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Form 10-Q Mobile Infrastructure For: Jun 30

August 15, 2022 5:02 PM EDT

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0001642985 Mobile Infrastructure Corp false --12-31 Q2 2022 112,000 94,000 0.1 0 0.0001 0.0001 50,000 50,000 2,862 2,862 2,862 2,862 2,862,000 2,862,000 0.0001 0.0001 97,000 97,000 39,811 39,811 39,811 39,811 39,811,000 39,811,000 0.0001 0.0001 1,000 1,000 0 0 0 0 0.0001 0.0001 98,999,000 98,999,000 7,762,375 7,762,375 7,762,375 7,762,375 1,702,128 1,702,128 1,702,128 1,702,128 13.3 150,000 0 0 148,000 194,000 74,000 0 442,000 501,000 5 5 5 The Company issued a promissory note to Cantor Commercial Real Estate Lending, L.P. (“CCRE”) for $16.25 million secured by the pool of properties. Pursuant to the Closing of the Transaction, the Company recorded the $6.0 million loan with Cantor Commercial Real Estate upon the consolidation of its investment in MVP St. Louis Cardinal Lot, DST. See Note I for further information. 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 $5.5 million to repay and discharge the outstanding KeyBank loan agreement. The loan is secured by a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing on each of the properties owned by MVP St. Louis 2013 and MVP Memphis Poplar. 2 Year Interest Only Represents the value of the 7,495,090 OP Units issued at $11.75 per unit, excluding associated transaction costs of approximately $4.0 million. The in-place lease asset has a life of 5 years and is included in intangible assets on the consolidated balance sheet. 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. On September 30, 2021, the Company entered into a loan with Meta Bank to finance $337,500 of the Directors & Officers insurance policy premium. The loan matured on July 31, 2022. The Company issued a promissory note to KeyBank for $12.7 million secured by the pool of properties. 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 5 years. 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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

FORM 10-Q

 

(Mark one) 

 

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2022

 

Or 

 

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________ to _________

 

Commission File Number: 000-55760

mic2022logo-resized3.jpg
 

MOBILE INFRASTRUCTURE CORPORATION

(Exact name of registrant as specified in its charter)

 

Maryland

 

47-3945882

(State or Other Jurisdiction of

 

(I.R.S. Employer

Incorporation or Organization)

 

Identification No.)

 

30 W. 4th Street, Cincinnati, OH 45202

(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s Telephone Number, including Area Code: (513) 834-5110

 

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.

 

Yes ☒ No ☐

 

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).

 

Yes ☒ No ☐

 

 

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 ☐

Non-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 No ☒

 

As of August 11, 2022, the registrant had 7,762,375 shares of common stock outstanding.

 

 

TABLE OF CONTENTS

 

   

Page

     

Part I

FINANCIAL INFORMATION

 
     

Item 1.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1

     
 

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30 2022 (UNAUDITED) AND DECEMBER 31, 2021

1

     
 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (UNAUDITED)

2

     
 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (UNAUDITED)

3

     
 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (UNAUDITED)

4

     
 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5

     

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

23

     

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

36

     

Item 4.

CONTROLS AND PROCEDURES

37

     

Part II

OTHER INFORMATION

 
     

Item 1.

LEGAL PROCEEDINGS

38

     

Item 1A.

RISK FACTORS

38

     

Item 5

OTHER INFORMATION

38

     

Item 6.

EXHIBITS

39

 

 

PART I

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

 $167,538,000  $166,224,000 

Buildings and improvements

  271,046,000   254,379,000 

Construction in progress

  461,000   89,000 

Intangible assets

  10,025,000   9,756,000 
   449,070,000   430,448,000 

Accumulated depreciation and amortization

  (26,844,000)  (22,873,000)

Total investments in real estate, net

  422,226,000   407,575,000 
         

Fixed Assets, net of accumulated depreciation of $112,000 and $94,000 as of June 30, 2022 and December 31, 2021 , respectively

  296,000   61,000 

Cash

  8,623,000   11,805,000 

Cash – restricted

  5,357,000   4,891,000 

Prepaid expenses

  544,000   676,000 

Accounts receivable, net allowance of doubtful accounts of $0.1 million as of December 31, 2021. No allowance as of June 30, 2022.

  2,494,000   4,031,000 

Other assets

  121,000   108,000 

Total assets

 $439,661,000  $429,147,000 

LIABILITIES AND EQUITY

 

Liabilities

        

Notes payable and paycheck protection program loan, net

 $150,299,000  $207,153,000 

Line of credit, net

  72,106,000    

Accounts payable and accrued expenses

  18,530,000   13,849,000 

Indemnification Liability

  2,000,000   2,000,000 

Security deposits

  185,000   166,000 

Deferred revenue

  101,000   155,000 

Total liabilities

  243,221,000   223,323,000 
         

Equity

        

Mobile Infrastructure Corporation Stockholders’ Equity

        

Preferred stock Series A, $0.0001 par value, 50,000 shares authorized, 2,862 shares issued and outstanding (stated liquidation value of $2,862,000 as of June 30, 2022 and December 31, 2021)

      

Preferred stock Series 1, $0.0001 par value, 97,000 shares authorized, 39,811 shares issued and outstanding (stated liquidation value of $39,811,000 as of June 30, 2022 and December 31, 2021)

      

Non-voting, non-participating convertible stock, $0.0001 par value, 1,000 shares authorized, no shares issued and outstanding

      

Common stock, $0.0001 par value, 98,999,000 shares authorized, 7,762,375 shares issued and outstanding as of June 30, 2022 and December 31, 2021

      

Warrants issued and outstanding – 1,702,128 warrants as of June 30, 2022 and December 31, 2021, respectively

  3,319,000   3,319,000 

Additional paid-in capital

  194,676,000   196,176,000 

Accumulated deficit

  (104,541,000)  (101,049,000)

Total Mobile Infrastructure Corporation Stockholders’ Equity

  93,454,000   98,446,000 

Non-controlling interest

  102,986,000   107,378,000 

Total equity

  196,440,000   205,824,000 

Total liabilities and equity

 $439,661,000  $429,147,000 

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

                               

Base rent income

  $ 2,122,000     $ 3,062,000     $ 4,173,000     $ 6,285,000  

Management income

    427,000       663,000       427,000       1,004,000  

Percentage rent income

    4,856,000       93,000       9,185,000       240,000  

Total revenues

    7,405,000       3,818,000       13,785,000       7,529,000  
                                 

Operating expenses

                               

Property taxes

    1,844,000       1,173,000       3,680,000       2,302,000  

Property operating expense

    731,000       274,000       1,568,000       556,000  

General and administrative

    1,882,000       1,428,000       3,388,000       2,860,000  

Professional fees, net of reimbursement of insurance proceeds

    532,000       56,000       1,562,000       1,830,000  

Organizational and offering costs

    1,567,000             2,525,000        

Depreciation and amortization

    2,021,000       1,258,000       3,988,000       2,516,000  

Total operating expenses

    8,577,000       4,189,000       16,711,000       10,064,000  
                                 

Other income (expense)

                               

Interest expense

    (3,168,000 )     (2,092,000 )     (5,707,000 )     (4,296,000 )

PPP loan forgiveness

    328,000       348,000       328,000       348,000  

Other Income

    15,000             30,000        

Total other income (expense)

    (2,825,000 )     (1,744,000 )     (5,349,000 )     (3,948,000 )

Net loss

    (3,997,000 )     (2,115,000 )     (8,275,000 )     (6,483,000 )

Less net loss attributable to non-controlling interest

    (2,311,000 )     (10,000 )     (4,783,000 )     (10,000 )

Net loss attributable to Mobile Infrastructure Corporation’s stockholders

  $ (1,686,000 )   $ (2,105,000 )   $ (3,492,000 )   $ (6,473,000 )
                                 

Preferred stock distributions declared - Series A

    (54,000 )     (54,000 )     (108,000 )     (108,000 )

Preferred stock distributions declared - Series 1

    (696,000 )     (696,000 )     (1,392,000 )     (1,392,000 )

Net loss attributable to Mobile Infrastructure Corporation’s common stockholders

  $ (2,436,000 )   $ (2,855,000 )   $ (4,992,000 )   $ (7,973,000 )
                                 

Basic and diluted loss per weighted average common share:

                               

Net loss per share attributable to Mobile Infrastructure Corporation’s common stockholders - basic and diluted

  $ (0.31 )   $ (0.37 )   $ (0.64 )   $ (1.03 )

Weighted average common shares outstanding, basic and diluted

    7,762,375       7,739,952       7,762,375       7,735,888  

 

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

    42,673     $       7,762,375     $     $ 3,319,000     $ 196,176,000     $ (101,049,000 )   $ 107,378,000     $ 205,824,000  

Distributions – Series A

                                  (54,000 )                 (54,000 )

Distributions – Series 1

                                  (696,000 )                 (696,000 )

Net loss

                                        (1,806,000 )     (2,472,000 )     (4,278,000 )

Balance, March 31, 2022

    42,673     $       7,762,375     $     $ 3,319,000     $ 195,426,000     $ (102,855,000 )   $ 104,906,000     $ 200,796,000  
                                                                         

Equity based payments

                                              391,000       391,000  

Distributions – Series A

                                  (54,000 )                 (54,000 )

Distributions – Series 1

                                  (696,000 )                 (696,000 )

Net loss

                                        (1,686,000 )     (2,311,000 )     (3,997,000 )

Balance, June 30, 2022

    42,673     $       7,762,375     $     $ 3,319,000     $ 194,676,000     $ (104,541,000 )   $ 102,986,000     $ 196,440,000  

 

 

   

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

    42,673     $       7,727,696     $     $ 198,769,000     $ (89,985,000 )   $ 2,034,000     $ 110,818,000  

Stock Awards

                12,255             144,000                   144,000  

Distributions – Series A

                            (54,000 )                 (54,000 )

Distributions – Series 1

                            (696,000 )                 (696,000 )

Net loss

                                  (4,368,000 )           (4,368,000 )

Balance, March 31, 2021

    42,673     $       7,739,951     $     $ 198,163,000     $ (94,353,000 )   $ 2,034,000     $ 105,844,000  
                                                                 

Distributions – Series A

                            (54,000 )                 (54,000 )

Distributions – Series 1

                            (696,000 )                 (696,000 )

Net loss

                                  (2,105,000 )     (10,000 )     (2,115,000 )

Balance, June 30, 2021

    42,673     $       7,739,951     $     $ 197,413,000     $ (96,458,000 )   $ 2,024,000     $ 102,979,000  

 

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,

 
   

2022

   

2021

 

Cash flows from operating activities:

               

Net Loss

  $ (8,275,000 )   $ (6,483,000 )

Adjustments to reconcile net loss to net cash used in operating activities:

               

Depreciation and amortization expense

    3,988,000       2,516,000  

Amortization of loan costs

    686,000       149,000  

PPP Forgiveness

    (328,000 )     (348,000 )

Amortization of right of use lease asset

          57,000  

Equity based payments

    391,000        

Changes in operating assets and liabilities

               

Due to/from related parties

          18,000  

Construction in progress

          (134,000 )

Accounts payable

    3,181,000       758,000  

Right of use lease liability

          (57,000 )

Security deposits

    19,000       16,000  

Other assets

    (13,000 )     99,000  

Deferred revenue

    (54,000 )     (41,000 )

Accounts receivable

    1,537,000       111,000  

Prepaid expenses

    132,000       1,259,000  

Net cash provided by (used in) operating activities

    1,264,000       (2,080,000 )

Cash flows from investing activities:

               

Building improvements

    (1,271,000 )      

Capitalized technology

    (90,000 )      

Purchase of investment in real estate

    (17,513,000 )      

Net cash used in investing activities

    (18,874,000 )      

Cash flows from financing activities

               

Proceeds from line of credit

    73,700,000        

Proceeds from notes payable

          2,473,000  

Payments on notes payable

    (56,760,000 )     (1,348,000 )

Loan fees

    (2,046,000 )     (21,000 )

Net cash provided by financing activities

    14,894,000       1,104,000  

Net change in cash and cash equivalents and restricted cash

    (2,716,000 )     (976,000 )

Cash and cash equivalents and restricted cash, beginning of period

    16,696,000       7,895,000  

Cash and cash equivalents and restricted cash, end of period

  $ 13,980,000     $ 6,919,000  
                 

Reconciliation of Cash and Cash Equivalents and Restricted Cash:

               

Cash and cash equivalents at beginning of period

  $ 11,805,000     $ 4,235,000  

Restricted cash at beginning of period

    4,891,000       3,660,000  

Cash and cash equivalents and restricted cash at beginning of period

  $ 16,696,000     $ 7,895,000  
                 

Cash and cash equivalents at end of period

  $ 8,623,000     $ 2,834,000  

Restricted cash at end of period

    5,357,000       4,085,000  

Cash and cash equivalents and restricted cash at end of period

  $ 13,980,000     $ 6,919,000  

Supplemental disclosures of cash flow information:

               

Interest Paid

  $ 5,021,000     $ 4,171,000  

Non-cash investing and financing activities:

               

Dividends declared not yet paid

  $ 1,500,000     $ 1,500,000  

 

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 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.  The Company also owns approximately 0.2 million square feet of retail/commercial space adjacent to its parking facilities.

 

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 45.8% of the common units of the Operating Partnership (the “OP Units”). Color Up, LLC, a Delaware limited liability company (“Color Up” or “Purchaser”) and HSCP Strategic III, LP, a Delaware limited partnership (“HS3”), are limited partners of the Operating Partnership and own approximately 44.2% and 10%, respectively, of the outstanding OP Units. Color Up is our largest stockholder and is controlled by the Company’s Chief Executive Officer and a director, Manuel Chavez, the Company’s President, Interim Chief Financial Officer, Treasurer, Secretary and a director, Stephanie Hogue, and a director of the Company, Jeffrey Osher. HS3 is controlled by Mr. Osher.

 

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 765 and 1,625 parking spaces located in Cincinnati Ohio and approximately 1,154 parking spaces located in Chicago, Illinois totaling approximately 1,201,000 square feet. In addition to the parking garages contributed, proprietary technology was contributed to the Company, which will provide management real-time information on the performance of assets. Pursuant to the Closing, the Operating Partnership issued 7,495,090 newly issued common units of the Operating Partnership (the “OP Units”) at $11.75 per unit for total consideration of $84.1 million, net of transaction costs. The consideration received consisted of $35.0 million of cash, three parking assets with a fair value of approximately $98.9 million (“Contributed Interests”) and technology with a fair value of $4.0 million. The Company also assumed long-term debt with a fair value of approximately $44.5 million. In addition, the Company issued warrants to Color Up to purchase up to 1,702,128 shares of Common Stock at an exercise price of $11.75 for an aggregate cash purchase price of up to $20 million. The fair value of the warrants recorded as of the Closing was approximately $3.3 million. Transaction expenses not directly related to the acquisition of the Contributed Interests or issuance of OP Units of approximately $12.2 million and the settlement of the deferred management internalization liability of $10.0 million were recorded in transaction expenses and settlement of deferred management internalization, respectively, in the Statement of Operations.

 

- 5 -

 

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

 $98,919,000 

Intangibles - technology

  4,000,000 

Cash

  35,000,000 

Long-term debt

  (44,533,000)

Indemnification liability

  (2,000,000)

Total assets acquired and liabilities assumed

 $91,386,000 

OP Units (1)

  88,067,000 

Warrants

  3,319,000 

Total consideration

 $91,386,000 

 

(1) Represents the value of the 7,495,090 OP Units issued at $11.75 per unit, excluding associated transaction costs of approximately $4.0 million.

 

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 100% owned by Bombe Asset Management LLC ("Bombe"), an Ohio limited liability company owned by Mr. Chavez and Ms. Hogue. 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. The merger and the transactions contemplated by the Merger Agreement are referred to herein collectively as the "Merger."

 

Prior to the Merger, MIT expects to undertake an initial public offering (the "MIT IPO") of its common shares of beneficial interest, $0.0001 par value per share (“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 have not yet been determined.

 

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.

 

- 6 -

 

  

 

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 fourteen and thirteen parking tenants/operators during the six months ended June 30, 2022 and 2021, respectively. One tenant/operator, SP + Corporation (Nasdaq: SP) (“SP+”), represented 59.4% and 63.3of the Company’s revenue, excluding retail revenue, for the six months ended June 30, 2022 and 2021, respectively. Premier Parking Service, LLC represented 13.3% of the Company’s revenue, excluding retail revenue, for each of the six months ended June 30, 2022 and 2021.

 

In addition, the Company had concentrations in Cincinnati (19.1% and 8.1%), Detroit (12.7% and 19.0%), Chicago (8.8% and 0.0%), and Houston (7.8% and 11.7%) based on gross book value of the real estate the Company owned, as of  June 30, 2022 and 2021, respectively.

 

For the six months ended June 30, 2022, 61.7% of the Company’s outstanding accounts receivable balance was with SP+. For the six months ended June 30, 2021, 25.4%, 23.6% and 13.0% of the Company’s outstanding accounts receivable balance was with SP+, Premier Parking Service, LLC and ABM Parking Services Inc., respectively.

 

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.

 

- 7 -

 

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.

 

- 8 -

 

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 $255,000 and $510,000 for the three and six months ended June 30, 2021, respectively, to properly report property tax expense and tenant reimbursement of property tax expense on a gross basis in accordance with ASC 842.  This correction had no effect on the reported results of operations.

 

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 900,506 shares of the Company’s outstanding Common Stock at $11.75 per share. Color Up launched the Tender Offer on October 5, 2021 and it expired on November 5, 2021. Upon the expiration of the Tender Offer, the terms of the Settlement Agreement were satisfied and the prior lawsuits settled.

 

- 9 -

 

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 $2 million. This liability was recognized by the Company upon the Closing and is included in indemnification liability. Effective as of the Closing, Mr. Shustek resigned as Chief Executive Officer and director of the Company.

 

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

  555   0.64   15,628  $17,513,000 

 

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)

 $1,314,000  $16,020,000  $179,000  $17,513,000 
  $1,314,000  $16,020,000  $179,000  $17,513,000 

 

 a.The in-place lease asset has a life of 5 years and is included in intangible assets on the consolidated balance sheet. 

 

- 10 -

 

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

  765   1.21   18,385  $32,122,000 

222W7, LLC

Cincinnati, OH

8/25/2021

Garage

  1,625   1.84     $28,314,000 

322 Streeter, LLC

Chicago, IL

8/25/2021

Garage

  1,154   2.81     $38,483,000 

2nd Street, LLC

Miami, FL

9/9/2021

Contract

  118   N/A     $3,253,000 

Denver 1725 Champa Street Garage

Denver, CO

11/3/2021

Garage

  450   0.72     $16,274,000 

 

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)

 $2,995,000  $28,819,000  $308,000  $-  $32,122,000 

222W7

  4,391,000   23,923,000         28,314,000 

322 Streeter

  11,387,000   27,096,000         38,483,000 

2nd Street (a)

  93,000         3,160,000   3,253,000 

Denver 1725 Champa Street Garage

  7,414,000   8,860,000         16,274,000 
  $26,280,000  $88,698,000  $308,000  $3,160,000  $118,446,000 

 

 

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 5 years. The life of the contract at 2nd Street is indefinite.

 

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 $150,000 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.

 

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During 2021, VRMI and VRMII acquired $11.5 million of outstanding notes payable the Company had with various lenders. As of  June 30, 2022, these notes payable are included in notes payable and paycheck protection program loan on the consolidated balance sheet. Interest expense of $0.2 million and $0.4 million is included on consolidated statement of operations for the three and six months ended June 30, 2022, respectively. There is no interest expense related to the VRMI and VRMII notes payable in the three and six months ended June 30, 2021. See Note P for additional information.

 

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 $1.6 million and $2.5 million, respectively, pursuant to this agreement. Such amounts are included in organizational and offering costs on the consolidated statement of operations.

 

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 21,000 square feet of vacant unfinished commercial space in a 531,000 square foot building used primarily for parking rental in Cincinnati, Ohio for 120 months with no rent due to the Company throughout the lease term, other than a rental fee on parking spaces used by the ProKids staff. As of June 30, 2022, ProKids does not owe the Company rental income related to the lease agreement. No rental income from ProKids has been recognized during the six months ended June 30, 2022. 

 

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 $5,000 per month.

 

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.

 

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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 $144,000. The non-restricted shares were issued by the Company on March 1, 2021 at a price of $11.75 per share. This price equals the net asset value of the Company, which was approved by the Board of Directors in January 2021. The shares awarded fully vested immediately upon issuance and these shares were not issued pursuant to the Company’s Long-Term Incentive Plan ("LTIP"). No share-based compensation awards were outstanding as of June 30, 2021.

 

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 $15.47. Prior to the granting of the LTIP Units, the associated compensation was anticipated to be paid in cash, and as such, the expense was accrued as a liability in the condensed consolidated balance sheets. Upon vesting, the LTIP Units are redeemable in cash or shares, at the option of the holder. As a result, the LTIP Units are classified as a liability within accounts payable and accrued expenses in the condensed consolidated balance sheet as of June 30, 2022.

 

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

  9,686   15.47 

Vested

      

Forfeited

      

Total unvested LTIPs

  9,686  $15.47 

 

On May 27, 2022, the Operating Partnership granted an aggregate of 1,500,000 Performance Units of the Operating Partnership (“PUs”) to the executive officers of the Company pursuant to performance unit award agreements entered into with respect to the PUs. The PUs vest, subject to the continued employment of the executive officers, upon the achievement of a 50% market condition and a 50% performance condition. The performance period for the market and performance conditions are May 27, 2022 through December 31, 2025 and May 27, 2022 through December 31, 2027, respectively, subject to the executive's continued performance of the services of the Company, the Operating Partnership or an affiliate. No PUs were vested as of June 30, 2022. Market condition PUs are recorded at fair value using a Monte Carlo simulation for the future stock prices of the Company and its corresponding peer group. A fair value of $8.95 was determined for the PUs subject to a market condition. The PUs subject to a performance condition will vest if the Company's adjusted funds from operations ("AFFO") per share of common stock is at least $1.25 for four consecutive quarters prior to the fourth quarter of 2025 and then for an additional four consecutive quarters prior to December 31, 2027. These PUs were deemed not probable of achievement as of June 30, 2022. The probability of achievement of the performance condition will continue to be monitored throughout the performance period.

 

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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 10% of the distributions payable on common units. The amortization of compensation costs for the awards of PUs are included in general and administrative expenses in the accompanying consolidated statements of operations and amount to $391,000 for the period ended June 30, 2022. The remaining unrecognized compensation cost of approximately $6.3 million for PUs is expected to be recognized over the derived service period of 1.57 years as of June 30, 2022.

 

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

  1,500,000   12.21 

Vested

      

Forfeited

      

Total unvested PUs

  1,500,000  $12.21 

 

The weighted average grant date fair value per share of $8.95 is for 750,000 shares subject to the market condition. The weighted average grant date fair value per share of $15.47 is for 750,000 shares subject to the performance condition, which was deemed not probable of achievement as of June 30, 2022.

 

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

 $2,564,000  $1,459,000  $2,398,000  $1,311,000 

Value of lease commissions

  165,000   93,000   152,000   82,000 

Value of indefinite lived contract (1)

  3,160,000   --   3,160,000   -- 

Value of technology

  4,136,000   343,000   4,046,000   133,000 

Total intangible assets

 $10,025,000  $1,895,000  $9,756,000  $1,526,000 

 

(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 $370,000 and $148,000 for the six months ended June 30, 2022 and 2021, respectively, and $194,000 and $74,000 for the three months ended  June 30, 2022 and 2021, respectively.

 

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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)

 $157,000  $12,000  $221,000 

2023

  320,000   24,000   427,000 

2024

  303,000   21,000   427,000 

2025

  189,000   10,000   427,000 

2026

  107,000   4,000   427,000 

Thereafter

  29,000   1,000   1,864,000 
  $1,105,000  $72,000  $3,793,000 

 

 

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 150,000 additional performance units that were granted to our executive officers on May 27, 2022, which are considered antidilutive to the dilutive loss per share calculation for the six months ended June 30, 2022. See Note F for additional information. The Company did not have any additional dilutive shares resulting in basic loss per share equaling dilutive loss per share for the six months ended June 30, 2021.

 

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

 $(2,436,000) $(2,855,000) $(4,992,000) $(7,973,000)

Net loss attributable to participating securities

            

Net loss attributable to MIC common stock

 $(2,436,000) $(2,855,000) $(4,992,000) $(7,973,000)

Denominator:

                

Basic and dilutive weighted average shares of Common Stock outstanding

  7,762,375   7,739,952   7,762,375   7,735,888 

Diluted share equivalents outstanding

            

Dilutive weighted average shares of Common Stock outstanding

  7,762,375   7,739,952   7,762,375   7,735,888 

Basic and diluted loss per weighted average common share:

                

Basic and dilutive

 $(0.31) $(0.37) $(0.64) $(1.03)

 

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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)

 $450,000  $38,000  $37,000 

MetaBank

  1   3.95%

7/31/2022

MVP Clarksburg Lot

 $476,000  

Interest Only

  $476,000 

Vestin Realty Mortgage I

  1   7.00%

8/25/2022

MCI 1372 Street

 $574,000  

Interest Only

  $574,000 

Vestin Realty Mortgage I

  1   7.00%

8/25/2022

MVP Milwaukee Old World

 $771,000  

Interest Only

  $1,871,000 

Vestin Realty Mortgage I

  1   7.00%

8/25/2022

MVP Milwaukee Clybourn

 $191,000  

Interest Only

  $191,000 

Vestin Realty Mortgage I

  1   7.00%

8/25/2022

MVP Wildwood NJ Lot, LLC

 $1,000,000  

Interest Only

  $1,000,000 

Vestin Realty Mortgage I

  1   7.00%

8/25/2022

MVP Cincinnati Race Street, LLC

 $2,550,000  

Interest Only

  $3,450,000 

Vestin Realty Mortgage II

  1   7.00%

8/25/2022

Minneapolis Venture

 $2,000,000  

Interest Only

  $4,000,000 

Vestin Realty Mortgage I

  1   7.00%

8/25/2022

MVP Memphis Poplar (3)

 $1,800,000  

Interest Only

  $1,800,000 

LoanCore

  5   5.38%

3/6/2024

MVP St. Louis (3)

 $3,700,000  

Interest Only

  $3,700,000 

LoanCore

  5   5.38%

3/6/2024

1W7 Carpark, LLC and 222W7th Holdco, LLC

 $339,000  $6,400  $140,000 

FlashParking, Inc

  5   5.00%

5/31/2024

Mabley Place Garage, LLC

 $9,000,000  $44,000  $7,717,000 

Barclays

  10   4.25%

12/6/2024

322 Streeter Holdco LLC

 $25,900,000  

Interest Only

  $25,683,000 

American National Insurance Co.

  5

*

  3.50%

3/1/2025

MVP Houston Saks Garage, LLC

 $3,650,000  $20,000  $3,007,000 

Barclays Bank PLC

  10   4.25%

8/6/2025

Minneapolis City Parking, LLC

 $5,250,000  $29,000  $4,442,000 

American National Insurance, of NY

  10   4.50%

5/1/2026

MVP Bridgeport Fairfield Garage, LLC

 $4,400,000  $23,000  $3,718,000 

FBL Financial Group, Inc.

  10   4.00%

8/1/2026

West 9th Properties II, LLC

 $5,300,000  $30,000  $4,559,000 

American National Insurance Co.

  10   4.50%

11/1/2026

MVP Fort Worth Taylor, LLC

 $13,150,000  $73,000  $