MOBILE INFRASTRUCTURE CORP MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q) – Marketscreener.com | Vette Leader

The following is a financial review and analysis of the Company's financial
condition and results of operations for the three and six months ended June 30,
2022 and 2021. This discussion and analysis should be read in conjunction with
the accompanying condensed consolidated financial statements and the notes
thereto and Management's Discussion and Analysis of Financial Conditions and
Results of Operations in the Company's annual report on Form 10-K for the year
ended December 31, 2021. As used herein, the terms "we," "our" and "us" refer to
Mobile Infrastructure Corporation, and, as required by context, Mobile Infra
Operating Partnership, L.P., formerly known as MVP REIT II Operating
Partnership, LP, which the Company refers to as the "Operating Partnership," and
to their subsidiaries.



Forward-Looking Statements



Certain statements included in this quarterly report on Form 10-Q (this
"Quarterly Report") that are not historical facts (including any statements
concerning investment objectives, other plans and objectives of management for
future operations or economic performance, or assumptions or forecasts related
thereto) are forward-looking statements. Forward-looking statements are
typically identified by the use of terms such as "may," "should," "expect,"
"could," "intend," "plan," "anticipate," "estimate," "believe," "continue,"
"predict," "potential" or the negative of such terms and other comparable
terminology.



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The forward-looking statements included herein are based upon the Company's
current expectations, plans, estimates, assumptions and beliefs, which involve
numerous risks and uncertainties. Assumptions relating to the foregoing involve
judgments with respect to, among other things, future economic, competitive and
market conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the Company's
control. Although the Company believes that the expectations reflected in such
forward-looking statements are based on reasonable assumptions, the actual
results and performance could differ materially from those set forth in the
forward-looking statements. Factors which could have a material adverse effect
on operations and future prospects include, but are not limited to:



? the fact that the company has a limited history since the company was founded

2015;

? the ability of Confidence in the mobile infrastructurea Maryland real estate investment

Trust (“MIT”) to complete the initial public offering (the “MIT IPO”) of

its common shares of economic interest, $0.0001 Par value per share and the

company and MIT’s Ability to complete the merger and transactions

contemplated by the agreement and proposed merger (the “Merger Agreement”) of

and between the company and WITH100% owned by Bombe Asset Management

LLC, a Ohio Limited liability company owned by Mr Chavez and Mrs. Hoge (the

“Merger”) and realize the anticipated benefits of the MIT IPO and merger;


  ? the Company's ability to complete a liquidity event;

? the company’s ability to generate sufficient cash flows to pay dividends

to the company’s shareholders;

? the impact on our business and that of our tenants from epidemics, pandemics

or outbreaks of disease, disease or virus (including COVID-19), including

lockdowns and similar mandates;

? the fact that the company has suffered net losses since its inception and in May

continue to suffer additional losses;

? Changes in general economic conditions and in the real estate and credit markets

    specifically, including economic trends impacting parking facilities;


  ? risks inherent in the real estate business, including tenant defaults,
    potential liability relating to environmental matters and the lack of
    liquidity of real estate investments;

? Competitive factors that may limit the Company’s ability to make investments

or attract and retain tenants;

? the possibility of leases under our new Lease Structure (as defined below).

Increase in rental income of the same property compared to our predecessor

Leasing;

? the Company’s ability to execute its investment strategy or add value

    of its portfolio;


  ? the loss of key personnel could have a material adverse effect upon the
    Company's ability to conduct and manage the Company's business;

? the performance of real estate that the company has acquired or may acquire or loans

the company has made or will make that are secured by real property;

? the company’s ability to successfully integrate pending acquisitions; and

transactions and implementation of an operational strategy;

? potential damages and costs arising from natural disasters, terrorism and others

    extraordinary events, including extraordinary events affecting parking
    facilities included in the Company's portfolio;


  ? the Company's ability to act on its pipeline of acquisitions;

? the availability of capital and debt financing generally and any default

    obtain debt financing at favorable terms or a failure to satisfy the
    conditions, covenants and requirements of that debt;


  ? changes in interest rates;

? the company’s ability to negotiate changes to or extensions of existing debt

Agreement;

? the company’s loss of REIT status and the ability to recover from its REIT loss

    status under U.S. federal income tax law;


  ? potential adverse impacts from changes to the U.S. tax laws; and


  ? changes to generally accepted accounting principles, or GAAP.




Any of the assumptions underlying the forward-looking statements included herein
could be inaccurate, and undue reliance should not be placed upon any
forward-looking statements included herein. All forward-looking statements are
made as of the date of this Quarterly Report, and the risk that actual results
will differ materially from the expectations expressed herein will increase with
the passage of time. Except as otherwise required by the federal securities
laws, the Company undertakes no obligation to publicly update or revise any
forward - looking statements made after the date of this Quarterly Report,
whether as a result of new information, future events, changed circumstances or
any other reason. In light of the significant uncertainties inherent in the
forward - looking statements included in this Quarterly Report, the inclusion of
such forward-looking statements should not be regarded as a representation by us
or any other person that the objectives and plans set forth in this Quarterly
Report will be achieved.



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Overview


The Company is focused on acquiring, owning and leasing parking facilities and related infrastructure, including parking lots, parking garages and other parking structures The United States. The Company targets both parking garages and properties primarily in the top 50 metropolitan areas (“MSAs”) with proximity to key demand drivers such as retail, events and venues, government and institutions, hospitality and multi-family central business districts .




As of June 30, 2022, the Company owned 45 parking facilities in 23 separate
markets throughout the United States, with a total of 15,818 parking spaces and
approximately 5.5 million square feet. As of June 30, 2022, the Company also
owned approximately 0.2 million square feet of commercial space adjacent to its
parking facilities. The Company owns substantially all of its assets and
conducts its operations through the Operating Partnership.



Management of the Company has been focused on the undertaking of four strategic
objectives to reposition the Company for its next phase of growth and a
potential liquidity event. The Company converted all management contracts back
to leases under the New Lease Structure effective as of January 1, 2022, so that
the Company once again has qualifying income from a REIT-test perspective
beginning in 2022. The second objective was to focus on the balance sheet and
the Company's upcoming debt maturities. During the first quarter, the Company
extended maturities and refinanced 2022 maturities with a facility from KeyBank,
which greatly improved the cost of interest on that debt. Management's third
objective was to focus heavily on the performance of each asset, working with
the operators to create a business plan for each asset to improve cash flow and
rental income to the Company. Those business plans were finalized in the first
quarter of 2022 and are currently being implemented with our tenant-operators.
The Company anticipates that asset-level performance will continue to improve
through 2022. Finally, management continues to focus on the fourth objective
which is the remediation of REIT status for the Company and evaluating options
for a potential liquidity event, including a potential listing on a national
securities exchange.



On May 27, 2022, the Company and MIT entered into the Merger Agreement pursuant
to which, at the effective time, the Company will merge with and into MIT, with
MIT continuing as the surviving entity resulting from the merger. The merger and
the transactions contemplated by the Merger Agreement are referred to herein
collectively as the "Merger." See Note A - Organization and Business Operations
in Part I, Item 1 - Notes to the Condensed Consolidated Financial Statements of
this Quarterly Report for further information regarding the Merger.



Objectives



The Company closed on the Transaction on August 25, 2021, which resulted in a
new management team. In addition, as of December 3, 2021, Ms. Hogue was
appointed Interim Chief Financial Officer of the Company. Over the next twelve
months management will be focused predominantly on the following:



• Identifying ways to restore REIT status, which is desirable

The company is moving towards a potential liquidity event;

• Working with the third party vendors to optimize the performance of the

The company’s parking facilities and other assets are to be moved toward cash flow

positivity;

• Reducing business overheads to make the business profitable; and

  • Pursuing options for refinancing the near-term debt maturities.




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The Company's strategic plan includes pursuing acquisitions as well as a
potential liquidity event, which may include a potential listing event or other
alternatives intended to provide the Company scale and capacity to grow beyond
its current asset base.



Since the Closing, our new management team has been working closely with our
tenants to evaluate capital requirements of the assets, with a view to
understanding current and future demand drivers of those assets. The Company has
been implementing the recently contributed proprietary technology which will
provide real-time information on the performance of assets. Going forward under
the New Lease Structure (as defined below), the Company is involved with capital
expenditures related to upgrades and optimization of our parking facilities,
including but not limited to gate arm systems, lighting, and large capital
improvements to structure and concrete. We expect to maintain an active dialogue
with our tenants for the betterment of the Company's portfolio.



Investment strategy & criteria




Because of the Company's management team's long experience in the parking
industry, the new management team often receives off-market calls for parking
facilities that are not yet being marketed for sale, as well as have early
notices on properties just getting ready to be marketed. As such, the Company
has a pipeline of acquisitions that is both bespoke and actionable, that the
Company believes are off-market and largely unavailable to our competitors. The
Company intends to continue to consolidate the industry through acquisitions,
partnering with both owners and operator tenants, to create a meaningful
pipeline and scale.



The Company's investment strategy has historically focused primarily on
acquiring, owning and leasing parking facilities, including parking lots,
parking garages and other parking structures throughout the United States. The
Company has historically focused primarily on investing in income-producing
parking lots and garages with air rights in MSAs. In expanding the Company's
portfolio, the Company will seek geographically diverse investments that address
multiple key demand drivers and demonstrate consistent consumer use that are
expected to generate positive cash flows and provide greater predictability
during periods of economic uncertainty. Such targeted investments include, but
are not limited to, parking facilities near one or more of the following key
demand drivers:



  • Commerce
  • Events and venues
  • Government and institutions
  • Hospitality
  • Multifamily central business districts



The company generally targets parking facilities that are close to multiple key demand drivers to avoid being dependent on a single source of revenue. Parking garages in inner-city cores make up a large part of the company’s parking options, as they serve several key demand drivers.




As a result of the COVID-19 pandemic, such key demand drivers have been and are
expected to be diminished for an indeterminate period of time with an uneven
return to downtown cores across our properties. Many state and local governments
have restricted public gatherings, which has in some cases eliminated or
severely reduced the demand for parking.



The Company works closely with our current tenants to understand the return to
each individual market, both as the Company considers the key demand drivers of
the Company's current assets, as well as new assets that the Company may
consider acquiring as part of our investment strategy. The Company's deep
relationships with key tenants help facilitate collaboration with respect to our
portfolio.



The Company is focused on acquiring properties that are expected to generate
positive cash flow, located in populated MSAs and expected to produce income
within 12 months of the properties' acquisition. The Company intends to acquire
under-managed parking facilities and collaborate with its tenants to implement a
tailored, value-add approach that includes fostering the implementation of
identified value levers and mitigating risk exposure, while fostering local
business relationships to derive market knowledge and connectivity.



In the event of a future acquisition of properties, the Company would expect the
foregoing criteria to serve as guidelines; however, management and the Company's
Board of Directors may vary from these guidelines to acquire properties which
they believe represent value or growth opportunities.



The Company's investments are subject to various federal, state, local and
foreign laws, ordinances and regulations, including, among other things, zoning
regulations, land use controls, environmental controls relating to air and water
quality, noise pollution and indirect environmental impacts such as increased
motor vehicle activity. The Company has obtained or intends to obtain all
permits and approvals necessary under current law to operate its investments.



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The Company cannot assure you that the Company will attain investment objectives
or that the value of the Company's assets will not decrease. The Company's Board
of Directors reviews the Company's investment policies at least annually to
determine whether the Company's investment policies continue to be in the best
interests of the Company's stockholders.



See Note A - Organization and Business Operations in Part I, Item 1 - Notes to
the Condensed Consolidated Financial Statements of this Quarterly Report for
information on the Company's recapitalization.



Trends and other factors affecting our business

Various trends and other factors are affecting or have affected the Company’s results of operations, including:




The COVID-19 Pandemic



The ongoing COVID-19 pandemic has significantly adversely impacted global
economic activity, contributing to significant volatility. The return to
normalized movement within and between states and cities is relatively uneven
among markets and industries, which has impacted the performance of our assets,
as many of the Company's properties are located in urban centers, near
government buildings, entertainment centers, or hotels. While the employment
level in the United States has nearly returned to 2019 levels, many companies
continue to deploy a work-from-home or hybrid remote strategy for employees. We
anticipate that a hybrid work structure for traditional central business
district office workers will be the normalized state going-forward. This has
impacted the performance of many of our assets that have office exposure and
underscores the importance of a multi-key demand driver strategy in
repositioning current and/or acquiring new assets. During 2020 and 2021, many
state and local governments restricted public gatherings and implemented social
distancing measures, which has, in some cases, eliminated or severely reduced
the demand for parking. State governments and other authorities have been
increasingly lifting or modifying some of these measures, which will encourage
greater movement around and between cities. Should COVID-19 restrictions be
reinstated, the Company's rental revenue may continue to be adversely affected
by the COVID-19 pandemic and may be further materially adversely affected to the
extent that economic conditions result in the elimination of jobs or the
migration of jobs from the urban centers where the Company's parking facilities
are situated to other locations. In particular, a majority of the Company's
property leases call for additional percentage rent, which will be adversely
impacted by a decline in the demand for parking. However, we see increasing
demand for multi-use assets that have exposure to entertainment and sporting
venues or have exposure to driving travel through hotel relationships. As
restrictions continue to lift across the United States, we anticipate a return
to normal, in particular a return to driving vacations, which may positively
impact the longer-term outlook of central business districts.



The COVID-19 pandemic has had, and may continue to have, a material adverse
effect on the Company's business, financial condition, results of operations,
cash flows, liquidity and ability to satisfy debt service obligations, and its
duration and ultimate lasting impact is unknown. The Company's business,
financial condition, results of operations, cash flows, liquidity and ability to
satisfy debt service obligations may continue to be negatively impacted as a
result of the COVID-19 pandemic and may remain at depressed levels compared to
pre-COVID-19 pandemic levels for an extended period.



The Company's 2020 and 2021 annual financial results were more severely impacted
by the COVID-19 pandemic in comparison with the financial results during the
first six months of 2022. In response to the COVID-19 pandemic, the
Company entered into certain lease amendments and new lease agreements with
tenants and operators during 2020. Under these lease amendments and agreements,
the tenants operated parking facilities on the Company's behalf and paid their
operating expenses from gross parking revenue and was required to remit an
agreed upon percentage of the remainder to the Company instead of base rent
payments. Revenues from these properties were recorded as management income,
which did not constitute qualifying REIT income for purposes of the annual REIT
gross income tests, and, as a result, the Company was not in compliance with the
annual REIT income tests for its taxable year ended December 31, 2020.
Accordingly, the Company did not qualify as a REIT in 2020 and has been taxed as
a C corporation beginning with its taxable year ended December 31, 2020. The
Company converted these lease amendments and new lease agreements to the New
Lease Structure as defined below, and does not expect to recognize any
management income from the New Lease Structure described below going forward.



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Fuel Prices



Increased fuel prices may adversely affect the Company's operating environment
and costs. Fuel prices have a direct impact on the ability and frequency of
consumers to engage in activities related to transportation. Increases in the
price of fuel may result in higher transportation costs and adversely affect
consumer use at the Company's parking garages. Increases in fuel costs also can
lead to other non-recoverable, direct expense increases to the Company through,
for example, increased costs of energy. Increases in energy costs for the
Company's tenants are typically recovered from lessees, although the
Company's share of energy costs increases as a result of lower occupancies, and
higher operating cost reimbursements impact the ability to increase underlying
rents. Rising fuel prices also may increase the cost of construction and the
cost of materials that are petroleum-based, thus affecting the development of
the Company's existing assets or tenants' ongoing development projects.



The Company's 2020 and 2021 annual financial results and the financial results
for the six months ended June 30, 2022 were not impacted by the recent increase
in fuel prices in the United States. The Company cannot predict the extent and
duration of the increase in fuel prices or its economic impact. Further, the
extent and strength of any economic recovery, and/or when fuel prices decline is
uncertain and subject to various factors and conditions. As a result, the
Company's results of operations and balance sheets may not be indicative of
future operating results or of its future financial condition.



Operating results for the past three months June 30, 2022compared to the three months ended June 30, 2021.



                                    For the Three Months Ended June 30,
                            2022            2021          $ Change       % Change
Revenues
Base rent income         $ 2,122,000     $ 3,062,000     $  (940,000 )       (30.7 )%
Management income            427,000         663,000        (236,000 )       (35.6 )%
Percentage rent income     4,856,000          93,000       4,763,000        5121.5 %
Total revenues           $ 7,405,000     $ 3,818,000     $ 3,587,000          93.9 %




Total Revenues



The $3,587,000 increase in revenues for the three months ended June 30, 2022,
which includes reimbursement revenue, is primarily attributable to (1) an
aggregate increase in base rent income and percentage rent income of $307,000
and $1,886,000, respectively, related to five parking facilities acquired in the
third and fourth quarters of 2021 and one property acquired during the second
quarter of 2022 and (2) a decrease in base rent income and management income and
an offsetting increase in percentage rent income as a result of the New Lease
Structure, as defined below.



In 2021, the Company began amending certain leases to the New Lease
Structure. Under this structure, tenants pay a base rent (typically $500 -
$1,000 per month) and percentage rent equal to a designated percentage,
typically ninety percent (90%), of the amount by which gross revenues at the
property during any lease year exceed a negotiated base amount. The Company
negotiates base rent, percentage rent, and the base amount used in the
calculation of percentage rent based on economic factors applicable to the
particular parking facility and geographic market. Under the New Lease
Structure, the majority of the revenue earned is variable in nature and
classified as percentage rent, whereas under the previous lease and management
agreements in effect during 2021, the majority of revenue was classified as
either base rent or management income. As of June 30, 2021, there were 15
properties on property management agreements that are now under the New Lease
Structure resulting in monthly base rent and percentage rent in lieu of
management income. As of June 30, 2022, 30 of the Company's leases, or 66.7%,
are structured under the New Lease Structure.



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The management income for the three months ended June 30, 2022 is attributable
to operator collections for a management agreement that was converted into the
New Lease Structure at the beginning of 2022.



                                                      For the Three Months Ended June 30,
                                              2022            2021          $ Change        % Change
Operating expenses
Property taxes                             $ 1,844,000     $ 1,173,000     $   671,000           57.2 %
Property operating expense                     731,000         274,000         457,000          166.8 %
General and administrative                   1,882,000       1,428,000         454,000           31.8 %
Professional fees                              532,000          56,000         476,000          850.0 %
Organizational and offering costs            1,567,000               -       1,567,000          100.0 %
Depreciation and amortization expenses       2,021,000       1,258,000         763,000           60.7 %
Total operating expenses                   $ 8,577,000     $ 4,189,000     $ 4,388,000          104.8 %




Property taxes



The $671,000 increase in property taxes during the three months ended June 30,
2022 compared to June 30, 2021 is attributable primarily to (1) approximately
$664,000 related to new acquisitions, including the five properties acquired
during the third and fourth quarters of 2021 and one property acquired during
the second quarter of 2022 and (2) the New Lease Structure, which increased the
property tax burden on the Company as it is solely responsible for the property
tax payments under the New Lease Structure.



See Note D – Acquisitions and disposals of real estate investments in Part I, Item 1 – Notes to the Condensed Consolidated Financial Statements of this quarterly report for more information.



Property operating expense



The $457,000 increase in property operating expense during the three months
ended June 30, 2022 compared to June 30, 2021 is attributable primarily to
increased insurance, professional services related to engineering surveys and
other operating expenses attributable to the five properties acquired during the
third and fourth quarters of 2021 and one property acquired during the second
quarter of 2022.


See Note D – Acquisitions and disposals of real estate investments in Part I, Item 1 – Notes to the Condensed Consolidated Financial Statements of this quarterly report for more information.

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General and administrative



The $454,000 increase in general and administrative expenses during
the three months ended June 30, 2022 compared to June 30, 2021 is primarily
attributable to an increase in payroll and related expenses of approximately
$197,000, compensation costs for the performance units granted on May 27, 2022
of $391,000 and an increase in travel and other office related expenses of
$180,000. This was partially offset by a decrease in corporate directors and
officers insurance of $280,000.



Professional fees



Professional fees increased approximately $476,000 during the three months ended
June 30, 2022 compared to June 30, 2021. The increase was primarily due to
an increase in consulting and accounting fees of approximately $436,000 for the
three months ended June 30, 2022 compared to the same period in the prior year.



Organization and offer costs

During the three months ended June 30, 2022originated the company about
$1.6 million in organizational and bid costs related to the merger, which are mainly attributable to legal and accounting costs.

depreciation and amortization costs




The $763,000 increase in depreciation and amortization expenses during
the three months ended June 30, 2022 compared to June 30, 2021 is due to the
five properties acquired during the third and fourth quarters of 2021, the one
property acquired during the second quarter of 2022, and the $4.0 million of
technology acquired as a result of the Transaction.



See Note D – Acquisitions and disposals of real estate investments in Part I, Item 1 – Notes to the Condensed Consolidated Financial Statements of this quarterly report for more information.



                                      For the Three Months Ended June 30,
                             2022             2021           $ Change        % Change
Other income (expense)
Interest expense         $ (3,168,000 )   $ (2,092,000 )   $ (1,076,000 )         51.4 %
PPP loan forgiveness          328,000          348,000          (20,000 )         (5.7 )%
Other income                   15,000                -           15,000          100.0 %
Total other expense      $ (2,825,000 )   $ (1,744,000 )   $ (1,081,000 )         62.0 %




Interest expense



The increase in interest expense of approximately $1.1 million during the three
months ended June 30, 2022 compared to the same period in the prior year
is primarily attributable to (1) the new loans assumed as part of the
Transaction, (2) a previously unencumbered property included in the Credit
Facility and (3) the acquisition of a new garage in the second quarter of 2022
financed under the Credit Facility. Total loan amortization cost for the three
months ended June 30, 2022 and 2021, was approximately $134,000 and $72,000,
respectively. Total line of credit amortization costs for the three months ended
June 30, 2022 was approximately $452,000.



See Note I - Notes Payable and Paycheck Protection Program Loan and Note D -
Acquisitions and Dispositions of Investments in Real Estate in Part I, Item
1- Notes to the Condensed Consolidated Financial Statements of this Quarterly
Report for additional information.



PPP loan forgiveness


While May 2021the company received a communication from the Small business administration (“SBA”), stating that the first round Paycheck Protection Program loan of was fully forgiven $348,000.

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During April 2022, the Company received notification from the SBA stating that
the second round paycheck protection program loan was forgiven in full in the
amount of $328,000.


Operating results for the past six months June 30, 2022compared to the six months ended June 30, 2021.



                                      For the Six Months Ended June 30,
                             2022            2021           $ Change       % Change
Revenues
Base rent income         $  4,173,000     $ 6,285,000     $ (2,112,000 )       (33.6 )%
Management income             427,000       1,004,000         (577,000 )       (57.5 )%
Percentage rent income      9,185,000         240,000        8,945,000        3727.1 %
Total revenues           $ 13,785,000     $ 7,529,000     $  6,256,000          83.1 %




Total Revenues



The $6,256,000 increase in revenues for the six months ended June 30, 2022,
which includes reimbursement revenue, is primarily attributable to (1) an
aggregate increase in base rent income and percentage rent income of $596,000
and $3,282,000, respectively, related to five parking facilities acquired in the
third and fourth quarters of 2021 and one property acquired during the second
quarter of 2022 and (2) a decrease in base rent income and management income and
an offsetting increase in percentage rent income as a result of the New Lease
Structure.



In 2021, the Company began amending certain leases to the New Lease
Structure. Under this structure, tenants pay a base rent (typically $500 -
$1,000 per month) and percentage rent equal to a designated percentage,
typically ninety percent (90%), of the amount by which gross revenues at the
property during any lease year exceed a negotiated base amount. The Company
negotiates base rent, percentage rent, and the base amount used in the
calculation of percentage rent based on economic factors applicable to the
particular parking facility and geographic market. Under the New Lease
Structure, the majority of the revenue earned is variable in nature and
classified as percentage rent, whereas under the previous lease and management
agreements in effect during 2021, the majority of revenue was classified as
either base rent or management income. As of June 30, 2021, there were 15
properties on property management agreements that are now under the New Lease
Structure resulting in monthly base rent and percentage rent in lieu of
management income. As of June 30, 2022, 30 of the Company's leases, or 66.7%,
are structured under the New Lease Structure.



The management income for the three months ended June 30, 2022 is attributable
to operator collections for a management agreement that was converted into the
New Lease Structure at the beginning of 2022.



                                                        For the Six Months Ended June 30,
                                               2022             2021          $ Change        % Change
Operating expenses
Property taxes                             $  3,680,000     $  2,302,000     $ 1,378,000           59.9 %
Property operating expense                    1,568,000          556,000       1,012,000          182.0 %
General and administrative                    3,388,000        2,860,000         528,000           18.5 %
Professional fees                             1,562,000        1,830,000        (268,000 )        (14.6 )%
Organizational and offering costs             2,525,000                -       2,525,000          100.0 %
Depreciation and amortization expenses        3,988,000        2,516,000       1,472,000           58.5 %
Total operating expenses                   $ 16,711,000     $ 10,064,000     $ 6,647,000           66.0 %




Property taxes



The $1,378,000 increase in property taxes during the six months ended June 30,
2022 compared to June 30, 2021 is attributable primarily to (1) approximately
$1,320,000 related to new acquisitions, including the five properties acquired
during the third and fourth quarters of 2021 and one property acquired during
the second quarter of 2022 and (2) the New Lease Structure, which increased the
property tax burden on the Company as it is solely responsible for the property
tax payments under the New Lease Structure.



See Note D – Acquisitions and disposals of real estate investments in Part I, Item 1 – Notes to the Condensed Consolidated Financial Statements of this quarterly report for more information.

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Property operating expense



The $1,012,000 increase in property operating expense during the six months
ended June 30, 2022 compared to June 30, 2021 is attributable primarily to
increased insurance, professional services related to engineering surveys and
other operating expenses attributable to the five properties acquired during the
third and fourth quarters of 2021 and one property acquired during the second
quarter of 2022.


See Note D – Acquisitions and disposals of real estate investments in Part I, Item 1 – Notes to the Condensed Consolidated Financial Statements of this quarterly report for more information.



General and administrative



The $528,000 increase in general and administrative expenses during the
six months ended June 30, 2022 compared to June 30, 2021 is primarily
attributable to an increase in payroll and related expenses of approximately
$393,000, compensation costs for the performance units granted on May 27, 2022
of $391,000, and an increase in travel and other office related expenses of
$379,000. This was partially offset by a decrease in corporate directors and
officers insurance of $566,000 and a related refund of $50,000.



Professional fees



Professional fees decreased approximately $268,000 during the six months ended
June 30, 2022 compared to June 30, 2021. The decrease was primarily due to the
settlement of previously disclosed legal investigations. This was offset by an
increase in consulting and accounting fees for the six months ended June 30,
2022 compared to the same period in the prior year.



For more information, see Note C – Commitments and Contingent Liabilities in Part I, Item 1 – Notes to the Condensed Consolidated Financial Statements of this quarterly report.

Organization and offer costs




During the six months ended June 30, 2022, the Company incurred approximately
$2.5 million in organizational and offering costs in connection with the Merger
primarily attributable to legal and accounting fees.



depreciation and amortization costs




The $1,472,000 increase in depreciation and amortization expenses during the six
months ended June 30, 2022 compared to June 30, 2021 is primarily due to the
five properties acquired during the third and fourth quarters of 2021, one
property acquired during the second quarter of 2022, and the $4.0 million of
technology acquired as a result of the Transaction.



See Note D – Acquisitions and disposals of real estate investments in Part I, Item 1 – Notes to the Condensed Consolidated Financial Statements of this quarterly report for more information.



                                       For the Six Months Ended June 30,
                             2022             2021           $ Change        % Change
Other income (expense)
Interest expense         $ (5,707,000 )   $ (4,296,000 )   $ (1,411,000 )         32.8 %
Other income                   30,000                -           30,000          100.0 %
PPP loan forgiveness          328,000          348,000          (20,000 )         (5.7 )%
Total other expense      $ (5,349,000 )   $ (3,948,000 )   $ (1,401,000 )         35.5 %




Interest expense



The increase in interest expense of approximately $1.4 million during the
six months ended June 30, 2022 compared to the same period in the prior year is
primarily attributable to (1) the new loans assumed as part of the Transaction,
(2) a previously unencumbered property included in the Credit Facility and
(3) the acquisition of a new garage in the second quarter of 2022 financed under
the Credit Facility. Total notes payable amortization costs for the six months
ended June 30, 2022 and 2021, was approximately $234,000 and $149,000,
respectively. Total line of credit amortization costs for the six months ended
June 30, 2022 was approximately $452,000.



See Note I - Notes Payable and Paycheck Protection Program Loan and Note D -
Acquisitions and Dispositions of Investments in Real Estate in Part I, Item
1- Notes to the Condensed Consolidated Financial Statements of this Quarterly
Report for additional information.



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PPP loan forgiveness



During May 2021, the Company received notification from the SBA stating that the
first round paycheck protection program loan was forgiven in full in the amount
of $348,000.



During April 2022, the Company received notification from the SBA stating that
the second round paycheck protection program loan was forgiven in full in the
amount of $328,000.


liquidity and capital resources




Effective March 29, 2022, the Company secured a $75.0 million loan with a $75.0
million accordion feature (the "Credit Facility") with KeyBanc Capital Markets,
as lead arranger, and KeyBank National Association, as administrative agent. The
initial $75.0 million will be used for debt maturities in 2022, whereas the
accordion can be utilized for acquisitions, capital expenditures and other
working capital requirements. This refinancing significantly reduced cash paid
for interest payments, thus improving our cash position, as well as provided
flexibility for working capital and growth via acquisitions.



The Company's principal source of funds to meet our operating expenses, pay debt
service obligations and make distributions to our stockholders will be rents
from tenants at the Company's parking facilities. Although the Company has no
present intention to do so, the Company also may sell properties that the
Company owns or place mortgages on properties that the Company owns to raise
capital.


The company has no commercial paper outstanding, nor have we entered into any swaps or hedges.

The Company’s short- and long-term liquidity needs will consist primarily of funds required for debt repayments, asset acquisitions, land development and capital expenditures. Existing development activities due to be completed shortly are expected to cost approximately $2.5 million.



Sources and Uses of Cash



The following table summarizes our cash flows for the six months ended June 30,
2022 and 2021:



                                                             For the Six Months Ended June 30,
                                                                  2022                  2021

Net cash provided (used) from operating activities $1,264,000 $ (2,080,000 )
Net cash used in investing activities

                      $      (18,874,000 )     $           -
Net cash provided by financing activities                  $       14,894,000       $   1,104,000



Comparison of the past six months June 30, 2022 for the past six months June 30, 2021:

The Company’s cash and cash equivalents and restricted cash positions were approximately
$14.0 million away June 30, 2022which is an increase of approx
$7.1 million from the balance of $6.9 million away June 30, 2021.

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The cash flow from operating activities




Net cash provided by operating activities during the six months ended June 30,
2022 was approximately $1.3 million, compared to approximately $2.1 million used
in operating activities for the six months ended June 30, 2021. The increase in
cash provided by operating activities was primarily attributable to an increase
in accounts payable resulting from increased organizational and offering costs
related to the Merger.


Cash flows from investing activities




Net cash used in investing activities for the six months ended June 30, 2022 was
approximately $18.9 million primarily attributable to the purchase of an
additional real estate investment in the second quarter of 2022 as well as
additions to building improvements and intangible assets. There was no cash used
in or provided by investing activities during the six months ended June 30,
2021.



Cash flows from financing activities




Net cash provided by financing activities for the six months ended June 30, 2022
was approximately $14.9 million compared to approximately $1.1 million for the
six months ended June 30, 2021. The increase in cash provided by financing
activities was primarily attributable to proceeds from the Credit Facility of
$73.7 million, including $17.6 million which was used in the acquisition of one
property during the second quarter of 2022. This was partially offset by the
repayment of $55.1 million of notes payable and an increase in loan fees
resulting from the Credit Facility during the six months ended June 30, 2021.



Company Indebtedness



On March 29, 2022, the Company entered into the Credit Facility. The initial
$75.0 million has been used to refinance certain of the Company's current loans
for various properties and will also be available for our general corporate
purposes, including liquidity, acquisitions and working capital. The
Company will borrow under the Credit Facility in U.S. dollars and expects
borrowings under the Credit Facility to bear interest at a floating rate based
upon a Secured Overnight Financing Rate, or SOFR, benchmark rate or an alternate
base rate, plus a margin of between 1.75% and 3.00%, with respect to SOFR loans,
or 0.75% to 2.00%, with respect to base rate loans, based on the leverage ratio
as calculated pursuant to our Credit Facility.



The obligations under the Credit Agreement underlying the Credit Facility are
guaranteed by the Company and other guarantors. The Credit Agreement contains
customary representations, warranties, conditions to borrowing, covenants and
events of default, including certain covenants that limit or restrict, subject
to certain exceptions, the ability of the Company, the Operating Partnership
and other subsidiaries to sell or transfer assets, enter into a merger or
consolidate with another company, create liens, make investments or acquisitions
or incur certain indebtedness.  The Credit Agreement also includes financial
covenants that require the Company to (i) maintain a total leverage ratio not to
exceed 65.0%, (ii) not to exceed certain fixed charge coverage ratios, and (iii)
maintain a certain tangible net worth.



The credit facility expires on April 1, 2023, which can be extended according to the terms of the credit agreement. away June 30, 2022, $73.7 million was outstanding under the credit facility.

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The Company's loan with Bank of America, N.A. for the MVP Detroit Center Garage,
LLC ("MVP Detroit") garage requires the Company to maintain approximately $2.3
million in liquidity at all times, which is defined as unencumbered cash and
cash equivalents. As of the date of this filing, the Company was in compliance
with this lender requirement.


The Company may set aside capital reserves for certain investments. The Company may also, but is not required to, reserve cash flows generated from investments or net sales proceeds in non-liquidating sales transactions. Working capital reserves are typically used to fund tenant improvements, lease commissions, and major capital expenditures. The company’s lenders may also require working capital reserves.




Over time, management intends to both extend and sculpt our maturity wall, so
that our maturities are spread over multiple years. As of the date of this
filing, the Company has significant commercial mortgage-backed securities
("CMBS") debt with prohibitive defeasance, which will limit our ability to
refinance our CMBS debt prior to the maturity date or any permitted prepayment
date. As our loans approach maturity, we will assess the lowest cost, most
flexible options available to the Company and refinance those loans accordingly.
Our intent over the mid-term period is to work with lending relationships to
maintain a revolver that can address upcoming maturities, should market
conditions not permit us to refinance with longer-term debt.



On July 5, 2022, VRMI merged with and into Suncrest Holdings, LLC ("Suncrest"),
an entity managed by an entity majority owned and controlled by Michael Shustek,
the Company's former Chief Executive Officer. On July 11, 2022, Suncrest
assigned and sold five of the six notes issued originally by VRMI to certain of
the subsidiaries of the Company as described in Note P - Subsequent Events -
Part I, Item 1, Note I - Notes to the Condensed Consolidated Financial
Statements of this Quarterly Report above (collectively, the "VRMI Notes") to
VRMII. As a result, the obligations of Company subsidiaries under the five VRMI
Notes, including all repayment obligations, are now owed to VRMII. All of the
loans evidenced by the VRMI Notes mature and are payable in full on August 25,
2022.


Distributions and Stock Dividends




On March 22, 2018, the Company suspended the payment of distributions on its
Common Stock. There can be no assurance that cash distributions to the Company's
common stockholders will be resumed in the future. The actual amount and timing
of distributions, if any, will be determined by the Company's board of directors
in its discretion and typically will depend on various factors that the
Company's board of directors deems relevant.



The Company is not currently and may not in the future generate sufficient cash
flow from operations to fully fund distributions. The Company does not currently
anticipate that it will be able to resume the payment of distributions.
However, if distributions do resume, all or a portion of the distributions may
be paid from other sources, such as cash flows from equity offerings, financing
activities, borrowings, or by way of waiver or deferral of fees. The Company has
not established any limit on the extent to which distributions could be funded
from these other sources. Accordingly, the amount of distributions paid may not
reflect current cash flow from operations and distributions may include a return
of capital, (rather than a return on capital). If the Company pays distributions
from sources other than cash flow from operations, the funds available to the
Company for investments would be reduced and the share value may be diluted. The
level of distributions will be determined by the board of directors and depend
on several factors including current and projected liquidity requirements,
anticipated operating cash flows and tax considerations, and other relevant
items deemed applicable by the board of directors.



The Company did not repurchase any of its shares during the six months ended
June 30, 2022. During the six months ended June 30, 2022, the Company did not
pay dividends on its shares of Common Stock and does not intend to pay dividends
on its shares of Common Stock in 2022. No cash dividends can be made on the
Common Stock until the preferred distributions are paid. See Note O - Equity in
the notes to the consolidated financial statements included in Part I, Item 1 -
Notes to the Consolidated Financial Statements of this Quarterly Report for
additional information.



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Dividend Reinvestment Plan



From inception through June 30, 2022, the Company had paid approximately $1.8
million in cash, issued 83,437 shares of its Common Stock pursuant to
its Dividend Reinvestment Plan ("DRIP") and issued 153,826 shares of its Common
Stock in distributions to the Company's stockholders. All of the cash
distributions were paid from offering proceeds and constituted a return of
capital. On March 22, 2018, the Company suspended payment of distributions and
as such there are currently no distributions to invest in the DRIP.



Preferred Stock



On March 24, 2020, the Company's board of directors unanimously authorized the
suspension of the payment of distributions on the Series A Preferred Stock and
Series 1 Preferred Stock; however, such distributions will continue to accrue in
accordance with the terms of the Series A Preferred Stock and Series 1 Preferred
Stock.



As of June 30, 2022 and 2021, approximately $501,000 and $286,000 of accrued and
unpaid Series A Preferred Stock distributions, respectively, are included in
accounts payable and accrued liabilities on the consolidated balance sheet.



As of June 30, 2022 and 2021, approximately $6.5 million and $3.7 million of
accrued and unpaid Series 1 Preferred Stock distributions, respectively, are
included in accounts payable and accrued liabilities on the consolidated balance
sheet.


For more information on the Company’s preferred stock, see Note O – Equity in Part I, Item 1 – Notes to the Condensed Consolidated Financial Statements of this quarterly report.



Warrants



On August 25, 2021, in connection with the Closing, the Company entered into a
warrant agreement (the "Warrant Agreement") pursuant to which it issued warrants
(the "Warrants") to Color Up to purchase up to 1,702,128 shares of Common Stock,
at an exercise price of $11.75 per share for an aggregate cash purchase price of
up to $20.0 million (the "Common Stock Warrants"). Each whole Common Stock
Warrant entitles the registered holder thereof to purchase one whole share of
Common Stock at a price of $11.75 per share (the "Warrant Price"), subject to
customary adjustments, at any time following a "Liquidity Event," which is
defined as an initial public offering and/or Listing of the Common Stock on the
Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock
Exchange. The Common Stock Warrants will expire five years after the date of the
Warrant Agreement.



The Company assesses its warrants as either equity or a liability based upon the
characteristics and provisions of each instrument.  Warrants classified as
equity are recorded at fair value as of the date of issuance on the Company's
balance sheet and no further adjustments to their valuation are made.
Management estimates the fair value of these warrants using option pricing
models and assumptions that are based on the individual characteristics of the
warrants or other instruments on the valuation date, as well as assumptions for
future financings, expected volatility, expected life, yield and risk-free
interest rate. As of June 30, 2022, all outstanding warrants issued by the
Company were classified as equity.



See Note O – Equity in Part I, Item 1 – Notes to the Condensed Consolidated Financial Statements of this quarterly report for a discussion of preferred stock and warrants.

Critical Accounting Principles

Our 2021 Annual Report on Form 10-K filed with the SEC on March 30, 2022, contains a description of our critical accounting policies and estimates, including those relating to real estate investments and acquisitions. In 2022 there were no material changes to our critical accounting policies.

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