Company will merge with and into MIT, with MIT continuing as the surviving entity resulting from the Merger. Prior to the Merger, MIT expects to undertake the MIT IPO of its MIT Common Shares, which is expected to close at least one business day prior to the effective time of the Merger. The closing of the MIT IPO is a condition to the closing of the Merger. The size and price range for the MIT IPO have yet to be determined. The MIT IPO is subject to the completion of the review process of the U.S. Securities and Exchange Commission and to market and other conditions; therefore, the expected date of completion of the MIT IPO and the closing date of the Merger has have not yet been determined.
In March 2022, the Company entered into an agreement with MIT, an affiliate of Bombe, requiring the Company to be allocated, bear and (where practicable) pay directly certain costs and expenses related to the Merger and MIT IPO. During the three and six months ended June 30, 2022, the Company incurred costs of approximately $
In May 2022, the Company entered into a lease agreement with ProKids, an Ohio not-for-profit. An immediate family member of the Company’s CEO is a member of the Board of Trustees and President-Elect of that organization. ProKids leased
License Agreement
On August 25, 2021, the Company entered into a Software License and Development Agreement, or the License Agreement, with an affiliate of Bombe, or the Supplier, pursuant to which the Company granted to the Supplier a limited, non-exclusive, non-transferable, worldwide right and license to access certain software and services for a fee of $
Tax Matters Agreement
On August 25, 2021, the Company, the Operating Partnership and Color Up entered into the Tax Matters Agreement, or the Tax Matters Agreement, pursuant to which the Operating Partnership agreed to indemnify Color Up and certain affiliates and transferees of Color Up, together, the Protected Partners, against certain adverse tax consequences in connection with (1) (i) a taxable disposition of certain specified properties and (ii) certain dispositions of the Protected Partners’ interest in the Operating Partnership, in each case, prior to the tenth anniversary of the completion of the Transaction (or earlier, if certain conditions are satisfied); and (2) the Operating Partnership’s failure to provide the Protected Partners the opportunity to guarantee a specified amount of debt of the Operating Partnership during the period ending on the tenth anniversary of the completion of the Transaction (or earlier, if certain conditions are satisfied). In addition, and for so long as the Protected Partners own at least 20% of the units in the Operating Partnership received in the Transaction, the Company agreed to use commercially reasonable efforts to provide the Protected Partners with similar guarantee opportunities.
Note F — Stock-Based Compensation
On October 14, 2020, the Compensation Committee of the Board of Directors of the Company approved the award of non-restricted shares to the Company’s four independent directors and to the Company’s former chief financial officer, J. Kevin Bland. Total stock-compensation expense for the year ended December 31, 2020 was approximately $
On May 27, 2022, the Operating Partnership issued long-term incentive equity awards in the form of LTIP units of the Operating Partnership ("LTIP Units") to the Company's five independent directors in consideration for their accrued but unpaid director compensation fees. The LTIP Units will vest ratably in equal installments on each of the next three anniversaries of the grant date, subject to the director's continued employment, contractual or other service relationship with the Company or an affiliate of the Company on the vesting date. The grant date fair value was determined to be $
The following table sets forth unvested LTIPs from January 1, 2022 through June 30, 2022:
| As of June 30, 2022 | ||||||||
| Number of Unvested Shares of LTIPs | Weighted Avg Grant FV Per Share | |||||||
| Balance - January 1, 2022 | $ | |||||||
| Granted | ||||||||
| Vested | ||||||||
| Forfeited | ||||||||
| Total unvested LTIPs | $ | |||||||
On May 27, 2022, the Operating Partnership granted an aggregate of
PUs are subject to restrictions on transfer and may be subject to a risk of forfeiture if the executive ceases to be an employee of the Company, the Operating Partnership or an affiliate prior to vesting of the award. Each vested PU is entitled to receive a dividend equivalent payment equal to the dividend paid on the number of shares of common units issued. Each unvested PU is entitled to receive
The following table sets forth unvested PUs from January 1, 2022 through June 30, 2022:
| As of June 30, 2022 | ||||||||
| Number of Unvested Shares of PUs | Weighted Avg Grant FV Per Share | |||||||
| Balance - January 1, 2022 | $ | |||||||
| Granted | ||||||||
| Vested | ||||||||
| Forfeited | ||||||||
| Total unvested PUs | $ | |||||||
The weighted average grant date fair value per share of $
Note G - Intangible Assets
A schedule of the Company’s intangible assets and related accumulated amortization and accretion as of June 30, 2022 and December 31, 2021 is as follows:
| As of June 30, 2022 | As of December 31, 2021 | |||||||||||||||
| Gross carrying amount | Accumulated amortization | Gross carrying amount | Accumulated amortization | |||||||||||||
| Value of in-place leases | $ | $ | $ | $ | ||||||||||||
| Value of lease commissions | ||||||||||||||||
| Value of indefinite lived contract (1) | -- | -- | ||||||||||||||
| Value of technology | ||||||||||||||||
| Total intangible assets | $ | $ | $ | $ | ||||||||||||
(1) Indefinite-Lived in-place contract includes the 2nd Street, LLC property in Miami, FL acquired on November 3, 2021. Refer to Note D - Acquisitions and Dispositions of Investments in Real Estate.
Amortization of the acquired in-place leases and lease commissions are included in depreciation and amortization in the accompanying consolidated statements of operations. Amortization expense associated with intangible assets totaled $
A schedule of future amortization and accretion of acquired intangible assets for the six months ended June 30, 2022 and thereafter is as follows:
| Six Months Ended June 30, 2022 | Acquired in-place leases | Lease commissions | Technology | |||||||||
| 2022 (Remainder) | $ | $ | $ | |||||||||
| 2023 | ||||||||||||
| 2024 | ||||||||||||
| 2025 | ||||||||||||
| 2026 | ||||||||||||
| Thereafter | ||||||||||||
| $ | $ | $ | ||||||||||
Note H - Earnings Per Share
Basic and diluted loss per weighted average common share (“EPS”) is calculated by dividing net income (loss) attributable to the Company’s common stockholders, including any participating securities, by the weighted average number of shares outstanding for the period. The Company includes the effect of participating securities in basic and diluted earnings per share computations using the two-class method of allocating distributed and undistributed earnings when the two-class method is more dilutive than the treasury stock method. Outstanding warrants were antidilutive as a result of the net loss for the six months ended June 30, 2022 and therefore were excluded from the dilutive calculation. The Company includes unvested PUs as contingently issuable shares in the computation of diluted EPS once the market criteria is met, assuming that the end of the reporting period is the end of the contingency period. The Company had
The following table reconciles the numerator and denominator used in computing the Company’s basic and diluted per-share amounts for net loss attributable to common stockholders for the three and six months ended June 30, 2022 and 2021:
| For the three months ended June 30, 2022 | For the three months ended June 30, 2021 | For the six months ended June 30, 2022 | For the six months ended June 30, 2021 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net loss attributable to MIC | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss attributable to participating securities | ||||||||||||||||
| Net loss attributable to MIC common stock | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator: | ||||||||||||||||
| Basic and dilutive weighted average shares of Common Stock outstanding | ||||||||||||||||
| Diluted share equivalents outstanding | ||||||||||||||||
| Dilutive weighted average shares of Common Stock outstanding | ||||||||||||||||
| Basic and diluted loss per weighted average common share: | ||||||||||||||||
| Basic and dilutive | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Note I — Notes Payable and Paycheck Protection Program Loan
As of June 30, 2022, the principal balances on notes payable are as follows:
| Loan | Original Debt Amount | Monthly Payment | Balance as of 6/30/22 | Lender | Term (in years) | Interest Rate | Loan Maturity | |||||||||||||||
| Corporate D&O Insurance (4) | $ | $ | $ | MetaBank | % | 7/31/2022 | ||||||||||||||||
| MVP Clarksburg Lot | $ | Interest Only | $ | Vestin Realty Mortgage I | % | 8/25/2022 | ||||||||||||||||
| MCI 1372 Street | $ | Interest Only | $ | Vestin Realty Mortgage I | % | 8/25/2022 | ||||||||||||||||
| MVP Milwaukee Old World | $ | Interest Only | $ | Vestin Realty Mortgage I | % | 8/25/2022 | ||||||||||||||||
| MVP Milwaukee Clybourn | $ | Interest Only | $ | Vestin Realty Mortgage I | % | 8/25/2022 | ||||||||||||||||
| MVP Wildwood NJ Lot, LLC | $ | Interest Only | $ | Vestin Realty Mortgage I | % | 8/25/2022 | ||||||||||||||||
| MVP Cincinnati Race Street, LLC | $ | Interest Only | $ | Vestin Realty Mortgage II | % | 8/25/2022 | ||||||||||||||||
| Minneapolis Venture | $ | Interest Only | $ | Vestin Realty Mortgage I | % | 8/25/2022 | ||||||||||||||||
| MVP Memphis Poplar (3) | $ | Interest Only | $ | LoanCore | % | 3/6/2024 | ||||||||||||||||
| MVP St. Louis (3) | $ | Interest Only | $ | LoanCore | % | 3/6/2024 | ||||||||||||||||
| 1W7 Carpark, LLC and 222W7th Holdco, LLC | $ | $ | $ | FlashParking, Inc | % | 5/31/2024 | ||||||||||||||||
| Mabley Place Garage, LLC | $ | $ | $ | Barclays | % | 12/6/2024 | ||||||||||||||||
| 322 Streeter Holdco LLC | $ | Interest Only | $ | American National Insurance Co. | * | % | 3/1/2025 | |||||||||||||||
| MVP Houston Saks Garage, LLC | $ | $ | $ | Barclays Bank PLC | % | 8/6/2025 | ||||||||||||||||
| Minneapolis City Parking, LLC | $ | $ | $ | American National Insurance, of NY | % | 5/1/2026 | ||||||||||||||||
| MVP Bridgeport Fairfield Garage, LLC | $ | $ | $ | FBL Financial Group, Inc. | % | 8/1/2026 | ||||||||||||||||
| West 9th Properties II, LLC | $ | $ | $ | American National Insurance Co. | % | 11/1/2026 | ||||||||||||||||
| MVP Fort Worth Taylor, LLC | $ | $ | $ | American National Insurance, of NY | % | 12/1/2026 | ||||||||||||||||
| MVP Detroit Center Garage, LLC | $ | $ | $ | Bank of America | % | 2/1/2027 | ||||||||||||||||
| MVP St. Louis Washington, LLC (1) | $ | $ | $ | KeyBank | * | % | 5/1/2027 | |||||||||||||||
| St. Paul Holiday Garage, LLC (1) | $ | $ | $ | KeyBank | * | % | 5/1/2027 | |||||||||||||||
| Cleveland Lincoln Garage, LLC (1) | $ | $ | $ | KeyBank | * | % | 5/1/2027 | |||||||||||||||
| MVP Denver Sherman, LLC (1) | $ | $ | $ | KeyBank | * | % | 5/1/2027 | |||||||||||||||
| MVP Milwaukee Arena Lot, LLC (1) | $ | $ | $ | KeyBank | * | % | 5/1/2027 | |||||||||||||||
| MVP Denver 1935 Sherman, LLC (1) | $ | $ | $ | KeyBank | * | % | 5/1/2027 | |||||||||||||||
| MVP Louisville Broadway Station, LLC (2) | $ | Interest Only | $ | Cantor Commercial Real Estate | ** | % | 5/6/2027 | |||||||||||||||
| MVP Whitefront Garage, LLC (2) | $ | Interest Only | $ | Cantor Commercial Real Estate | ** | % | 5/6/2027 | |||||||||||||||
| MVP Houston Preston Lot, LLC (2) | $ | Interest Only | $ | Cantor Commercial Real Estate | ** | % | 5/6/2027 | |||||||||||||||
| MVP Houston San Jacinto Lot, LLC (2) | $ | Interest Only | $ | Cantor Commercial Real Estate | ** | % | 5/6/2027 | |||||||||||||||
| St. Louis Broadway, LLC (2) | $ | Interest Only | $ | Cantor Commercial Real Estate | ** | % | 5/6/2027 | |||||||||||||||
| St. Louis Seventh & Cerre, LLC (2) | $ | Interest Only | $ | Cantor Commercial Real Estate | ** | % | 5/6/2027 | |||||||||||||||
| MVP Indianapolis Meridian Lot, LLC (2) | $ | Interest Only | $ | Cantor Commercial Real Estate | ** | % | 5/6/2027 | |||||||||||||||
| St Louis Cardinal Lot DST, LLC (5) | $ | Interest Only | $ | Cantor Commercial Real Estate | ** | % | 5/31/2027 | |||||||||||||||
| MVP Preferred Parking, LLC | $ | Interest Only | $ | Key Bank | ** | % | 8/1/2027 | |||||||||||||||
| Less unamortized loan issuance costs | $ | ( | ) | |||||||||||||||||||
| $ | ||||||||||||||||||||||
| (1) | The Company issued a promissory note to KeyBank for $ |
| (2) | The Company issued a promissory note to Cantor Commercial Real Estate Lending, L.P. (“CCRE”) for $ |
| (3) | On February 8, 2019, subsidiaries of the Company, consisting of MVP PF St. Louis 2013, LLC (“MVP St. Louis 2013”), and MVP PF Memphis Poplar 2013, LLC (“MVP Memphis Poplar”), LLC entered into a loan agreement, dated as of February 8, 2019, with LoanCore Capital Credit REIT LLC (“LoanCore”). Under the terms of the Loan Agreement, LoanCore agreed to loan MVP St. Louis 2013 and MVP Memphis Poplar $ |
| (4) | On September 30, 2021, the Company entered into a loan with Meta Bank to finance $ |
| (5) | Pursuant to the Closing of the Transaction, the Company recorded the $ |
* 2 Year Interest Only
** 10 Year Interest Only
During April 2022, the Company received notification from the Small Business Administration stating that the round two paycheck protection program loan was forgiven in full in the amount of $
Reserve funds are generally required for repairs and replacements, real estate taxes, and insurance premiums. Some notes contain various terms and conditions including debt service coverage ratios and debt yield limits. Borrowers for six of the Company’s loans totaling $
As of June 30, 2022, future principal payments on notes payable are as follows:
| 2022 (remainder) | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total | $ |
Note J - Line of Credit
On March 29, 2022, the Company entered into a Credit Agreement (the "Credit Agreement") with KeyBanc Capital Markets, as lead arranger, and KeyBank, National Association, as administrative agent. The Credit Agreement refinances the Company’s current loan agreements for certain properties. The Credit Agreement will provide for, among other things, a $
On April 15, 2022 the Company used proceeds from the Credit Agreement to pay a loan in full with LoanCore in the amount of $
Note K — Fair Value
A fair value measurement is based on the assumptions that market participants would use in pricing an asset or liability in an orderly transaction. The hierarchy for inputs used in measuring fair value are as follows:
| 1. | Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. | |
| 2. | Level 2 – Inputs include quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, and model-derived valuations whose inputs are observable. | |
| 3. | Level 3 – Model-derived valuations with unobservable inputs. |
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
The Company's financial instruments include cash and cash equivalents, restricted cash, accounts receivable and accounts payable. Due to their short maturities, the carrying amounts of these assets and liabilities approximate fair value. The estimated fair value of the Company’s debt was approximately $
Our real estate assets are measured and recognized at fair value, less costs to sell held-for-sale properties, on a nonrecurring basis dependent upon when we determine an impairment has occurred. When the Company impairs assets that have operational impairment indicators, management uses an independent third-party to determine the fair value primarily using the income capitalization approach based on the contracted rent to be received from the operator or the sales comparison approach. The income capitalization approach reflects the property’s income-producing capabilities based on the assumption that value is created by the expectation of benefits to be derived in the future. The sales comparison approach utilizes sales of comparable properties, adjusted for differences, to indicate value. These methods are considered Level 2 measurements in the hierarchy.
Note L – Variable Interest Entities
The Company, through a wholly owned subsidiary of its Operating Partnership, owns a
At the time of the initial investment, the Company conducted an analysis and concluded that the 51% investment in the DST should not be consolidated, as the Company was not the primary beneficiary because the power to direct the activities that most significantly impact the economic performance of MVP St. Louis was held by MVP Parking DST, LLC (the “Manager”) and certain subsidiaries of the Manager. The investment in MVP St. Louis was accounted for using the equity method of accounting through August 25, 2021.
In connection with the Closing, the former advisor of the Company, MVP Realty Advisors, LLC ("MVPRA”) transferred ownership of the Manager to Manuel Chavez, III, the Chief Executive Officer of the Company. This change in structure was deemed a reconsideration event and therefore the Company reevaluated whether it had control. Based on the Company's evaluation, the Company began consolidating the investment in MVP St. Louis and MVP St. Louis Cardinal Lot Master Tenant, LLC, which had total assets and liabilities of approximately $
Amounts related to MVP St. Louis included in the consolidated balance sheet are as follows:
| June 30, 2022 | ||||
| (Unaudited) | ||||
| ASSETS | ||||
| Investments in real estate | $ | |||
| Cash | ||||
| Cash – restricted | ||||
| Accounts receivable | ||||
| Prepaid expenses | ||||
| Total assets | $ | |||
| LIABILITIES | ||||
| Notes payable | $ | |||
| Accounts payable and accrued liabilities | ||||
| Total liabilities | $ | |||
Summarized Statements of Operations—Unconsolidated Real Estate Affiliates—Equity Method Investments
| For the three months ended June 30, 2021 | For the six months ended June 30, 2021 | |||||||
| Revenue | $ | $ | ||||||
| Expenses | ( | ) | ( | ) | ||||
| Net income (loss) | $ | $ | ( | ) | ||||
Note M –Leases
The Company accounts for rental income and percentage rent income in accordance with ASC 842 - Leases. The majority of the Company’s leases are largely similar and the lease agreements generally contain similar provisions and features, without substantial variations. All leases are currently classified as operating leases. The following table summarizes the components of lease revenue recognized during the three and six months ended June 30, 2022 and 2021 included within the Company's Consolidated Statements of Operations:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| Lease revenue | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Fixed contractual payments | $ | $ | $ | $ | ||||||||||||
| Variable lease payments | $ | $ | $ | $ | ||||||||||||
| Straight-line rental income | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
Approximate future fixed contractual lease payments to be received under non-cancelable operating leases in effect as of June 30, 2022, assuming no new or renegotiated leases or option extensions on lease agreements, are as follows:
| For the year ended, | Future lease payments due | |||
| 2022 (Remainder) | $ | |||
| 2023 | $ | |||
| 2024 | $ | |||
| 2025 | $ | |||
| 2026 | $ | |||
| Thereafter | $ | |||
Note N - Income Taxes
The Company previously elected to be taxed as a REIT for federal income tax purposes and operated in a manner that allowed the Company to qualify as a REIT through December 31, 2019. As a consequence of the COVID-19 pandemic, the Company earned income from a number of distressed tenants that did not constitute qualifying REIT income for purposes of the annual REIT gross income tests, and, as a result, the Company was not in compliance with the annual REIT income tests for the year ended December 31, 2020. Accordingly, the Company did not qualify for taxation as a REIT in 2020 and has been taxed as a C corporation beginning with its 2020 taxable year. As a C corporation, the Company is subject to federal income tax on its taxable income at regular corporate rates.
A full valuation allowance for deferred tax assets was historically provided each year since the Company believed that as a REIT it was more likely than not that it would not realize the benefits of its deferred tax assets. As a taxable C Corporation, the Company has evaluated its deferred tax assets for the six months ended June 30, 2022, which consist primarily of net operating losses and its investment in the Operating Partnership (as a result of the Closing). Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended June 30, 2022. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. Due to the ongoing impact to the Company of the COVID-19 pandemic, the Company has determined that it will continue to record a full valuation allowance against its deferred tax assets for the six months ended June 30, 2022. A change in circumstances may cause the Company to change its judgment about whether deferred tax assets should be recorded, and further whether any such assets would more likely than not be realized. The Company would generally report any change in the valuation allowance through its income statement in the period in which such changes in circumstances occur.
Note O - Equity
Series A Preferred Stock
On November 1, 2016, the Company commenced an offering of up to $
The holders of the Series A Preferred Stock are entitled to receive, when and as authorized by the Board of Directors and declared by the Company out of funds legally available for the payment of dividends, cash dividends at the rate of
Each investor in the Series A offering received, for every $1,000 in shares subscribed by such investor, detachable warrants to purchase
On March 24, 2020, the Company’s Board of Directors unanimously authorized the suspension of the payment of distributions on the Series A Preferred Stock; however, such distributions will continue to accrue in accordance with the terms of the Series A Preferred Stock. Since initial issuance, the Company had declared distributions of approximately $
Series 1 Preferred Stock
On March 29, 2017, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary to the charter of the Company classifying and designating
The holders of the Series 1 Preferred Stock are entitled to receive, when and as authorized by the Company’s Board of Directors and declared by us out of legally available funds, cumulative, cash dividends on each share at an annual rate of
Each investor in the Series 1 offering received, for every $
On March 24, 2020, the Company’s Board of Directors unanimously authorized the suspension of the payment of distributions on the Series 1 Preferred Stock, however, such distributions will continue to accrue in accordance with the terms of the Series 1 Preferred Stock. Since initial issuance, the Company had declared distributions of approximately $
Warrants
On August 25, 2021, in connection with the Closing, the Company entered into a warrant agreement (the “Warrant Agreement”) pursuant to which it issued to the Purchaser warrants to purchase up to
The Company assesses its warrants as either equity or a liability based upon the characteristics and provisions of each instrument. Warrants classified as equity are recorded at fair value as of the date of issuance on the Company’s balance sheet and no further adjustments to their valuation are made. Management estimates the fair value of these warrants using option pricing models and assumptions that are based on the individual characteristics of the warrants or other instruments on the valuation date, as well as assumptions for future financings, expected volatility, expected life, yield and risk-free interest rate.
As of June 30, 2022, all outstanding warrants issued by the Company were classified as equity.
Tender Offer
On October 5, 2021, Color Up, LLC (“Purchaser”) initiated a Tender Offer (the “Offer”) to purchase up to
Effective November 8, 2021, the Purchaser executed a subscription agreement with the Company pursuant to which the Purchaser acquired the remaining
Securities Purchase Agreement
On November 2, 2021, the Company, entered into a securities purchase agreement (the “Purchase Agreement”) by and among the Company, the Operating Partnership, and HS3 affiliated with Jeffrey Osher, a director of the Company, pursuant to which the Operating Partnership issued and sold to HS3 (a)
Convertible Noncontrolling Interests
As of June 30, 2022, the Operating Partnership had approximately
Dividend Reinvestment Plan
The Dividend Reinvestment Plan (“DRIP”) allows stockholders to invest distributions in additional shares of our Common Stock, subject to certain limits. Stockholders who elect to participate in the DRIP may choose to invest all or a portion of their cash distributions in shares of our Common Stock at a price equal to our most recent estimated value per share. On March 22, 2018, the Company suspended payment of distributions and as such there are currently no distributions to invest in the DRIP.
Share Repurchase Program
On May 29, 2018, the Company’s Board of Directors suspended the Share Repurchase Program, other than for hardship repurchases in connection with a shareholder’s death. Repurchase requests made in connection with the death of a stockholder were repurchased at a price per share equal to 100% of the amount the stockholder paid for each share, or once the Company had established an estimated NAV per share, 100% of such amount as determined by the Company’s Board of Directors, subject to any special distributions previously made to the Company’s stockholders. On March 24, 2020, the Board of Directors suspended all repurchases, even in the case of a shareholder’s death.
Note P - Subsequent Events
On July 5, 2022, VRMI merged with and into Suncrest Holdings, LLC (“Suncrest”), an entity managed by an entity majority owned and controlled by Michael Shustek, the Company’s former Chief Executive Officer. On July 11, 2022 Suncrest assigned and sold five of the six notes issued originally by VRMI to certain of the subsidiaries of the Company as described in Note I above (collectively, the “VRMI Notes”) to VRMII. As a result, the obligations of Company subsidiaries under the five VRMI Notes, including all repayment obligations, are now owed to VRMII. All of the loans evidenced by the VRMI Notes mature and are payable in full on August 25, 2022.
On July 18, 2022, affiliates of MacKenzie Capital Management, LP (the “Bidder”), launched an unsolicited “mini-tender” offer for up to
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a financial review and analysis of the Company’s financial condition and results of operations for the three and six months ended June 30, 2022 and 2021. This discussion and analysis should be read in conjunction with the accompanying condensed consolidated financial statements and the notes thereto and Management's Discussion and Analysis of Financial Conditions and Results of Operations in the Company’s annual report on Form 10-K for the year ended December 31, 2021. As used herein, the terms "we," "our" and "us" refer to Mobile Infrastructure Corporation, and, as required by context, Mobile Infra Operating Partnership, L.P., formerly known as MVP REIT II Operating Partnership, LP, which the Company refers to as the "Operating Partnership," and to their subsidiaries.
Forward-Looking Statements
Certain statements included in this quarterly report on Form 10-Q (this "Quarterly Report") that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements. Forward-looking statements are typically identified by the use of terms such as "may," "should," "expect," "could," "intend," "plan," "anticipate," "estimate," "believe," "continue," "predict," "potential" or the negative of such terms and other comparable terminology.
The forward-looking statements included herein are based upon the Company’s current expectations, plans, estimates, assumptions and beliefs, which involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the Company’s control. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, the actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on operations and future prospects include, but are not limited to:
| ● |
the fact that the Company has limited history, as the Company was formed in 2015; |
|
| ● | the ability of Mobile Infrastructure Trust, a Maryland real estate investment trust (“MIT”), to consummate the initial public offering (the "MIT IPO") of its common shares of beneficial interest, $0.0001 par value per share and the Company’s and MIT’s ability to consummate the merger and the transactions contemplated by the Agreement and Plan of Merger (the "Merger Agreement") by and between the Company and MIT, which is 100% owned by Bombe Asset Management LLC, an Ohio limited liability company owned by Mr. Chavez and Ms. Hogue (the “Merger”) and realize the anticipated benefits of the MIT IPO and the Merger; |
| ● |
the Company’s ability to complete a liquidity event; |
| ● |
the Company’s ability to generate sufficient cash flows to pay distributions to the Company’s stockholders; |
| ● |
the impact on our business and those of our tenants from epidemics, pandemics or outbreaks of an illness, disease or virus (including COVID-19), including lockdowns and similar mandates; |
| ● |
the fact that the Company has experienced net losses since inception and may continue to experience additional losses; |
| ● |
changes in economic conditions generally and the real estate and debt markets specifically, including economic trends impacting parking facilities; |
| ● |
risks inherent in the real estate business, including tenant defaults, potential liability relating to environmental matters and the lack of liquidity of real estate investments; |
| ● |
competitive factors that may limit the Company’s ability to make investments or attract and retain tenants; |
| ● |
the ability of leases under our New Lease Structure (as defined below) to provide increases in same property rental revenue as compared to our prior leases; |
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the Company’s ability to attain its investment strategy or increase the value of its portfolio; |
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the loss of key personnel could have a material adverse effect upon the Company's ability to conduct and manage the Company's business; |
| ● |
the performance of properties the Company has acquired or may acquire or loans the Company has made or may make that are secured by real property; |
| ● |
the Company’s ability to successfully integrate pending acquisitions and transactions and implement an operating strategy; |
| ● |
potential damage and costs arising from natural disasters, terrorism and other extraordinary events, including extraordinary events affecting parking facilities included in the Company’s portfolio; |
| ● |
the Company’s ability to act on its pipeline of acquisitions; |
| ● |
the availability of capital and debt financing generally, and any failure to obtain debt financing at favorable terms or a failure to satisfy the conditions, covenants and requirements of that debt; |
| ● |
changes in interest rates; |
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the Company’s ability to negotiate amendments or extensions to existing debt agreements; |
| ● |
the Company’s loss of REIT status and ability to remediate its loss of REIT status under U.S. federal income tax law; |
| ● |
potential adverse impacts from changes to the U.S. tax laws; and |
| ● |
changes to generally accepted accounting principles, or GAAP. |
Any of the assumptions underlying the forward-looking statements included herein could be inaccurate, and undue reliance should not be placed upon any forward-looking statements included herein. All forward-looking statements are made as of the date of this Quarterly Report, and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. Except as otherwise required by the federal securities laws, the Company undertakes no obligation to publicly update or revise any forward – looking statements made after the date of this Quarterly Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward – looking statements included in this Quarterly Report, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Quarterly Report will be achieved.
Overview
The Company focuses on acquiring, owning and leasing parking facilities and related infrastructure, including parking lots, parking garages and other parking structures throughout the United States. The Company targets both parking garage and surface lot properties primarily in top 50 U.S. Metropolitan Statistical Areas ("MSAs"), with proximity to key demand drivers, such as commerce, events and venues, government and institutions, hospitality and multifamily central business districts.
As of June 30, 2022, the Company owned 45 parking facilities in 23 separate markets throughout the United States, with a total of 15,818 parking spaces and approximately 5.5 million square feet. As of June 30, 2022, the Company also owned approximately 0.2 million square feet of commercial space adjacent to its parking facilities. The Company owns substantially all of its assets and conducts its operations through the Operating Partnership.
Management of the Company has been focused on the undertaking of four strategic objectives to reposition the Company for its next phase of growth and a potential liquidity event. The Company converted all management contracts back to leases under the New Lease Structure effective as of January 1, 2022, so that the Company once again has qualifying income from a REIT-test perspective beginning in 2022. The second objective was to focus on the balance sheet and the Company’s upcoming debt maturities. During the first quarter, the Company extended maturities and refinanced 2022 maturities with a facility from KeyBank, which greatly improved the cost of interest on that debt. Management’s third objective was to focus heavily on the performance of each asset, working with the operators to create a business plan for each asset to improve cash flow and rental income to the Company. Those business plans were finalized in the first quarter of 2022 and are currently being implemented with our tenant-operators. The Company anticipates that asset-level performance will continue to improve through 2022. Finally, management continues to focus on the fourth objective which is the remediation of REIT status for the Company and evaluating options for a potential liquidity event, including a potential listing on a national securities exchange.
On May 27, 2022, the Company and MIT entered into the Merger Agreement pursuant to which, at the effective time, the Company will merge with and into MIT, with MIT continuing as the surviving entity resulting from the merger. The merger and the transactions contemplated by the Merger Agreement are referred to herein collectively as the "Merger." See Note A - Organization and Business Operations in Part I, Item 1 - Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for further information regarding the Merger.
Objectives
The Company closed on the Transaction on August 25, 2021, which resulted in a new management team. In addition, as of December 3, 2021, Ms. Hogue was appointed Interim Chief Financial Officer of the Company. Over the next twelve months management will be focused predominantly on the following:
| • |
Identifying paths for remediation of REIT status, which is desirable as the Company moves towards a potential liquidity event; |
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| • |
Working with the third-party operators to optimize the performance of the Company's parking facilities and other assets to move towards cash flow positivity; |
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| • |
Reducing corporate overhead to move the Company towards profitability; and |
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| • |
Pursuing options for refinancing the near-term debt maturities. |
The Company’s strategic plan includes pursuing acquisitions as well as a potential liquidity event, which may include a potential listing event or other alternatives intended to provide the Company scale and capacity to grow beyond its current asset base.
Since the Closing, our new management team has been working closely with our tenants to evaluate capital requirements of the assets, with a view to understanding current and future demand drivers of those assets. The Company has been implementing the recently contributed proprietary technology which will provide real-time information on the performance of assets. Going forward under the New Lease Structure (as defined below), the Company is involved with capital expenditures related to upgrades and optimization of our parking facilities, including but not limited to gate arm systems, lighting, and large capital improvements to structure and concrete. We expect to maintain an active dialogue with our tenants for the betterment of the Company’s portfolio.
Investment Strategy & Criteria
Because of the Company’s management team’s long experience in the parking industry, the new management team often receives off-market calls for parking facilities that are not yet being marketed for sale, as well as have early notices on properties just getting ready to be marketed. As such, the Company has a pipeline of acquisitions that is both bespoke and actionable, that the Company believes are off-market and largely unavailable to our competitors. The Company intends to continue to consolidate the industry through acquisitions, partnering with both owners and operator tenants, to create a meaningful pipeline and scale.
The Company’s investment strategy has historically focused primarily on acquiring, owning and leasing parking facilities, including parking lots, parking garages and other parking structures throughout the United States. The Company has historically focused primarily on investing in income-producing parking lots and garages with air rights in MSAs. In expanding the Company’s portfolio, the Company will seek geographically diverse investments that address multiple key demand drivers and demonstrate consistent consumer use that are expected to generate positive cash flows and provide greater predictability during periods of economic uncertainty. Such targeted investments include, but are not limited to, parking facilities near one or more of the following key demand drivers:
| • |
Commerce |
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| • |
Events and venues |
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| • |
Government and institutions |
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| • |
Hospitality |
|
| • |
Multifamily central business districts |
The Company generally targets parking facilities that are near multiple key demand drivers so as not to be solely reliant on a single source of income. Parking garages in downtown cores constitute a large portion of the Company’s parking facilities as they serve multiple key demand drivers.
As a result of the COVID-19 pandemic, such key demand drivers have been and are expected to be diminished for an indeterminate period of time with an uneven return to downtown cores across our properties. Many state and local governments have restricted public gatherings, which has in some cases eliminated or severely reduced the demand for parking.
The Company works closely with our current tenants to understand the return to each individual market, both as the Company considers the key demand drivers of the Company’s current assets, as well as new assets that the Company may consider acquiring as part of our investment strategy. The Company's deep relationships with key tenants help facilitate collaboration with respect to our portfolio.
The Company is focused on acquiring properties that are expected to generate positive cash flow, located in populated MSAs and expected to produce income within 12 months of the properties’ acquisition. The Company intends to acquire under-managed parking facilities and collaborate with its tenants to implement a tailored, value-add approach that includes fostering the implementation of identified value levers and mitigating risk exposure, while fostering local business relationships to derive market knowledge and connectivity.
In the event of a future acquisition of properties, the Company would expect the foregoing criteria to serve as guidelines; however, management and the Company’s Board of Directors may vary from these guidelines to acquire properties which they believe represent value or growth opportunities.
The Company’s investments are subject to various federal, state, local and foreign laws, ordinances and regulations, including, among other things, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution and indirect environmental impacts such as increased motor vehicle activity. The Company has obtained or intends to obtain all permits and approvals necessary under current law to operate its investments.
The Company cannot assure you that the Company will attain investment objectives or that the value of the Company’s assets will not decrease. The Company’s Board of Directors reviews the Company’s investment policies at least annually to determine whether the Company's investment policies continue to be in the best interests of the Company’s stockholders.
See Note A - Organization and Business Operations in Part I, Item 1 - Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for information on the Company's recapitalization.
Trends and Other Factors Affecting Our Business
Various trends and other factors affect or have affected the Company's operating results, including:
The COVID-19 Pandemic
The ongoing COVID-19 pandemic has significantly adversely impacted global economic activity, contributing to significant volatility. The return to normalized movement within and between states and cities is relatively uneven among markets and industries, which has impacted the performance of our assets, as many of the Company’s properties are located in urban centers, near government buildings, entertainment centers, or hotels. While the employment level in the United States has nearly returned to 2019 levels, many companies continue to deploy a work-from-home or hybrid remote strategy for employees. We anticipate that a hybrid work structure for traditional central business district office workers will be the normalized state going-forward. This has impacted the performance of many of our assets that have office exposure and underscores the importance of a multi-key demand driver strategy in repositioning current and/or acquiring new assets. During 2020 and 2021, many state and local governments restricted public gatherings and implemented social distancing measures, which has, in some cases, eliminated or severely reduced the demand for parking. State governments and other authorities have been increasingly lifting or modifying some of these measures, which will encourage greater movement around and between cities. Should COVID-19 restrictions be reinstated, the Company’s rental revenue may continue to be adversely affected by the COVID-19 pandemic and may be further materially adversely affected to the extent that economic conditions result in the elimination of jobs or the migration of jobs from the urban centers where the Company’s parking facilities are situated to other locations. In particular, a majority of the Company’s property leases call for additional percentage rent, which will be adversely impacted by a decline in the demand for parking. However, we see increasing demand for multi-use assets that have exposure to entertainment and sporting venues or have exposure to driving travel through hotel relationships. As restrictions continue to lift across the United States, we anticipate a return to normal, in particular a return to driving vacations, which may positively impact the longer-term outlook of central business districts.
The COVID-19 pandemic has had, and may continue to have, a material adverse effect on the Company's business, financial condition, results of operations, cash flows, liquidity and ability to satisfy debt service obligations, and its duration and ultimate lasting impact is unknown. The Company's business, financial condition, results of operations, cash flows, liquidity and ability to satisfy debt service obligations may continue to be negatively impacted as a result of the COVID-19 pandemic and may remain at depressed levels compared to pre-COVID-19 pandemic levels for an extended period.
The Company's 2020 and 2021 annual financial results were more severely impacted by the COVID-19 pandemic in comparison with the financial results during the first six months of 2022. In response to the COVID-19 pandemic, the Company entered into certain lease amendments and new lease agreements with tenants and operators during 2020. Under these lease amendments and agreements, the tenants operated parking facilities on the Company's behalf and paid their operating expenses from gross parking revenue and was required to remit an agreed upon percentage of the remainder to the Company instead of base rent payments. Revenues from these properties were recorded as management income, which did not constitute qualifying REIT income for purposes of the annual REIT gross income tests, and, as a result, the Company was not in compliance with the annual REIT income tests for its taxable year ended December 31, 2020. Accordingly, the Company did not qualify as a REIT in 2020 and has been taxed as a C corporation beginning with its taxable year ended December 31, 2020. The Company converted these lease amendments and new lease agreements to the New Lease Structure as defined below, and does not expect to recognize any management income from the New Lease Structure described below going forward.
Fuel Prices
Increased fuel prices may adversely affect the Company's operating environment and costs. Fuel prices have a direct impact on the ability and frequency of consumers to engage in activities related to transportation. Increases in the price of fuel may result in higher transportation costs and adversely affect consumer use at the Company's parking garages. Increases in fuel costs also can lead to other non-recoverable, direct expense increases to the Company through, for example, increased costs of energy. Increases in energy costs for the Company's tenants are typically recovered from lessees, although the Company's share of energy costs increases as a result of lower occupancies, and higher operating cost reimbursements impact the ability to increase underlying rents. Rising fuel prices also may increase the cost of construction and the cost of materials that are petroleum-based, thus affecting the development of the Company's existing assets or tenants' ongoing development projects.
The Company's 2020 and 2021 annual financial results and the financial results for the six months ended June 30, 2022 were not impacted by the recent increase in fuel prices in the United States. The Company cannot predict the extent and duration of the increase in fuel prices or its economic impact. Further, the extent and strength of any economic recovery, and/or when fuel prices decline is uncertain and subject to various factors and conditions. As a result, the Company's results of operations and balance sheets may not be indicative of future operating results or of its future financial condition.
Results of Operations for the three months ended June 30, 2022, compared to the three months ended June 30, 2021.
| For the Three Months Ended June 30, |
||||||||||||||||
| 2022 |
2021 |
$ Change |
% Change |
|||||||||||||
| Revenues |
||||||||||||||||
| Base rent income |
$ | 2,122,000 | $ | 3,062,000 | $ | (940,000 | ) | (30.7 | )% | |||||||
| Management income |
427,000 | 663,000 | (236,000 | ) | (35.6 | )% | ||||||||||
| Percentage rent income |
4,856,000 | 93,000 | 4,763,000 | 5121.5 | % | |||||||||||
| Total revenues |
$ | 7,405,000 | $ | 3,818,000 | $ | 3,587,000 | 93.9 | % | ||||||||
Total Revenues
The $3,587,000 increase in revenues for the three months ended June 30, 2022, which includes reimbursement revenue, is primarily attributable to (1) an aggregate increase in base rent income and percentage rent income of $307,000 and $1,886,000, respectively, related to five parking facilities acquired in the third and fourth quarters of 2021 and one property acquired during the second quarter of 2022 and (2) a decrease in base rent income and management income and an offsetting increase in percentage rent income as a result of the New Lease Structure, as defined below.
In 2021, the Company began amending certain leases to the New Lease Structure. Under this structure, tenants pay a base rent (typically $500 - $1,000 per month) and percentage rent equal to a designated percentage, typically ninety percent (90%), of the amount by which gross revenues at the property during any lease year exceed a negotiated base amount. The Company negotiates base rent, percentage rent, and the base amount used in the calculation of percentage rent based on economic factors applicable to the particular parking facility and geographic market. Under the New Lease Structure, the majority of the revenue earned is variable in nature and classified as percentage rent, whereas under the previous lease and management agreements in effect during 2021, the majority of revenue was classified as either base rent or management income. As of June 30, 2021, there were 15 properties on property management agreements that are now under the New Lease Structure resulting in monthly base rent and percentage rent in lieu of management income. As of June 30, 2022, 30 of the Company's leases, or 66.7%, are structured under the New Lease Structure.
The management income for the three months ended June 30, 2022 is attributable to operator collections for a management agreement that was converted into the New Lease Structure at the beginning of 2022.
| For the Three Months Ended June 30, |
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| 2022 |
2021 |
$ Change |
% Change |
|||||||||||||
| Operating expenses |
||||||||||||||||
| Property taxes |
$ | 1,844,000 | $ | 1,173,000 | $ | 671,000 | 57.2 | % | ||||||||
| Property operating expense |
731,000 | 274,000 | 457,000 | 166.8 | % | |||||||||||
| General and administrative |
1,882,000 | 1,428,000 | 454,000 | 31.8 | % | |||||||||||
| Professional fees |
532,000 | 56,000 | 476,000 | 850.0 | % | |||||||||||
| Organizational and offering costs |
1,567,000 | — | 1,567,000 | 100.0 | % | |||||||||||
| Depreciation and amortization expenses |
2,021,000 | 1,258,000 | 763,000 | 60.7 | % | |||||||||||
| Total operating expenses |
$ | 8,577,000 | $ | 4,189,000 | $ | 4,388,000 | 104.8 | % | ||||||||
Property taxes
The $671,000 increase in property taxes during the three months ended June 30, 2022 compared to June 30, 2021 is attributable primarily to (1) approximately $664,000 related to new acquisitions, including the five properties acquired during the third and fourth quarters of 2021 and one property acquired during the second quarter of 2022 and (2) the New Lease Structure, which increased the property tax burden on the Company as it is solely responsible for the property tax payments under the New Lease Structure.
See Note D – Acquisitions and Dispositions of Investments in Real Estate in Part I, Item 1–Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
Property operating expense
The $457,000 increase in property operating expense during the three months ended June 30, 2022 compared to June 30, 2021 is attributable primarily to increased insurance, professional services related to engineering surveys and other operating expenses attributable to the five properties acquired during the third and fourth quarters of 2021 and one property acquired during the second quarter of 2022.
See Note D – Acquisitions and Dispositions of Investments in Real Estate in Part I, Item 1–Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
General and administrative
The $454,000 increase in general and administrative expenses during the three months ended June 30, 2022 compared to June 30, 2021 is primarily attributable to an increase in payroll and related expenses of approximately $197,000, compensation costs for the performance units granted on May 27, 2022 of $391,000 and an increase in travel and other office related expenses of $180,000. This was partially offset by a decrease in corporate directors and officers insurance of $280,000.
Professional fees
Professional fees increased approximately $476,000 during the three months ended June 30, 2022 compared to June 30, 2021. The increase was primarily due to an increase in consulting and accounting fees of approximately $436,000 for the three months ended June 30, 2022 compared to the same period in the prior year.
Organizational and offering costs
During the three months ended June 30, 2022, the Company incurred approximately $1.6 million in organizational and offering costs in connection with the Merger primarily attributable to legal and accounting fees.
Depreciation and amortization expenses
The $763,000 increase in depreciation and amortization expenses during the three months ended June 30, 2022 compared to June 30, 2021 is due to the five properties acquired during the third and fourth quarters of 2021, the one property acquired during the second quarter of 2022, and the $4.0 million of technology acquired as a result of the Transaction.
See Note D – Acquisitions and Dispositions of Investments in Real Estate in Part I, Item 1–Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
| For the Three Months Ended June 30, |
||||||||||||||||
| 2022 |
2021 |
$ Change |
% Change |
|||||||||||||
| Other income (expense) |
||||||||||||||||
| Interest expense |
$ | (3,168,000 | ) | $ | (2,092,000 | ) | $ | (1,076,000 | ) | 51.4 | % | |||||
| PPP loan forgiveness |
328,000 | 348,000 | (20,000 | ) | (5.7 | )% | ||||||||||
| Other income |
15,000 | — | 15,000 | 100.0 | % | |||||||||||
| Total other expense |
$ | (2,825,000 | ) | $ | (1,744,000 | ) | $ | (1,081,000 | ) | 62.0 | % | |||||
Interest expense
The increase in interest expense of approximately $1.1 million during the three months ended June 30, 2022 compared to the same period in the prior year is primarily attributable to (1) the new loans assumed as part of the Transaction, (2) a previously unencumbered property included in the Credit Facility and (3) the acquisition of a new garage in the second quarter of 2022 financed under the Credit Facility. Total loan amortization cost for the three months ended June 30, 2022 and 2021, was approximately $134,000 and $72,000, respectively. Total line of credit amortization costs for the three months ended June 30, 2022 was approximately $452,000.
See Note I – Notes Payable and Paycheck Protection Program Loan and Note D – Acquisitions and Dispositions of Investments in Real Estate in Part I, Item 1- Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
PPP loan forgiveness
During May 2021, the Company received notification from the Small Business Administration ("SBA") stating that the first round paycheck protection program loan was forgiven in full in the amount of $348,000.
During April 2022, the Company received notification from the SBA stating that the second round paycheck protection program loan was forgiven in full in the amount of $328,000.
Results of Operations for the six months ended June 30, 2022, compared to the six months ended June 30, 2021.
| For the Six Months Ended June 30, |
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| 2022 |
2021 |
$ Change |
% Change |
|||||||||||||
| Revenues |
||||||||||||||||
| Base rent income |
$ | 4,173,000 | $ | 6,285,000 | $ | (2,112,000 | ) | (33.6 | )% | |||||||
| Management income |
427,000 | 1,004,000 | (577,000 | ) | (57.5 | )% | ||||||||||
| Percentage rent income |
9,185,000 | 240,000 | 8,945,000 | 3727.1 | % | |||||||||||
| Total revenues |
$ | 13,785,000 | $ | 7,529,000 | $ | 6,256,000 | 83.1 | % | ||||||||
Total Revenues
The $6,256,000 increase in revenues for the six months ended June 30, 2022, which includes reimbursement revenue, is primarily attributable to (1) an aggregate increase in base rent income and percentage rent income of $596,000 and $3,282,000, respectively, related to five parking facilities acquired in the third and fourth quarters of 2021 and one property acquired during the second quarter of 2022 and (2) a decrease in base rent income and management income and an offsetting increase in percentage rent income as a result of the New Lease Structure.
In 2021, the Company began amending certain leases to the New Lease Structure. Under this structure, tenants pay a base rent (typically $500 - $1,000 per month) and percentage rent equal to a designated percentage, typically ninety percent (90%), of the amount by which gross revenues at the property during any lease year exceed a negotiated base amount. The Company negotiates base rent, percentage rent, and the base amount used in the calculation of percentage rent based on economic factors applicable to the particular parking facility and geographic market. Under the New Lease Structure, the majority of the revenue earned is variable in nature and classified as percentage rent, whereas under the previous lease and management agreements in effect during 2021, the majority of revenue was classified as either base rent or management income. As of June 30, 2021, there were 15 properties on property management agreements that are now under the New Lease Structure resulting in monthly base rent and percentage rent in lieu of management income. As of June 30, 2022, 30 of the Company's leases, or 66.7%, are structured under the New Lease Structure.
The management income for the three months ended June 30, 2022 is attributable to operator collections for a management agreement that was converted into the New Lease Structure at the beginning of 2022.
| For the Six Months Ended June 30, |
||||||||||||||||
| 2022 |
2021 |
$ Change |
% Change |
|||||||||||||
| Operating expenses |
||||||||||||||||
| Property taxes |
$ | 3,680,000 | $ | 2,302,000 | $ | 1,378,000 | 59.9 | % | ||||||||
| Property operating expense |
1,568,000 | 556,000 | 1,012,000 | 182.0 | % | |||||||||||
| General and administrative |
3,388,000 | 2,860,000 | 528,000 | 18.5 | % | |||||||||||
| Professional fees |
1,562,000 | 1,830,000 | (268,000 | ) | (14.6 | )% | ||||||||||
| Organizational and offering costs |
2,525,000 | — | 2,525,000 | 100.0 | % | |||||||||||
| Depreciation and amortization expenses |
3,988,000 | 2,516,000 | 1,472,000 | 58.5 | % | |||||||||||
| Total operating expenses |
$ | 16,711,000 | $ | 10,064,000 | $ | 6,647,000 | 66.0 | % | ||||||||
Property taxes
The $1,378,000 increase in property taxes during the six months ended June 30, 2022 compared to June 30, 2021 is attributable primarily to (1) approximately $1,320,000 related to new acquisitions, including the five properties acquired during the third and fourth quarters of 2021 and one property acquired during the second quarter of 2022 and (2) the New Lease Structure, which increased the property tax burden on the Company as it is solely responsible for the property tax payments under the New Lease Structure.
See Note D – Acquisitions and Dispositions of Investments in Real Estate in Part I, Item 1–Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
Property operating expense
The $1,012,000 increase in property operating expense during the six months ended June 30, 2022 compared to June 30, 2021 is attributable primarily to increased insurance, professional services related to engineering surveys and other operating expenses attributable to the five properties acquired during the third and fourth quarters of 2021 and one property acquired during the second quarter of 2022.
See Note D – Acquisitions and Dispositions of Investments in Real Estate in Part I, Item 1–Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
General and administrative
The $528,000 increase in general and administrative expenses during the six months ended June 30, 2022 compared to June 30, 2021 is primarily attributable to an increase in payroll and related expenses of approximately $393,000, compensation costs for the performance units granted on May 27, 2022 of $391,000, and an increase in travel and other office related expenses of $379,000. This was partially offset by a decrease in corporate directors and officers insurance of $566,000 and a related refund of $50,000.
Professional fees
Professional fees decreased approximately $268,000 during the six months ended June 30, 2022 compared to June 30, 2021. The decrease was primarily due to the settlement of previously disclosed legal investigations. This was offset by an increase in consulting and accounting fees for the six months ended June 30, 2022 compared to the same period in the prior year.
See Note C — Commitments and Contingencies in Part I, Item 1- Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
Organizational and offering costs
During the six months ended June 30, 2022, the Company incurred approximately $2.5 million in organizational and offering costs in connection with the Merger primarily attributable to legal and accounting fees.
Depreciation and amortization expenses
The $1,472,000 increase in depreciation and amortization expenses during the six months ended June 30, 2022 compared to June 30, 2021 is primarily due to the five properties acquired during the third and fourth quarters of 2021, one property acquired during the second quarter of 2022, and the $4.0 million of technology acquired as a result of the Transaction.
See Note D – Acquisitions and Dispositions of Investments in Real Estate in Part I, Item 1–Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
| For the Six Months Ended June 30, |
||||||||||||||||
| 2022 |
2021 |
$ Change |
% Change |
|||||||||||||
| Other income (expense) |
||||||||||||||||
| Interest expense |
$ | (5,707,000 | ) | $ | (4,296,000 | ) | $ | (1,411,000 | ) | 32.8 | % | |||||
| Other income |
30,000 | — | 30,000 | 100.0 | % | |||||||||||
| PPP loan forgiveness |
328,000 | 348,000 | (20,000 | ) | (5.7 | )% | ||||||||||
| Total other expense |
$ | (5,349,000 | ) | $ | (3,948,000 | ) | $ | (1,401,000 | ) | 35.5 | % | |||||
Interest expense
The increase in interest expense of approximately $1.4 million during the six months ended June 30, 2022 compared to the same period in the prior year is primarily attributable to (1) the new loans assumed as part of the Transaction, (2) a previously unencumbered property included in the Credit Facility and (3) the acquisition of a new garage in the second quarter of 2022 financed under the Credit Facility. Total notes payable amortization costs for the six months ended June 30, 2022 and 2021, was approximately $234,000 and $149,000, respectively. Total line of credit amortization costs for the six months ended June 30, 2022 was approximately $452,000.
See Note I – Notes Payable and Paycheck Protection Program Loan and Note D – Acquisitions and Dispositions of Investments in Real Estate in Part I, Item 1- Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
PPP loan forgiveness
During May 2021, the Company received notification from the SBA stating that the first round paycheck protection program loan was forgiven in full in the amount of $348,000.
During April 2022, the Company received notification from the SBA stating that the second round paycheck protection program loan was forgiven in full in the amount of $328,000.
Liquidity and Capital Resources
Effective March 29, 2022, the Company secured a $75.0 million loan with a $75.0 million accordion feature (the “Credit Facility”) with KeyBanc Capital Markets, as lead arranger, and KeyBank National Association, as administrative agent. The initial $75.0 million will be used for debt maturities in 2022, whereas the accordion can be utilized for acquisitions, capital expenditures and other working capital requirements. This refinancing significantly reduced cash paid for interest payments, thus improving our cash position, as well as provided flexibility for working capital and growth via acquisitions.
The Company’s principal source of funds to meet our operating expenses, pay debt service obligations and make distributions to our stockholders will be rents from tenants at the Company’s parking facilities. Although the Company has no present intention to do so, the Company also may sell properties that the Company owns or place mortgages on properties that the Company owns to raise capital.
The Company has no commercial paper outstanding, nor have we entered into any swaps or hedges.
The Company’s short-term and long-term liquidity needs will consist primarily of funds necessary for payments of indebtedness, acquisitions of assets, development of properties, and capital expenditures. Existing development activities expected to be completed in the near-term are expected to cost approximately $2.5 million.
Sources and Uses of Cash
The following table summarizes our cash flows for the six months ended June 30, 2022 and 2021:
| For the Six Months Ended June 30, |
||||||||
| 2022 |
2021 |
|||||||
| Net cash provided by (used in) operating activities |
$ | 1,264,000 | $ | (2,080,000 | ) | |||
| Net cash used in investing activities |
$ | (18,874,000 | ) | $ | — | |||
| Net cash provided by financing activities |
$ | 14,894,000 | $ | 1,104,000 | ||||
Comparison of the six months ended June 30, 2022 to the six months ended June 30, 2021:
The Company’s cash and cash equivalents and restricted cash were approximately $14.0 million as of June 30, 2022, which was an increase of approximately $7.1 million from the balance of $6.9 million as of June 30, 2021.
Cash flows from operating activities
Net cash provided by operating activities during the six months ended June 30, 2022 was approximately $1.3 million, compared to approximately $2.1 million used in operating activities for the six months ended June 30, 2021. The increase in cash provided by operating activities was primarily attributable to an increase in accounts payable resulting from increased organizational and offering costs related to the Merger.
Cash flows from investing activities
Net cash used in investing activities for the six months ended June 30, 2022 was approximately $18.9 million primarily attributable to the purchase of an additional real estate investment in the second quarter of 2022 as well as additions to building improvements and intangible assets. There was no cash used in or provided by investing activities during the six months ended June 30, 2021.
Cash flows from financing activities
Net cash provided by financing activities for the six months ended June 30, 2022 was approximately $14.9 million compared to approximately $1.1 million for the six months ended June 30, 2021. The increase in cash provided by financing activities was primarily attributable to proceeds from the Credit Facility of $73.7 million, including $17.6 million which was used in the acquisition of one property during the second quarter of 2022. This was partially offset by the repayment of $55.1 million of notes payable and an increase in loan fees resulting from the Credit Facility during the six months ended June 30, 2021.
Company Indebtedness
On March 29, 2022, the Company entered into the Credit Facility. The initial $75.0 million has been used to refinance certain of the Company’s current loans for various properties and will also be available for our general corporate purposes, including liquidity, acquisitions and working capital. The Company will borrow under the Credit Facility in U.S. dollars and expects borrowings under the Credit Facility to bear interest at a floating rate based upon a Secured Overnight Financing Rate, or SOFR, benchmark rate or an alternate base rate, plus a margin of between 1.75% and 3.00%, with respect to SOFR loans, or 0.75% to 2.00%, with respect to base rate loans, based on the leverage ratio as calculated pursuant to our Credit Facility.
The obligations under the Credit Agreement underlying the Credit Facility are guaranteed by the Company and other guarantors. The Credit Agreement contains customary representations, warranties, conditions to borrowing, covenants and events of default, including certain covenants that limit or restrict, subject to certain exceptions, the ability of the Company, the Operating Partnership and other subsidiaries to sell or transfer assets, enter into a merger or consolidate with another company, create liens, make investments or acquisitions or incur certain indebtedness. The Credit Agreement also includes financial covenants that require the Company to (i) maintain a total leverage ratio not to exceed 65.0%, (ii) not to exceed certain fixed charge coverage ratios, and (iii) maintain a certain tangible net worth.
The Credit Facility matures on April 1, 2023, as may be extended pursuant to the terms of the Credit Agreement. As of June 30, 2022, $73.7 million was outstanding under the Credit Facility.
The Company's loan with Bank of America, N.A. for the MVP Detroit Center Garage, LLC ("MVP Detroit") garage requires the Company to maintain approximately $2.3 million in liquidity at all times, which is defined as unencumbered cash and cash equivalents. As of the date of this filing, the Company was in compliance with this lender requirement.
The Company may establish capital reserves with respect to particular investments. The Company also may, but is not required to, establish reserves out of cash flow generated by investments or out of net sale proceeds in non-liquidating sale transactions. Working capital reserves are typically utilized to fund tenant improvements, leasing commissions and major capital expenditures. The Company’s lenders also may require working capital reserves.
Over time, management intends to both extend and sculpt our maturity wall, so that our maturities are spread over multiple years. As of the date of this filing, the Company has significant commercial mortgage-backed securities (“CMBS”) debt with prohibitive defeasance, which will limit our ability to refinance our CMBS debt prior to the maturity date or any permitted prepayment date. As our loans approach maturity, we will assess the lowest cost, most flexible options available to the Company and refinance those loans accordingly. Our intent over the mid-term period is to work with lending relationships to maintain a revolver that can address upcoming maturities, should market conditions not permit us to refinance with longer-term debt.
On July 5, 2022, VRMI merged with and into Suncrest Holdings, LLC (“Suncrest”), an entity managed by an entity majority owned and controlled by Michael Shustek, the Company’s former Chief Executive Officer. On July 11, 2022, Suncrest assigned and sold five of the six notes issued originally by VRMI to certain of the subsidiaries of the Company as described in Note P - Subsequent Events - Part I, Item 1, Note I - Notes to the Condensed Consolidated Financial Statements of this Quarterly Report above (collectively, the “VRMI Notes”) to VRMII. As a result, the obligations of Company subsidiaries under the five VRMI Notes, including all repayment obligations, are now owed to VRMII. All of the loans evidenced by the VRMI Notes mature and are payable in full on August 25, 2022.
Distributions and Stock Dividends
On March 22, 2018, the Company suspended the payment of distributions on its Common Stock. There can be no assurance that cash distributions to the Company’s common stockholders will be resumed in the future. The actual amount and timing of distributions, if any, will be determined by the Company’s board of directors in its discretion and typically will depend on various factors that the Company's board of directors deems relevant.
The Company is not currently and may not in the future generate sufficient cash flow from operations to fully fund distributions. The Company does not currently anticipate that it will be able to resume the payment of distributions. However, if distributions do resume, all or a portion of the distributions may be paid from other sources, such as cash flows from equity offerings, financing activities, borrowings, or by way of waiver or deferral of fees. The Company has not established any limit on the extent to which distributions could be funded from these other sources. Accordingly, the amount of distributions paid may not reflect current cash flow from operations and distributions may include a return of capital, (rather than a return on capital). If the Company pays distributions from sources other than cash flow from operations, the funds available to the Company for investments would be reduced and the share value may be diluted. The level of distributions will be determined by the board of directors and depend on several factors including current and projected liquidity requirements, anticipated operating cash flows and tax considerations, and other relevant items deemed applicable by the board of directors.
The Company did not repurchase any of its shares during the six months ended June 30, 2022. During the six months ended June 30, 2022, the Company did not pay dividends on its shares of Common Stock and does not intend to pay dividends on its shares of Common Stock in 2022. No cash dividends can be made on the Common Stock until the preferred distributions are paid. See Note O – Equity in the notes to the consolidated financial statements included in Part I, Item 1 - Notes to the Consolidated Financial Statements of this Quarterly Report for additional information.
Dividend Reinvestment Plan
From inception through June 30, 2022, the Company had paid approximately $1.8 million in cash, issued 83,437 shares of its Common Stock pursuant to its Dividend Reinvestment Plan (“DRIP”) and issued 153,826 shares of its Common Stock in distributions to the Company’s stockholders. All of the cash distributions were paid from offering proceeds and constituted a return of capital. On March 22, 2018, the Company suspended payment of distributions and as such there are currently no distributions to invest in the DRIP.
Preferred Stock
On March 24, 2020, the Company’s board of directors unanimously authorized the suspension of the payment of distributions on the Series A Preferred Stock and Series 1 Preferred Stock; however, such distributions will continue to accrue in accordance with the terms of the Series A Preferred Stock and Series 1 Preferred Stock.
As of June 30, 2022 and 2021, approximately $501,000 and $286,000 of accrued and unpaid Series A Preferred Stock distributions, respectively, are included in accounts payable and accrued liabilities on the consolidated balance sheet.
As of June 30, 2022 and 2021, approximately $6.5 million and $3.7 million of accrued and unpaid Series 1 Preferred Stock distributions, respectively, are included in accounts payable and accrued liabilities on the consolidated balance sheet.
For additional information see Note O —Equity in Part I, Item 1 - Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for a discussion of the Company’s Preferred Stock.
Warrants
On August 25, 2021, in connection with the Closing, the Company entered into a warrant agreement (the “Warrant Agreement”) pursuant to which it issued warrants (the “Warrants”) to Color Up to purchase up to 1,702,128 shares of Common Stock, at an exercise price of $11.75 per share for an aggregate cash purchase price of up to $20.0 million (the "Common Stock Warrants"). Each whole Common Stock Warrant entitles the registered holder thereof to purchase one whole share of Common Stock at a price of $11.75 per share (the “Warrant Price”), subject to customary adjustments, at any time following a “Liquidity Event,” which is defined as an initial public offering and/or Listing of the Common Stock on the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange. The Common Stock Warrants will expire five years after the date of the Warrant Agreement.
The Company assesses its warrants as either equity or a liability based upon the characteristics and provisions of each instrument. Warrants classified as equity are recorded at fair value as of the date of issuance on the Company’s balance sheet and no further adjustments to their valuation are made. Management estimates the fair value of these warrants using option pricing models and assumptions that are based on the individual characteristics of the warrants or other instruments on the valuation date, as well as assumptions for future financings, expected volatility, expected life, yield and risk-free interest rate. As of June 30, 2022, all outstanding warrants issued by the Company were classified as equity.
See Note O - Equity in Part I, Item 1 - Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for a discussion of preferred stocks and warrants.
Critical Accounting Policies
Our 2021 Annual Report on Form 10-K, filed with the SEC on March 30, 2022, contains a description of our critical accounting policies and estimates, including those relating to real estate investments and acquisitions. There have been no significant changes to our critical accounting policies during 2022.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
In connection with the filing of this Form 10-Q for the quarter ended June 30, 2022, our Chief Executive Officer ("CEO") and our Interim Chief Financial Officer ("CFO") evaluated the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. As a result of this evaluation, our CEO and CFO concluded that the material weaknesses previously identified in Item 9A. “Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2021, were still present as of June 30, 2022 (“the Evaluation Date”). Based on those material weaknesses, and the evaluation of our disclosure controls and procedures, our CEO and CFO concluded that our disclosure controls and procedures were not effective as of the Evaluation Date.
(b) Remediation Plan and Status
Our remediation efforts previously identified in Item 9A. “Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2021, are ongoing and we continue our initiatives to implement and document policies, procedures, and internal controls. Remediation of the identified material weaknesses and strengthening our internal control environment will require a substantial effort throughout 2022 and beyond. While we believe the steps taken to date and those planned for implementation will improve our internal controls over financial reporting, we have not completed all remediation efforts. The planned remediation activities described in Item 9A. “Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2021 highlight our commitment to remediating our identified material weaknesses and remain largely unchanged through the date of filing this Quarterly Report.
The following remedial actions have been identified and initiated by the Company through June 30, 2022:
• The Company has hired a Chief Accounting Officer and will continue hiring and training additional accounting resources with appropriate levels of experience and reallocating responsibilities across the Company’s finance organization. This measure provides for segregation of duties and ensures that the appropriate level of knowledge and experience will be applied based on the risk and complexity of transactions and tasks under review.
• The Company will continue to educate control owners and enhance policies to ensure appropriate restrictions related to user access and privileged access are in place.
• The Company has provided access to accounting literature and research to enable the control owners in evaluating technical accounting pronouncements for certain transactions, in addition to utilizing third party resources when appropriate.
Remediation of the identified material weaknesses and strengthening our internal control environment will require a substantial effort throughout 2022 and beyond. While we believe the steps taken to date and those planned for implementation will improve our internal controls over financial reporting, we have not completed all remediation efforts. The planned remediation activities described in Item 9A. “Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2021 highlight our commitment to remediating our identified material weaknesses and remain largely unchanged through the date of filing this Quarterly Report.
As the Company continues to evaluate and works to improve its internal control over financial reporting, the Company’s management may determine that additional or different measures to address control deficiencies or modifications to the remediation plan are necessary.
(c) Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting during the second quarter of 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
See Note C — Commitments and Contingencies in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report.
The nature of the Company’s business exposes its properties, the Company, its Operating Partnership and its other subsidiaries to the risk of claims and litigation in the normal course of business. Other than as noted above or routine litigation arising out of the ordinary course of business, the Company is not presently subject to any material litigation nor, to its knowledge, is any material litigation threatened against the Company.
The following risk factors are material changes only and should be read in conjunction with the risk factors in the Company’s annual report on Form 10-K for the year ended December 31, 2021.
An increase in fuel prices may adversely affect our operating environment and costs.
Fuel prices have a direct impact on the ability and frequency of consumers to engage in activities related to transportation. Increases in the price of fuel may result in higher transportation costs and adversely affect consumer use at the Company’s parking garages. Increases in fuel costs also can lead to other non-recoverable, direct expense increases to us through, for example, increased costs of energy. Increases in energy costs for our tenants are typically recovered from lessees, although our share of energy costs increases as a result of lower occupancies, and higher operating cost reimbursements impact the ability to increase underlying rents. Rising fuel prices also may increase the cost of construction and the cost of materials that are petroleum-based, thus affecting the development of our existing assets or our tenants’ ongoing development projects.
Common Shares NAV
The Company is undertaking an appraisal to establish an estimated NAV per share of the Company’s common stock. The Company expects to disclose the results thereof in the third or fourth quarters of 2022. Please see “Item 1A. Risk Factors— Risks Related to an Investment in the Company–Stockholders should not rely on the estimated NAV per share as being an accurate measure of the current value of our shares of Common Stock” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
| 2.1(7) | Agreement and Plan of Merger, dated as of May, 27, 2022, between Mobile Infrastructure Trust and Mobile Infrastructure Corporation | |
| 3.1(1) |
Articles of Amendment and Restatement of THE PARKING REIT, Inc. |
|
| 3.2(2) |
||
| 3.3(5) |
||
| 3.4(6) | Certificate of Correction to the Articles of Amendment and Restatement of Mobile Infrastructure Corporation | |
| 3.5(3) |
Articles Supplementary for Series A Convertible Redeemable Preferred Stock of THE PARKING REIT, Inc. |
|
| 3.6(4) |
Articles Supplementary for Series 1 Convertible Redeemable Preferred Stock of THE PARKING REIT, Inc. |
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| 3.7(5) |
Amended & Restated Bylaws of MOBILE INFRASTRUCTURE CORPORATION. |
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| 10.1(*)(**) | Form of Performance Unit Award Agreement | |
| 10.2(*) | Form of LTIP Unit Award Agreement | |
| 31.1(*) |
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| 31.2(*) |
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| 32(*) |
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| 101(*) |
The following materials from the Company’s Quarterly Report on Form 10-Q for the six months ended June 30, 2022, formatted in iXBRL (inline extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statement of Stockholder’s Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Financial Statements. As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Section 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934. |
|
| 104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * |
Filed concurrently herewith. |
|
| ** | Management compensatory agreement | |
| (1) |
Filed previously with Pre-Effective Amendment No. 2 to the Registration Statement on Form S-11 on September 24, 2015 and incorporated herein by reference. |
|
| (2) |
Filed previously on Form 8-K on December 18, 2017 and incorporated herein by reference. |
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| (3) |
Filed previously on Form 8-K on October 28, 2016 and incorporated herein by reference. |
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| (4) |
Filed previously on Form 8-K on March 30, 2017 and incorporated herein by reference. |
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| (5) |
Filed previously on Form 8-K on November 12, 2021 and incorporated herein by reference. |
|
| (6) | Filed previously on Form 8-K on March 21, 2022 and incorporated herein by reference. | |
| (7) | Filed previously on Form 8-K on May 31, 2022 and incorporated herein by reference. |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Mobile Infrastructure Corporation |
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| By: |
/s/ Manuel Chavez |
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| Manuel Chavez |
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| Chief Executive Officer |
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| Date: |
August 15, 2022 |
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| By: |
/s/ Stephanie Hogue |
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| Stephanie Hogue |
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| President and Interim Chief Financial Officer |
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| Date: |
August 15, 2022 |
|
Exhibit 10.1
MOBILE INFRASTRUCTURE CORPORATION AND
MOBILE INFRA OPERATING PARTNERSHIP, L.P.
FORM OF PERFORMANCE UNIT AGREEMENT
In consideration of the mutual agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Mobile Infra Operating Partnership, L.P., a Maryland limited partnership (the “Partnership”), hereby issues to [______] (the “Participant”), as of [__________], an award (the “Award”) of Performance Units pursuant to the terms of this Performance Unit Agreement (this “Agreement”). The Performance Units constitute Profits Interest Units as defined below.
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ARTICLE I. |
The capitalized terms below shall have the following meanings for purposes of this Agreement. Additional defined terms are set forth on Appendix I. Capitalized terms that are used but not defined herein or in Appendix I shall have the meanings given to them in the Partnership Agreement.
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1.1. “Administrator” All Performance Unit Awards made hereunder shall be administered by the Compensation Committee of the Board. The Administrator may from time to time adopt any rules or procedures it deems necessary or desirable for the proper and efficient administration of Awards, consistent with the terms hereof. The Administrator’s determinations and interpretations with respect to an Award hereunder and this Agreement shall be final and binding on all parties. |
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1.2. “Board” shall mean the Board of Directors of the Company. |
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1.3. “Cause” shall have the meaning assigned such term in the employment or similar agreement, if any, between such Participant and the Company or an Affiliate, provided, however that if there is no such agreement in which such term is defined, “Cause” shall mean any of the following acts by the Participant, as determined by the Administrator: gross neglect of duty, intentionally engaging in activity that is in conflict with or adverse to the business or other interests of the Company or Affiliate, prolonged absence from duty without the consent of the Company, material breach by the Participant of any published Company or Partnership code of conduct or code of ethics; intentionally engaging in activity that is in conflict with or adverse to the business or other interests of the Company or an Affiliate; or willful misconduct, misfeasance or malfeasance of duty which is reasonably determined to be detrimental to the Company or an Affiliate. The determination of the Administrator as to the existence of “Cause” shall be conclusive on the Participant and the Company. |
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1.4. “Company” shall mean Mobile Infrastructure Corporation, a Maryland corporation. |
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1.5. “Disability” shall mean that the Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident or health plan covering employees of the Participant’s employer. In the event of a dispute, the determination of whether a Participant has incurred a Disability will be made by the Board and may be supported by the advice of a physician competent in the area to which such Disability relates. |
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1.6. “Distribution Equivalent Units” means a number of Performance Units equal to the quotient obtained by dividing (x) the excess of (A) the value of all Company dividends with an ex-dividend date that occurs during the Performance Period in respect of that number of REIT Shares equal to the number of Performance Units that become Vested Performance Units as of the Vesting Date, over (B) the amount any distributions paid or payable by the Partnership pursuant to Section 19.4(A) of the Partnership Agreement to the Participant in respect of Unvested Performance Units, adjusted as follows: (i) plus (or minus) the amount of gain (or loss) on such excess dividend amounts had they been reinvested in REIT Shares on the ex-dividend date (at a price equal to the closing price of the REIT Shares on the applicable ex-dividend date) and (ii) plus the value of any dividends on the notional shares resulting from the hypothetical reinvestment of distributions with an ex-dividend date on or after the hypothetical issuance of such notional shares and, by (y) the REIT Share value as of the Vesting Date. For the avoidance of doubt, Performance Units issued, if any, to the Participant as Distribution Equivalent Units shall be fully vested at issuance and shall be issued as soon as practicable following the Vesting Date. |
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1.7. “Employee” shall mean any officer or other employee (within the meaning of Section 3401(c) of the Code) of the Company or any Affiliate. |
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1.8. “Grant Date” has the meaning set forth in Section 2.1(a). |
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1.9. “Partnership Agreement” means the Third Amended and Restated Agreement of Limited Partnership of the Partnership, as amended from time to time. |
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1.10. “Profits Interest Unit” means, to the extent authorized by the Partnership Agreement, a unit of the Partnership that is granted pursuant to this Agreement and is intended to constitute a “profits interest” within the meaning of Revenue Procedure 93-27, 1993-2 C.B. 343 and Revenue Procedure 2001-43, 2001-2 C.B. 191. |
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1.11. “Qualifying Termination” means a termination of the Participant’s services with the Company, the Partnership and any Affiliate without Cause and due to the Participant’s death or Disability. |
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1.12. “Termination of Service” means the time at which a Participant ceases to provide services to the Company, the Partnership or any Affiliate for any reason, but excluding a Qualifying Termination. |
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ARTICLE II. |
This Award represents the rights to: (i) receive and vest in a number of Performance Units determined in accordance with this Agreement and Appendix I hereto, and (ii) receive Distribution Equivalent Units, in each case, subject to the vesting, payment, forfeiture, and other terms and conditions set forth in this Agreement and the Partnership Agreement.
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2.1. Issuance of Performance Units. |
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a. |
Issuance of Award. The Partnership hereby issues to the Participant [_____] Performance Units, effective as of [____________] (the “Grant Date”) subject to the vesting and other terms and conditions of this Agreement and the Partnership Agreement. This Award is issued pursuant to the Partnership Agreement and in consideration of the Participant’s agreement to provide services to or for the benefit of the Partnership. If not already a Partner, the Partnership hereby admits the Participant as a Partner of the Partnership on the terms and conditions set forth herein and in the Partnership Agreement. The Partnership and the Participant acknowledge and agree that the Performance Units are hereby issued to the Participant for the performance of services to or for the benefit of the Partnership in his or her capacity as a Partner or in anticipation of the Participant becoming a Partner. Upon receipt of the Award, the Participant shall, automatically and without further action on his or her part, be deemed to be a party to, signatory of and bound by the Partnership Agreement. At the request of the Partnership, the Participant shall execute the Partnership Agreement or a joinder or counterpart signature page thereto. The Participant acknowledges that the Partnership may from time-to-time issue or cancel (or otherwise modify) Performance Units and/or other equity interests in accordance with the terms of the Partnership Agreement. The Award shall have the rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption and conversion set forth herein and in the Partnership Agreement. |
The Administrator shall determine the number of Distribution Equivalent Units to be granted pursuant to this Agreement, if any.
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2.2. Vesting of Award. |
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a. |
General. Subject to Section 2.2(b) hereof, the Performance Units shall vest as set forth in Appendix I attached hereto, subject to the Participant’s continued performance of services for the Company, the Partnership or an Affiliate on the Vesting Date. |
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b. |
Qualifying Termination. Notwithstanding the foregoing or anything contained herein or in any employment or similar agreement to the contrary, in the event of a Qualifying Termination during the Performance Period, the Participant or the Participant’s estate, heirs, or decedents, as the case may be, shall continue to hold the Performance Units and rights to Distribution Equivalent Units, which Performance Units and Distribution Equivalent Unit rights, if any, shall otherwise vest or not vest and be forfeited and canceled all in accordance with this Agreement. |
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2.3. Distributions. Performance Units shall be treated as “Performance Units” under the Partnership Agreement. As of the Grant Date and in accordance with Section 19.4A of the Partnership Agreement, the Unvested Performance Units shall be entitled to receive the Performance Unit Sharing Percentage (i.e., ten percent (10%)) of the distributions payable on Common Units, which may be made from time to time (if applicable, assuming the Unvested Performance Units were held for the entire period to which such distributions relate). For the avoidance of doubt, Vested Performance Units shall be entitled to receive the same distributions payable to Common Units. All distributions paid with respect to Performance Units shall be fully vested and non-forfeitable when paid, whether the underlying Performance Units are vested or unvested. At the Administrator’s discretion, distributions may be paid in the form of additional Performance Units. |
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2.4. Forfeiture. At the end of the Performance Period or, if earlier, upon Termination of Service other than in a Qualifying Termination, the Participant shall forfeit all rights and interest under this Agreement without further action on the part of the Company, the Partnership or the Participant and without payment of consideration therefor, which forfeiture shall include, without limitation, any rights or interest in Unvested Performance Units and associated Distribution Equivalent Unit rights (other than any distributions previously made pursuant to Section 19.4A of the Partnership Agreement and Section 2.3 hereof). |
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ARTICLE III. |
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3.1. Performance Units Subject to Partnership Agreement; Transfer Restrictions. |
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a. |
The Award and the Performance Units are subject to the terms of the Partnership Agreement, including, without limitation, the restrictions on Transfer of Partnership Interests (including, without limitation, Performance Units) set forth in Articles 11 and 19 of the Partnership Agreement. Any permitted transferee of the Award or the Performance Units shall take such Award or Performance Units subject to the terms of this Agreement and the Partnership Agreement. Any such permitted transferee must, upon the request of the Partnership, agree to be bound by the Partnership Agreement and this Agreement, and shall execute the same and such other documents and perform such further acts in connection with the same at the Partnership’s or the Company’s request, and must agree to such other waivers, limitations, and restrictions as the Partnership or the Company may reasonably require. Any Transfer of the Award or Performance Units which is not made in compliance with the terms of the Partnership Agreement and this Agreement shall be null and void and of no further force or effect. |
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b. |
Without the consent of the Administrator (which it may give or withhold in its sole discretion), the Participant shall not Transfer any Unvested Performance Units or any portion of the Award attributable to such Unvested Performance Units (or any securities into which such Unvested Performance Units are converted or exchanged), other than by will or pursuant to applicable laws of descent and distribution (the “Transfer Restrictions”); provided, however, that the Transfer Restrictions shall not apply to any Transfer of Unvested Performance Units or of the Award to the Partnership or the Company. |
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c. |
Notwithstanding anything to the contrary contained herein, the Participant shall not, without the consent of the Administrator (which shall not be unreasonably withheld), Transfer any Vested Share Price Performance Units or convert the Share Price Performance Units or any Distribution Equivalent Units related to Vested Share Price Performance Units into Partnership Common Units prior to the first anniversary of the Vesting Date (the “Post-Vesting Transfer Restrictions”); provided, however, that the Post-Vesting Transfer Restrictions shall not apply to any Transfer following the Participant’s Termination of Service, including without limitation by will or pursuant to the laws of descent and distribution. |
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3.2. Covenants, Representations and Warranties. The Participant hereby represents, warrants, covenants, acknowledges, and agrees on behalf of the Participant and his or her spouse, if applicable, that: |
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a. |
Investment. The Participant is holding the Award and the Performance Units for the Participant’s own account, and not for the account of any other Person. The Participant is holding the Award and the Performance Units for investment purposes and not with a view to distribution or resale thereof except in compliance with applicable laws regulating securities. |
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b. |
Relation to the Partnership. The Participant is presently an Employee or is otherwise providing services to or for the benefit of the Company, the Partnership or an Affiliate, and in such capacity has become personally familiar with the business of the Partnership. |
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c. |
Access to Information. The Participant has had the opportunity to ask questions of, and to receive answers from, the Partnership with respect to the terms and conditions of the transactions contemplated hereby and with respect to the business, affairs, financial conditions, and results of operations of the Partnership. |
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d. |
Registration. The Participant understands that the Performance Units have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and the Performance Units cannot be transferred by the Participant unless such transfer is in compliance with this Agreement, registered under the Securities Act, or an exemption from such registration is available. The Partnership has made no agreements, covenants or undertakings whatsoever to register the transfer of the Performance Units under the Securities Act. The Partnership has made no representations, warranties, or covenants whatsoever as to whether any exemption from the Securities Act, including, without limitation, any exemption for limited sales in routine brokers’ transactions pursuant to Rule 144 of the Securities Act, will be available. If an exemption under Rule 144 is available at all, it will not be available until at least six months from issuance of the Award, and then, not unless the terms and conditions of Rule 144 have been satisfied in full to the satisfaction of the Partnership in its sole and absolute discretion. |
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e. |
Public Trading. None of the Partnership’s securities are presently publicly traded, and the Partnership has made no representations, covenants or agreements as to whether there will be a public market for any of its securities. |
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f. |
Tax Advice. The Partnership has made no warranties or representations to the Participant with respect to the income tax consequences of the transactions contemplated by this Agreement (including, without limitation, with respect to the decision of whether to make an election under Section 83(b) of the Code), and the Participant is in no manner relying on the Partnership or its representatives for an assessment of such tax consequences. Participant hereby recognizes that the Internal Revenue Service has proposed regulations under Sections 83 and 704 of the Code that may affect the proper treatment of the Performance Units for federal income tax purposes. In the event that those proposed regulations are finalized, the Participant hereby agrees to cooperate with the Partnership in amending this Agreement and the Partnership Agreement, and to take such other action as may be required to conform to such regulations. Participant hereby further recognizes that the U.S. Congress is considering legislation that would change the federal tax consequences of owning and disposing of Performance Units. The Participant is advised to consult with his or her own tax advisor with respect to such tax consequences and his or her ownership of the Performance Units. |
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3.3. Capital Account. The Participant shall make no contribution of capital to the Partnership in connection with the Award and, as a result, the Participant’s Capital Account balance in the Partnership immediately after his or her receipt of the Performance Units shall be equal to zero, unless the Participant was a Partner in the Partnership prior to such issuance, in which case the Participant’s Capital Account balance shall not be increased as a result of his or her receipt of the Performance Units. |
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3.4. Redemption Rights. Notwithstanding the contrary terms in the Partnership Agreement, Partnership Units which are acquired upon the conversion of the Share Price Performance Units shall not, without the consent of the Partnership (which may be given or withheld in its sole discretion), be redeemed pursuant to Section 15.1 of the Partnership Agreement within one year of the date of vesting of such Share Price Performance Units. |
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3.5. Section 83(b) Election. The Participant covenants that the Participant shall make a timely election under Section 83(b) of the Code (and any comparable election in the state of the Participant’s residence) with respect to the Performance Units covered by the Award, and the Partnership hereby consents to the making of such election(s). In connection with such election, the Participant shall promptly provide a copy of such election to the Partnership. Instructions for completing an election under Section 83(b) of the Code and a form of election under Section 83(b) of the Code are attached hereto as Exhibit A. The Participant represents that the Participant has consulted any tax advisor(s) that the Participant deems advisable in connection with the filing of an election under Section 83(b) of the Code and similar state tax provisions. The Participant acknowledges that it is the Participant’s sole responsibility, and not the Company’s or the Partnership’s, to timely file an election under Section 83(b) of the Code (and any comparable state election), even if the Participant requests that the Company or the Partnership, or any representative of the Company or the Partnership, make such filing on the Participant’s behalf. The Participant should consult his or her tax advisor to determine if there is a comparable election to file in the state of his or her residence. |
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3.6. Ownership Information. The Participant hereby covenants that so long as the Participant holds any Performance Units, at the request of the Partnership, the Participant shall disclose to the Partnership in writing such information relating to the Participant’s ownership of the Performance Units as the Partnership reasonably believes to be necessary or desirable to ascertain in order to comply with the Code or the requirements of any other appropriate taxing authority. |
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3.7. Execution and Return of Documents and Certificates. At the Company’s or the Partnership’s request, the Participant hereby agrees to promptly execute, deliver and return to the Partnership any and all documents or certificates that the Company or the Partnership deems necessary or desirable to effectuate the cancellation and forfeiture of the Unvested Performance Units and the portion of the Award attributable to the Unvested Performance Units, and/or to effectuate the transfer or surrender of such Unvested Performance Units and portion of the Award to the Partnership. |
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3.8. Taxes. The Partnership and the Participant intend that (a) the Performance Units be treated as a “profits interest” as defined in Internal Revenue Service Revenue Procedure 93-27, as clarified by Revenue Procedure 2001-43, (b) the issuance of such units not be a taxable event to the Partnership or the Participant as provided in such revenue procedure, and (c) the Partnership Agreement and this Agreement be interpreted consistently with such intent. In furtherance of such intent, effective immediately prior to the issuance of the Performance Units, the Partnership may revalue all Partnership assets to their respective gross fair market values, and make the resulting adjustments to the Capital Accounts of the Partners, in each case as set forth in the Partnership Agreement. The Company, the Partnership or any Affiliate may withhold from the Participant’s wages, or require the Participant to pay to such entity, any applicable withholding or employment taxes resulting from the issuance of the Award hereunder, from the vesting or lapse of any restrictions imposed on, or payment with respect to, the Award, or from the ownership or disposition of the Performance Units. |
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3.9. Remedies. The Participant shall be liable to the Partnership for all costs and damages, including incidental and consequential damages, resulting from a disposition of the Award or the Performance Units in violation of the provisions of this Agreement or the Partnership Agreement. Without limiting the generality of the foregoing, the Participant agrees that the Partnership shall be entitled to obtain specific performance of the obligations of the Participant under this Agreement and the Partnership Agreement and immediate injunctive relief in the event any action or proceeding is brought in equity to enforce the same. The Participant hereby waives any claim or defense that there is an adequate remedy at law available to the Partnership in connection with the same. |
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3.10. Restrictive Legends. Certificates evidencing the Performance Units, to the extent such certificates are issued, may bear such restrictive legends as the Partnership and/or the Partnership’s counsel may deem necessary or advisable under applicable law or pursuant to this Agreement, including, without limitation, the following legends or any legends similar thereto: |
“The securities represented hereby have not been registered under the Securities Act of 1933, as amended (the “Securities Act”). Any transfer of such securities will be invalid unless a Registration Statement under the Securities Act is in effect as to such transfer or in the opinion of counsel for Mobile Infra Operating Partnership, L.P. (the “Partnership”) such registration is unnecessary in order for such transfer to comply with the Securities Act.”
“The securities represented hereby are subject to forfeiture, transferability and other restrictions as set forth in (i) a written agreement with the Partnership and (ii) the Third Amended and Restated Agreement of Limited Partnership of the Partnership, in each case, as has been and as may in the future be amended (or amended and restated) from time to time, and such securities may not be sold or otherwise transferred except pursuant to the provisions of such documents.”
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3.11. Restrictions on Public Sale by the Participant. To the extent not inconsistent with applicable law, the Participant agrees not to effect any sale or distribution of the Performance Units or any similar security of the Company or the Partnership, or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under the Securities Act, during the 14 days prior to, and for a period of up to 90 days beginning on, the date of the pricing of any public or private debt or equity securities offering by the Company or the Partnership (except as part of such offering), if and to the extent requested in writing by the Partnership or the Company in the case of a non-underwritten public or private offering or if and to the extent requested in writing by the managing underwriter or underwriters (or initial purchaser or initial purchasers, as the case may be) and consented to by the Partnership or the Company, which consent may be given or withheld in the Partnership’s or the Company’s sole and absolute discretion, in the case of an underwritten public or private offering (such agreement to be in the form of a lock-up agreement provided by the Company, the Partnership, the managing underwriter or underwriters, or the initial purchaser or initial purchasers, as the case may be). |
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ARTICLE IV. |
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4.1. Adjustments. In the event that the Administrator determines that any acquisition or disposition of any portfolio property by the Company and/or its Affiliates, any dividend or other distribution (whether in the form of cash, common stock, other securities, or other property), the change or exchange of REIT Shares for a different number or kind of shares or other securities of the Company by reason of any recapitalization, reclassification, share split, share dividend, combination, or division, merger, consolidation, or similar transaction, any unusual or nonrecurring transactions or events affecting the Company or the financial statements of the Company, or changes in applicable laws, or changes in generally accepted accounting principles applicable to, or the accounting policies used by, the Company occur, such that an adjustment, including a substitution of other awards or otherwise, is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available with respect to the Awards, then the Administrator may in good faith and in such manner as it may deem equitable, adjust the Award to reflect the effect or projected effect of such transaction(s) or event(s). |
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4.2. Section 409A. |
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a. |
To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the effective date of this Agreement. Notwithstanding any provision of this Agreement to the contrary, in the event that following the effective date of this Agreement, the Company or the Partnership determines that the Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the effective date of this Agreement), the Company or the Partnership may adopt such amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Company or the Partnership determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance; provided, however, that this Section 4.2 shall not create any obligation on the part of the Company, the Partnership or any Affiliate to adopt any such amendment, policy or procedure or take any such other action, and none of the Company, the Partnership or any Affiliate shall have any obligation to indemnify any person for any taxes imposed under or by operation of Section 409A of the Code. |
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4.3. Not a Contract of Employment. Nothing in this Agreement shall confer upon the Participant any right to continue to serve as an Employee or other service provider of the Company, the Partnership or any of their Affiliates or shall interfere with or restrict in any way the rights of the Company, the Partnership or their Affiliates, which rights are hereby expressly reserved, to discharge or terminate the services of the Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided to the contrary in a written agreement between the Company, the Partnership or an Affiliate, on the one hand, and the Participant on the other. |
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4.4. Governing Law. The laws of the State of Maryland shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws. |
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4.5. Authority of Administrator. The Administrator shall make all determinations under this Agreement in its sole and absolute discretion and all interested parties shall be bound by such determinations. |
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4.6. Conformity to Securities Laws. The Participant acknowledges that this Agreement is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act, and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, as well as all applicable state securities laws and regulations. Notwithstanding anything herein to the contrary, the Award of Performance Units and any Distribution Equivalent Units is made, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. |
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4.7. Amendment, Suspension and Termination. To the extent permitted by the Partnership Agreement, this Agreement may be wholly or partially amended or otherwise modified, suspended, or terminated at any time or from time to time by the Administrator, provided, however, that, except as may otherwise be provided by the Partnership Agreement, no amendment, modification, suspension or termination of this Agreement shall adversely affect the Award in any material way without the prior written consent of the Participant. |
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4.8. Notices. Notices required or permitted hereunder shall be given and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail, with postage and fees prepaid, addressed to the Participant to his or her address shown in the Company records, and to the Company and the Partnership at their principal executive office(s). |
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4.9. Successors and Assigns. The Company and the Partnership may assign any of their respective rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company and the Partnership. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon the Participant and his or her heirs, executors, administrators, successors and assigns. |
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4.10. Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Partnership Agreement or this Agreement, if the Participant is subject to Section 16 of the Exchange Act, then the Partnership Agreement, the Award and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. |
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4.11. Entire Agreement. The Partnership Agreement and this Agreement (including all exhibits and appendices hereto or thereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company, the Partnership and the Participant with respect to the subject matter hereof. Without limiting the generality of the foregoing, the parties acknowledge and agree that this Agreement embodies their final intent and understanding with respect to the grant of the Award, and supersedes all previous descriptions, discussions, agreements or other materials relating to this Award. |
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4.12. Clawback. This Award shall be subject to any clawback or recoupment policy currently in effect or as may be adopted by the Company or the Partnership, in each case, as may be amended from time to time. |
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4.13. Fractional Units. For purposes of this Agreement, any fractional Performance Units that vest or become entitled to distributions pursuant to the Partnership Agreement shall be rounded up or down to whole Performance Units as determined by the Administrator in its sole and absolute discretion. |
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4.14. Survival of Representations and Warranties. The representations, warranties and covenants contained in Section 3.2 hereof shall survive the later of the date of execution and delivery of this Agreement and the issuance of the Award. |
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4.15. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which together shall be deemed to be one and the same agreement. Counterparts may be delivered via facsimile, electronic mail (including .pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, for example, www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes. |
By his or her signature and the Partnership’s and the Company’s signature below, the Participant agrees to be bound by the terms and conditions of this Agreement. The Participant has reviewed this Agreement in its entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of this Agreement. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under this Agreement. In addition, by signing below, the Participant acknowledges that the Administrator, in its sole discretion, may satisfy any withholding obligations arising under this Agreement (if any) by any method.
[Signature Page Follows]
| MOBILE INFRASTRUCTURE CORPORATION: | PARTICIPANT: | ||
| ________________________________ | |||
| By:_______________________________________ | Name:___________________________ | ||
| Name: ____________________________________ | Address: _________________________ | ||
| Title: _____________________________________ |
MOBILE INFRA OPERATING PARTNERSHIP, L.P.:
By: Mobile Infrastructure Corporation, its
General Partner
By: _____________________________
Name: ______________________
Title: ___________________________
EXHIBIT A
FORM OF SECTION 83(b) ELECTION AND INSTRUCTIONS
These instructions are provided to assist you if you choose to make an election under Section 83(b) of the Internal Revenue Code, as amended, with respect to the Performance Units of Mobile Infra Operating Partnership, L.P. transferred to you. Please consult with your personal tax advisor as to whether an election of this nature will be in your best interests in light of your personal tax situation.
The executed original of the Section 83(b) election must be filed with the Internal Revenue Service not later than 30 days after the grant date. PLEASE NOTE: There is no remedy for failure to file on time. Follow the steps outlined below to ensure that the election is mailed and filed correctly and in a timely manner. PLEASE ALSO NOTE: If you make the Section 83(b) election, the election is irrevocable.
Complete all of the Section 83(b) election steps below:
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1. |
Complete the Section 83(b) election form (sample form follows) and make three copies of the signed election form. |
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2. |
Prepare a cover letter to the Internal Revenue Service (sample letter included, following election form). |
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3. |
Send the cover letter with the originally executed Section 83(b) election form and one copy via certified mail, return receipt requested to the Internal Revenue Service at the address of the Internal Revenue Service where you file your personal tax returns. |
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It is advisable that you have the package date-stamped at the post office. Enclose a self-addressed, stamped envelope so that the Internal Revenue Service may return a date-stamped copy to you. However, your postmarked receipt is your proof of having timely filed the Section 83(b) election if you do not receive confirmation from the Internal Revenue Service. |
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4. |
One copy must be sent to Mobile Infra Operating Partnership, L.P. for its records. |
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5. |
Keep one copy for your files and, if required by applicable law, attach to your federal income tax return for the applicable calendar year. |
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6. |
Retain the Internal Revenue Service file stamped copy (when returned) for your records. |
Please consult your personal tax advisor for the address of the office of the Internal Revenue Service to which you should mail your election form.
ELECTION PURSUANT TO SECTION 83(b) OF THE INTERNAL REVENUE CODE TO INCLUDE IN GROSS INCOME THE EXCESS OVER THE
PURCHASE PRICE, IF ANY, OF THE VALUE OF PROPERTY
TRANSFERRED IN CONNECTION WITH SERVICES
The undersigned hereby elects pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in the undersigned’s gross income for the taxable year in which the property was transferred the excess (if any) of the fair market value of the property described below, over the amount the undersigned paid for such property, if any, and supplies herewith the following information in accordance with the Treasury regulations promulgated under Section 83(b):
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1. |
The name, address and taxpayer identification (social security) number of the undersigned, and the taxable year in which this election is being made, are: |
TAXPAYER’S NAME:
TAXPAYER’S SOCIAL SECURITY NUMBER: _____________________
ADDRESS: _____________________________________
TAXABLE YEAR: _______________________________
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2. |
The property with respect to which the election is made consists of [______] Performance Units (the “Units”) of Mobile Infra Operating Partnership, L.P. (the “Company”), representing an interest in the future profits, losses and distributions of the Company. |
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3. |
The date on which the above property was transferred to the undersigned was [______]. |
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4. |
The above property is subject to the following restrictions: The Units are subject to forfeiture to the extent unvested upon a termination of service with the Company under certain circumstances or in the event that certain performance objectives are not satisfied. These restrictions lapse upon the satisfaction of certain conditions as set forth in an agreement between the taxpayer and the Company. In addition, the Units are subject to certain transfer restrictions pursuant to such agreement and the Third Amended and Restated Agreement of Limited Partnership of Mobile Infra Operating Partnership, L.P., as amended (or amended and restated) from time to time, should the taxpayer wish to transfer the Units. |
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5. |
The fair market value of the above property at the time of transfer (determined without regard to any restrictions other than those which by their terms will never lapse) was $[_____]. |
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6. |
The amount paid for the above property by the undersigned was $[____]. |
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7. |
The undersigned taxpayer will file this election with the Internal Revenue Service office with which taxpayer files his or her annual income tax return not later than 30 days after the date of transfer of the property. A copy of this election will be furnished to the person for whom the services were performed, and, if required by applicable law, a copy will be filed with the income tax return of the undersigned to which this election relates. The undersigned is the person performing the services in connection with which the property was transferred. |
Date: ______________________ Name: ____________________________
VIA CERTIFIED MAIL
RETURN RECEIPT REQUESTED
Internal Revenue Service
______________________________________
[Address where taxpayer files returns]
Re: Election under Section 83(b) of the Internal Revenue Code of 1986
Taxpayer: _______________________________
Taxpayer’s Social Security Number: ___________________________
Ladies and Gentlemen:
Enclosed please find an original and one copy of an Election under Section 83(b) of the Internal Revenue Code of 1986, as amended, being made by the taxpayer referenced above. Please acknowledge receipt of the enclosed materials by stamping the enclosed copy of the Election and returning it to me in the self-addressed stamped envelope provided herewith.
Very truly yours,
__________________________
Enclosures
cc: Mobile Infra Operating Partnership, L.P.
APPENDIX I
Vesting of Share Price Performance Units
Fifty percent (50%) of the Performance Units granted under this Agreement (“Share Price Performance Units”) shall vest and become “Vested Share Price Performance Units” based on the achievement of the Share Price Performance Goal by the Company at any time during the Share Price Performance Period. The “Share Price Performance Goal” shall be achieving a $25.00 price per REIT Share based on 90-day volume weighted average price at any time during the Share Price Performance Period.
Vesting of AFFO Performance Units
Fifty percent (50%) of the Performance Units granted under the Agreement (the “AFFO Performance Units”) shall vest and become “Vested AFFO Performance Units” based on the achievement of the AFFO Performance Goal by the Company at any point during the AFFO Performance Period. The “AFFO Performance Goal” shall be met if, at any time during the AFFO Performance Period, the Company achieves $1.25 AFFO per REIT Share for 4 consecutive quarters prior to the fourth quarter of 2025 (the “First AFFO Achievement”) and then, subsequent to the First AFFO Achievement, the Company achieves $1.25 AFFO per REIT Share for an additional 4 consecutive quarters after the fourth quarter of 2025 and before the end of the AFFO Performance Period (the “Second AFFO Achievement”). For the avoidance of doubt, the Second AFFO Achievement shall not be met based on any quarters prior to 2026.
“AFFO” means adjusted funds from operations, as determined by the Administrator.
“AFFO Performance Period” means the period beginning on [_______] and ending on December 31, 2027, unless terminated earlier in connection with a Qualifying Termination, as provided herein.
“Share Price Performance Period” means the period beginning on [_______] and ending on December 31, 2025, unless terminated earlier in connection with a Qualifying Termination, as provided herein.
“Performance Goals” means the AFFO Performance Goal or the Share Price Performance Goal, separately or collectively.
“Performance Period(s)” means either the AFFO Performance Period or the Share Price Performance Period, separately or collectively.
“Vested Performance Units” means the Performance Units that vest in accordance with this Appendix I.
“Unvested Performance Units” means the Performance Units that have not vested in accordance with this Appendix I.
“Vesting Date” means any date on which vesting occurs with respect to the Performance Units as set forth herein.
Exhibit 10.2
MOBILE INFRASTRUCTURE CORPORATION AND
MOBILE INFRA OPERATING PARTNERSHIP, L.P.
FORM OF LTIP UNIT AGREEMENT
In consideration of the mutual agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Mobile Infra Operating Partnership, L.P., a Maryland limited partnership (the “Partnership”), hereby issues to [_________] (the “Participant”), as of [______], an award (the “Award”) of LTIP Units pursuant to the terms of this LTIP Unit Agreement (this “Agreement”). The LTIP Units constitute Profits Interest Units as defined below.
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ARTICLE I. |
The capitalized terms below shall have the following meanings for purposes of this Agreement. Capitalized terms not defined herein shall have the meanings given to them in the Partnership Agreement.
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1.1. “Administrator” All LTIP Unit Awards made hereunder shall be administered by the Compensation Committee of the Board. The Administrator may from time to time adopt any rules or procedures it deems necessary or desirable for the proper and efficient administration of Awards, consistent with the terms hereof. The Administrator’s determinations and interpretations with respect to an Award hereunder and this Agreement shall be final and binding on all parties. |
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1.2. “Board” shall mean the Board of Directors of the Company. |
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1.3. “Company” shall mean Mobile Infrastructure Corporation, a Maryland corporation. |
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1.4. “Change in Control” shall mean the occurrence of any of the following events: |
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a. |
A transaction or series of transactions (other than an offering of REIT Shares to the general public pursuant to a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, the Partnership or any Affiliate, an employee benefit plan maintained by any of the foregoing entities or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than fifty percent (50%) of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; or |
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b. |
During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in Section 1.4(a) or Section 1.4(c) hereof) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or |
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c. |
The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination (other than a merger, consolidation, reorganization, or business combination of the Company with and into an Affiliate approved by the Board) or (y) a sale or other disposition of all or substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case, other than a transaction: |
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1. |
Which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and |
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2. |
After which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this Section 1.4(c)(2) as beneficially owning 50% or more of combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or |
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d. |
Approval by the Company’s stockholders of a liquidation or dissolution of the Company. |
Consistent with the terms of this Section 1.4, the Administrator shall have full and final authority to determine conclusively whether a Change in Control of the Company has occurred pursuant to the above definition, the date of the occurrence of such Change in Control, and any incidental matters relating thereto.
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1.5. “Director” shall mean a member of the Board as constituted from time to time. |
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1.6. “Disability” shall mean that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months. In the event of a dispute, the determination of whether a Participant has incurred a Disability will be made by the Board and may be supported by the advice of a physician competent in the area to which such Disability relates. |
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1.7. “Grant Date” has the meaning set forth in Section 2.1(a). |
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1.8. “Partnership Agreement” means the Third Amended and Restated Agreement of Limited Partnership of the Partnership, as amended from time to time. |
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1.9. “Profits Interest Unit” means, to the extent authorized by the Partnership Agreement, a unit of the Partnership that is granted pursuant to this Agreement and is intended to constitute a “profits interest” within the meaning of Revenue Procedure 93-27, 1993-2 C.B. 343 and Revenue Procedure 2001-43, 2001-2 C.B. 191. |
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1.10. “Qualifying Termination” means a termination of the Participant’s Director status by the Board or due to the Participant’s death or Disability, retirement, or due to a Change in Control. |
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1.11. “Termination of Service” means the time at which a Participant ceases to be a Director for any reason, including, without limitation, a termination by resignation, or by failure to be re-elected, but excluding a Qualifying Termination and terminations where the Participant simultaneously commences or remains in employment or service with the Company or an Affiliate. |
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1.12. “Vesting Date” has the meaning set forth in Section 2.2(a). |
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ARTICLE II. |
This Award represents the right to receive and vest in a number of LTIP Units, subject to the vesting, payment, forfeiture, and other terms and conditions set forth in this Agreement and the Partnership Agreement.
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2.1. Issuance of LTIP Units. |
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a. |
Issuance of Award. The Partnership hereby issues to the Participant [_____] LTIP Units, effective as of [_________] (the “Grant Date”), subject to the vesting and other terms and conditions of this Agreement and the Partnership Agreement. This Award is issued in consideration of the Participant’s agreement to provide services to or for the benefit of the Partnership. If not already a Partner, the Partnership hereby admits the Participant as a Partner of the Partnership on the terms and conditions set forth herein and in the Partnership Agreement. The Partnership and the Participant acknowledge and agree that the LTIP Units are hereby issued to the Participant for the performance of services to or for the benefit of the Partnership in his or her capacity as a Partner or in anticipation of the Participant becoming a Partner. Upon receipt of the Award, the Participant shall, automatically and without further action on his or her part, be deemed to be a party to, signatory of and bound by the Partnership Agreement. At the request of the Partnership, the Participant shall execute the Partnership Agreement or a joinder or counterpart signature page thereto. The Participant acknowledges that the Partnership may from time-to-time issue or cancel (or otherwise modify) LTIP Units and/or other equity interests in accordance with the terms of the Partnership Agreement. The Award shall have the rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption and conversion set forth herein and in the Partnership Agreement. |
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2.2. Vesting of Award. |
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a. |
General. Subject to Section 2.2(b) hereof, the LTIP Units shall vest over three years with one-third (1/3) vesting on each of the next three anniversaries of the Grant Date, each a “Vesting Date”, subject to the Participant’s continued employment, contractual or other service relationship with the Company or an Affiliate on the Vesting Date. |
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b. |
Qualifying Termination. Notwithstanding the foregoing or anything contained herein, in the event of a Qualifying Termination all Unvested LTIP Units shall accelerate and become Vested LTIP Units as of the date of such Qualifying Termination. |
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2.3. Distributions. LTIP Units shall be treated as “LTIP Units” under the Partnership Agreement. As of the Grant Date and in accordance with Section 18.4 of the Partnership Agreement, the LTIP Units shall be entitled to the full distribution payable on Common Units outstanding, which may be made from time to time (if applicable, assuming the LTIP Units were held for the entire period to which such distributions relate). All distributions paid with respect to the LTIP Units shall be fully vested and non-forfeitable when paid whether the underlying LTIP Units are vested or unvested. At the Administrator’s discretion, distributions may be paid in the form of additional LTIP Units. |
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2.4. Forfeiture. Upon the Participant’s Termination of Service, the Participant shall forfeit all rights and interest under this Agreement without further action on the part of the Company, the Partnership or the Participant and without payment of consideration therefor, which forfeiture shall include, without limitation, any rights or interest in Unvested LTIP Units (other than any distributions previously made pursuant to Section 18.4 of the Partnership Agreement and Section 2.3 hereof). |
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ARTICLE III. |
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3.1. LTIP Units Subject to Partnership Agreement; Transfer Restrictions. |
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a. |
The Award and the LTIP Units are subject to the terms of the Partnership Agreement, including, without limitation, the restrictions on Transfer of Partnership Interests (including, without limitation, LTIP Units) set forth in Articles 11 and 18 of the Partnership Agreement. Any permitted transferee of the Award or LTIP Units shall take such Award or LTIP Units subject to the terms of this Agreement and the Partnership Agreement. Any such permitted transferee must, upon the request of the Partnership, agree to be bound by the Partnership Agreement and this Agreement, and shall execute the same and such other documents and perform such further acts in connection with the same at the Partnership’s or the Company’s request, and must agree to such other waivers, limitations, and restrictions as the Partnership or the Company may reasonably require. Any Transfer of the Award or LTIP Units which is not made in compliance the Partnership Agreement and this Agreement shall be null and void and of no further force or effect. |
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b. |
Without the consent of the Administrator (which it may give or withhold in its sole discretion), the Participant shall not Transfer any Unvested LTIP Units or any portion of the Award attributable to such Unvested LTIP Units (or any securities into which such Unvested LTIP Units are converted or exchanged), other than by will or pursuant to applicable laws of descent and distribution (the “Transfer Restrictions”); provided, however, that the Transfer Restrictions shall not apply to any Transfer of Unvested LTIP Units or of the Award to the Partnership or the Company. |
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3.2. Covenants, Representations and Warranties. The Participant hereby represents, warrants, covenants, acknowledges, and agrees on behalf of the Participant and his or her spouse, if applicable, that: |
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a. |
Investment. The Participant is holding the Award and the LTIP Units for the Participant’s own account, and not for the account of any other Person. The Participant is holding the Award and the LTIP Units for investment purposes and not with a view to distribution or resale thereof except in compliance with applicable laws regulating securities. |
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b. |
Relation to the Partnership. The Participant is presently a Director of the Company or is otherwise providing services to or for the benefit of the Partnership, and in such capacity has become personally familiar with the business of the Partnership. |
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c. |
Access to Information. The Participant has had the opportunity to ask questions of, and to receive answers from, the Partnership with respect to the terms and conditions of the transactions contemplated hereby and with respect to the business, affairs, financial conditions, and results of operations of the Partnership. |
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d. |
Registration. The Participant understands that the LTIP Units have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and the LTIP Units cannot be transferred by the Participant unless such transfer is registered under the Securities Act or an exemption from such registration is available. The Partnership has made no agreements, covenants or undertakings whatsoever to register the transfer of the LTIP Units under the Securities Act. The Partnership has made no representations, warranties, or covenants whatsoever as to whether any exemption from the Securities Act, including, without limitation, any exemption for limited sales in routine brokers’ transactions pursuant to Rule 144 of the Securities Act, will be available. If an exemption under Rule 144 is available at all, it will not be available until at least six months from issuance of the Award, and then, not unless the terms and conditions of Rule 144 have been satisfied in full to the satisfaction of the Partnership in its sole and absolute discretion. |
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e. |
Public Trading. None of the Partnership’s securities are presently publicly traded, and the Partnership has made no representations, covenants or agreements as to whether there will be a public market for any of its securities. |
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f. |
Tax Advice. The Partnership has made no warranties or representations to the Participant with respect to the income tax consequences of the transactions contemplated by this Agreement (including, without limitation, with respect to the decision of whether to make an election under Section 83(b) of the Code), and the Participant is in no manner relying on the Partnership or its representatives for an assessment of such tax consequences. Participant hereby recognizes that the Internal Revenue Service has proposed regulations under Sections 83 and 704 of the Code that may affect the proper treatment of the LTIP Units for federal income tax purposes. In the event that those proposed regulations are finalized, the Participant hereby agrees to cooperate with the Partnership in amending this Agreement and the Partnership Agreement, and to take such other action as may be required to conform to such regulations. Participant hereby further recognizes that the U.S. Congress is considering legislation that would change the federal tax consequences of owning and disposing of LTIP Units. The Participant is advised to consult with his or her own tax advisor with respect to such tax consequences and his or her ownership of the LTIP Units. |
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3.3. Capital Account. The Participant shall make no contribution of capital to the Partnership in connection with the Award and, as a result, the Participant’s Capital Account balance in the Partnership immediately after his or her receipt of the LTIP Units shall be equal to zero, unless the Participant was a Partner in the Partnership prior to such issuance, in which case the Participant’s Capital Account balance shall not be increased as a result of his or her receipt of the LTIP Units. |
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3.4. Section 83(b) Election. The Participant covenants that the Participant shall make a timely election under Section 83(b) of the Code (and any comparable election in the state of the Participant’s residence) with respect to the LTIP Units covered by the Award, and the Partnership hereby consents to the making of such election(s). In connection with such election, the Participant shall promptly provide a copy of such election to the Partnership. Instructions for completing an election under Section 83(b) of the Code and a form of election under Section 83(b) of the Code are attached hereto as Exhibit A. The Participant represents that the Participant has consulted any tax advisor(s) that the Participant deems advisable in connection with the filing of an election under Section 83(b) of the Code and similar state tax provisions. The Participant acknowledges that it is the Participant’s sole responsibility, and not the Company’s or the Partnership’s, to timely file an election under Section 83(b) of the Code (and any comparable state election), even if the Participant requests that the Company or the Partnership, or any representative of the Company or the Partnership, make such filing on the Participant’s behalf. The Participant should consult his or her tax advisor to determine if there is a comparable election to file in the state of his or her residence. |
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3.5. Ownership Information. The Participant hereby covenants that so long as the Participant holds any LTIP Units, at the request of the Partnership, the Participant shall disclose to the Partnership in writing such information relating to the Participant’s ownership of the LTIP Units as the Partnership reasonably believes to be necessary or desirable to ascertain in order to comply with the Code or the requirements of any other appropriate taxing authority. |
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3.6. Execution and Return of Documents and Certificates. At the Company’s or the Partnership’s request, the Participant hereby agrees to promptly execute, deliver and return to the Partnership any and all documents or certificates that the Company or the Partnership deems necessary or desirable to effectuate the cancellation and forfeiture of the Unvested LTIP Units and the portion of the Award attributable to the Unvested LTIP Units, and/or to effectuate the transfer or surrender of such Unvested LTIP Units and portion of the Award to the Partnership. |
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3.7. Taxes. The Partnership and the Participant intend that (a) the LTIP Units be treated as a “profits interest” as defined in Internal Revenue Service Revenue Procedure 93-27, as clarified by Revenue Procedure 2001-43, (b) the issuance of such units not be a taxable event to the Partnership or the Participant as provided in such revenue procedure, and (c) the Partnership Agreement and this Agreement be interpreted consistently with such intent. In furtherance of such intent, effective immediately prior to the issuance of the LTIP Units, the Partnership may revalue all Partnership assets to their respective gross fair market values, and make the resulting adjustments to the Capital Accounts of the Partners, in each case as set forth in the Partnership Agreement. The Company, the Partnership or any Affiliate may withhold from the Participant’s compensation, or require the Participant to pay to such entity, any applicable withholding or taxes resulting from the issuance of the Award hereunder, from the vesting or lapse of any restrictions imposed on, or payment with respect to, the Award, or from the ownership or disposition of the LTIP Units. |
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3.8. Remedies. The Participant shall be liable to the Partnership for all costs and damages, including incidental and consequential damages, resulting from a disposition of the Award or the LTIP Units which is in violation of the provisions of this Agreement or the Partnership Agreement. Without limiting the generality of the foregoing, the Participant agrees that the Partnership shall be entitled to obtain specific performance of the obligations of the Participant under this Agreement and the Partnership Agreement and immediate injunctive relief in the event any action or proceeding is brought in equity to enforce the same. The Participant hereby waives any claim or defense that there is an adequate remedy at law available to the Partnership in connection with the same. |
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3.9. Restrictive Legends. Certificates evidencing the LTIP Units, to the extent such certificates are issued, may bear such restrictive legends as the Partnership and/or the Partnership’s counsel may deem necessary or advisable under applicable law or pursuant to this Agreement, including, without limitation, the following legends or any legends similar thereto: |
“The securities represented hereby have not been registered under the Securities Act of 1933, as amended (the “Securities Act”). Any transfer of such securities will be invalid unless a Registration Statement under the Securities Act is in effect as to such transfer or in the opinion of counsel for Mobile Infra Operating Partnership, L.P. (the “Partnership”) such registration is unnecessary in order for such transfer to comply with the Securities Act.”
“The securities represented hereby are subject to forfeiture, transferability and other restrictions as set forth in (i) a written agreement with the Partnership and (ii) the Third Amended and Restated Agreement of Limited Partnership of the Partnership, in each case, as has been and as may in the future be amended (or amended and restated) from time to time, and such securities may not be sold or otherwise transferred except pursuant to the provisions of such documents.”
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3.10. Restrictions on Public Sale by the Participant. To the extent not inconsistent with applicable law, the Participant agrees not to effect any sale or distribution of the LTIP Units or any similar security of the Company or the Partnership, or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under the Securities Act, during the 14 days prior to, and for a period of up to 90 days beginning on, the date of the pricing of any public or private debt or equity securities offering by the Company or the Partnership (except as part of such offering), if and to the extent requested in writing by the Partnership or the Company in the case of a non-underwritten public or private offering or if and to the extent requested in writing by the managing underwriter or underwriters (or initial purchaser or initial purchasers, as the case may be) and consented to by the Partnership or the Company, which consent may be given or withheld in the Partnership’s or the Company’s sole and absolute discretion, in the case of an underwritten public or private offering (such agreement to be in the form of a lock-up agreement provided by the Company, the Partnership, the managing underwriter or underwriters, or the initial purchaser or initial purchasers, as the case may be). |
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ARTICLE IV. |
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4.1. Adjustments. In the event that the Administrator determines that any acquisition or disposition of any portfolio property by the Company and/or its Affiliates, any dividend or other distribution (whether in the form of cash, common stock, other securities, or other property), the change or exchange of REIT Shares for a different number or kind of shares or other securities of the Company by reason of any recapitalization, reclassification, share split, share dividend, combination, or division, merger, consolidation or similar transaction, any unusual or nonrecurring transactions or events affecting the Company or the financial statements of the Company, or changes in applicable laws, or changes in generally accepted accounting principles applicable to, or the accounting policies used by, the Company occur, such that an adjustment, including a substitution of other awards or otherwise, is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available with respect to the Awards, then the Administrator may in good faith and in such manner as it may deem equitable, adjust the Award to reflect the effect or projected effect of such transaction(s) or event(s). |
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4.2. Section 409A. |
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a. |
To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the effective date of this Agreement. Notwithstanding any provision of this Agreement to the contrary, in the event that following the effective date of this Agreement, the Company or the Partnership determines that the Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the effective date of this Agreement), the Company or the Partnership may adopt such amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Company or the Partnership determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance; provided, however, that this Section 4.2 shall not create any obligation on the part of the Company, the Partnership or any Affiliate to adopt any such amendment, policy or procedure or take any such other action, and none of the Company, the Partnership or any Affiliate shall have any obligation to indemnify any person for any taxes imposed under or by operation of Section 409A of the Code. |
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4.3. Not a Contract for Services. Nothing in this Agreement shall confer upon the Participant any right to continue to serve as a Director or other service provider of the Company, the Partnership or any of their Affiliates or shall interfere with or restrict in any way the rights of the Company, the Partnership or their Affiliates, which rights are hereby expressly reserved, to discharge or terminate the services of the Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided to the contrary in a written agreement between the Company, the Partnership or an Affiliate, on the one hand, and the Participant on the other. |
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4.4. Governing Law. The laws of the State of Maryland shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws. |
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4.5. Authority of Administrator. The Administrator shall make all determinations under this Agreement in its sole and absolute discretion and all interested parties shall be bound by such determinations. |
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4.6. Conformity to Securities Laws. The Participant acknowledges that this Agreement is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act, and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, as well as all applicable state securities laws and regulations. Notwithstanding anything herein to the contrary, the Award of LTIP Units is made, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. |
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4.7. Amendment, Suspension and Termination. To the extent permitted by the Partnership Agreement, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator, provided, however, that, except as may otherwise be provided by the Partnership Agreement, no amendment, modification, suspension or termination of this Agreement shall adversely affect the Award in any material way without the prior written consent of the Participant. |
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4.8. Notices. Notices required or permitted hereunder shall be given and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail, with postage and fees prepaid, addressed to the Participant to his or her address shown in the Company records, and to the Company and the Partnership at their principal executive office(s). |
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4.9. Successors and Assigns. The Company and the Partnership may assign any of their respective rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company and the Partnership. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon the Participant and his or her heirs, executors, administrators, successors and assigns. |
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4.10. Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Partnership Agreement or this Agreement, if the Participant is subject to Section 16 of the Exchange Act, then the Partnership Agreement, the Award and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. |
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4.11. Entire Agreement. The Partnership Agreement and this Agreement (including all exhibits and appendices hereto or thereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company, the Partnership and the Participant with respect to the subject matter hereof. Without limiting the generality of the foregoing, the parties acknowledge and agree that this Agreement embodies their final intent and understanding with respect to the grant of the Award, and supersedes all previous descriptions, discussions, agreements or other materials relating to this Award. |
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4.12. Clawback. This Award shall be subject to any clawback or recoupment policy currently in effect or as may be adopted by the Company or the Partnership, in each case, as may be amended from time to time. |
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4.13. Fractional Units. For purposes of this Agreement, any fractional LTIP Units that vest or become entitled to distributions pursuant to the Partnership Agreement shall be rounded up or down to whole LTIP Units as determined by the Administrator, in its sole and absolute discretion. |
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4.14. Survival of Representations and Warranties. The representations, warranties and covenants contained in Section 3.2 hereof shall survive the later of the date of execution and delivery of this Agreement and the issuance of the Award. |
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4.15. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which together shall be deemed to be one and the same agreement. Counterparts may be delivered via facsimile, electronic mail (including .pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, for example, www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes. |
By his or her signature and the Partnership’s and the Company’s signature below, the Participant agrees to be bound by the terms and conditions of this Agreement. The Participant has reviewed this Agreement in its entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of this Agreement. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under this Agreement. In addition, by signing below, the Participant acknowledges that the Administrator, in its sole discretion, may satisfy any withholding obligations arising under this Agreement (if any) by any method.
[Signature Page Follows]
| MOBILE INFRASTRUCTURE CORPORATION: | PARTICPANT: | |
| __________________________________ | ||
| By: ____________________________________ | Name: ____________________________ | |
| Name: __________________________________ | Address: __________________________ | |
| Title: ___________________________________ |
MOBILE INFRA OPERATING PARTNERSHIP, L.P.:
By: Mobile Infrastructure Corporation, its General Partner
By: _____________________________
Name: ___________________________
Title: ____________________________
EXHIBIT A
FORM OF SECTION 83(b) ELECTION AND INSTRUCTIONS
These instructions are provided to assist you if you choose to make an election under Section 83(b) of the Internal Revenue Code, as amended, with respect to the LTIP Units of Mobile Infra Operating Partnership, L.P. transferred to you. Please consult with your personal tax advisor as to whether an election of this nature will be in your best interests in light of your personal tax situation.
The executed original of the Section 83(b) election must be filed with the Internal Revenue Service not later than 30 days after the grant date. PLEASE NOTE: There is no remedy for failure to file on time. Follow the steps outlined below to ensure that the election is mailed and filed correctly and in a timely manner. PLEASE ALSO NOTE: If you make the Section 83(b) election, the election is irrevocable.
Complete all of the Section 83(b) election steps below:
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1. |
Complete the Section 83(b) election form (sample form follows) and make three copies of the signed election form. |
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2. |
Prepare a cover letter to the Internal Revenue Service (sample letter included, following election form). |
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3. |
Send the cover letter with the originally executed Section 83(b) election form and one copy via certified mail, return receipt requested to the Internal Revenue Service at the address of the Internal Revenue Service where you file your personal tax returns. |
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■ |
It is advisable that you have the package date-stamped at the post office. Enclose a self-addressed, stamped envelope so that the Internal Revenue Service may return a date-stamped copy to you. However, your postmarked receipt is your proof of having timely filed the Section 83(b) election if you do not receive confirmation from the Internal Revenue Service. |
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4. |
One copy must be sent to Mobile Infra Operating Partnership, L.P. for its records. |
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5. |
Keep one copy for your files and, if required by applicable law, attach to your federal income tax return for the applicable calendar year. |
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6. |
Retain the Internal Revenue Service file stamped copy (when returned) for your records. |
Please consult your personal tax advisor for the address of the office of the Internal Revenue Service to which you should mail your election form.
ELECTION PURSUANT TO SECTION 83(b) OF THE INTERNAL REVENUE CODE TO INCLUDE IN GROSS INCOME THE EXCESS OVER THE PURCHASE PRICE, IF ANY, OF THE VALUE OF PROPERTY TRANSFERRED IN CONNECTION WITH SERVICES
The undersigned hereby elects pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in the undersigned’s gross income for the taxable year in which the property was transferred the excess (if any) of the fair market value of the property described below, over the amount the undersigned paid for such property, if any, and supplies herewith the following information in accordance with the Treasury regulations promulgated under Section 83(b):
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1. |
The name, address and taxpayer identification (social security) number of the undersigned, and the taxable year in which this election is being made, are: |
TAXPAYER’S NAME:
TAXPAYER’S SOCIAL SECURITY NUMBER: _____________________
ADDRESS: _____________________________________
TAXABLE YEAR: _______________________________
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2. |
The property with respect to which the election is made consists of [______] LTIP Units (the “Units”) of Mobile Infra Operating Partnership, L.P. (the “Company”), representing an interest in the future profits, losses and distributions of the Company. |
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3. |
The date on which the above property was transferred to the undersigned was [______]. |
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4. |
The above property is subject to the following restrictions: The Units are subject to forfeiture to the extent unvested upon a termination of service with the Company under certain circumstances. These restrictions lapse upon the satisfaction of certain conditions as set forth in an agreement between the taxpayer and the Company. In addition, the Units are subject to certain transfer restrictions pursuant to such agreement and the Third Amended and Restated Agreement of Limited Partnership of Mobile Infra Operating Partnership, L.P., as amended (or amended and restated) from time to time, should the taxpayer wish to transfer the Units. |
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5. |
The fair market value of the above property at the time of transfer (determined without regard to any restrictions other than those which by their terms will never lapse) was $[____]. |
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6. |
The amount paid for the above property by the undersigned was $[____]. |
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7. |
The undersigned taxpayer will file this election with the Internal Revenue Service office with which taxpayer files his or her annual income tax return not later than 30 days after the date of transfer of the property. A copy of this election will be furnished to the person for whom the services were performed, and, if required by applicable law, a copy will be filed with the income tax return of the undersigned to which this election relates. The undersigned is the person performing the services in connection with which the property was transferred. |
Date: ______________________ Name: ____________________________
VIA CERTIFIED MAIL
RETURN RECEIPT REQUESTED
Internal Revenue Service
______________________________________
[Address where taxpayer files returns]
Re: Election under Section 83(b) of the Internal Revenue Code of 1986
Taxpayer: _______________________________
Taxpayer’s Social Security Number: ___________________________
Ladies and Gentlemen:
Enclosed please find an original and one copy of an Election under Section 83(b) of the Internal Revenue Code of 1986, as amended, being made by the taxpayer referenced above. Please acknowledge receipt of the enclosed materials by stamping the enclosed copy of the Election and returning it to me in the self-addressed stamped envelope provided herewith.
Very truly yours,
__________________________
Enclosures
cc: Mobile Infra Operating Partnership, L.P.
Exhibit 31.1
CERTIFICATIONS
I, Manuel Chavez, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Mobile Infrastructure Corporation; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: August 15, 2022
|
/s/ Manuel Chavez |
|
|
Manuel Chavez |
|
|
Chief Executive Officer (Principal Executive Officer) |
|
|
Mobile Infrastructure Corporation |
Exhibit 31.2
CERTIFICATIONS
I, Stephanie Hogue, certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of Mobile Infrastructure Corporation; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: August 15, 2022
|
/s/ Stephanie Hogue |
|
|
Stephanie Hogue |
|
|
President and Interim Chief Financial Officer |
|
|
(Principal Financial Officer) |
|
|
Mobile Infrastructure Corporation |
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Each of Manuel Chavez, as Chief Executive Officer of Mobile Infrastructure Corporation (the “Registrant”), and Stephanie Hogue, as President and Interim Chief Financial Officer of the Registrant, hereby certifies, pursuant to 18 U.S.C. §1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to each of their knowledge:
(1) the Registrant’s accompanying Quarterly Report on Form 10-Q for the period ended June 30, 2022 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: August 15, 2022
|
/s/ Manuel Chavez |
|
|
Manuel Chavez |
|
|
Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
|
Mobile Infrastructure Corporation |
Date: August 15, 2022
|
/s/ Stephanie Hogue |
|
|
Stephanie Hogue |
|
|
President and Interim Chief Financial Officer |
|
|
(Principal Financial Officer) |
|
|
Mobile Infrastructure Corporation |
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
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