NOTE 1 — BUSINESS
Organization. MGM Growth Properties LLC (“MGP” or the “Company”) is a limited liability company that was organized in Delaware in October 2015. MGP conducts its operations through MGM Growth Properties Operating Partnership LP (the “Operating Partnership”), a Delaware limited partnership that was formed in January 2016 and became a subsidiary of MGP in April 2016. The Company elected to be taxed as a real estate investment trust (“REIT”) commencing with its taxable year ended December 31, 2016.
MGP is a publicly traded REIT primarily engaged through its investment in the Operating Partnership which owns, acquires, leases and invests in large-scale destination entertainment and leisure properties, whose tenants generally offer casino gaming, hotel, convention, dining, entertainment and retail and other amenities. A wholly owned subsidiary of the Operating Partnership leases its real estate properties back to a wholly owned subsidiary of MGM under a master lease agreement (the “MGM-MGP Master Lease”). A venture owned 50.1% by the Operating Partnership and 49.9% by a subsidiary of Blackstone Real Estate Income Trust, Inc. (“BREIT”, such venture, the “MGP BREIT Venture”) owns the real estate assets of MGM Grand Las Vegas and Mandalay Bay and leases such real estate properties back to a wholly owned subsidiary of MGM under a master lease agreement (the “MGP BREIT Venture lease”).
As of March 31, 2022, there were approximately 268.1 million Operating Partnership units outstanding in the Operating Partnership, of which MGM owned approximately 111.4 million, or 41.5%, and MGP owned the remaining 58.5%. MGM’s Operating Partnership units are exchangeable into Class A shares of MGP on a one-to-one basis, or cash at the Fair Market Value of a Class A share (as defined in the Operating Partnership’s partnership agreement). The determination of settlement method is at the option of MGP’s independent conflicts committee. MGM’s indirect ownership of these Operating Partnership units is recognized as a noncontrolling interest in MGP’s financial statements. A wholly owned subsidiary of MGP is the general partner of the Operating Partnership and operates and controls all of its business affairs. As a result, MGP consolidates the Operating Partnership and its subsidiaries. MGM also has ownership of MGP’s outstanding Class B share. The Class B share is a non-economic interest in MGP which does not provide its holder any rights to profits or losses or any rights to receive distributions from the operations of MGP or upon liquidation or winding up of MGP but which represents a majority of the voting power of MGP’s shares. As a result, MGP continues to be controlled by MGM through its majority voting rights and is consolidated by MGM.
VICI Transaction
On August 4, 2021, the Company and the Operating Partnership entered into an agreement with VICI Properties, Inc. (“VICI”) and MGM whereby VICI will acquire the Company in a stock-for-stock transaction (such transaction, the “VICI Transaction”). Pursuant to the agreement, MGP Class A shareholders will have the right to receive 1.366 shares of newly issued VICI stock in exchange for each MGP Class A share outstanding and MGM will have the right to receive 1.366 units of the new VICI operating partnership (“VICI OP”) in exchange for each Operating Partnership unit held by MGM. The fixed exchange ratio represents an agreed upon price of $43 per share of MGP Class A share to the five-day volume weighted average price of VICI stock as of the close of business on July 30, 2021. In connection with the exchange, VICI OP will redeem the majority of MGM’s VICI OP units for cash consideration of $4.4 billion, with MGM retaining approximately 12.2 million VICI OP units. MGP’s Class B share that is held by MGM will be cancelled. As of April 15, 2022, all closing conditions have been satisfied or waived (other than those that by their nature or terms are to be satisfied at the closing or, with respect to certain conditions, if the failure of such condition is as a result of an event, circumstance, effect or development occurring on or after April 15, 2022), and, accordingly, the VICI Transaction is expected to close on or about April 29, 2022, or otherwise within the marketing period pursuant to the master transaction agreement.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation. The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information set forth in the Accounting Standards Codification (“ASC”), as published by the Financial Accounting Standards Board (“FASB”), and with the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. All adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included.
The accompanying condensed consolidated financial statements and related notes should be read in conjunction with the audited financial statements and notes thereto included in the Company’s most recent Annual Report on Form 10-K.
Principles of consolidation. The Company identifies entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIE”). A VIE is an entity in which either (i) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. The Company identifies the primary beneficiary of a VIE as the enterprise that has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or receive benefits of the VIE that could potentially be significant to the entity. The Company consolidates its investment in a VIE when it determines that it is its primary beneficiary. The Company may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary. The Company performs this analysis on an ongoing basis. The consolidated financial statements of MGP include the accounts of the Operating Partnership, a VIE of which the Company is the primary beneficiary, as well as its wholly owned and majority-owned subsidiaries, which represents all of MGP’s assets and liabilities. As MGP holds what is deemed a majority voting interest in the Operating Partnership through its ownership of the Operating Partnership’s sole general partner, it qualifies for the exemption from providing certain of the required disclosures associated with investments in VIEs. The consolidated financial statements of the Operating Partnership include the accounts of its wholly owned subsidiary, MGP Lessor LLC, which is the MGM-MGP Master Lease landlord, a VIE of which the Operating Partnership is the primary beneficiary. As of March 31, 2022, on a consolidated basis, MGP Lessor, LLC had total assets of $8.8 billion primarily related to its real estate investments, and total liabilities of $617.4 million primarily related to its deferred revenue and operating lease liabilities.
For entities determined not to be VIEs, the Company consolidates such entities in which the Company owns 100% of the equity. For entities in which the Company owns less than 100% of the equity interest, the Company consolidates the entity under the voting interest model if it has controlling financial interest based upon the terms of the respective entities’ ownership agreements. If the entity does not qualify for consolidation under the voting interest model and the Company has significant influence over the operating and financial decisions of the entity, the Company accounts for the entity under the equity method, such as the Company’s MGP BREIT Venture, which does not qualify for consolidation as the Company has joint control, given the entity is structured with substantive participating rights whereby both owners participate in the decision making process which prevents the Company from exerting a controlling financial interest, as defined in ASC 810.
Noncontrolling interest. MGP presents noncontrolling interest and classifies such interest as a component of consolidated shareholders’ equity, separate from the Company’s Class A shareholders’ equity. Noncontrolling interest in MGP represents Operating Partnership units currently held by subsidiaries of MGM. Comprehensive income or loss of the Operating Partnership is allocated to its noncontrolling interest based on the noncontrolling interest’s ownership percentage in the Operating Partnership except for income tax expenses. Ownership percentage is calculated by dividing the number of Operating Partnership units held by the noncontrolling interest by the total Operating Partnership units held by the noncontrolling interest and the Company. Issuance of additional Class A shares and Operating Partnership units changes the ownership interests of both the noncontrolling interest and the Company. Such transactions and the related proceeds are treated as capital transactions.
MGM may tender its Operating Partnership units for redemption in exchange for cash equal to the market price of MGP’s Class A shares at the time of redemption or for unregistered Class A shares on a one-for-one basis. Such election to pay cash or issue Class A shares to satisfy an Operating Partnership unitholder’s redemption request is solely within the control of MGP’s independent conflicts committee.
Property transactions, net. Property transactions, net are comprised of transactions related to long-lived assets, such as gains and losses on the disposition of assets.
Fair value measurements. Fair value measurements are utilized in the accounting and impairment assessments of the Company’s real estate investments, investment in unconsolidated affiliate, and certain of its financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and is measured according to a hierarchy that includes: Level 1 inputs, such as quoted prices in an active market; Level 2 inputs, which are observable inputs for similar assets; or Level 3 inputs, which are unobservable inputs. The Company used the following inputs in its fair value measurements:
•Level 2 inputs for its debt fair value disclosures. See Note 6; and
•Level 2 inputs when measuring the fair value of its interest rate swaps. See Note 7.
Reportable segment. The Company’s operations consist of investments in real estate, both wholly-owned and through its investment in MGP BREIT Venture, for which all such real estate properties are similar to one another in that they consist of large-scale destination entertainment and leisure properties and related offerings, whose tenants generally offer casino gaming, hotel, convention, dining, entertainment and retail amenities, have similar economic characteristics and are governed by triple-net operating leases. The operating results of the Company’s wholly owned and equity method real estate investments are regularly reviewed, in the aggregate, by the chief operating decision maker. As such, the Company has one reportable segment.
Income tax provision. For interim income tax reporting, the Company estimates its annual effective tax rate and applies it to its year-to-date ordinary income. The tax effects of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur. The Company’s effective income tax rate was 1.9% and 2.4% for the three months ended March 31, 2022 and 2021, respectively.
The Company and MGM join in the filing of a New Jersey consolidated corporation business tax return and have entered into a tax sharing agreement which provides for an allocation of taxes due in the consolidated New Jersey return. No amounts were due to MGM under the tax sharing agreement between the Company and MGM as of March 31, 2022 or December 31, 2021.
NOTE 3 — REAL ESTATE INVESTMENTS
The carrying value of real estate investments is as follows:
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| (in thousands) |
Land | $ | 3,522,546 | | | $ | 3,522,546 | |
Buildings, building improvements, land improvements and integral equipment | 8,139,231 | | | 8,142,008 | |
| 11,661,777 | | | 11,664,554 | |
Less: Accumulated depreciation | (2,945,623) | | | (2,884,033) | |
| $ | 8,716,154 | | | $ | 8,780,521 | |
NOTE 4 — INVESTMENT IN UNCONSOLIDATED AFFILIATE
As of March 31, 2022, the Operating Partnership’s investment in unconsolidated affiliate was comprised of its 50.1% interest in MGP BREIT Venture. The Operating Partnership recorded its share of income as “Income from unconsolidated affiliate” in the condensed consolidated statements of operations. The Operating Partnership received $24.1 million and $15.2 million in distributions from MGP BREIT Venture during the three months ended March 31, 2022 and 2021, respectively.
Summarized results of operations of MGP BREIT Venture are as follows:
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | |
| (in thousands) |
Net revenues | $ | 98,681 | | | $ | 98,681 | | | | | |
Net income | 50,721 | | | 50,869 | | | | | |
MGP BREIT Venture guarantee. The Operating Partnership provides a guarantee for losses incurred by the lenders of the $3.0 billion indebtedness of the MGP BREIT Venture arising out of certain bad acts by the Operating Partnership, its venture partner, or the venture, such as fraud or willful misconduct, based on the party’s percentage ownership of the MGP BREIT Venture, which guarantee is capped at 10% of the principal amount outstanding at the time of the loss. The Operating Partnership and its venture partner have separately indemnified each other for the other party’s share of the overall liability exposure, if at fault. The guarantee is accounted for under ASC 460 at fair value; such value is immaterial.
MGP BREIT Venture excess cash flow guarantee. The MGP BREIT Venture loan agreement requires that the tenant EBITDAR to MGP BREIT Venture cash interest ratio is maintained above a specified level. If this ratio is not met for two consecutive fiscal quarters, then the borrowers will be unable to distribute excess cash flows to the venture partners unless and until an excess cash flow guarantee is provided. The ratio was not met for the two consecutive quarters ended December 31,
2020, and, as a result, in April 2021, the Operating Partnership and an entity affiliated with BREIT each delivered an excess cash flow guarantee to the lenders covering all distributions since January 1, 2021. Such guarantee had provided that the MGP BREIT Venture was permitted to distribute an aggregate amount of cash not to exceed 9.9% of the principal amount of the MGP BREIT Venture’s outstanding indebtedness under the loan agreement, after which distributions were required to remain at the MGP BREIT Venture in a restricted cash account until such time as the tenant EBITDAR to MGP BREIT Venture cash interest ratio was met for two consecutive quarters. In addition, in the event of a default under the loan agreement while the ratio is not met, the Company may have been required to return its respective share of distributions received during the period covered by the guarantee. The ratio was met for two consecutive quarters ending December 31, 2021, and, accordingly, the guarantee was released in accordance with its terms.
NOTE 5 — LEASES
MGM-MGP Master Lease. The MGM-MGP Master Lease is accounted for as an operating lease and has an initial lease term of ten years that began on April 25, 2016 (other than with respect to MGM National Harbor, as described below) with the potential to extend the term for four additional five-year terms thereafter at the option of the tenant (with additional renewal options with respect to MGM Springfield, as described below). The lease provides that any extension of its term must apply to all of the real estate under the lease at the time of the extension. With respect to MGM National Harbor, the initial lease term ends on August 31, 2024. Thereafter, the initial term of the lease with respect to MGM National Harbor may be renewed at the option of the tenant for an initial renewal period lasting until the earlier of the end of the then-current term of the lease or the next renewal term (depending on whether MGM elects to renew the other properties under the lease in connection with the expiration of the initial ten-year term). If, however, the tenant chooses not to renew the lease with respect to MGM National Harbor after the initial MGM National Harbor term under the lease, the tenant would also lose the right to renew the lease with respect to the rest of the properties when the initial ten-year lease term ends related to the rest of the properties in 2026. In addition to the four five-year renewal terms, the term of the lease with respect to MGM Springfield may be extended for an additional four five-year renewal terms.
The lease has a triple-net structure, which requires the tenant to pay substantially all costs associated with the lease, including real estate taxes, ground lease rent, insurance, utilities and routine maintenance, in addition to the base rent. Additionally, the lease provides MGP with a right of first offer with respect to any future gaming development by MGM on the undeveloped land adjacent to Empire City, which MGP may exercise should MGM elect to sell such property in the future.
Rent under the lease consists of a “base rent” component and a “percentage rent” component. As of March 31, 2022, the base rent represents approximately 91% of the rent payments due under the lease and the percentage rent represents approximately 9% of the rent payments due under the lease. The base rent includes a fixed annual rent escalator of 2.0% for the second through the sixth lease years (as defined in the lease). Thereafter, beginning on April 1, 2022, the annual escalator of 2.0% is subject to the tenant and, without duplication, the MGM operating subsidiary sublessees of the tenant, collectively meeting an adjusted net revenue to rent ratio of 6.25:1.00 based on their net revenue from the leased properties subject to the lease (as determined in accordance with U.S. GAAP, adjusted to exclude net revenue attributable to certain scheduled subleases and, at the tenant’s option, reimbursed cost revenue). The percentage rent was initially a fixed amount for approximately the first six years and, starting with the seventh lease year that commenced on April 1, 2022, is now adjusted every five years based on the average annual adjusted net revenues of the tenant and, without duplication, the operating subtenants, from the leased properties subject to the lease at such time for the trailing five calendar-year period (calculated by multiplying the average annual adjusted net revenues, excluding net revenue attributable to certain scheduled subleases and, at the tenant’s option, reimbursed cost revenue, for the trailing five calendar-year period by 1.4%). With respect to the additional renewal terms for MGM Springfield, for the first two additional renewal terms, base rent will include a fixed annual rent escalator of 2.0%, subject to the tenant and the MGM operating subsidiary sublessee of our tenant collectively meeting an adjusted net revenue to rent ratio, discussed above, and for each lease year subsequent to the first two additional renewal terms, the base rent shall be the Fair Market Rent (as defined in the MGM-MGP Master Lease).
As of March 31, 2022, total annual cash rent under the MGM-MGP Master Lease was $872.8 million. In connection with the commencement of the seventh lease year on April 1, 2022, and the corresponding 2.0% fixed annual rent escalator that went into effect on such date due to the adjusted net revenue to rent ratio being met, as discussed above, the base rent under the MGM-MGP Master Lease increased to $807.7 million. Additionally, in connection with the percentage rent adjustment as discussed above, starting with the seventh lease year that commenced on April 1, 2022, the percentage rent adjusted to $69.1 million, resulting in total annual cash rent under the MGM-MGP Master Lease of $876.8 million.
Straight-line rental revenues from the MGM-MGP Master Lease, which includes lease incentive asset amortization, were $195.1 million and $188.3 million for the three months ended March 31, 2022 and 2021, respectively. The Company also
recognized revenue related to ground lease and other of $6.9 million and $6.0 million for the three months ended March 31, 2022 and 2021, respectively.
Under the MGM-MGP Master Lease, future non-cancelable minimum cash rental payments, which are the payments under the initial 10-year term through April 30, 2026 and do not include renewal options and, with respect to MGM National Harbor, through August 31, 2024, are as follows as of March 31, 2022:
| | | | | |
Year ending December 31, | (in thousands) |
2022 (excluding the three months ended March 31, 2022) | $ | 593,896 | |
2023 | 791,861 | |
2024 | 760,161 | |
2025 | 696,760 | |
2026 | 232,253 | |
Thereafter | — | |
Total | $ | 3,074,931 | |
NOTE 6 — DEBT
Debt consists of the following:
| | | | | | | | | | | |
| March 31, | | December 31, |
| 2022 | | 2021 |
| (in thousands) |
Senior secured revolving credit facility | $ | — | | | $ | 50,000 | |
5.625% senior notes, due 2024 | 1,050,000 | | | 1,050,000 | |
4.625% senior notes, due 2025 | 800,000 | | | 800,000 | |
4.50% senior notes, due 2026 | 500,000 | | | 500,000 | |
5.75% senior notes, due 2027 | 750,000 | | | 750,000 | |
4.50% senior notes, due 2028 | 350,000 | | | 350,000 | |
3.875% senior notes, due 2029 | 750,000 | | | 750,000 | |
| 4,200,000 | | | 4,250,000 | |
Less: Unamortized discount and debt issuance costs | (31,143) | | | (33,123) | |
| $ | 4,168,857 | | | $ | 4,216,877 | |
Operating Partnership senior secured credit facility. At March 31, 2022, the Operating Partnership senior secured credit facility consisted of a $1.4 billion revolving credit facility.
The Operating Partnership’s senior secured credit facility limits the amount of letters of credit that can be issued to $75 million. No letters of credit were outstanding under the Operating Partnership senior secured credit facility at March 31, 2022. The Operating Partnership was in compliance with its financial covenants at March 31, 2022.
Refer to Note 7 for further discussion of the Company’s interest rate swap agreements.
Fair value of debt. The estimated fair value of the Operating Partnership’s debt was $4.3 billion at March 31, 2022 and $4.6 billion at December 31, 2021. Fair value was estimated using quoted market prices for the Operating Partnership’s senior notes and senior secured credit facility.
NOTE 7 — DERIVATIVES AND HEDGING ACTIVITIES
In March 2022, the Operating Partnership terminated all of its interest rate swap agreements which resulted in a loss of $0.5 million.
The interest rate swaps as of December 31, 2021 are summarized in the table below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Notional Amount | | Weighted Average Fixed Rate | | Fair Value Liability | | Effective Date | | Maturity Date |
| (in thousands, except percentages) |
Derivatives designated as hedges: | | | | | | |
| $ | 900,000 | | | 1.940 | % | | $ | (25,299) | | | June 30, 2022 | | June 30, 2027 |
| $ | 900,000 | | | | | $ | (25,299) | | | | | |
| | | | | | | | | |
Derivatives not designated as hedges: | | | | | | |
| $ | 300,000 | | | 1.158 | % | | $ | (969) | | | September 6, 2019 | | December 31, 2024 |
| 400,000 | | | 2.252 | % | | (26,319) | | | October 1, 2019 | | December 31, 2029 |
| $ | 700,000 | | | | | $ | (27,288) | | | | | |
| | | | | $ | (52,587) | | | | | |
As of December 31, 2021, the Operating Partnership’s interest rate swaps are recorded within “Accounts payable, accrued expenses, and other liabilities”.
NOTE 8 — SHAREHOLDERS’ EQUITY AND PARTNERS’ CAPITAL
Accumulated Other Comprehensive Loss. Comprehensive income (loss) includes net income (loss) and all other non-shareholder changes in equity, or other comprehensive income (loss). Elements of the Company’s accumulated other comprehensive loss are reported in the accompanying condensed consolidated statement of shareholders’ equity. The following table summarizes the changes in accumulated other comprehensive loss by component:
| | | | | | | | | | | | | | | | | |
| Cash Flow Hedges | | Other | | Total |
| (in thousands) |
Balance at December 31, 2021 | $ | (18,998) | | | $ | (22,191) | | | $ | (41,189) | |
Other comprehensive income before reclassifications | 34,410 | | | — | | | 34,410 | |
Amounts reclassified from accumulated other comprehensive loss to interest expense | 5,339 | | | — | | | 5,339 | |
Other comprehensive income | 39,749 | | | — | | | 39,749 | |
Less: Other comprehensive income attributable to noncontrolling interest | (16,511) | | | — | | | (16,511) | |
Balance at March 31, 2022 | $ | 4,240 | | | $ | (22,191) | | | $ | (17,951) | |
MGP dividends and Operating Partnership distributions. The Operating Partnership declares and pays distributions. MGP pays its dividends with the receipt of its share of the Operating Partnership’s distributions.
On April 14, 2022, the Company paid a dividend of $0.5300 per Class A share upon receipt of its share of the Operating Partnership’s distribution of $0.5300 per unit made the same day.
NOTE 9 — EARNINGS PER CLASS A SHARE
The table below provides earnings and the number of Class A shares used in the computations of “basic” earnings per share, which utilizes the weighted-average number of Class A shares outstanding without regard to dilutive potential Class A shares, and “diluted” earnings per share, which includes all such shares. Diluted earnings per Class A share does not assume conversion of the Operating Partnership units held by MGM as such conversion would be antidilutive. Earnings per share has not been presented for the Class B shareholder as the Class B share is not entitled to any economic rights in the Company.
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | |
| (in thousands) |
Numerator: | | | | | | | |
Net income attributable to Class A shares - basic and diluted | $ | 69,428 | | | $ | 59,598 | | | | | |
Denominator: | | | | | | | |
Weighted average Class A shares outstanding — basic (1) | 156,903 | | | 135,709 | | | | | |
Effect of dilutive shares for diluted net income per Class A share (2) | 93 | | | 227 | | | | | |
Weighted average Class A shares outstanding — diluted (1) | 156,996 | | | 135,936 | | | | | |
(1) Includes weighted average deferred share units granted to certain members of the board of directors.
(2) Less than 0.1 million shares related to outstanding share-based compensation awards were excluded due to being antidilutive for each of the three months ended March 31, 2022 and 2021.
NOTE 10 — EARNINGS PER OPERATING PARTNERSHIP UNIT
The table below provides earnings and the number of Operating Partnership units used in the computations of “basic” earnings per Operating Partnership unit, which utilizes the weighted-average number of Operating Partnership units outstanding without regard to dilutive potential Operating Partnership units, and “diluted” earnings per Operating Partnership units, which includes all such Operating Partnership units.
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | |
| (in thousands) |
Numerator: | | | | | | | |
Net income attributable to unitholders - basic and diluted | $ | 116,500 | | | $ | 115,409 | | | | | |
Denominator: | | | | | | | |
Weighted average Operating Partnership units outstanding — basic (1) | 268,276 | | | 276,692 | | | | | |
Effect of dilutive shares for diluted net income per Operating Partnership unit (2) | 93 | | | 227 | | | | | |
Weighted average Operating Partnership units outstanding — diluted (1) | 268,369 | | | 276,919 | | | | | |
(1) Includes weighted average deferred share units granted to certain members of the board of directors.
(2) Less than 0.1 million units related to outstanding share-based compensation awards were excluded due to being antidilutive for each of the three months ended March 31, 2022 and 2021.
NOTE 11 — COMMITMENTS AND CONTINGENCIES
Litigation. In the ordinary course of business, from time to time, the Company expects to be subject to legal claims and administrative proceedings, none of which are currently outstanding, which the Company believes could have, individually or in the aggregate, a material adverse effect on its business, financial position, results of operations, or cash flows.