Mobile Infrastructure (US:BEEP)2024-03-22 12:56PART I ITEM 1. BUSINESS Mobile Infrastructure Corporation acquires, owns, and leases parking facilities, strategically converting to asset management contracts for enhanced NOI and performance visibility - The company's core business is acquiring, owning, and leasing parking facilities, targeting the top 50 U.S. Metropolitan Statistical Areas (MSAs)22 Portfolio Overview as of December 31, 2023 | Metric | Value | | :--- | :--- | | Number of Parking Facilities | 43 | | Markets | 21 | | Parking Spaces | ~15,700 | | Total Square Feet | ~5.4 million | | Adjacent Commercial Space | ~0.2 million sq. ft. | - A primary strategic objective is converting properties to asset management contracts to better align operator performance with company results and improve NOI. In January and February 2024, 26 of the 43 assets were converted26330 Revenue and Accounts Receivable Concentration | Operator | 2023 Revenue % | 2022 Revenue % | Dec 31, 2023 A/R % | Dec 31, 2022 A/R % | | :--- | :--- | :--- | :--- | :--- | | SP+ Corporation | 61.3% | 60.5% | 60.1% | 59.2% | | Premier Parking Service, LLC | 12.1% | 12.4% | N/A | N/A | - The company has geographic concentration in Cincinnati (19.4%), Detroit (10.3%), and Chicago (9.1%) based on the gross book value of real estate as of December 31, 20237 ITEM 1A. RISK FACTORS The company faces diverse risks including net losses, high dependency on a single operator, remote work impacts, and material weaknesses in internal financial controls Risks Related to Our Business and Industry The company faces significant business risks including a history of net losses, high dependency on a single operator, negative impacts from remote work trends, and intense competition - The company has a history of losses, with net losses attributable to common stockholders of $32.1 million in 2023 and $11.1 million in 2022135 - Operations are highly concentrated with one tenant operator, SP Plus Corporation (SP+), which accounted for approximately 61.3% of parking rental revenue for the fiscal year ended December 31, 2023122148 - The shift to work-from-home or hybrid remote strategies is anticipated to be the 'normalized state going-forward,' which has negatively impacted and may continue to impact the performance of assets located in urban centers117127154 - The parking industry faces intense competition from other REITs, private investment funds, and other operators, many with greater resources, which may increase acquisition costs and reduce demand910121 Risks Related to Financial, Tax and Accounting Issues The company identified material weaknesses in internal financial controls, faces refinancing risks with $96.3 million of debt due within twelve months, and may have limitations on its $73.8 million NOL carryforwards - Management identified material weaknesses in internal control over financial reporting as of December 31, 2023, specifically a lack of appropriate segregation of duties and ineffective design and documentation of controls92164195 - As of December 31, 2023, the company had $96.3 million of debt due within twelve months, posing a refinancing risk, although some was subsequently refinanced in early 2024192 - The company has U.S. federal and state Net Operating Loss (NOL) carryforwards of $73.8 million as of December 31, 2023, but their future usability may be limited by Section 382 of the Internal Revenue Code due to ownership changes177203231 Risks Related to Our Indebtedness and Certain Other Obligations The company faces risks from significant debt obligations, including restrictive covenants that could trigger default and acceleration of repayment, and potential asset loss through foreclosure - The company has significant debt and may incur more. Its Credit Agreement contains restrictive covenants that, if breached, could result in an event of default and acceleration of repayment20205233 - The Credit Agreement requires maintaining specific financial ratios, including a total leverage ratio not to exceed 65% and a tangible net worth of not less than $206.9 million plus 90% of net proceeds from stock issuances179234 - Many loans are secured by mortgages on properties. A default could lead to foreclosure, and cross-collateralization or cross-default provisions mean a single default could affect multiple properties181207 Risks Related to Legal and Regulatory Matters The company faces legal and regulatory risks, including potential litigation, vulnerability of unpatented proprietary software to infringement, and risks from open-source software use - The company's proprietary software systems, Inigma and pKatalyst, are not patented, which may prevent the enforcement of intellectual property rights and could adversely affect the business209239 - The use of open-source software in its proprietary systems poses risks, as some licenses could require public disclosure of source code or making derivative works available at no cost96182238 - The company may be subject to claims of infringing on third-party intellectual property rights, which can be costly to defend regardless of merit67210211 Risks Related to Ownership of Our Securities Ownership of the company's securities involves significant risks, including high stock price volatility, subordination of common stockholders to preferred, 'controlled company' status, and potential dilution - The market price of the company's common stock has been highly volatile, with the closing price ranging from a low of $3.10 to a high of $10.37 since its listing in August 2023214245 - Holders of Series A and Series 1 Preferred Stock have rights senior to common stockholders, including preference on dividends and liquidation payments. As of December 31, 2023, approximately $10.5 million in preferred distributions were accrued and unpaid69217 - The company is a 'controlled company' under NYSE American rules, as key insiders control over 50% of the voting power, allowing it to be exempt from requirements like having a majority-independent board218250 - Stockholders face significant dilution risk from the potential issuance of additional common stock, conversion of preferred stock, and exercise of outstanding warrants and other equity units221255 Risks Related to Our Organizational Structure and Our Constituent Documents and Policies The company's holding company structure subordinates stockholder interests, the Board can change policies without stockholder approval, and charter provisions may deter changes in control - As a holding company, it relies on funds from the Operating Company to pay liabilities, and stockholder interests are structurally subordinated to all liabilities of the Operating Company132229261 - The Board can change key policies regarding acquisitions, indebtedness, and distributions without a stockholder vote, which could adversely affect the market value of the common stock101288 - The company's charter and Maryland law include provisions that may deter, delay, or prevent a change in control, such as ownership limitations and the ability for the board to implement takeover defenses230262289 - The company qualifies as an 'emerging growth company,' allowing it to rely on reduced public company disclosure requirements, which may make its stock less attractive to some investors269295 ITEM 1B. UNRESOLVED STAFF COMMENTS The company reports that it has no unresolved staff comments from the SEC - Not applicable. The company has no unresolved staff comments296 ITEM 1C. CYBERSECURITY The company manages cybersecurity risks through established processes overseen by the Audit Committee, with no material threats identified as of the report date - The company has processes for assessing, identifying, and managing material risks from cybersecurity threats, which are integrated into its overall risk management system297 - The Audit Committee oversees cybersecurity risk management, with the Chief Financial Officer and VP of Technology responsible for the incident response plan and reporting to the committee74299 - As of the date of the annual report, the company is not aware of any cybersecurity threats that have materially affected or are reasonably likely to materially affect its business, operations, or financial condition272 ITEM 2. PROPERTIES As of December 31, 2023, the company's portfolio comprised 43 parking facilities across 21 markets, including garages and surface lots, totaling approximately 15,200 spaces and 5.4 million square feet Property Portfolio Summary (as of Dec 31, 2023) | Property Type | Count | | :--- | :--- | | Total Facilities | 43 | | Parking Garages | 19 | | Surface Lots | 24 | | Total Spaces | ~15,200 | | Total Sq. Feet | ~5.4 million | - The report includes a comprehensive table listing all 43 properties with details on location, property type, number of spaces, and square footage275301 ITEM 3. LEGAL PROCEEDINGS The company is not currently subject to any material litigation beyond routine business matters, with further details incorporated by reference from the financial statements - The company is not presently subject to any material litigation outside of routine matters arising from the ordinary course of business276302 ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the company's business - Not applicable278321 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The company's common stock trades on the NYSE American, with approximately 30.4 million shares outstanding as of March 1, 2024, and cash dividends are currently suspended until preferred distributions are paid - The company's common stock is traded on the NYSE American under the ticker symbol 'BEEP'44303 - As of March 1, 2024, there were approximately 30.4 million shares of common stock outstanding83322 - Payment of dividends on common stock is currently suspended. No cash dividends can be paid on common stock until preferred distributions are paid277323546 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Total revenues increased 4.0% to $30.3 million in 2023, but a net loss of $38.2 million was reported due to significant non-cash expenses and impairment charges, while Adjusted EBITDA improved to $14.8 million Results of Operations For 2023, total revenues increased 4.0% to $30.3 million, but total operating expenses surged 73.4% to $60.5 million due to non-cash preferred stock issuance expense and impairment, widening the net loss to $38.2 million Revenues Comparison (in thousands) | Revenue Type | 2023 | 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Base rental income | $8,165 | $8,345 | ($180) | (2.2)% | | Percentage rental income | $22,107 | $20,329 | $1,778 | 8.7% | | Management income | $0 | $427 | ($427) | (100.0)% | | Total revenues | $30,272 | $29,101 | $1,171 | 4.0% | Operating Expenses Comparison (in thousands) | Expense Type | 2023 | 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Property taxes | $7,178 | $6,885 | $293 | 4.3% | | General and administrative | $13,160 | $8,535 | $4,625 | 54.2% | | Preferred Series 2 - issuance expense | $16,101 | $0 | $16,101 | 100.0% | | Impairment | $8,982 | $0 | $8,982 | 100.0% | | Total operating expenses | $60,504 | $34,897 | $25,607 | 73.4% | - The net loss for 2023 was $38.2 million, compared to a net loss of $18.3 million for 2022343376 - The increase in G&A expenses was primarily due to a $5.6 million increase in Equity Based Compensation in 2023312 Non-GAAP Measures The company utilizes non-GAAP measures, with Net Operating Income (NOI) increasing 9.5% to $21.1 million and Adjusted EBITDA rising to $14.8 million in 2023, reflecting improved property-level performance Net Operating Income (NOI) (in thousands) | Metric | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $30,272 | $29,101 | 4.0% | | Property Operating Expenses | ($9,163) | ($9,832) | (6.8)% | | Net Operating Income | $21,109 | $19,269 | 9.5% | EBITDA and Adjusted EBITDA (in thousands) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net loss | ($38,238) | ($18,326) | | EBITDA | ($15,816) | $2,834 | | Adjustments (Impairment, Stock Comp, etc.) | $30,617 | $8,217 | | Adjusted EBITDA | $14,801 | $11,051 | Liquidity and Capital Resources Cash used in operating activities was $2.1 million in 2023, a shift from the prior year, with financing activities providing $8.2 million from merger proceeds used for debt reduction and subsequent refinancing efforts Summary of Cash Flows (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash from operating activities | ($2,125) | $1,509 | | Net cash from investing activities | ($346) | ($19,442) | | Net cash from financing activities | $8,208 | $12,211 | - In March 2024, the company executed the Third Amendment to its Credit Agreement, providing extension options through June 2025, and exercised an option to extend the maturity to October 2024348358 - As of December 31, 2023, the company has identified a pipeline of potential acquisition targets with an asset value of over $300 million545 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, the company is not required to provide the information for this item - The company is a smaller reporting company and is not required to provide the information under this item390 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This section presents the company's audited consolidated financial statements for 2023 and 2022, along with the independent auditor's report and extensive explanatory notes Key Financial Statement Data (Year-End, in thousands) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Balance Sheet | | | | Total Assets | $423,237 | $436,113 | | Total Liabilities | $220,282 | $249,105 | | Total Equity | $202,955 | $187,008 | | Income Statement | | | | Total Revenues | $30,272 | $29,101 | | Net Loss | ($38,238) | ($18,326) | | Net Loss per Share | ($2.45) | ($0.85) | - The financial statements were audited by Deloitte & Touche LLP, which issued an unqualified opinion592 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The company reports no changes in or disagreements with its accountants on any accounting principles, practices, or financial statement disclosure matters - None555 ITEM 9A. CONTROLS AND PROCEDURES Management concluded that disclosure controls and internal control over financial reporting were ineffective as of December 31, 2023, due to material weaknesses in segregation of duties and control documentation, with a remediation plan underway - Management concluded that disclosure controls and procedures were not effective as of December 31, 2023563 - Two material weaknesses were identified in internal control over financial reporting: (i) lack of appropriate segregation of duties and (ii) ineffective design and documentation of controls557558 - A remediation plan is underway, which includes hiring and training additional accounting resources, reallocating responsibilities, and enhancing internal control documentation559568578 ITEM 9B. OTHER INFORMATION On December 15, 2023, CEO Manuel Chavez, III, entered into a Rule 10b5-1 trading plan to purchase up to 142,000 shares of Common Stock - On December 15, 2023, CEO Manuel Chavez, III, entered into a Rule 10b5-1 trading plan to purchase up to 142,000 shares of Common Stock571 ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS This item is not applicable to the company - Not applicable581 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information for this item will be included in the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders and is incorporated by reference - Information is incorporated by reference from the forthcoming proxy statement582 ITEM 11. EXECUTIVE COMPENSATION Information for this item will be included in the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders and is incorporated by reference - Information is incorporated by reference from the forthcoming proxy statement583 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information for this item will be included in the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders and is incorporated by reference - Information is incorporated by reference from the forthcoming proxy statement572584 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information for this item will be included in the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders and is incorporated by reference - Information is incorporated by reference from the forthcoming proxy statement573 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Information for this item will be included in the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders and is incorporated by reference - Information is incorporated by reference from the forthcoming proxy statement574 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES This section lists the financial statements, schedules, and all exhibits filed as part of the Form 10-K, including merger agreements, corporate documents, and certifications - This section contains the index to the consolidated financial statements and a list of all exhibits filed with the report359575 ITEM 16. FORM 10-K SUMMARY The company indicates that no Form 10-K summary is provided - None provided364589