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Item 5. Market for Registrant’s Common Equity

2024-03-22 compared with 2023-04-07 · 279 added, 31 removed, 2 unchanged (99% of the section changed)

1 unchanged sentence

Market Information

Our Class A ordinary shares are traded on Nasdaq under the symbol FWAC.

Our Class A ordinary shares commenced public trading on May 25, 2021.

There is no trading market for our Class B ordinary shares.

As of March 1, 2023, there were 2 holders of record of our Class A ordinary shares and 5 holders of record of our Class B ordinary shares.

We have not paid any cash dividends on our ordinary shares to date and do not intend to pay cash dividends prior to the completion of our Initial Business Combination.

The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of our Initial Business Combination.

The payment of any cash dividends subsequent to our Initial Business Combination will be within the discretion of our board of directors at such time and we will only pay such dividend out of our profits or share premium (subject to solvency requirements) as permitted under Cayman Islands law.

If we incur any indebtedness in connection with a business combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.

Securities Authorized for Issuance Under Equity Compensation Plans

Recent Sales of Unregistered Securities;

Use of Proceeds from Registered Offerings

Unregistered Sales

Private Placement Shares

Simultaneously with the consummation of the IPO and the issuance and sale of the shares, the Company consummated the Private Placement of 907,000 Private Placement Shares at a price of $10.00 per Private Placement Share, to the sponsor, generating gross proceeds of $9,070,000.

No underwriting discounts or commissions were paid with respect to the Private Placement.

The Private Placement was conducted as a non-public transaction and, as a transaction by an issuer not involving a public offering, is exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act.

The Private Placement Shares are identical to the Class A Ordinary Shares sold in the IPO, subject to certain limited exceptions, including that the sponsor has agreed not to transfer, assign or sell any of the Private Placement Shares (except to certain permitted transferees) until 30 days after the completion of the Company’s initial business combination.

PIPE Investment

Concurrently with the execution of the Merger Agreement, the Company entered into the Subscription Agreement with the Initial PIPE Investor, pursuant to which, among other things, the Initial PIPE Investor has agreed to subscribe for and purchase, and the Company has agreed to issue and sell to the Initial PIPE Investor an aggregate of 1,200,000 Surviving Pubco Shares for a purchase price of $10.00 per 1.2 shares, on the terms and subject to the conditions set forth therein.

The Subscription Agreement contains customary representations and warranties of the Company, on the one hand, and the Initial PIPE Investor, on the other hand, and customary conditions to closing, including the consummation of the transactions contemplated by the Merger Agreement.

Surviving Pubco Shares to be issued and sold to the Initial PIPE Investor pursuant to the Subscription Agreement will not be registered under the Securities Act, in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.

The Subscription Agreement provides the Initial PIPE Investor with certain customary registration rights.

The Subscription Agreement further provides that one-sixth of the Surviving Pubco Shares issued to the PIPE Investors will be subject to certain transfer restrictions.

Use of Proceeds

The registration statement on Form S-1 (File No.

333-255292) for our Initial Public Offering was declared effective by the SEC on May 24, 2021.

On May 27, 2021, the Company consummated the Initial Public Offering of 27,500,000 Class A ordinary shares, including 2,500,000 shares as a result of the underwriters’ partial exercise of their overallotment option, at an offering price of $10.00 per share.

The gross proceeds from the Initial Public Offering were $275,000,000 in aggregate.

A total of $275,000,000 of the net proceeds of the Initial Public Offering and Private Placement (inclusive of the underwriters’ deferred discount of $9,625,000, which has subsequently been waived by the underwriters) was placed in the Trust Account.

Transaction costs amounted to approximately $16.1 million, of which approximately $9.6 million was for deferred underwriting commissions (which has subsequently been waived by the underwriters).

There has been no material change in the planned use of proceeds from such use as described in the Company’s registration statement on Form S-1 (File No.

Our common stock is traded on the NYSE American under the ticker symbol “BEEP.” Prior to the consummation of the Merger, FWAC’s Class A ordinary shares were listed on the Nasdaq Stock Market LLC under the ticker symbol “FWAC.”

Holders of Record

As of March 1, 2024, we had approximately 30.4 million shares of Common Stock outstanding, held by a total of 1,257 stockholders of record.

We believe the actual number of beneficial owners of our Common Stock is greater than this number of record holders and includes beneficial owners whose shares are held in “street name” by brokers, banks and other nominees.

We do not currently, and may not in the future, generate sufficient cash flow from operations to pay and fully fund future distributions.

We do not currently anticipate that we 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, or borrowings.

We have 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 we pay distributions from sources other than cash flow from operations, the funds available to us for investments would be reduced and the share value may be diluted.

The level of distributions will be determined by our Board 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 our Board.

No cash dividends can be made on the Common Stock until the preferred distributions are paid.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

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

The following discussion and analysis of our financial condition and results of operations is based on, and should be read in conjunction with the audited consolidated financial statements and the notes thereto contained elsewhere in this Annual Report.

Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties.

See “Forward-Looking Statements” preceding Part I.

and “Risk Factors” for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by these forward-looking statements.

We are a Maryland corporation focused on acquiring, owning and leasing parking facilities and related infrastructure, including parking lots, parking garages and other parking structures throughout the United States.

We target both parking garage and surface lot properties primarily in top 50 U.S.

Metropolitan Statistical Areas (“MSAs”), with proximity to key demand drivers, such as commerce, events and venues, government and institutions, hospitality and multifamily central business districts.

As of December 31, 2023, we owned 43 parking facilities in 21 separate markets throughout the United States, with a total of approximately 15,700 parking spaces and approximately 5.4 million square feet.

We also own approximately 0.2 million square feet of commercial space adjacent to our parking facilities.

Consummation of the Merger

On the Closing Date, we consummated the Merger and the other transactions contemplated by the Merger Agreement.

Additionally, on the Closing Date, the Conversion was consummated by which the Operating Partnership converted into the Operating Company.

Finally, on the Closing Date, we consummated the Preferred PIPE Financing, pursuant to which the Preferred PIPE Investors purchased a total of 46,000 shares of Series 2 Preferred Stock at $1,000 per share for an aggregate purchase price of $46,000,000.

On December 31, 2023, the Series 2 Preferred Stock converted into 13,787,462 shares of Common Stock inclusive of 1,253,404 shares of Common Stock issued to the Preferred PIPE Investors upon the conversion of dividends.

Impact of Return to Work

The return to normalized movement following the COVID-19 pandemic is relatively uneven among markets and industries, which has impacted the performance of our assets, as many of our 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.

Asset Management Contracts

In January and February 2024, 26 of our 43 assets converted to management contracts.

We believe asset management contracts provide the opportunity for net operating income ("NOI") growth through more transparent and controlled expense management, and will reduce the revenue variability associated with the timing of payments for contract parking agreements.

In addition, the move to management contracts properly aligns the incentives and rewards for revenue growth between the third-party operator and the company.

This change is also expected to result in better revenue linearity compared to revenue recognition in our current agreements, in which lease payments are based on cash collections from operators.

Overall, the conversion to contracts also provides enhanced visibility on the performance of the portfolio within our financial results.

Our intent is to convert the remaining assets to asset management contracts by the end of 2027, with additional assets expected to be converted in 2024.

The conversion to asset management contracts will impact the comparability of operating results in future periods as we expect to recognize additional revenue because our operators will no longer share in the revenue and certain expenses that were paid by the operators will now be recognized by us.

Results of Operations for the Years Ended December 31, 2023 and 2022 (dollars in thousands)

For the Year Ended December 31,

Base rental income

Management income

Percentage rental income

Total revenues

Total Revenues

The increase in total revenues for 2023 compared to 2022 is due primarily to the acquisition of one parking asset in Oklahoma City in the second quarter of 2022, increased contract parking and additional demand for event parking, specifically in markets with sporting events, theatres, festivals, and other gatherings, partially offset by changes in lease structures resulting in lower base rental and management income as well as the sale of one parking asset in the first quarter of 2023.

For the Year Ended December 31,

Operating expenses

Property taxes

Property operating expense

Depreciation and amortization

General and administrative

Preferred Series 2 - issuance expense

Professional fees

Organizational, offering and other costs

Total operating expenses

Property Operating Expense

The $1.0 million decrease in Property Operating Expense is primarily related to professional services related to engineering surveys and other operating expenses in 2022 attributable to the five properties acquired during 2021 and one property acquired during the second quarter of 2022.

General and Administrative Expense

The $4.6 million increase in General and administrative expenses during the year ended December 31, 2023 compared to December 31, 2022 is primarily attributable to an increase in Equity Based Compensation in 2023 of $5.6 million offset by a decrease in gross wages of $1.0 million.

Equity Based Compensation costs for the year ended December 31, 2023 we attributable to non-cash compensation for certain executive LTIP Units granted in February 2023 and awards granted related to 2023 performance, as well as the cancellation of executive LTIP Units for $1.4 million in the third quarter of 2023.

Preferred Series 2 - Issuance Expense

As part of accounting for the reverse recapitalization, we evaluated the Series 2 Preferred Stock arrangement, and determined that the fair value of the Series 2 Preferred Stock at the time of the transaction of $66.7 million ($4.84 per share) exceeded the implied conversion rate ($3.34 per share) based on a total of 13,787,464 shares of common stock being issued on December 31, 2023 in return for $46 million in proceeds.

As a result, the excess in fair value was treated as non-cash compensation and was recorded as Preferred Series 2 - Issuance Expense on the Consolidated Statements of Operations.

Professional Fees

Professional fees decreased by approximately $1.0 million during the year ended December 31, 2023 compared to the year ended December 31, 2022.

The decrease was primarily due to consulting costs related to valuation, tax, and accounting services needed in 2022 that were non-recurring items in 2023.

Organizational, Offering and Other C osts

In May 2022, Legacy MIC entered into an Agreement and Plan of Merger (the “MIT Merger Agreement”) by and between Legacy MIC and Mobile Infrastructure Trust, a Maryland real estate investment trust (“MIT”).

Pursuant to the terms of the MIT Merger Agreement, Legacy MIC would merge with and into MIT, with MIT continuing as the surviving entity resulting from the transaction.

Prior to and as a condition to the merger with MIT, MIT expected to undertake an initial public offering of its common shares of beneficial interest.

Also, in March 2022, Legacy MIC had entered into an agreement with MIT, requiring Legacy MIC to be allocated, bear and (where practicable) pay directly certain costs and expenses related to the merger with MIT.

In connection with the execution of the Merger Agreement with FWAC, the MIT Merger Agreement and the cost allocation agreement with MIT were terminated.

The $2.7 million decrease in Organizational, Offering and Other Costs during 2023 compared to 2022 is due to the termination of the MIT Merger Agreement and other transactions primarily attributable to legal and accounting fees.

This is partially offset by transaction costs associated with the Merger that were allocated to the 1,900,000 FWAC Class B ordinary shares that converted to Common Stock and which are subject to an earn-out structure (the “Earn-Out Shares”) under terms outlined in the Second Amended and Restated Sponsor Agreement as well as well as $1.0 million in lender consent costs.

During the year ended December 31, 2023 the Company recorded approximately $9.0 million of asset impairment charges related to assets impacted by delayed return-to-work trends or other reductions of demand-drivers impacting these assets, as well as disposition of properties.

For the Year Ended December 31,

Interest expense, net

Gain (loss) on sale of real estate

Other income, net

Change in fair value of Earn-out Liability

PPP loan forgiveness

Total other, net

Line items that result in a percent change that exceed certain limitations are considered not meaningful (“NM”) and indicated as such.

Interest Expense

The increase in Interest expense, net of approximately $1.0 million during the year ended December 31, 2023 compared to the prior year is primarily attributable to increases in interest rates on the Revolving Credit Facility compared to the prior year partially offset by the repayment of $9.9 million of mortgage loans and the paydown of $15.0 million on the Revolving Credit Facility.

Gain (Loss) on Sale of Real Estate

In February 2023 we sold a parking lot located in Wildwood, New Jersey for $1.5 million, resulting in a gain on sale of real estate of approximately $0.7 million.

We received net proceeds of approximately $0.3 million after the repayment of the outstanding mortgage loan, interest and transaction costs.

In September 2022 we sold a parking lot located in Canton, Ohio for $0.7 million, resulting in a loss on sale of real estate of approximately $0.1 million.

Other Income, Net

The increase in Other Income, Net of approximately $1.1 million during the year ended December 31, 2023 compared to the prior year is primarily attributable to a settlement agreement relating to indemnification expenses entered into in third quarter 2023.

Change in Fair Value of Earn-out Liability

In connection with the Merger, in August 2023 we recognized a liability for Earn-Out Shares which may vest if certain hurdles are met regarding share price.

Changes to the fair value during the period are based on changes in Company stock price and are reflected in earnings.

PPP loan forgiveness

During May 2021, the Company received notification from the U.S.

Small Business Administration ("SBA") stating that the first-round paycheck protection program loan was forgiven in full in the amount of $348,000.

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

The forgiveness of these loans was recognized in the consolidated statements of operations in the month they were forgiven.

Non-GAAP Measures

Net Operating Income

Net Operating Income (“NOI”) is presented as a supplemental measure of our performance.

We believe that NOI provides useful information to investors regarding our results of operations, as it highlights operating trends such as pricing and demand for our portfolio at the property level as opposed to the corporate level.

NOI is calculated as total revenues less property operating expenses and property taxes.

We use NOI internally in evaluating property performance, measuring property operating trends, and valuing properties in our portfolio.

Other real estate companies may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other real estate companies.

NOI should not be viewed as an alternative measure of our financial performance as it does not reflect the impact of general and administrative expenses, depreciation and amortization, interest expense, other income and expenses, or the level of capital expenditures necessary to maintain the operating performance of our properties that could materially impact our results from operations.

The following table presents our NOI as well as a reconciliation of NOI to Net Loss, the most directly comparable financial measure under U.S.

GAAP reported in our consolidated financial statements, for the years ended December 31, 2023 and 2022 (dollars in thousands):

For the Years Ended December 31,

Base rental income

Management income

Percentage rental income

Total revenues

Operating Expenses

Property taxes

Property operating expense

Net Operating Income

Reconciliation

(Gain) loss on sale of real estate

PPP loan forgiveness

Other income, net

Change in fair value of Earn-out Liability

Interest expense

Depreciation and amortization

General and administrative

Preferred Series 2 - issuance expense

Professional fees

Organizational, offering and other costs

Impairment of real estate assets

Net Operating Income

EBITDA and Adjusted EBITDA

Earnings Before Interest Expense, Taxes, Depreciation and Amortization (“EBITDA”) reflects net income (loss) excluding the impact of the following items:

interest expense, depreciation and amortization, and the provision for income taxes, for all periods presented.

When applicable, Adjusted EBITDA also excludes certain recurring and non-recurring items from EBITDA, including, but not limited to gains or losses from disposition of real estate assets, impairment write-downs of depreciable property, non-cash changes in the fair value of the Earn-out liability, merger-related charges and other expenses, gains or losses on settlements, and stock-based compensation expense.

Our use of EBITDA and Adjusted EBITDA facilitates comparison with results from other companies because it excludes certain items that can vary widely across different industries or among companies within the same industry.

For example, interest expense can be dependent on a company’s capital structure, debt levels, and credit ratings.

The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate.

EBITDA and Adjusted EBITDA also exclude depreciation and amortization expense because differences in types, use, and costs of assets can result in considerable variability in depreciation and amortization expense among companies.

We exclude stock-based compensation expense in all periods presented to address the considerable variability among companies in recording compensation expense because companies use stock-based payment awards differently, both in the type and quantity of awards granted.

We use EBITDA and Adjusted EBITDA as measures of operating performance which allow us to compare earnings and evaluate debt leverage and fixed cost coverage.

The following table presents our calculation of EBITDA and Adjusted EBITDA for the for the years ended December 31, 2023 and 2022 (dollars in thousands):

For the Year Ended December 31,

Reconciliation of Net loss to Adjusted EBITDA Attributable to the Company

Interest expense

Depreciation and amortization

EBITDA Attributable to the Company

Organization and offering costs

Impairment of real estate

Preferred Series 2 - Issuance expense

Change in fair value of Earn-out Liability

Gain on settlement of indemnification liability

Gain on sale of real estate

PPP loan forgiveness

Equity and non-cash compensation

Adjusted EBITDA Attributable to the Company

Liquidity and Capital Resources

Sources and Uses of Cash

Aside from standard operating expenses, we expect our principal cash demands to be for:

principal and interest payments on our outstanding indebtedness;

capital expenditures;

acquisitions of assets.

Our principal source of funds will be rental income from tenants at our parking facilities as well as existing cash on hand as a result of the Merger and the Preferred PIPE Investment.

We also may sell properties that we own or place mortgages on properties that we own to raise capital.

During 2022 and 2023, and subsequent to December 31, 2023, we have taken steps to both extend and ladder maturities in our debt profile, including:

In March 2022 we entered into the Credit Agreement, and established a $75.0 million revolving credit facility (the “Revolving Credit Facility”).

During 2022, we used $73.7 million of available capacity to refinance certain of our current loans for various properties and to finance the acquisition of a parking garage in June 2022.

In November 2022 we amended the Credit Agreement to extend the maturity of the Credit Agreement to April 1, 2024 and amended certain financial covenants through the new term.

As of December 31, 2022, we were not in compliance with all applicable financial covenants under the Credit Agreement, resulting in certain events of default.

Subsequently, we entered into the Second Amendment to the Credit Agreement, which resulted in, among other things, a waiver of all existing events of defaults, certain modifications to the financial covenants and a decrease of available credit from $75.0 million to $58.7 million;

In September 2023, we paid approximately $9.9 million to Vestin Realty Mortgage II, Inc.

("Vestin"), which represented payment in full of five notes held by Vestin.

In February 2024, we refinanced $5.5 million of notes payable maturing in March 2024 with a 10-year note for $5.9 million.

In March 2024, we executed the Third Amendment to the Credit Agreement, which provided extension options through June 2025 with increased interest rate spreads above SOFR at each extension.

We executed one of these options, which extends the maturity through October 2024.

Exercising an option following that maturity date would result in an interest rate spread above SOFR of 3.5%.

We intend to pursue additional refinancing options related to the Credit Agreement and our near-term maturities.

Certain lenders may require reserves related to capital improvements, insurance, and excess cash.

These lender-required reserves make up the majority of our restricted cash amounts as of December 31, 2023.

Capital Expenditures

Existing capital expenditure activities expected to be completed in the near-term for general deferred maintenance are expected to cost approximately $0.3 million.

Asset Acquisitions

Our future acquisitions or development of properties cannot be accurately projected because such acquisitions or development activities depend upon available opportunities that come to our attention and upon our ability to successfully acquire, develop and lease such properties.

However, we have identified a pipeline of acquisition opportunities that we believe is bespoke and actionable, while being largely off-market and unavailable to our competitors.

As of December 31, 2023, we have identified and are evaluating several parking facilities with more than $300 million in asset value as potential acquisition targets.

Distributions and Warrants

In March 2018, we suspended the payment of distributions on our Common Stock.

There can be no assurance that cash distributions to our common stockholders will be resumed in the future.

The actual amount and timing of distributions, if any, will be determined by our Board in its discretion and typically will depend on various factors that our Board deems relevant.

We do not currently, and may not in the future, generate sufficient cash flow from operations to fully fund distributions.

We do not currently anticipate that we 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.

We have not established any limit on the extent to which distributions could be funded from these other sources.

We are currently accruing dividends in accordance with the terms of the Series A Preferred Stock and Series 1 Preferred Stock.

As of December 31, 2023, the balance unpaid dividends outstanding was approximately $0.8 million and $9.7 million for Series A Preferred Stock and Series 1 Preferred Stock, respectively.

No cash dividend on the Common Stock can be paid until the preferred distributions are paid.

As a result of the Merger, our previously outstanding warrant became the Warrant to purchase 2,553,192 shares of our common stock at an exercise price of $7.83 per share, exercisable as of the date of the Closing.

As of the Closing Date, FWAC, Legacy MIC, and Color Up entered into a Warrant Assumption and Amendment Agreement (the “Warrant Assumption and Amendment Agreement”) to the Warrant Agreement, whereby the Company assumed the Common Stock Warrants remaining outstanding and unexpired at that time, and such Common Stock Warrants became the common stock warrants of the Company.

On August 29, 2023, the Company and Color Up entered into the Amended and Restated Warrant Agreement pursuant to which the Warrant Agreement was amended and restated to reflect the effects of the Merger and permit Color Up to exercise the Warrant on a cashless basis at Color Up’s option.

While exercise of the Warrant is a potential source of cash, we do not currently believe this is a likely event and therefore do not use this assumption in our operating plans.

Cash flow activities

The following table summarizes our cash flows for the years ended December 31, 2023 and 2022 (dollars in thousands):

For the Year Ended December 31,

Net cash provided by (used in) operating activities

Net cash (used in) investing activities

Net cash provided by financing activities

Cash flows from operating activities

The cash used in operating activities for the year ended December 31, 2023 was primarily attributable to payments of deferred offering costs and other Merger-related amounts paid and an increase in cash paid for interest as a result of higher rates during the same comparable period.

Cash flows from investing activities

The cash used in investing activities during the year ended December 31, 2023 was primarily attributable to capital expenditures offset by proceeds from the sale of one parking asset in February 2023.

The cash used in investing activities during the year ended December 31, 2022 was primarily attributable to routine and strategic capital expenditures and the acquisition of one parking asset in June 2022.

Cash flows from financing activities

The cash provided by financing activities during the year ended December 31, 2023 was primarily attributable to the Merger and the PIPE investment.

The proceeds from the Merger were then used to fund the $15.0 million paydown of the Revolving Credit Facility, payment of transaction costs, and pay-off of certain of mortgage loans.

The cash provided by financing activities during the year ended December 31, 2022 was primarily attributable to proceeds from the Revolving Credit Facility of $73.7 million partially offset by the repayment of $55.1 million of notes payable and loan fees resulting from the Revolving Credit Facility.

Critical Accounting Estimates

Our accounting estimates have been established in conformity with U.S.

The preparation of financial statements in conformity with U.S.

GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions.

These judgments 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 revenue and expenses during the reporting periods.

If management’s judgment or interpretation of the facts and circumstances relating to various transactions is different, it is possible that different accounting policies will be applied, or different amounts of assets, liabilities, revenues and expenses will be recorded, resulting in a different presentation of the financial statements or different amounts reported in the financial statements.

Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses.

Below is a discussion of the accounting policies that management considers to be most critical.

These policies require complex judgment in their application or estimates about matters that are inherently uncertain.

Merger Accounting

In connection with the Merger, we were required to estimate the fair value of multiple forms of equity.

These fair value estimates impacted the allocation and classification of the costs incurred during the Merger.

1,900,000 FWAC Class B ordinary shares that converted to Common Stock are subject to “Earn-Out Shares” under terms outlined in the Second Amended and Restated Sponsor Agreement.

The Earn-Out Shares vest if certain milestones related to share price are achieved as further described in Footnote I.

Because the shares have voting rights but have contingent vesting conditions, we have included the shares as issued but not outstanding on the face of the Consolidated Balance Sheets.

The estimated fair value of the Earn-Out Shares was recorded as approximately $5.8 million as of the Closing Date and is presented as earnout liability on the Consolidated Balance Sheets.

We allocated $0.9 million of offering costs to the Earn-Out Shares, which was recorded as part of Organization, offering, and other costs on the Consolidated Statements of Operations.

We estimated the fair value of each tranche of shares separately using a Monte Carlo simulation.

These estimates require us to make various assumptions about the risk-free rate, expected volatility for each tranche of the Earn-Out Shares, and other items that are unobservable and are considered Level 3 inputs in the fair value hierarchy.

Because we are a newly-listed company with limited share activity, we were required to exercise judgment in estimating expected volatility (30.0% to 45.0%) and in selection of comparable companies.

The estimated fair value of the Earn-Out shares will continue to impact our financial results each quarter, and changes to our underlying assumption or our performance could result in a material change to our earnings.

As part of accounting for the reverse recapitalization, we evaluated the Series 2 Preferred Stock arrangement using the guidance in ASC 820 and 480.

We determined the fair value of the Series 2 Preferred Stock, including the dividends to be paid-in-kind, was $66.7 million ($4.84 per share) at the time of the transaction.

We compared the fair value to the implied conversion rate based on a total of 13,787,464 shares of common stock being issued and $4.6 million of dividends paid in kind in return for $46 million in proceeds.

As a result, the excess in fair value was treated as non-cash compensation and was recorded as Preferred Series 2 issuance expense on the Consolidated Statements of Operations.

A change in our assumptions, such as expected volatility and the discount for lack of marketability, around the valuation of these shares could have resulted in an allocation of offering costs that was recorded as additional paid in capital rather than impacting earnings.

Impairment of Long-Lived Assets

On a quarterly basis, we employ a multi-step approach to assess our real estate assets for possible impairment and record any impairment charges identified.

The first step is the identification of potential triggering events, such as declines in NOI and performance compared to internal forecasts.

If the results of this first step indicate a triggering event for a property, we proceed to the second step, utilizing an undiscounted cash flow model to identify potential impairment.

If the undiscounted cash flows are less than the net book value of the property as of the balance sheet date, we record an impairment charge based on the fair value determined in the third step.

Valuing our investment in real estate assets in both the second and third step of our impairment testing requires us to utilize a significant amount of judgment in the inputs that we select.

We select these inputs based on all available evidence and using techniques that are commonly employed by other real estate companies.

To estimate fair value we may use internally developed valuation models or independent third-parties where available.

In either case, the fair value of real estate may be based on a number of approaches including the income capitalization approach, sales comparable approach or discounted cash flow approach.

We utilize market data such as sales price per stall on comparable recent real estate transactions to estimate the fair value of the real estate assets.

We also utilize expected net sales proceeds to estimate the fair value of any centers that are actively being marketed for sale.

We believe that our real estate valuation estimates are based on reasonable assumptions.

However, the use of inappropriate estimates could result in an incorrect valuation of our real estate properties, which could result in material impairment losses in the future.

All assets acquired and liabilities assumed in an acquisition of real estate accounted for as a business combination are measured at their acquisition date fair values.

For acquisitions of real estate accounted for as an asset acquisition, the fair value of consideration transferred by us (including transaction costs) is allocated to all assets acquired and liabilities assumed on a relative fair value basis.

In making estimates of fair values for purposes of allocating purchase price, we 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.

We will also consider information obtained about each property as a result of the our 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.

We allocate the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their relative fair values.

Tangible assets include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis.

We utilize various estimates, processes and information to determine the as-if vacant property value.

Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other methods.

Amounts allocated to land, land improvements, buildings and fixtures are based on valuations performed by independent third parties or on our analysis of comparable properties in our 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 in our 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, we 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.

The value of lease intangibles is amortized to depreciation and amortization expense over the remaining term of the respective lease.

If a tenant terminates its lease with us, the unamortized portion of the in-place lease intangibles is recognized over the shortened lease term.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 under the Exchange Act and are not required to provide the information otherwise reported under this item.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements, together with the report of our independent registered public accounting firm, appear on pages F-1 though F-27 of this Annual Report.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity