Mobile Infrastructure Corp current report, 25 August 2023

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Business Context and Reporting Period

Mobile Infrastructure Corporation filed a Form 8-K reporting the August 25, 2023 completion of the domestication and business combination between Fifth Wall Acquisition Corp. III and Mobile Infrastructure Corporation. The combined company adopted the name Mobile Infrastructure Corporation and began trading on NYSE American under the symbol BEEP on August 28, 2023. The filing was signed on August 31, 2023.

The transaction converted FWAC into a Maryland corporation, merged MIC into the reorganized entity, and converted the former operating partnership into Mobile Infra Operating Company, LLC. The company owns and operates substantially all assets and conducts substantially all operations through the Operating Company.

Key Financial Metrics and Capital Structure

  • MIC reported net losses attributable to common stockholders of $11.1 million in 2022 and $14.1 million in 2021.
  • MIC reported net losses attributable to common stockholders of $1.7 million for the six months ended June 30, 2023, compared with $2.0 million for the comparable 2022 period.
  • The filing text does not provide clear revenue, operating cash flow, gross margin, EBITDA, or comparable profitability figures; it incorporates the company’s Form 10-Q, annual financial statements, and pro forma financial information by reference.
  • The Preferred PIPE Investment raised $46.0 million through the issuance of 46,000 shares of Series 2 Convertible Preferred Stock at $1,000 per share.
  • The Series 2 Preferred Stock carries a cumulative annual dividend rate of 10%, payable in kind, and is expected to convert into approximately 13.8 million common shares including accrued dividends, subject to adjustments and applicable conditions.
  • The company applied $15.0 million of PIPE proceeds to repay borrowings under its credit facility.
  • Credit facility commitments were reduced from $75.0 million to $58.7 million. The amendment waived specified existing defaults and modified financial covenants.
  • The amended credit agreement requires a borrowing-base interest coverage ratio of at least 1.10 to 1.00 and at least $7.0 million of unencumbered cash, cash equivalents, or interest-payment collateral.
  • Immediately before the merger, MIC had approximately $90 million of debt maturing within the following twelve months. The filing states that the company did not then have sufficient cash or available liquidity to repay that debt as it matured.
  • As of August 28, 2023, 14,978,325 shares of common stock were outstanding. New MIC owned approximately 52.05% of the Operating Company’s 28,774,152 outstanding Common Units.
  • The company has not paid common-stock cash dividends and does not anticipate paying them in the foreseeable future.

Material Changes Versus the Prior Comparable Period

  • The transaction changed FWAC from a shell company into the operating company and resulted in a change of control. Former FWAC shareholders held approximately 22.34% of the combined company immediately after closing.
  • MIC common stock was exchanged at a 1.5-to-1 exchange ratio for an aggregate of 11,632,040 shares of New MIC common stock.
  • The existing MIC warrant was adjusted to a warrant for 2,553,192 common shares at an exercise price of $7.83 per share, compared with 1,702,128 shares at $11.75 per share before the merger. The warrant may be exercised on a cashless basis at the holder’s option.
  • The company issued preferred equity to fund the transaction and debt repayment, creating senior dividend and liquidation rights and expected future dilution to common stockholders.
  • The sponsor cancelled 100,000 FWAC Class B shares for no consideration.
  • WithumSmith+Brown was dismissed as FWAC’s independent registered public accounting firm, and Deloitte & Touche LLP was engaged as the company’s auditor for 2023. Deloitte had served as MIC’s auditor before the merger.
  • The company disclosed that MIC’s previously identified material weaknesses in internal control over financial reporting remained unresolved as of June 30, 2023.

Guidance, Outlook, Risks, Contingencies, and Unusual Items

  • Management plans to increase revenue through higher utilization of parking assets and, in some cases, higher average ticket rates, while reducing or eliminating certain controllable overhead expenses in 2023. The filing provides no quantitative earnings or revenue guidance.
  • The company disclosed conditions and events raising substantial doubt about its ability to continue as a going concern, including recurring losses, limited liquidity, approximately $90 million of near-term debt maturities, and the possibility of future credit agreement defaults.
  • KeyBank’s credit amendment includes leverage, interest coverage, liquidity, tangible net worth, collateral, borrowing-base, and other operating restrictions. It also increased the applicable debt pool yield from 8.0% to 9.0% and established an interest-payment cash collateral reserve.
  • Material risks include dependence on parking demand, competition, fuel prices, interest rates, real estate conditions, access to financing, the ability to acquire additional facilities, technology and cybersecurity failures, and the company’s limited operating history.
  • Series 2 Preferred Stock and other preferred securities rank senior to common stock for dividends, liquidation, and related rights. Conversion of the Series 2 Preferred Stock and accrued dividends could materially dilute common stockholders.
  • Management identified material weaknesses involving segregation of duties, information-system access controls, and application of GAAP. Remediation efforts were underway, but the company could not conclude that the weaknesses had been fully remedied as of June 30, 2023.
  • The filing reports no litigation, investigation, or claim expected to have a material adverse effect as of the filing date.

Most Important Facts for Investors to Verify

  1. Review the incorporated MIC financial statements, June 30, 2023 Form 10-Q, and pro forma financial information for revenue, cash balances, operating cash flow, debt balances, maturities, and liquidity details not clearly presented in the 8-K text.
  2. Confirm the terms, conversion timing, dividend accrual, and potential dilution from the $46.0 million Series 2 Preferred Stock issuance.
  3. Assess compliance with the amended credit agreement, including the $7.0 million liquidity requirement, 1.10-to-1.00 interest coverage covenant, leverage requirements, collateral obligations, and upcoming maturities.
  4. Evaluate the going-concern disclosure and management’s ability to improve operating cash flow or obtain refinancing and additional capital.
  5. Monitor remediation of material weaknesses and the effect of any accounting corrections, restatements, or delayed filings.
  6. Review registration rights, lock-up provisions, sponsor holdings, the New MIC Warrant, and Operating Company unit redemption rights because substantial additional shares may become available for resale or issuance.