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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark one) 

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

For the quarterly period endedJune 30, 2021March 31, 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

THE PARKING REIT, INC. MOBILE INFRASTRUCTURE CORPORATION

(Exact Name (Exact name of Registrantregistrant as Specifiedspecified in its Charter)charter)

 

marylandMaryland		47-3945882
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

 

9130 WEST POST ROAD250 E. 5th STREET, SUITE 200, LAS VEGAS, NV891482110, CINCINNATI, OH 45202

 (Address(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s Telephone Number, including Area Code: (702)534-5577

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)(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 [X] ☒ 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 [X] ☒ No [   ]☐

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Table of Contents

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 [X] ☒	Smaller reporting company [X]☒
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 [ X ]☒

 

As of August 11, 2021,May 12, 2022, the registrant had 7,739,957,762,375 sh1 sharesares of common stock outstanding.

 

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PART I

ITEM 1.FINANCIAL STATEMENTS

THE PARKING REIT, INC.MOBILE INFRASTRUCTURE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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THE PARKING REIT, INC.MOBILE INFRASTRUCTURE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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THE PARKING REIT, INC.MOBILE INFRASTRUCTURE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED JUNE 30,three months ended March 31, 2022 and 2021 AND 2020

(UNAUDITED)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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THE PARKING REIT, INC.MOBILE INFRASTRUCTURE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

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THE PARKING REIT, INC.MOBILE INFRASTRUCTURE CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021March 31, 2022

(UNAUDITED)

Note A —Organization and Business Operations

Mobile Infrastructure Corporation (formerly known as The Parking REIT, Inc., formerly known as MVP REIT II, Inc.) (the “Company,” “we,” “us” or “our”), is a Maryland corporation formed on May 4, 2015 and had elected to be taxed, and subject to the discussion below under the heading Income Taxes in Note B, has operated in a manner that allowed the Company to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with the taxable year ended December 31, 2017 through December 31, 2019.  As a result of the COVID-19 pandemic, the Company entered into temporary lease amendments with some of its tenants during the year ended December 31, 2020. The income generated under these lease amendments 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 as a REIT in 2020 and will be taxed as a C corporation for the year ended December 31, 2020 and for at least its next four taxable years.

As a C corporation, the Company will be subject to federal income tax on its taxable income at regular corporate rates and will generally not be permitted to qualify for treatment as a REIT for federal income tax purposes again for four years following the year in which it no longer qualified as a REIT. In addition, distributions to its stockholders will not be deductible by the Company. As a result, being taxed as a C corporation rather than a REIT could reduce the cash available for distribution by the Company to its stockholders. Moreover, as a C Corporation, the Company is not required to distribute any amounts to its stockholders and all distributions to stockholders would be taxable as regular corporate dividends to the extent of its current and accumulated earnings and profits.  In such event, corporate stockholders may be eligible for the dividends-received deduction.  In addition, non-corporate stockholders, including individuals, may be eligible for the preferential tax rates on qualified dividend income. Non-corporate stockholders, including individuals, generally may deduct up to 20% of dividends from a REIT, other than capital gain dividends and dividends treated as qualified dividend income, for taxable years beginning after December 31, 2017 and before January 1, 2026 for purposes of determining their U.S. federal income tax (but not for purposes of the 3.8% Medicare tax), subject to certain limitations. 

2015. The Company was formed to focus primarilyfocuses on investments inacquiring, owning and leasing parking facilities and related infrastructure, including parking lots, parking garages and other parking structures throughout the United StatesStates. The Company targets both parking garage and Canada. To a lesser extent, 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 March 31, 2022, the Company mayowned 44 parking facilities in 22 separate markets throughout the United States, with a total of 15,263 parking spaces and approximately 5.3 million square feet.  The Company also invest inowns approximately 0.2 million square feet of retail/commercial space adjacent to its parking properties that contain other sources of rental income, potentially including office, retail, storage, residential, billboard or cell towers.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 DelawareMaryland limited partnership (the “Operating Partnership”). The Company owns substantially all of its assets and conducts substantially all of its operations through the Operating Partnership. The Company’s wholly owned subsidiary, MVP REIT II Holdings, LLC,Partnership, is the sole limitedgeneral partner of the Operating Partnership. The operating agreement provides thatPartnership 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, 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 enablesallowed the Company to (1) satisfy the requirements to qualify and maintain qualification as a REIT for federalthrough December 31, 2019. As a consequence of lease modifications entered into during the COVID-19 pandemic, the Company earned income tax purposes, (2) avoid any federalfrom a number of tenants that did not constitute qualifying REIT income or excise tax liability and (3) ensure that the Operating Partnership is not classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986,annual REIT gross income tests, and, as amended (the “Code”), which classification coulda result, the Company was notin compliance with the Operating Partnership beingannual 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 corporation.C corporation beginning with its 2020 taxable year. As a C corporation, the Company is not required to distribute any amounts to its stockholders. 

The Company utilizes an Umbrella Partnership Real Estate Investment Trust (“UPREIT”) structure to enable the Company to acquire real property in exchange for limited partnership interests in the Operating Partnership from owners who desire to defer taxable gain that would otherwise normally be recognized by them upon the disposition of their real property or transfer of their real property to the Company in exchange for shares of the Company’s common stock or cash.Recapitalization

The Company’s former advisor is MVP Realty Advisors, LLC, dba The Parking REIT AdvisorsOn January 8, 2021, the Company entered into an equity purchase and contribution agreement (the “former Advisor”“Purchase Agreement”), a Nevada limited liability company, which is owned 60% by Vestin Realty Mortgage II, Inc. (“VRM II”) and 40% by Vestin Realty Mortgage I, Inc. (“VRM I”). Prior to the Internalization (as defined below), the former Advisor was responsible for managing the Company’s affairs on a day-to-day basis and for identifying and making investments on the Company’s behalf pursuant to a second amended and restated advisory agreement 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“Former Advisor”) and Color Up (the “Amended and Restated Advisory Agreement”“Purchaser”), which became effective upon consummation. The transactions contemplated by the Purchase Agreement are referred to herein collectively as the “Transaction.”

On August 25, 2021, the closing of the Merger (as such term is defined below)Transaction occurred (the “Closing”). VRM IIAs a result of the Transaction, the Company acquired three multi-level parking garages consisting of approximately 765 and VRM I are Maryland corporations that trade1,625 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 OTC pink sheets and is managed by Vestin Mortgage, LLC, an affiliateperformance of assets. Pursuant to the Closing, the Operating Partnership issued 7,495,090 newly issued common units of the former Advisor, prior to being internalized in January 2018.

As partOperating Partnership (the “OP Units”) at $11.75 per unit for total consideration of the Company’s initial capitalization, 8,000 shares of common stock were sold for $200,000 to an affiliate of the former Advisor (as defined below).

Merger of MVP REIT with Merger Sub, LLC

On May 26, 2017, the Company, MVP REIT, Inc., a Maryland corporation (“MVP I”), MVP Merger Sub, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“Merger Sub”), and the former Advisor entered into an agreement and plan of merger (the “Merger Agreement”), pursuant to which MVP I would merge with and into Merger Sub (the “Merger”). On December 15, 2017, the Merger was consummated. Following the Merger, the Company contributed 100% of its equity interests in Merger Sub to the Operating Partnership.

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At the effective time of the Merger, each share of MVP I common stock, par value $0.001 per share, that was issued and outstanding immediately prior to the Merger (the “MVP I Common Stock”), was converted into the right to receive 0.365 shares of Company common stock. A total of approximately 3.9 million shares of Company common stock were issued to former MVP I stockholders, and former MVP I stockholders, immediately following the Merger, owned approximately 59.7% of the Company's common stock. The Company was subsequently renamed “The Parking REIT, Inc.”

Capitalization

As of June 30, 2021, the Company had 7,739,951 shares of common stock issued and outstanding. On December 31, 2016, the Company ceased all selling efforts for the initial public offering of its common stock (the “Common Stock Offering”). The Company accepted additional subscriptions through March 31, 2017, the last day of the Common Stock Offering. In connection with its formation, the Company sold 8,000 shares of common stock to MVP Capital Partners II, LLC (the “Sponsor”) for $200,000.

On October 27, 2016, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary to the charter of the Company classifying and designating 50,000 shares of Series A Convertible Redeemable Preferred Stock, par value $0.0001 per share (the “Series A”). The Company commenced a private placement of the shares of Series A, together with warrants to acquire the Company’s common stock, to accredited investors on November 1, 2016 and closed the offering on March 24, 2017. The Company raised approximately $2.5$84.1 million, net of offering costs,transaction costs. The consideration received consisted of $35.0 million of cash, three parking assets with a fair value of approximately $98.8 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 Series A private placement and had 2,862 Series A shares issued and outstanding asStatement of June 30, 2021.Operations.

On March 29, 2017,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 filed withas asset acquisitions in the State Departmentfinancial statements, resulting in the recognition of Assessmentsassets and Taxationliabilities, at acquired cost and reflect the capitalization of Maryland, Articles Supplementaryany transaction costs directly attributable to the charter of the Company classifying and designating 97,000asset acquisitions. shares of Series 1 Convertible Redeemable Preferred Stock par value $0.0001 per share (the “Series 1”). On April 7, 2017, the Company commenced a private placement of shares of Series 1, together with warrants to acquire the Company’s common stock to accredited investors and closed the offering on January 31, 2018. The Company raised approximately $36.0 million, net of offering costs, in the Series 1 private placements and had 39,811 Series 1 shares issued and outstanding as of June 30, 2021.

Note B — Summary of Significant Accounting Policies

Basis of Accounting

The accompanying unaudited condensed consolidated financial statements of the Company are prepared on the accrual basis of accounting and in accordance with principles generally accepted in the United States of America (“GAAP”) for interim financial information as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”),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 unaudited 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, 2021March 31, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. These unaudited condensed consolidated financial statements should be read in conjunction with2022. There were no significant changes to our significant accounting policies during the financial statements and notes thereto included in the Company’sthree months ended March 31, 2022, except for those disclosed below. For a full summary of our accounting policies, refer to our 2021 Annual Report on Form 10-K for10-K as originally filed with the year ended December 31, 2020.

The condensed consolidated balance sheet as of December 31, 2020 contained herein has been derived from the audited financial statements as of December 31, 2020 but does not include all disclosures required by GAAP.

Liquidity Matters

The Company has incurred net losses since its inception and anticipates net losses and negative operating cash flows for the near future. For the six months ended JuneSEC on March 30, 2021, the Company had a net loss of $6.5 million and had $6.9 million in cash, cash equivalents and restricted cash. In connection with preparing the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2021, management evaluated the extent of the impact from the COVID-19 pandemic on the Company’s business and its future liquidity for one year from the issuance of the June 30, 2021 financial statements.

Management has implemented the following plan to address the Company’s liquidity over the next twelve months plus a day from the filing of this Quarterly Report: 

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If the Company raises additional funds by issuing equity securities, its stockholders would experience dilution. Additional debt financing, if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt financing or additional equity that the Company raises may contain terms that are not favorable to it or its stockholders and require significant debt service payments, which diverts resources from other activities. If the Company is unable to obtain additional financing, it may be required to significantly scale back its business and operations.  The Company’s ability to raise additional capital will also be impacted by the recent outbreak of COVID-19.

Based on this current business plan, the Company believes its existing cash, anticipated cash collections and cash inflows is sufficient to conduct planned operations for one year from the issuance of the June 30, 2021 financial statements.2022.

Consolidation

The Company’s condensed consolidated financial statements include its accounts, the accounts of the Company’s assets that were sold during 2021 and 2020 (as applicable),Company, the accounts of its subsidiaries, Operating Partnership, each of their wholly owned subsidiaries, and all of the following subsidiaries. All intercompany profits and losses, balances and transactions are eliminated in consolidation. The following list includes the subsidiaries that are included in the Company’s condensed consolidated financial statements, not the number of properties owned by the Company at June 30, 2021 and December 31, 2020.

Under GAAP, the Company’s condensed consolidated financial statements will also include the accounts of its consolidated subsidiaries and joint ventures in which the Company is the primary beneficiary, orother entities in which the Company has a controlling financial interest. In determining whetherFor entities that meet the Company has a controlling interest in a joint venture and the requirement to consolidate the accountsdefinition of that entity, the Company’s management considers factors such as an entity’s purpose and design and the Company’s ability to direct the activities of the entity that most significantly impacts the entity’s economic performance, ownership interest, board representation, management representation, authority to make decisions and contractual and substantive participating rights of the partners/members as well as whether the entity is a variable interest entity in which it will absorb(“VIE”), the majorityCompany consolidates those entities when the Company is the primary beneficiary of the entity’s expected losses, if they occur, or receiveentity. The Company is determined to be the majorityprimary beneficiary when it possesses both the unilateral power to direct activities that most significantly impact the economic performance of the expected residual returns, if they occur,VIE and the obligation to absorb losses or both.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. Investments in which the Company is not able to exercise significant influence over the investee are accounted for under the cost method.

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 revenue recognition,asset impairment and purchase price allocations to record investments in real estate, and derivative financial instruments and hedging activities, as applicable.

Concentration

The Company had 15 and 14 parking tenants/operators during the sixthree months ended June 30, 2021 March 31, 2022 and 2020,2021, respectively. One tenant/operator, SP + Corporation (Nasdaq: SP) (“SP+”), represented represen84.2%ted 56.1% and 70.4% of the Company’s rental revenue, from base parking and management agreementsexcluding retail revenue, for the sixthree months ended June 30, 2021.March 31, 2022 and 2021, respectively. Premier Parking Service, LLC represented 15.0 % and 10.0% of the Company’s revenue, excluding retail revenue, for the three months ended March 31, 2022 and 2021, respectively.

SP+ is one of the largest providers of parking management in the United States. As of June 30, 2021, SP+ managed approximately 3,200 locations in North America.

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In addition, the Company had concentrations in Cincinnati (19.9% and 8.1%), Detroit (19.0%)(13.2% and 19.0%), Chicago (9.1% and 0.0%), andHouston ((8.1% and 11.7%) based on gross book value of the real estate the Company owned.owned, as of March 31, 2022 and 2021, respectively.

For the three months ended March 31,2022, 56.7% of the Company’s outstanding accounts receivable balance was with SP+. For the three months ended March 31, 2021,38.6%, 16.8% and 12.5% of the Company’s outstanding accounts receivable balance was with SP+, Premier Parking Service, LLC and ABM Parking Services Inc., respectively.

Acquisitions

The Company records theAll assets acquired tangible and intangible assets andliabilities assumed liabilitiesin an acquisition of acquisitions of all operating properties and those development and redevelopment opportunities that meet the accounting criteria to bereal estate accounted for as a business combinationscombination are measured at their acquisition date fair value at the acquisition date. The Company assesses and considers fair value based on estimated cash flow projections that utilize available market information and discount and/or capitalization rates that the Company deems appropriate. Estimatesvalues. For acquisitions of future cash flows are based on several factors including historical operating results, known and anticipated trends, and market and economic conditions. The acquired assets and assumed liabilities for an operating property acquisition generally include but are not limited to: land, buildings and improvements, construction in progress and identified tangible and intangible assets and liabilities associated with in-place leases, including tenant improvements, leasing costs, value of above-market and below-market operating leases and ground leases, acquired in-place lease values and tenant relationships, if any. Costs directly associated with all operating property acquisitions and those development and redevelopment acquisitions that meet the accounting criteria to bereal estate accounted for as business combinations are expensed as incurred within operating expenses inan asset acquisition, the condensed consolidated statement of operations.

Impairment of Long-Lived Assets

When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset 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 consideration transferred by the property for propertiesCompany (including transaction costs) is allocated to be heldall assets acquired and used. For properties held for sale, the impairment loss is the adjustment toliabilities assumed on a relative 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.

Cash

The Company maintains a significant portion of its cash deposits at KeyBank, which are held by the Company’s subsidiaries allowing the Company to maximize FDIC insurance coverage. The balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) under the same ownership category of $250,000. As of June 30, 2021, and December 31, 2020, the Company had approximately $0.5 million and $1.9 million, respectively, in excess of the federally insured limits. As of the date of this filing, the Company has not experienced any losses on cash deposits.

Restricted Cash

Restricted cash primarily consists of escrowed tenant improvement funds, real estate taxes, capital improvement funds, insurance premiums and other amounts required to be escrowed pursuant to loan agreements.

Revenue Recognition

The Company's revenues, which are derived primarily from rental income, include rents that each tenant pays in accordance with the terms of each lease reported on a straight-line basis over the initial term of the lease. Since many of the Company's leases will provide for rental increases at specified intervals, straight-line basis accounting requires the Company to record a receivable, and include in revenues, unbilled rent receivables that the Company will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. Percentage rents will be recorded when earned and certain thresholds have been met.

The Company will continually review receivables related to rent and unbilled rent receivables and determine collectability 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. If the collectability of a receivable is in doubt, the Company will record an increase in the Company's allowance for uncollectible accounts or record a direct write-off of the receivable after exhaustive efforts at collection.

Advertising Costs

Advertising costs incurred in the normal course of operations are expensed as incurred. During the three and six months ended June 30, 2021 and 2020, the Company had 0 advertising costs.

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Investments in Real Estate and Fixed Assets

Investments in real estate and fixed assets are stated at cost less accumulated depreciation. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, which are primarily 3 to 40 years. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income (expense).

The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful lives of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability.

Purchase Price Allocationbasis.

The Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their respectiverelative 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 cost segregation studiesvaluations 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.

The capitalized below-market lease values will be amortized as an increase to rental income over the remaining term and any fixed rate renewal periods provided within the respective leases. In determining the amortization period for below-market lease intangibles, the Company initially will consider and periodically evaluate on a quarterly basis, 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 aggregate value of intangible assets related to customer relationship, as applicable, is measured based on the Company's evaluation of the specific characteristics of each tenant’s lease and the Company's overall relationship with the tenant. Characteristics considered by the Company in determining these values include the nature and extent of its existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors.

The value of in-place leases is amortized to expense over the initial term of the respective leases. The value of customer relationship 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 value and customer relationship 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.

Stock-Based CompensationImpairment 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 records stock-based compensation expense accordingdetermined 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 provisionsConsolidated Statements of Operations for the three months ended March 31, 2021. Property taxes and rental revenue were both increased by $255,000 to properly report property tax expense and tenant reimbursement of property tax expense on a gross basis in accordance with ASC Topic 718, Compensation – Stock Compensation. ASC Topic 718 requires all share-based payments to employees and nonemployees, to be recognized in the financial statements based on their fair values. Under the provisions of ASC Topic 718, the Company determines the appropriate fair value to be used for valuing share-based payments.

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The Company has a stock-based incentive award plan, which is accounted for under the guidance for share based payments. The expense for such awards will be included in general and administrative expenses and is recognized over the vesting period or when the requirements for exercise of the award have been met (See Note G — Stock-Based Compensation).

Reclassifications

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications842.  This correction had no effect on the reported results of operations.

Income TaxesReportable 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.

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 elected to be treated as a REIT for federal income tax purposes for the year ended December 31, 2017 and continued to operate in a manner to qualify as a REIT for federal income tax purposes for the years ended December 31, 2018 and 2019. In order to qualify as a REIT, there are a number of requirements thathas previously disclosed pending class action legal proceedings facing the Company must satisfy as set forth in sections 856and the Former Advisor and/or Mr. Shustek prior to 860the completion of the Code.Transaction. As a result of the COVID-19 pandemic,Transaction, the CompanySettlement Agreement (as defined in the Purchase Agreement) was entered into temporary lease amendments with somesubject to completion of its tenants duringColor Up’s Tender Offer (as defined in the year ended December 31, 2020.  The income generated under these lease amendments did not constitute qualifying REIT incomePurchase Agreement) for purposesup to 900,506 shares of the annual REIT gross income tests, Company’s outstanding Common Stock at $11.75 per share. Color Up launched the Tender Offer on October 5, 2021 and as a result,it expired on November 5, 2021. Upon the Company was not in compliance with its annual REIT income tests forexpiration of the year ended December 31, 2020.  Accordingly,Tender Offer, the Company did not qualify as a REIT in 2020terms of the Settlement Agreement were satisfied and will be taxed as a C corporation for the year ended December 31, 2020 and for at least its next four taxable years.

As a C corporation, the Company will be subject to federal income tax on its taxable income at regular corporate rates and will generally not be permitted to qualify for treatment as a REIT for federal income tax purposes again for four years following the year in which it no longer qualified as a REIT. Failing to qualify as a REIT could materially and adversely affect the Company’s net income as it will not be entitled to a deduction for dividends paid while it is taxable as a C corporation.  As a result, being taxed as a C corporation rather than a REIT could reduce the cash available for distribution by the Company to its stockholders. Moreover, as a C Corporation, the Company is not required to distribute any amounts to its stockholders and all distributions to stockholders would be taxable as regular corporate dividends to the extent of its current and accumulated earnings and profits.  In such event, corporate stockholders may be eligible for the dividends-received deduction.  In addition, non-corporate stockholders, including individuals, may be eligible for the preferential tax rates on qualified dividend income.prior lawsuits settled.

The Company uses a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than nothas previously disclosed that the position will be sustained on audit, including resolutions of related appeals or litigation processes, if any. The second step isSEC was conducting an investigation relating to measure the tax benefit as Company. On March 11, 2021, the largest amount that is more likely than not of being realized upon ultimate settlement. The Company believes that its income tax filing positions and deductions would be sustained upon examination; thus,SEC notified the Company has that they do not recorded any uncertain tax positions as of June 30, 2021.

A full valuation allowance for deferred tax assets was historically provided each year since intend to recommend an enforcement action by the Company believed that as a REIT it was more likely than not that it would not realizeCommission against the benefits of its deferred tax assets.  The Company has evaluated its deferred tax assets (primarily net operating losses and tax basis in goodwill that was taken as an expense on the Company’s books) both in the context of retaining its status as a REIT and as a taxable C Corporation.  The Company had a §382 study performed to determine limitations on the potential utilization of pre-2020 net operating losses and concluded that it does not expect significant limitations on its ability to utilize such losses in the future as a C Corporation.  However, given the Company’s history of taxable losses and its current taxable losses, and due to the ongoing impact to the Company of the COVID-19 pandemic to the Company, the Company has determined that it will continue to record a full valuation allowance against its deferred tax assets for the year ended December 31, 2021. 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.Company.

The Company is the sole general partner of MVP REIT II Operating Partnership, LP, a Delaware limited partnership (the “Operating Partnership”). The Company owns substantially all of its assets and conducts substantially all of its operations through the Operating Partnership. The Company’s wholly owned subsidiary, MVP REIT II Holdings, LLC, is the sole limited partner of the Operating Partnership. The operating agreement provides that the Operating Partnership is operated in a manner that enables the Company to avoid any federal income or excise tax liability and ensure that the Operating Partnership is not classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended (the “Code”), which classification could result in the Operating Partnership being taxed as a corporation.

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Per Share Data

The Company calculates basic income (loss) per share by dividing net income (loss) for the period by weighted-average shares of its common stock outstanding for the respective period. Diluted income per share considers the effect of dilutive instruments, such as stock options and convertible stock, but uses the average share price for the period in determining the number of incremental shares that are to be addedSEC investigation also related to the weighted-average number of shares outstanding. The Company had 0 outstanding common share equivalents during the three and six months ended June 30, 2021 and 2020.

There is a potential for dilution from the Company’s Series A Convertible Redeemable Preferred Stock which may be converted into the Company’s common stock at any time. As of June 30, 2021, there were 2,862 shares of the Series A Convertible Redeemable Preferred Stock issued and outstanding. As of filing date, the Company has not received any requests to convert.

There is a potential for dilution from the Company’s Series 1 Convertible Redeemable Preferred Stock which may be converted upon a holder’s election into the Company’s common stock at any time. As of June 30, 2021, there were 39,811 shares of the Series 1 Convertible Redeemable Preferred Stock issued and outstanding. As of filing date, the Company has not received any requests to convert.

Each share of Series A preferred stock and Series 1 preferred stock will convert into the number of sharesconduct of the Company’s common stock determinedformer 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 dividingthe 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 stated value per Series A share or Series 1 share of $1,000 (as may be adjusted pursuantCompany assigned to the applicable articles supplementary) plus any accrued but unpaid dividends to, but not including, the conversion date by (ii) the conversion price. The conversion price is equal to the net asset value per shareFormer Advisor all of the Company’s common stock; provided that if a “Listing Event” (as definedright, title, interest, and benefits, whether legal, equitable, or otherwise, in the applicable articles supplementary) occurs, the conversion price will be 100%and to any and all of the volume weighted average price per shareclaims and causes of action that the Company’s common stock for the 20 trading days priorCompany may have against certain parties and any amounts that may be recovered or awarded to the delivery date ofFormer Advisor on such claims and (ii) the conversion notice. TheFormer Advisor agreed to indemnify the Company will haveagainst all liabilities in connection with the right (but not the obligation) to redeem any Series A or Series 1 shares that are subject to a conversion notice on the terms set forth in the applicable articles supplementary.

Non-controlling Interests

The FASB issued authoritative guidance for non-controlling interests in December 2007, which establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance clarifies that a non-controlling interest in a subsidiary, which is sometimes referred to as an unconsolidated investment, is an ownership interest in the consolidated entity that should be reported as a component of equity in the condensed consolidated financial statements. Among other requirements, the guidance requires consolidated net income to be reported at amounts attributable to both the parent and the non-controlling interest. It also requires disclosure, on the face of the condensed consolidated income statement, of the amounts of condensed consolidated net income attributable to the parent and to the non-controlling interest.

Note C — Commitments and Contingenciesassignment.  

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.

During the Company’s predecessor’s due diligence of a property purchased on December 15, 2017 (originally purchased by predecessor on March 31, 2015) and located in Milwaukee, it was discovered that the soil and ground water at the subject property had been impacted by the site’s historical use as a printing press as well as neighboring property uses. As a result, the Company retained a local environmental engineer to seek a closure letter or similar certificate of no further action from the State of Wisconsin due to the Company’s use of the property as a parking lot. On February 5, 2021, the Company received the closure letter, for this matter, from the State of Wisconsin.

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, 2021,March 31,2022, 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.

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Note D – Acquisitions and Dispositions of Investments in Real Estate

AsThere were no acquisitions of June 30, investments in real estate during the three months ended March 31, 2022.

2021

The following table is a summary of the parking asset acquisitions for the year ended December 31, 2021.

The following table is a summary of the allocated acquisition value of all properties acquired by the Company hadfor the following Investments in Real Estate that were consolidated on the Company’s balance sheet:year ended December 31, 2021.

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There were no dispositions of investments in real estate or properties held for sale as of March 31, 2022 and December 31, 2021. 

Note E —Related Party Transactions and Arrangements

The transactions described in this Note were approved by a majorityTwo of the Company’s board of directors (includingCincinnati assets, 1W7 Carpark and 222W7, are currently operated by PCA, Inc., dba Park Place Parking. Park Place Parking is a majorityprivate parking operator that is wholly owned by relatives of the independent directors) not otherwise interestedCompany’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 such transactions as fairplace and reasonableat the same terms under which they were operating prior to the Transaction. As of March 31,2022, Park Place Parking owed the Company andapproximately $133,000 which is included in accounts receivable on terms and conditions no less favorablethe consolidated balance sheet.

The Company has an investment in MVP St. Louis Cardinal Lot, DST, a Delaware Statutory Trust (“MVP St. Louis”). Pursuant to the Company than those available from unaffiliated third parties.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.

OwnershipDuring 2021, VRMI and VRMII acquired $11.5 million of outstanding notes payable the Company Stockhad with various lenders. As of March 31, 2022, these notes payable are included in notes payable and paycheck protection program loan on the consolidated balance sheet and interest expense of $0.2 million is included on consolidated statement of operations.

As of June 30, 2021, March 31, 2022, the Sponsor owned 9,108 shares, VRM II owned 1,084,960 sharesCompany owed VRMI approximately $20,000.  All amounts are related to AP trade invoices for professional fees and VRM I owned 616,834 sharestravel paid by the Company or related party.

In March 2022, the Company entered into an agreement with an affiliate of Bombe Asset Management LLC ("Bombe") requiring the Company’s outstanding common stock.  No distributions were received by either entity duringCompany to be allocated, bear and (where practicable) pay directly certain costs and expenses of such party.  During the three and six months ended June 30, 2021 dueMarch 31, 2022, the Company incurred approximately $1.0 million pursuant to this agreement and such amount is included in professional fees on the suspensionconsolidated statement of the distributions.operations.

Ownership

VRM I and VRM II own 40% and 60%, respectively, of the former Advisor. Neither VRM I nor VRM II paid any up-front consideration for these ownership interests, but each agreed to be responsible for its proportionate share of future expenses of the former Advisor.License Agreement

On March 29, 2019,August 25,2021, the Company entered into a ContributionSoftware License and Development Agreement, (the “Contribution 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) with(i) a taxable disposition of certain specified properties and (ii) certain dispositions of the former Advisor, Vestin Realty Mortgage I, Inc. (“VRTA”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) (solely for purposesthe Operating Partnership’s failure to provide the Protected Partners the opportunity to guarantee a specified amount of Section 1.01(c) thereof), Vestin Realty Mortgage II, Inc. (“VRTB”) (solely for purposesdebt of Section 1.01(c) thereof) and Shustek (solely for purposesthe Operating Partnership during the period ending on the tenth anniversary of Section 4.03 thereof)the completion of the Transaction (or earlier, if certain conditions are satisfied). In exchangeaddition, and for so long as the Contribution,Protected Partners own at least 20% of the units in the Operating Partnership received in the Transaction, the Company agreed to issue to the former Advisor 1,600,000 shares of Common Stock as consideration (the “Consideration”), issuable in four equal installments. The first three installments of 400,000 shares of Common Stock per installment were issued on April 1, 2019, December 31, 2019 and December 31, 2020, respectively. See Note O — Deferred Management Internalization. The remaining installment was due to be issued on December 31, 2021; however, pursuant to the Purchase Agreement, the Advisor has agreed to surrender its claim to such shares. If requested by the Company in connection with any contemplated capital raise by the Company, the former Advisor has agreed not to sell, pledge or otherwise transfer or dispose of any of the Internalization Consideration for a period not to exceed the lock-up period that otherwise would apply to other stockholders of the Company in connection with such capital raise. See the Company’s Current Report on Form 8-K filed with the SEC on April 3, 2019 for more information regarding the Management Internalization.

Note F — Economic Dependency

Under various agreements, the Company has engaged or will engage the former Advisor and its affiliates to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition services, the sale of shares of the Company’s securities available for issuance, as well as other administrative responsibilities for the Company, including accounting services and investor relations. In addition, the Sponsor paid selling commissions in connection with the sale of the Company’s shares in the Common Stock Offering and the former Advisor paid the Company’s organization and offering expenses.

As a result of these relationships, the Company is dependent upon the former Advisor and its affiliates. If these companies are unableuse commercially reasonable efforts to provide the CompanyProtected Partners with the respective services, the Company may be required to find alternative providers of these services.similar guarantee opportunities.

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.

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$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 price agreed to in the Equity Purchase and Contribution Agreement entered into betweennet asset value of the Company, and Color Up, LLC, a Delaware limited liability company (the “Purchaser”) affiliated with Bombe Asset Management LLC, a Cincinnati, Ohio based alternative asset management firm (“Bombe”). For additional information see the Current Report Form 8-K filedwhich was approved by the Company on Board of Directors in January 14, 2021.

The shares awarded fully vested immediately upon issuance and these shares were not issued pursuant to the Company’s Long-Term Incentive Plan. NaN share-based compensation awards were outstanding as of March 31, 2022 and 2021.

Note G - Intangible Assets

A schedule of the Company’s intangible assets and related accumulated amortization and accretion as of March 31,2022 and December 31, 2021 is as follows:

(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 notincluded in depreciation and amortization in the accompanying consolidated statements of operations. Amortization expense associated with intangible assets totaled $176,000 and $74,000 for the three months ended March 31,2022 and 2021, respectively.

A schedule of future amortization and accretion of acquired intangible assets for the three months ended March 31,2022 and thereafter is as follows:

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. Outstanding warrants were antidilutive as a result of the net loss for the three months ended March 31, 2022 and therefore were excluded from the Company’s Incentive Plan.

Long-Term Incentive Plandilutive calculation. The Company did not have any additional dilutive shares resulting in basic loss per share equaling dilutive loss per share for the three months ended March 31,2022 and 2021.

The Company’s board of directors has adopted a long-term incentive plan whichfollowing table reconciles the Company may use to attractnumerator and retain qualified directors, officers, employees and consultants. The Company’s long-term incentive plan will offer these individuals an opportunity to participatedenominator used in computing the Company’s growth through awards inbasic and diluted per-share amounts for net loss attributable to common stockholders for the form of, or based on, the Company’s common stock. The Company currently anticipates that it will not issue awards under the Company’s long-term incentive plan, although it may do so in the future, including possible equity grants to the Company’s independent directors as a form of compensation.three months ended March 31,2022 and 2021:

The long-term incentive plan authorizes the granting of restricted stock, stock options, stock appreciation rights, restricted or deferred stock units, dividend equivalents, other stock-based awards and cash-based awards to directors, officers, employees and consultants of the Company and the Company’s affiliates selected by the board of directors for participation in the Company’s long-term incentive plan. Stock options granted under the long-term incentive plan will not exceed an amount equal to 10% of the outstanding shares of the Company’s common stock on the date of grant of any such stock options. Stock options may not have an exercise price that is less than the fair market value of a share of the Company’s common stock on the date of grant.

The Company’s board of directors or a committee appointed by its board of directors will administer the long-term incentive plan, with sole authority to determine all of the terms and conditions of the awards, including whether the grant, vesting or settlement of awards may be subject to the attainment of one or more performance goals. No awards will be granted under the long-term incentive plan if the grant or vesting of the awards would jeopardize the Company’s status as a REIT under the Code or otherwise violate the ownership and transfer restrictions imposed under its charter. Unless otherwise determined by the Company’s board of directors, no award granted under the long-term incentive plan will be transferable except through the laws of descent and distribution.

The Company has authorized and reserved an aggregate maximum number of 500,000 common shares for issuance under the long-term incentive plan. In the event of a transaction between the Company and its stockholders that causes the per-share value of the Company’s common stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering or large nonrecurring cash dividend), the share authorization limits under the long-term incentive plan will be adjusted proportionately and the board of directors will make such adjustments to the long-term incentive plan and awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement of rights immediately resulting from such transaction. In the event of a stock split, a stock dividend or a combination or consolidation of the outstanding shares of common stock into a lesser number of shares, the authorization limits under the long-term incentive plan will automatically be adjusted proportionately and the shares then subject to each award will automatically be adjusted proportionately without any change in the aggregate purchase price.

The Company’s board of directors may in its sole discretion at any time determine that all or a portion of a participant’s awards will become fully vested. The board may discriminate among participants or among awards in exercising such discretion. The long-term incentive plan will automatically expire on the tenth anniversary of the date on which it is approved by the board of directors and stockholders, unless extended or earlier terminated by the board of directors. The Company’s board of directors may terminate the long-term incentive plan at any time. The expiration or other termination of the long-term incentive plan will not, without the participant’s consent, have an adverse impact on any award that is outstanding at the time the long-term incentive plan expires or is terminated. The board of directors may amend the long-term incentive plan at any time, but no amendment will adversely affect any award without the participant’s consent and no amendment to the long-term incentive plan will be effective without the approval of the Company’s stockholders if such approval is required by any law, regulation or rule applicable to the long-term incentive plan. During the six months ended June 30, 2021 and 2020, 0 grants were made under the long-term incentive plan.

Note H – Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The amendments in this ASU replace the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. During the first quarter 2020, the Company adopted ASU 2016-13 and such adoption did not have a material impact on the Company’s condensed consolidated financial statements.

Note I —Notes Payable and Paycheck Protection Program Loan

As of June 30, 2021,March 31, 2022, the principal balances on notes payable are as follows:

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