Quarterly report pursuant to Section 13 or 15(d)

Equity and Mezzanine Equity

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Equity and Mezzanine Equity
9 Months Ended
Sep. 30, 2018
Equity [Abstract]  
Equity and Mezzanine Equity
Equity and Mezzanine Equity
Series A Preferred Stock
    
At September 30, 2018 and December 31, 2017, the Company had 562 shares of Series A Preferred Stock, without par value (“Series A Preferred”) issued and outstanding and 4,500 shares authorized with a $1,000 liquidation preference per share, or $562 thousand in aggregate. The Series A Preferred accrues cumulative dividends at a rate of 9% per annum, which is paid quarterly. The Company has the right to redeem the 562 shares of Series A Preferred, on a pro rata basis, at any time at a price equal to 103% of the purchase price for the Series A Preferred plus any accrued but unpaid dividends.

Series B Preferred Stock

At September 30, 2018 and December 31, 2017, the Company had 1,875,748 and 1,875,848 shares, respectively, and 5,000,000 shares of Series B Convertible Preferred Stock, without par value (“Series B Preferred”) issued and authorized with a $25.00 liquidation preference per share, or $46.90 million in aggregate. The Series B Preferred bears interest at a rate of 9% per annum. The Series B Preferred has no redemption rights. However, the Series B Preferred is subject to a mandatory conversion once the 20-trading day volume-weighted average closing price of our Common Stock, exceeds $58 per share; once this weighted average closing price is met, each share of our Series B Preferred will automatically convert into shares of our Common Stock at a conversion price equal to $40.00 per share of Common Stock. In addition, holders of our Series B Preferred also have the option, at any time, to convert shares of our Series B Preferred into shares of our Common Stock at a conversion price of $40.00 per share of Common Stock. Upon any voluntary or involuntary liquidation, dissolution or winding up of our company, the holders of shares of our Series B Preferred shall be entitled to be paid out of our assets a liquidation preference of $25.00 per share, plus an amount equal to all accumulated, accrued and unpaid dividends to and including the date of payment. The Series B Preferred has no maturity date and will remain outstanding indefinitely unless subject to a mandatory or voluntary conversion as described above.

In conjunction with the 2014 issuance of Series B Preferred, 1,986,600 warrants were issued. Each warrant permits investors to purchase 0.125 share of Common Stock at an exercise price of $44 per share of Common Stock, subject to adjustment. The warrants expire in April 2019.

Series D Preferred Stock - Redeemable Preferred Stock

In January 2018, the Company, issued and sold 1,363,636 shares of Series D Cumulative Convertible Preferred Stock, without par value (“Series D Preferred”), in a public offering. Each share of Series D Preferred Stock was sold to investors at an offering price of $16.50 per share. Net proceeds from the public offering totaled $21.16 million, which includes the impact of the underwriters' selling commissions and legal, accounting and other professional fees.

At September 30, 2018 and December 31, 2017, the Company had 3,600,636 and 2,237,000, respectively, and 4,000,000 shares of Series D Preferred issued and authorized with a $25.00 liquidation preference per share, or $90.02 million and $55.93 million in aggregate, respectively. Until September 21, 2023, the holders of the Series D Preferred are entitled to receive cumulative cash dividends at a rate of 8.75% per annum of the $25.00 liquidation preference per share (equivalent to the fixed annual amount of $2.1875 per share) (the “Initial Rate”). Commencing September 21, 2023, the holders will be entitled to cumulative cash dividends at an annual dividend rate of the Initial Rate increased by 2% of the liquidation preference per annum on each subsequent anniversary thereafter, subject to a maximum annual dividend rate of 14%. Dividends are payable quarterly in arrears on or before January 15th, April 15th, July 15th and October 15th of each year. On or after September 21, 2021, the Company may, at its option, redeem the Series D Preferred, for cash at a redemption price of $25.00 per share, plus an amount equal to all accrued and unpaid dividends, if any, to and including the redemption date. The holder of the Series D Preferred may convert shares at any time into shares of the Company’s Common Stock at an initial conversion rate of $16.96 per share of Common Stock. On September 21, 2023, the holders of the Series D Preferred may, at their option, elect to cause the Company to redeem any or all of their shares at a redemption price of $25.00 per share, plus an amount equal to all accrued and unpaid dividends, if any, to and including the redemption date, payable in cash or in shares of Common Stock, or any combination thereof, at the holder’s option.

On May 3, 2018, the Company filed a Certificate of Correction (the “Certificate of Correction”) with the State Department of Assessments and Taxation of Maryland (the “SDAT”) correcting an inadvertently omitted reference to “accumulated amortization” in “Section 10(a) (Mandatory Redemption for Asset Coverage)” of the Articles Supplementary for the Series D Preferred that was previously filed with SDAT on September 16, 2016. The Certificate of Correction became effective upon filing.

Accretion of Series D Preferred was $148 thousand and $444 thousand for the three and nine months ended September 30, 2018, respectively. Accretion of Series D Preferred was $184 thousand and $540 thousand for the three and nine months ended September 30, 2017, respectively.

Earnings per share
Basic earnings per share for the Company’s common shareholders is calculated by dividing income (loss) from continuing operations, excluding amounts attributable to preferred stockholders and the net loss attributable to noncontrolling interests, by the Company’s weighted-average shares of Common Stock outstanding during the period. Diluted earnings per share is computed by dividing the net income (loss) attributable to common shareholders, excluding amounts attributable to preferred shareholders and the net loss attributable to noncontrolling interests, by the weighted-average number of common shares including any dilutive shares.
As of September 30, 2018, the below shares are able to be converted to Common Stock. The common units, convertible preferred stock, cumulative convertible preferred stock, and warrants have been excluded from the Company’s diluted earnings per share calculation because their inclusion would be antidilutive. In addition to the below, 750,000 shares of the Company's Common Stock may be issued upon exercise of a warrant, solely in the event of a default under a loan agreement in which we serve as a guarantor.
 
 
September 30, 2018
 
 
Outstanding shares
 
Potential Dilutive Shares
 
 
 
 
 
 
 
(unaudited)
Common units
 
295,550

 
295,550

Series B Preferred Stock
 
1,875,748

 
1,172,343

Series D Preferred Stock
 
3,600,636

 
5,307,541

Warrants to purchase Common Stock
 
 
 
329,378



Dividends
Dividends were declared to holders of common units, common shares and preferred shares as follows (in thousands):

Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
(unaudited)
Common unit and common shareholders
$

 
$
3,187

 
$

 
$
10,288

Preferred shareholders
3,208

 
2,496

 
9,621

 
7,473

Total
$
3,208

 
$
5,683

 
$
9,621

 
$
17,761


 
During the three months ended September 30, 2018, the Company declared quarterly dividends of $3.04 million to preferred shareholders of record as of September 30, 2018 to be paid on October 15, 2018. Accordingly, the Company has accrued $3.04 million as of September 30, 2018 for these dividends.
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
(unaudited)
Dividends declared per common share
$

 
$
0.34

 
$

 
$
1.10

Dividends declared per Series A Preferred share
$
22.50

 
$
22.50

 
$
67.50

 
$
67.50

Dividends declared per Series B Preferred share
$
0.56

 
$
0.56

 
$
1.69

 
$
1.69

Dividends declared per Series D Preferred share
$
0.55

 
$
0.55

 
$
1.64

 
$
1.64


2015 Long-Term Incentive Plan

On June 4, 2015, the Company's shareholders approved the 2015 Long-Term Incentive Plan (the "2015 Incentive Plan"). The 2015 Incentive Plan allows for issuance of up to 125,000 shares of the Company's Common Stock to employees, directors, officers and consultants for services rendered to the Company.

During the nine months ended September 30, 2018, the Company issued no shares to employees for services rendered to the Company under the 2015 Incentive Plan. As of September 30, 2018, there are 41,104 shares available for issuance under the Company’s 2015 Incentive Plan.
2016 Long-Term Incentive Plan

On June 15, 2016, the Company's shareholders approved the 2016 Long-Term Incentive Plan (the "2016 Incentive Plan"). The 2016 Incentive Plan allows for issuance of up to 625,000 shares of the Company's Common Stock to employees, directors, officers and consultants for services rendered to the Company.

During the nine months ended September 30, 2018, the Company issued 168,217 shares to directors and employees for services rendered to the Company under the 2016 Incentive Plan. The market value of these shares at the time of issuance was approximately $894 thousand. As of September 30, 2018, there are 352,655 shares available for issuance under the Company’s 2016 Incentive Plan.