Note 8 - Equity

6 Months Ended

Jun. 30, 2022

Stockholders Equity Note [Abstract]

Equity

Note 8 - Equity

Common Stock

On January 3, 2022 and April 1, 2022, the Company issued 165,700 and 9,708 shares, respectively, of common stock to its directors. Also on April 1, 2022 and July 1, 2022, the Company issued 60,106 and 36,064 shares of common stock, respectively, in connection with the redemption of OP Units.

Preferred Stock

The Company is authorized to issue 1,000,000 shares of preferred stock, in one or more series, with a $0.01 par value per share, of which 20,000 shares had been designated as Series A preferred stock, $0.01 par value per share (the “Series A preferred stock”).

As of June 30, 2022 and December 31, 2021, the Company had 500 shares of Series A preferred stock outstanding, all of which were assumed from MedAmerica Properties Inc. (“MedAmerica”) upon completion of the initial mergers on December 27, 2019 (the “Initial Mergers”). The holders of Series A preferred stock are entitled to receive, out of funds legally available for that purpose, cumulative, non-compounded cash dividends on each outstanding share of Series A preferred stock at the rate of 10.0% of the $100 per share issuance price (“Series A preferred dividends”). The Series A preferred dividends are payable semiannually to the holders of Series A preferred stock, when and as declared by the Company’s board of directors, on June 30 and December 31 of each year, that shares of Series A preferred stock are outstanding; provided that due and unpaid Series A preferred dividends may be declared and paid on any date declared by the Company’s board of directors. As of June 30, 2022, less than $0.1 million of Series A preferred dividends were undeclared.

In the event of any voluntary or involuntary liquidation, sale, merger, consolidation, dissolution or winding up of the Company, before any distribution of assets shall be made to the holders of the Company’s common stock, each holder of Series A preferred stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders an amount equal to the $100 issue price plus all Series A preferred dividends accrued and unpaid on such shares up to the date of distribution of the available assets (such amount, the “Liquidation Preference”). The amount deemed distributed for purposes of determining the Liquidation Preference shall be the cash or the fair market value of the property, rights or securities distributed to the holders of Series A preferred stock as determined in good faith by the Company’s board of directors. If, upon a liquidation event, the available assets are insufficient to pay the Liquidation Preference to the holders of Series A preferred stock in full, then the available assets shall be distributed ratably among the holders of Series A preferred stock in proportion to their respective ownership of shares of Series A preferred stock.

Shares of Series A preferred stock, excluding accrued Series A preferred dividends, which will be paid as described above, may, in the sole discretion of the holder of such shares of Series A preferred stock and by written notice to the Company, be converted into shares of the Company’s common stock, at a conversion price of $0.20 per share, subject to certain adjustments, in whole or in part at any time.

Holders of Series A preferred stock are generally not entitled to voting rights.

Noncontrolling Interest

As of June 30, 2022, the Company owned a 92.2% interest in the Operating Partnership. Commencing on the 12-month anniversary of the date on which the OP units were issued, each limited partner of the Operating Partnership (other than the Company) has the right, subject to certain terms and conditions, to require the Operating Partnership to redeem all or a portion of the OP units held by such limited partner in exchange for cash based on the market price of the Company’s common stock or, at the Company’s option and sole discretion, for shares of the Company’s common stock on a one-for-one basis.

On April 1, 2022 and July 1, 2022, the Company issued 60,106 and 36,064 shares of common stock, respectively, in connection with the redemption of OP units.

Amended and Restated 2020 Equity Incentive Plan

On September 15, 2021, the Company’s board of directors approved the Company’s Amended and Restated 2020 Equity Incentive Plan (the “Plan”), which increased the number of shares of the Company’s common stock reserved for issuance under the Plan by 1,500,000 shares, from 3,620,000 shares to 5,120,000 shares. The Plan provides for the grant of stock options, share awards (including restricted stock and restricted stock units), share appreciation rights, dividend equivalent rights, performance awards, annual cash incentive awards and other equity-based awards, including LTIP units, which are convertible on a one-for-one basis into OP units. As of June 30, 2022, there were 841,683 shares available for future issuance under the Plan, subject to certain adjustments set forth in the Plan. Each share subject to an award granted under the Plan will reduce the available shares under the Plan on a one-for-one basis. The Plan is administered by the compensation committee of the Company’s board of directors.

Restricted Stock

Awards of restricted stock are awards of the Company’s common stock that are subject to restrictions on transferability and other restrictions as established by the Company’s compensation committee on the date of grant that are generally subject to forfeiture if employment (or service as a director) terminates prior to vesting. Upon vesting, all restrictions would lapse. Except to the extent restricted under the award agreement, a participant awarded restricted stock will have all of the rights of a stockholder as to those shares, including, without limitation, the right to vote and the right to receive dividends on the shares. The value of the awards is determined based on the market value of the Company’s common stock on the date of grant. The Company expenses the cost of restricted stock ratably over the vesting period.

The following table summarizes the stock-based award activity under the Plan for the six months ended June 30, 2022 and 2021.

	Restricted Stock Awards			Weighted-Average Grant Date Fair Value Per Restricted Stock Award
Outstanding as of December 31, 2021		237,621		$	1.26
Granted		138,262			2.20
Vested		(172,580	)		0.75
Forfeitures		(10,923	)		2.43
Outstanding as of June 30, 2022		192,380		$	2.03

	Restricted Stock Awards			Weighted-Average Grant Date Fair Value Per Restricted Stock Award
Outstanding as of December 31, 2020		153,200		$	0.55
Granted		90,517			2.95
Vested		(30,172	)		2.95
Outstanding as of June 30, 2021		213,545		$	1.23

Compensation expense related to these share-based payments for the three months and six months ended June 30, 2022 and 2021 was approximately $0.1 million and was included in general and administrative expenses on the consolidated statement of operations. The remaining unrecognized costs from stock-based awards as of June 30, 2022 was approximately $0.3 million and will be recognized over a weighted-average period of 1.3 years.

On April 1, 2022, the Company granted 138,262 restricted shares of common stock to certain employees, which will vest ratably on January 1, 2023, January 1, 2024 and January 1, 2025, subject to continued service through such dates. The total value of these awards is calculated to be approximately $0.3 million.

Restricted Stock Units

The Company’s restricted stock unit (“RSU”) awards represent the right to receive unrestricted shares of common stock based on the achievement of Company performance objectives as determined by the Company’s compensation committee. Grants of RSUs generally entitle recipients to shares of common stock equal to 0% up to 300% of the number of units granted on the vesting date. RSUs are not eligible to vote or to receive dividends prior to vesting. Dividend equivalents are credited to the recipient and are paid only to the extent the RSUs vest based on the achievement of the applicable performance objectives.

On October 1, 2021, the Company granted certain employees RSUs with an aggregate target number of 1,220,930 RSUs, of which 0% to 300% will vest based on the Company’s Implied Equity Market Capitalization (as defined in the performance award of stock units agreements pursuant to which the RSUs were granted) at the end of the performance period ending on December 31, 2024, subject to the executive’s continued service on such date. If, however, the maximum amount of the award is not earned as of December 31, 2024, the remaining RSUs may be earned based on the Company’s Implied Equity Market Capitalization as of December 31, 2025. To the extent performance is between any two designated amounts, the percentage of the target award earned will be determined using a straight-line linear interpolation between the two designated amounts. The value of the awards is determined by using a Monte Carlo simulation model in estimating the market value of the RSUs as of the date of grant. The Company expenses the cost of RSUs ratably over the vesting period. The remaining unrecognized costs from RSU awards as of June 30, 2022 was approximately $4.3 million and will be recognized over 3.6 years.

Option Awards

In connection with the completion of the Initial Mergers, the Company assumed option awards previously issued to directors and officers of MedAmerica. Details of these options for the six months ended June 30, 2022 and 2021 are presented in the tables below:

	Number of Shares Underlying Options		Weighted Average Exercise Price Per Share		Weighted Average Fair Value at Grant Date		Weighted Average Remaining Contractual Life		Intrinsic Value
Balance at December 31, 2021		70,000	$	7.71	$	—		0.76	$	—
Options granted		—		—		—		—		—
Options exercised		—		—		—		—		—
Options expired		—		—		—		—		—
Balance at June 30, 2022		70,000	$	7.71	$	—		0.26	$	—

	Number of Shares Underlying Options		Weighted Average Exercise Price Per Share		Weighted Average Fair Value at Grant Date		Weighted Average Remaining Contractual Life		Intrinsic Value
Balance at December 31, 2020		70,000	$	7.71	$	—		1.76	$	—
Options granted		—		—		—		—		—
Options exercised		—		—		—		—		—
Options expired		—		—		—		—		—
Balance at June 30, 2021		70,000	$	7.71	$	—		1.26	$	—

The fair values of stock options are estimated using the Black-Scholes method, which takes into account variables such as estimated volatility, expected holding period, dividend yield, and the risk-free interest rate. The risk-free interest rate is the five-year treasury rate at the date of grant. The expected life is based on the contractual life of the options at the date of grant. All 70,000 outstanding options were fully vested at grant date. The exercise price of the outstanding options exceeded the closing price of the Company’s common stock at June 30, 2022. The intrinsic value is not material.

Warrants

On June 4, 2021, the Company issued to Lamont Street warrants to purchase 200,000 shares of the Company’s common stock at an exercise price of $2.50 per share (the “Warrants”). The Warrants were issued in connection with the issuance of the Lamont Street Preferred Investment described in Note 6 under the heading “—Lamont Street Preferred Interest.” The fair value of these warrant liabilities is estimated using the Black-Scholes method, which takes into account variables such as estimated volatility, expected holding period, dividend yield and the risk-free interest rate. The risk-free interest rate is the U.S. Treasury rate at the date of grant. The expected life is based on the contractual life of the warrants at the date of grant, which is 4.3 years.