Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note B — Summary of Significant Accounting Policies

Basis of Accounting

The accompanying unaudited condensed consolidated financial statements of the Company are prepared on the accrual basis of accounting and in accordance with principles generally accepted in the United States of America (“GAAP”) for interim financial information as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), and in conjunction with rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. The unaudited condensed consolidated financial statements include accounts and related adjustments, which are, in the opinion of management, of a normal recurring nature and necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim period. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

The condensed consolidated balance sheet as of December 31, 2019 contained herein has been derived from the audited financial statements as of December 31, 2019 but does not include all disclosures required by GAAP.

Liquidity Matters

The Company has incurred net losses since its inception and anticipates net losses and negative operating cash flows for the near future. For the nine months ended September 30, 2020, the Company had a net loss of $20.0 million and had $6.9 million in cash, cash equivalents and restricted cash. In connection with preparing the condensed consolidated financial statements for the three and nine months ended September 30, 2020, management evaluated the extent of the impact from the COVID-19 pandemic on the Company’s business and its future liquidity for the next twelve months through November 16, 2021.

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

· The Company completed the sale of the San Jose, California garage on May 26, 2020 at the contract price of $4.1 million. See Note I – Disposition of Investment in Real Estate of this Quarterly Report for additional information.

· 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, however, such distributions will continue to accrue in accordance with the terms of the Series A.

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

· On March 24, 2020, the Board of Directors suspended all repurchases, even in the case of a shareholder’s death.

· The Company is continuing to have discussions with its lenders in light of the current economic conditions and entered into one loan modification during the quarter ended June 30, 2020 and five loan modifications during the quarter ended September 30, 2020.

· While the Company is currently unable to completely estimate the impact that the COVID-19 pandemic and efforts to contain its spread will have on the Company’s business and on its tenants, as of September 30, 2020, the Company has entered into thirty-five lease amendments with eight tenants/operators. The terms of such lease amendments generally provide for one of (i) a reduction in rent for a period of four to seven months, (ii) conversion of the lease to a management agreement pursuant to which the operator will receive a monthly fee; or (iii) extension of the lease.

· The Company applied for the Paycheck Protection Program loan, guaranteed by the Small Business Administration (“SBA”), through Key Bank National Association, Inc., on April 3, 2020. This loan program is for companies with 500 or less employees, under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) signed by President Trump on March 27, 2020. On April 23, 2020 the Company received the funding for its CARES Act loan of approximately $348,000. Because these funds were used exclusively for employee payroll management expects this loan will not be required to be paid back under the terms of the CARES Act.

· The Company is in preliminary discussions with LoanCore to exercise the one-year extension option in the loan agreement to extend the maturity of this loan on terms the Company can satisfy; however, there can be no assurance this option will be exercised. If the Company is unable to extend the maturity date and is unable to repay the loan at maturity, the lenders could foreclose upon the collateral securing the loan, in which case the Company would lose its significant amount of equity value in such collateral. See Company Indebtedness in Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.

· The Company has plans to dispose of an asset within the next twelve months. Management disposed of two assets in 2019 and one asset during the nine - months ended September 30, 2020.

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

Based on this current business plan, the Company believes its existing cash, anticipated cash collections and cash inflows is sufficient to conduct planned operations for one year from the issuance of the September 30, 2020 financial statements.

Consolidation

The Company’s consolidated financial statements include its accounts, the accounts of the Company’s assets that were sold during 2020 and 2019 (as applicable), the accounts of its subsidiaries, Operating Partnership and all of the following subsidiaries. All intercompany profits and losses, balances and transactions are eliminated in consolidation. The following list includes the subsidiaries that are included in the Company’s consolidated financial statements, not the number of properties owned by the Company at September 30, 2020 and 2019.

MVP PF Memphis Poplar 2013, LLC	MVP Indianapolis Meridian Lot, LLC	White Front Garage Partners, LLC
MVP PF St. Louis 2013, LLC	MVP Milwaukee Clybourn, LLC	Cleveland Lincoln Garage, LLC
Mabley Place Garage, LLC	MVP Milwaukee Arena Lot, LLC	MVP Houston Preston, LLC
MVP Denver Sherman, LLC	MVP Clarksburg Lot, LLC	MVP Houston San Jacinto Lot, LLC
MVP Fort Worth Taylor, LLC	MVP Denver Sherman 1935, LLC	MVP Detroit Center Garage, LLC
MVP Milwaukee Old World, LLC	MVP Bridgeport Fairfield Garage, LLC	St. Louis Broadway, LLC
MVP Houston Saks Garage, LLC	West 9th Street Properties II, LLC	St. Louis Seventh & Cerre, LLC
MVP Milwaukee Wells, LLC	MVP San Jose 88 Garage, LLC	MVP Preferred Parking, LLC
MVP Wildwood NJ Lot, LLC	MCI 1372 Street, LLC	MVP Raider Park Garage, LLC
MVP Indianapolis City Park, LLC	MVP Cincinnati Race Street, LLC	MVP New Orleans Rampart, LLC
MVP Indianapolis WA Street Lot, LLC	MVP St. Louis Washington, LLC	MVP Hawaii Marks Garage, LLC
Minneapolis City Parking, LLC	MVP St. Paul Holiday Garage, LLC
MVP Minneapolis Venture, LLC	MVP Louisville Station Broadway, LLC

Under GAAP, the Company’s consolidated financial statements will also include the accounts of its consolidated subsidiaries and joint ventures in which the Company is the primary beneficiary, or in which the Company has a controlling interest. In determining whether the Company has a controlling interest in a joint venture and the requirement to consolidate the accounts of that entity, the Company’s management considers factors such as an entity’s purpose and design and the Company’s ability to direct the activities of the entity that most significantly impacts the entity’s economic performance, ownership interest, board representation, management representation, authority to make decisions and contractual and substantive participating rights of the partners/members as well as whether the entity is a variable interest entity in which it will absorb the majority of the entity’s expected losses, if they occur, or receive the majority of the expected residual returns, if they occur, or both.

Equity investments in which the Company exercises significant influence but does not control and is not the primary beneficiary are accounted for using the equity method. The Company's share of its equity method investees' earnings or losses is included in other income in the accompanying condensed consolidated statements of operations. Investments in which the Company is not able to exercise significant influence over the investee are accounted for under the cost method.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding revenue recognition, purchase price allocations to record investments in real estate, and derivative financial instruments and hedging activities, as applicable.

Concentration

The Company had fourteen and sixteen parking tenants/operators during the nine months ended September 30, 2020 and 2019, respectively. One tenant/operator, SP Plus Corporation (Nasdaq: SP) (“SP+”), represented 61.0% of the Company’s base parking rental revenue for the nine months ended September 30, 2020.

SP+ is one of the largest providers of parking management in the United States. As of September 30, 2020, SP+ managed approximately 3,200 locations in North America.

Below is a table that summarizes parking rent by tenant/operator as a percentage of the Company’s total base parking rental revenue for the periods presented:

	For The Nine Months Ended September 30,
Parking Tenant	2020	2019
SP +	61.0%	58.1%
Premier Parking	15.9%	16.3%
Denison	6.4%	2.4%
ISOM Management	5.1%	4.1%
Interstate Parking	2.8%	2.9%
342 N Rampart	2.0%	3.1%
TNSH, LLC	1.5%	1.2%
Best Park	1.4%	0.3%
St. Louis Parking	1.3%	2.1%
Lanier	1.0%	2.6%
ABM	0.7%	4.3%
Riverside Parking	0.6%	1.0%
Denver School	0.2%	0.2%
Secure	0.1%	0.1%
Premium Parking	--	1.3%

In addition, the Company had concentrations in various cities based on parking rental revenue for the nine months ended September 30, 2020 and 2019, as well as concentrations in various cities based on the real estate the Company owned as September 30, 2020 and December 31, 2019. The below tables summarize this information by city.

City Concentration for Parking Rental Revenue
	For the Nine Months Ended September 30,
	2020	2019
Detroit	24.3%	17.4%
Houston	12.2%	12.8%
Fort Worth	10.1%	7.8%
Cincinnati	8.2%	8.9%
Indianapolis	6.4%	6.2%
Lubbock	5.1%	4.1%
Cleveland	4.5%	6.9%
Honolulu	4.4%	4.8%
Milwaukee	3.7%	3.2%
Nashville	3.7%	3.5%
St. Louis	3.6%	5.2%
Minneapolis	2.9%	4.1%
St Paul	2.8%	2.9%
New Orleans	2.0%	3.1%
Bridgeport	1.4%	2.1%
Memphis	1.4%	1.6%
San Jose	1.0%	2.3%
Denver	0.7%	0.8%
Louisville	0.6%	1.0%
Clarksburg	0.4%	0.3%
Wildwood	0.3%	0.4%
Canton	0.3%	0.2%
Ft. Lauderdale	--	0.4%

Real Estate Investment Concentration by City
	As of September 30, 2020	As of December 31, 2019
Detroit	18.9%	17.6%
Houston	11.6%	12.0%
Fort Worth	9.3%	8.8%
Cincinnati	8.1%	8.7%
Honolulu	6.7%	6.7%
Indianapolis	6.1%	5.8%
Cleveland	5.7%	6.2%
Lubbock	4.5%	3.7%
St Louis	4.2%	4.4%
Minneapolis	3.9%	4.4%
Nashville	3.9%	3.7%
Milwaukee	3.8%	3.8%
St Paul	2.8%	2.7%
Bridgeport	2.8%	2.6%
New Orleans	2.6%	2.6%
Memphis	1.2%	1.3%
San Jose	1.2%	1.1%
Denver	1.1%	1.0%
Louisville	1.0%	1.0%
Clarksburg	0.2%	0.2%
Canton	0.2%	0.2%
Wildwood	0.2%	0.4%
Fort Lauderdale	--	1.1%

Acquisitions

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

Impairment of Long-Lived Assets

When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If impairment exists, due to the inability to recover the carrying value of a property, the property is written down to fair value and an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income.

The Company recorded impairment charges of approximately $6.5 million and $0.5 million for the three months ended September 30, 2020 and 2019, respectively. The Company recorded impairment charges of approximately $14.1 million and $1.4 million for the nine months ended September 30, 2020 and 2019, respectively. These charges were recorded to write down the carrying value of these assets to their current appraised values net of estimated closing costs. The appraisals were performed by independent third-party appraisers primarily using the income capitalization approach based on the contracted rent to be received from the operator or the sales comparison approach. The income capitalization approach reflects the property’s income-producing capabilities based on the assumption that value is created by the expectation of benefits to be derived in the future. The sales comparison approach utilizes sales of comparable properties, adjusted for differences, to indicate value.

The following is a summary of the impairments for the nine months ended September 30, 2020:

Property	Impairment	Valuation Method
Mabley Place Garage	$3,000,000	Income Capitalization
MVP Houston Saks	$2,500,000	Income Capitalization
MVP Milwaukee Wells	$620,000	Sales Comparison
MVP Wildwood NJ Lot	$535,000	Sales Comparison
MVP Indianapolis Meridian	$50,000	Income Capitalization
MVP Clarksburg Lot	$90,000	Income Capitalization
Minneapolis City Parking	$320,000	Sales Comparison
33740 Crown Colony	$95,000	Income Capitalization
MVP St Louis Washington	$1,320,000	Income Capitalization
MVP Cincinnati Race Street	$500,000	Income Capitalization
MVP Louisville Broadway	$100,000	Income Capitalization
Cleveland Lincoln Garage	$2,725,000	Income Capitalization
MVP Preferred Parking	$740,000	Sales Comparison
MVP New Orleans Rampart	$270,000	Income Capitalization
MVP Hawaii Marks Garage	$1,250,000	Income Capitalization
Total	$14,115,000

The following is a summary of the impairments for the nine months ended September 30, 2019:

Property	2019 Impairment	Valuation Method
MVP Memphis Court	$558,000	Sales Comparison
Minneapolis City Parking	$500,000	Income Capitalization
MVP San Jose 88 Garage	$344,000	Income Capitalization
MVP St Louis Washington	$50,000	Income Capitalization
Total	$1,452,000

Cash

The Company maintains a significant portion of its cash deposits at KeyBank, which are held by the Company’s subsidiaries allowing the Company to maximize FDIC insurance coverage. The balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) under the same ownership category of $250,000. As of September 30, 2020, and December 31, 2019, the Company had approximately $0.7 million and $2.7 million, respectively, in excess of the federally insured limits. As of the date of this filing, the Company has not experienced any losses on cash deposits.

Restricted Cash

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

Revenue Recognition

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

The Company will continually review receivables related to rent and unbilled rent receivables and determine collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. If the collectability of a receivable is in doubt, the Company will record an increase in the Company's allowance for uncollectible accounts or record a direct write-off of the receivable after exhaustive efforts at collection.

Advertising Costs

Advertising costs incurred in the normal course of operations are expensed as incurred. During the three and nine months ended September 30, 2020 and 2019, the Company had no advertising costs.

Investments in Real Estate and Fixed Assets

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

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

Purchase Price Allocation

The Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their respective fair values. Tangible assets include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis. The Company utilizes various estimates, processes and information to determine the as-if vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other methods. Amounts allocated to land, land improvements, buildings and fixtures are based on cost segregation studies performed by independent third parties or on the Company's analysis of comparable properties in the Company's portfolio. Identifiable intangible assets include amounts allocated to acquire leases for above- and below-market lease rates, the value of in-place leases, and the value of customer relationships, as applicable. The aggregate value of intangible assets related to in-place leases is primarily the difference between the property valued with existing in-place leases adjusted to market rental rates and the property valued as if vacant. Factors considered by the Company in its analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, considering current market conditions and costs to execute similar leases. In estimating carrying costs, the Company will include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period. Estimates of costs to execute similar leases including leasing commissions, legal and other related expenses are also utilized.

Above-market and below-market in-place lease values for owned properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above-market lease intangibles are amortized as a decrease to rental income over the remaining term of the lease.

The capitalized below-market lease values will be amortized as an increase to rental income over the remaining term and any fixed rate renewal periods provided within the respective leases. In determining the amortization period for below-market lease intangibles, the Company initially will consider, and periodically evaluate on a quarterly basis, the likelihood that a lessee will execute the renewal option. The likelihood that a lessee will execute the renewal option is determined by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located.

The aggregate value of intangible assets related to customer relationship, as applicable, is measured based on the Company's evaluation of the specific characteristics of each tenant’s lease and the Company's overall relationship with the tenant. Characteristics considered by the Company in determining these values include the nature and extent of its existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors.

The value of in-place leases is amortized to expense over the initial term of the respective leases. The value of customer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event does the amortization period for intangible assets exceed the remaining depreciable life of the building. If a tenant terminates its lease, the unamortized portion of the in-place lease value and customer relationship intangibles is charged to expense.

In making estimates of fair values for purposes of allocating purchase price, the Company will utilize several sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company will also consider information obtained about each property as a result of the Company's pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.

Organization, Offering and Related Costs

Certain organization and offering costs will be incurred by the former Advisor. Pursuant to the terms of the Amended and Restated Advisory Agreement, the Company will not reimburse the Advisor for these out of pocket costs and future organization and offering costs it may incur. Such costs shall include legal, accounting, printing and other offering expenses, including marketing, and direct expenses of the former Advisor’s employees and employees of the former Advisor’s affiliates and others.

All direct offering costs incurred and or paid by the Company that are directly attributable to a proposed or actual offering, including sales commissions, if any, were charged against the gross proceeds of the Common Stock Offering and recorded as an offset to additional paid-in-capital. All indirect costs will be expensed as incurred.

Stock-Based Compensation

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

Income Taxes

Commencing with its taxable year ended December 31, 2017 through December 31, 2019, and subject to the discussion below relating to the Company’s REIT status from and after January 1, 2020, the Company has operated in a manner to qualify as a REIT under Sections 856 to 860 of the Code. A REIT is generally not subject to federal income tax on that portion of its REIT taxable income, which is distributed to its stockholders, provided that at least 90% of such taxable income is distributed and provided that certain other requirements are met. The Company’s REIT taxable income may substantially exceed or be less than the income calculated according to GAAP. In addition, the Company will be subjected to corporate income tax to the extent that less than 100% of the net taxable income is distributed, including any net capital gain.

The Company uses a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolutions of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more likely than not of being realized upon ultimate settlement. The Company believes that its income tax filing positions and deductions would be sustained upon examination; thus, the Company has not recorded any uncertain tax positions as of September 30, 2020.

A full valuation allowance for deferred tax assets was provided since the Company believes that it is more likely than not that it will not realize the benefits of its deferred tax assets. A change in circumstances may cause the Company to change its judgment about whether deferred tax assets should be recorded, and further whether any such assets would more likely than not be realized. The Company would generally report any change in the valuation allowance through its income statement in the period in which such changes in circumstances occur. As long as the Company continues to qualify as a REIT, it will generally not be subject to corporate level federal income taxes on earnings distributed to its stockholders and therefore may not realize any benefit from deferred tax assets arising during 2019 or any prior period in which the Company maintained its status as a REIT. The Company intends to distribute at least 100% of its taxable income annually for every year in which the Company is a REIT.

As of September 30, 2020, as a result of the COVID-19 pandemic, the Company has entered into temporary lease amendments with some of its tenants. The Company was compelled to make certain of these amendments in response to challenging market conditions faced by its lessees and operating partners due to the significant negative impact of COVID-19 on demand for parking in many of the markets in which the Company owns properties, particularly in major population centers. At the time the leases were amended, the Company intended for the amendments to be temporary and did not believe that the amendments would cause the Company to fail its REIT income tests for the 2020 year. Because the COVID-19 pandemic has continued to negatively impact the Company and its operating partners and lessees longer than anticipated, the Company has not yet been able to amend all of its agreements back to their original form. The income generated under these lease amendments do not constitute qualifying REIT income for purposes of the REIT gross income tests. As a result, the Company was not in compliance with the annual REIT income tests for the quarters ended June 30, 2020 and September 30, 2020. These REIT income tests are measured on an annual basis, and we are evaluating options and strategies that may enable us to maintain our REIT status for our taxable year ending December 31, 2020 notwithstanding our inability to comply with these income tests in the past two quarters. If implemented, these options and strategies may have negative ancillary impacts on our business and operations, including potentially increasing our overall tax liability. If we determine that the potential negative impacts of these options outweigh the benefits of potentially maintaining our REIT status, we may choose not to implement any of these options. Moreover, even if we choose to implement any of these options, no assurances can be given that our implementation will be successful or that these options will in fact enable us to maintain our status as a REIT for our taxable year ending December 31, 2020. Accordingly, unless we choose, and are able, to successfully implement an alternative operating strategy, it is highly likely that the Company will no longer qualify as a REIT for the year ending December 31, 2020. If we fail to qualify as a REIT for our taxable year ended December 31, 2020, we would no longer be required to make distributions of our annual taxable income in order to maintain our REIT status and any distributions we make would not be deductible by us. Moreover, unless entitled to relief under specific statutory or administrative provisions, we would be ineligible to elect to be treated as a REIT for the four taxable years following 2020. We believe that we may not be entitled to this statutory relief, and there can be no assurances that we will be able to obtain such relief.

Given projected losses in 2020, as well as the potential tax benefit of net operating loss carryforwards that the Company does not anticipate utilizing as long as it maintains its status as a REIT, the Company will continue to evaluate its current and deferred income tax situation (including the appropriateness of recording a deferred tax asset for net operating losses) throughout the year as there is additional clarity about the impact of the COVID-19 pandemic to the Company’s ongoing operations, including whether the Company can maintain its REIT status for the 2020 year.

Per Share Data

The Company calculates basic income (loss) per share by dividing net income (loss) for the period by weighted-average shares of its common stock outstanding for the respective period. Diluted income per share considers the effect of dilutive instruments, such as stock options and convertible stock, but uses the average share price for the period in determining the number of incremental shares that are to be added to the weighted-average number of shares outstanding. The Company had no outstanding common share equivalents during the three and nine months ended September 30, 2020 and 2019.

There is a potential for dilution from the Company’s Series A Convertible Redeemable Preferred Stock which may be converted into the Company’s common stock at any time. As of September 30, 2020, there were 2,862 shares of the Series A Convertible Redeemable Preferred Stock issued and outstanding. As of filing date, the Company has not received any requests to convert.

There is a potential for dilution from the Company’s Series 1 Convertible Redeemable Preferred Stock which may be converted upon a holder’s election into the Company’s common stock at any time. As of September 30, 2020, there were 39,811 shares of the Series 1 Convertible Redeemable Preferred Stock issued and outstanding. As of filing date, the Company has not received any requests to convert.

Each share of Series A preferred stock and Series 1 preferred stock will convert into the number of shares of the Company’s common stock determined by dividing (i) the stated value per Series A share or Series 1 share of $1,000 (as may be adjusted pursuant to the applicable articles supplementary) plus any accrued but unpaid dividends to, but not including, the conversion date by (ii) the conversion price. The conversion price is equal to the net asset value per share of the Company’s common stock; provided that if a “Listing Event” (as defined in the applicable articles supplementary) occurs, the conversion price will be 100% of the volume weighted average price per share of the Company’s common stock for the 20 trading days prior to the delivery date of the conversion notice. The Company will have the right (but not the obligation) to redeem any Series A or Series 1 shares that are subject to a conversion notice on the terms set forth in the applicable articles supplementary.

Accounting and Auditing Standards Applicable to “Emerging Growth Companies”

The Company is an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as the Company remains an “emerging growth company,” which is expected to be through December 31, 2020, the Company is not required to (1) comply with any new or revised financial accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies, (2) provide an auditor’s attestation report on management’s assessment of the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (3) comply with any new requirements adopted by the Public Company Accounting Oversight Board (the “PCAOB”), requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer or (4) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. The Company intends to take advantage of such extended transition period. Since the Company will not be required to comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies, the Company’s financial statements may not be comparable to the financial statements of companies that comply with public company effective dates. If the Company were to subsequently elect to instead comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act.

Non-controlling Interests

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