Equity

9 Months Ended

Sep. 30, 2024

Equity

Equity

7.      Equity

The Company has authority to issue 1,000,000,000 shares consisting of 750,000,000 Common Shares, and 250,000,000 shares of preferred stock, $0.01 par value per share ("Preferred Shares"). Substantially all of the Company’s business is conducted through its Operating Partnership. The REIT is the sole general partner of the Operating Partnership and owned an 82.65% and 98.81% interest in the Operating Partnership as of September 30, 2024 and December 31, 2023, respectively.  Limited partners in the Operating Partnership who have held their Operating Partnership Units for one year or longer have the right to redeem their common Operating Partnership Units for cash or, at the REIT’s option, Common Shares at a ratio of one Operating Partnership Unit for one common share. Under the Agreement of Limited Partnership, distributions to Operating Partnership Unit holders are made at the discretion of the REIT. The REIT intends to make distributions in a manner that will result in limited partners of the Operating Partnership receiving distributions at the same rate per Operating Partnership Unit as dividends per share are paid to the REIT’s holders of Common Shares.

Completion of 1-for-8 Reverse Stock Split

On May 3, 2023, the Company completed a reverse stock split of its Common Shares, and a corresponding adjustment to the outstanding common Operating Partnership Units of the Operating Partnership, at a ratio of 1-for-8 (the “2023 Reverse Stock Split”). The 2023 Reverse Stock Split automatically converted every eight Common Shares then outstanding into one Common Share.

Completion of 1-for-10 Reverse Stock Split and 5-for-1 Forward Stock Split

On July 2, 2024, the Company completed a reverse stock split of its Common Shares, and a corresponding adjustment to the outstanding common units of the Operating Partnership at a ratio of 1-for-10 (the “2024 Reverse Stock Split”). The 2024 Reverse Stock Split took effect at 5:00 p.m. Eastern Time on July 2, 2024 (the “2024 Reverse Stock Split Effective Time”) and automatically converted every ten Common Shares outstanding at that time into one Common Share.

The 2024 Reverse Stock Split affected all holders of Common Shares uniformly and did not affect any common stockholder’s percentage ownership interest in the Company, except for de minimis changes as a result of the elimination of fractional shares, as described below. Holders of Common Shares were not required to take any action as a result of the 2024 Reverse Stock Split. Their accounts were automatically adjusted to reflect the number of shares owned.

Also on July 2, 2024, and immediately following the 2024 Reverse Stock Split, the Company completed a forward stock split of its Common Shares, and a corresponding adjustment to the outstanding common units of the Operating Partnership, at a ratio of 5-for-1 (the “Forward Stock Split” and, together with the 2024 Reverse Stock Split, the “Stock Splits”). The Forward Stock Split took effect at 5:01 p.m. Eastern Time on July 2, 2024 (the “Forward Stock Split Effective Time”) and automatically converted every one share of Common Stock outstanding at that time into five shares of Common Stock.  The Forward Stock Split affected all holders of Common Stock uniformly and did not affect any common stockholder’s percentage ownership interest in the Company.

As a result of the Stock Splits, the number of Common Shares outstanding was reduced from 2,236,631 to 1,118,315 shares as of the Forward Stock Split Effective Time.  

For stockholders of record, no fractional shares were issued in connection with the 2024 Reverse Stock Split. Instead, each stockholder that otherwise would have received fractional shares received, in lieu of such fractional shares, cash in an amount equal to the applicable fraction multiplied by the closing price of the Common Shares on Nasdaq on July 2, 2024 (as adjusted for the 2024 Reverse Stock Split).   For beneficial stockholders, fractional shares resulting from the 2024 Reverse Stock Split were retained and applied to the Forward Stock Split.  Any fractional shares remaining after the Forward Stock Split were retired for cash in an amount equal to the applicable fraction multiplied by the closing price of the Common Shares on Nasdaq on July 2, 2024 (as adjusted for the 2024 Reverse Stock Split). The redemption of the fractional shares further reduced the number of Common Shares outstanding to 1,118,090 shares.

At the 2024 Reverse Stock Split Effective Time and the Forward Stock Split Effective Time, the aggregate number of Common Shares available for awards under the Company’s 2018 Equity Incentive Plan and the terms of outstanding awards were ratably adjusted to reflect the 2024 Reverse Stock Split and the Forward Stock Split, respectively.

Trading of the Common Shares on Nasdaq commenced on a split-adjusted basis on July 3, 2024 under the existing trading symbol “MDRR.” The new CUSIP number for the Common Shares following the Stock Splits is 58403P402.

Charter Amendments

In connection with the Stock Splits, on June 20, 2024, the Company filed three Articles of Amendment to its charter with the State Department of Assessments and Taxation of Maryland that provided for:

(i)a 1-for-10 Reverse Stock Split of the Common Stock, effective at 5:00 p.m. Eastern Time on July 2, 2024;

(ii)a 5-for-1 Forward Stock Split of the Common Stock, effective at 5:01 p.m. Eastern Time on July 2, 2024; and

(iii)the par value of the Common Stock to be decreased from $0.02 per share to $0.01 per share effective at 5:02 p.m. Eastern Time on July 2, 2024 (as a result of the Reverse Stock Split the par value of the Common Stock increased from $0.01 to $0.10 and as a result of the Forward Stock Split the par value of the Common Stock decreased from $0.10 to $0.02).

Common Stock Repurchase Plan

In December 2021, the Board approved a program to purchase up to 31,250 Common Shares in the open market, up to a maximum price of $76.80 per share. Under this authorization, the Company purchased 16,755 Common Shares at an average price of $16.608 per share in January 2022.  In October 2023, the Board approved the purchase of an additional 100,000 shares.  The repurchase program does not obligate the Company to acquire any particular amount of Common Shares, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion. In March 2024, the Board authorized and adopted a 10b5-1 and Rule 10b-18 Stock Repurchase Agreement (the “10b5-1 Plan”) which, as amended, authorized the purchase of up to 35,265 shares at or below a price of $12.00 per share.  The authorization under the 10b5-1 Plan expires on May 15, 2025 if not otherwise terminated or amended.  Under the 10b5-1 Plan, during the three and nine months ended September 30, 2024 the Company purchased 2,830 shares of common stock, $0.01 par value per share (“Common Shares”) at a total cost of $32,467 and at an average price of $11.45 per Common Share.  All repurchased Common Shares were retired in accordance with Maryland law.  The Company did not purchase any shares of Common Stock during the three and nine months ended September 30, 2023.

Purchase (Trade) Date	Shares Purchased	Price Per Share		Total Cost (1)
August 6, 2024	2,830	$	11.45	$	32,467
Total	2,830	$	11.45	$	32,467

(1) Total cost including transaction fees.

Common Shares and Operating Partnership Units Outstanding

As of September 30, 2024 and December 31, 2023, there were 1,349,454 and 1,122,751 Operating Partnership Units outstanding, respectively, with the REIT owning 1,115,260 and 1,109,405 of these Operating Partnership Units, respectively. As of September 30, 2024 and December 31, 2023, the remaining 234,194 and 13,346 Operating Partnership Units, respectively, are held by noncontrolling, limited partners.  As of September 30, 2024 and December 31, 2023, there were 6,150 Operating Partnership Units and

13,346 Operating Partnership Units, respectively, held by noncontrolling, limited partners that were eligible for conversion to Common Shares.  As of September 30, 2024 and December 31, 2023, respectively, there were 1,115,260 and 1,109,405 Common Shares of the REIT outstanding, respectively.

2018 Equity Incentive Plan

The Company’s 2018 Equity Incentive Plan (the “Equity Incentive Plan”) was adopted by the Board on July 27, 2018 and approved by the Company’s stockholders on August 23, 2018. The Equity Incentive Plan permits the grant of stock options, stock appreciation rights, stock awards, performance units, incentive awards and other equity-based awards (including LTIP units of the Company’s Operating Partnership) to its employees or an affiliate (as defined in the Equity Incentive Plan) of the Company and for up to the greater of (i) 15,000 Common Shares and (ii) eight percent (8)% of the number of fully diluted shares of the Company’s Common Shares (taking into account interests in the Operating Partnership that may become convertible into Common Shares).

On January 18, 2024, the Compensation Committee approved a grant of 7,637 Common Shares to the Company’s five independent directors, a grant of 1,273 Common Shares to a consultant of the Company and a grant of 19,348 Operating Partnership Units to the Company’s President and CEO, under the Equity Incentive Plan. The effective date of the grants was January 18, 2024. The Common Shares granted vested immediately and are unrestricted.  The Operating Partnership Units granted vested immediately but are not convertible to Common Shares until January 18, 2025.  However, the Equity Incentive Plan includes other restrictions on the sale of shares issued under the Equity Incentive Plan. Because the Common Shares and Operating Partnership Units vested immediately, the fair value of the grants, or $277,500, was recorded to share based compensation expense on the Company’s condensed consolidated statements of operations on the effective date of the grant. The fair value of the grants was determined by the market price of the Company’s Common Shares on the effective date of the grant.

On each January 1 during the term of the Equity Incentive Plan, the maximum number of Common Shares that may be issued under the Equity Incentive Plan will increase by eight percent (8%) of any additional Common Shares or interests in the Operating Partnership issued (i) after the completion date the Company’s initial registered public offering of Common Shares, in the case of the January 1, 2019 adjustment, or (ii) in the preceding calendar year, in the case of any adjustment subsequent to January 1, 2020. During the year ended December 31, 2023, no shares were issued under the Equity Incentive Plan so no adjustment was made as of January 1, 2024, and the shares available for issuance under the Equity Incentive Plan remained at 30,706 shares.  As of September 30, 2024, there are 2,447 shares available for issuance under the Equity Incentive Plan.  

Earnings Per Share

Basic earnings per share for the Common Shares is calculated by dividing (loss) income from continuing operations, excluding the net income (loss) attributable to noncontrolling interests, by the Company’s weighted-average number of Common Shares outstanding during the period. Diluted earnings per share is computed by dividing the net income attributable to common stockholders, excluding the net loss attributable to noncontrolling interests, by the weighted average number of Common Shares, including any dilutive shares. As of September 30, 2024 and 2023, respectively, 6,150 and 13,346 Operating Partnership Units held by noncontrolling, limited partners were eligible to be converted, on a one-to-one basis, into Common Shares. For the three months ended September 30, 2024 and the three and nine months ended September 30, 2023, the Operating Partnership Units and the equivalent Common Shares attributable to the conversion of the Operating Partnership Units have been excluded from the Company’s diluted earnings per share calculation because their inclusion would be antidilutive.  However, for the nine months ended September 30, 2024, the Operating Partnership Units and the equivalent Common Shares attributable to the conversion of the Operating Partnership Units have been included in the diluted earnings per share calculation.  

The Company's earnings (loss) per common share is determined as follows:

	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Basic and diluted shares outstanding
Weighted average Common Shares – basic		1,116,391		1,109,405		1,117,099		1,109,631
Effect of conversion of Operating Partnership Units		6,150		13,346		6,150		13,346
Weighted average Common Shares – diluted		1,122,541		1,122,751		1,123,249		1,122,977
Calculation of loss per share – basic and diluted
Net loss attributable to common stockholders	$	(526,996)	$	(1,948,827)			$	(4,047,786)
Weighted average Common Shares – basic and diluted		1,116,391		1,109,405				1,109,631
Loss per share – basic and diluted	$	(0.47)	$	(1.76)			$	(3.65)
Calculation of earnings per share – basic
Net income attributable to common stockholders					$	308,700
Weighted average Common Shares – basic						1,117,099
Earnings per share – basic					$	0.28
Calculation of earnings per share – diluted
Net income attributable to common stockholders					$	308,700
Weighted average Common Shares – diluted						1,123,249
Earnings per share – diluted					$	0.28

Dividends and Distributions

During the three and nine months ended September 30, 2024, dividends in the amount of $0.05 and $0.11, respectively, per share were paid on February 6, 2024, to stockholders of record on February 2, 2024, on April 28, 2024 to stockholders of record on April 22, 2024 and on July 26, 2024 to stockholders of record on July 23, 2024.  During the three and nine months ended September 30, 2023, dividends in the amount of $0 and $0.32, respectively, per share were paid on January 27, 2023, to stockholders of record on January 24, 2023 and on April 28, 2023 to stockholders of record on April 24, 2023.  Total dividends and distributions to noncontrolling interests paid during three and nine months ended September 30, 2024 and 2023, respectively, are as follows:

	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Common stockholders (dividends)	$	55,904	$	—	$	122,978	$	354,394
Hanover Square Property noncontrolling interest (distributions)		7,940		—		516,596		16,000
Parkway Property noncontrolling interest (distributions)		—		—		24,300		—
Operating Partnership Unit holders (distributions)		11,710		—		21,785		4,271
Total dividends and distributions	$	75,554	$	—	$	685,659	$	374,665