Note 6 - Investment in Affiliate

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Equity Method Investments and Joint Ventures Disclosure [Text Block]

6. Investment in Affiliate

On March 19, 2019, the Company entered into subscription agreements with HC Realty, pursuant to which it purchased (i) 200,000 shares of HC Realty’s 10.00% Series B Cumulative Convertible Preferred Stock (the “Series B Stock”) for an aggregate purchase price of $2,000,000 and (ii) 300,000 shares of HC Realty’s common stock for an aggregate purchase price of $3,000,000. Certain investors affiliated with Hale Partnership Capital Management, LLC (“HPCM”), an entity founded by our Chairman and Chief Executive Officer and for which our Chairman and Chief Executive Officer serves as sole manager, purchased an additional 850,000 shares of Series B Stock for an aggregate purchase price of $8,500,000. On April 3, April 9, and June 29, 2020, the Company entered into subscription agreements with HC Realty, pursuant to which we purchased 100,000, 250,000, and 475,000 shares of Series B Stock, respectively, for an aggregate purchase price of $8,250,000. While some of these investors have other investments with HPCM, each of these investors made a separate and direct investment in HC Realty and HPCM does not receive management fees, performance fees, or any other economic benefits with respect to these investors’ investments in HC Realty’s Series B Stock.

The Series B Stock is not deemed to be in-substance common stock and is accounted for using the measurement alternative for equity investments with no readily determinable fair value. The Series B Stock will be reported at cost, adjusted for impairments or any observable price changes in ordinary transactions with identical or similar investments issued by HC Realty.

The following table summarizes the Company’s investment in HC Realty as of the two years ended December 31, 2022 (dollars in thousands):

	Ownership %						Investment in Affiliate Balance				Loss recorded in the Consolidated Statements of Operations (b)
	As of December 31, 2022			As of December 31, 2021			As of December 31, 2022		As of December 31, 2021		For the Year Ended December 31, 2022			For the Year Ended December 31, 2021
HC Realty Series B Stock (a)		26.8	%		26.8	%	$	10,250	$	10,250	$	-		$	-
HC Realty common stock		7.1	%		7.1	%		600		1,200		(435	)		(458	)
Total		33.9	%		33.9	%	$	10,850	$	11,450	$	(435	)	$	(458	)

(a) Represents investments in shares of Series B Stock with a basis of $10.25 million. Each share of Series B Stock can be converted into one share of HC Realty common stock at a conversion price equal to the lesser of $9.10 per share or the fair market value per share of HC Realty common stock, subject to adjustment upon the occurrence of certain events.

(b) Loss from these investments is included in “Loss from affiliate” in the consolidated statements of operations. Since HC Realty is a real estate investment trust and not a taxable entity, the loss is not reported net of taxes.

The Company’s investment in HC Realty common stock is accounted for under the equity method of accounting.