Supplemental Financial Statement Information

6 Months Ended

Jun. 30, 2021

Supplemental Financial Statement Information

Supplemental Financial Statement Information

9.    Supplemental Financial Statement Information

Other Assets

INDUS's other assets are comprised of the following:

	June 30, 2021		Dec. 31, 2020
Deferred leasing costs, net	$	6,810	$	5,352
Straight-line rents		6,623		6,700
Intangible assets, net		4,228		2,126
Deposits		1,017		1,163
Mortgage escrows		882		558
Right-of-use assets		650		707
Accounts receivable (primarily leases)		568		254
Furniture, fixtures and equipment, net		368		181
Prepaid expenses		367		2,618
Registration statement costs		172		—
Deferred financing costs related to revolving lines of credit		171		162
Interest rate swap asset		134		—
Proceeds from sales of real estate assets held in escrow		—		1,993
Other		372		323
Total other assets	$	22,362	$	22,137

Accounts Payable and Accrued Liabilities

INDUS's accounts payable and accrued liabilities are comprised of the following:

	June 30, 2021		Dec. 31, 2020
Accrued construction costs and retainage	$	8,861	$	94
Accrued lease commissions		1,630		233
Accrued interest payable		588		580
Trade payables		586		1,093
Accrued salaries, wages and other compensation		578		1,027
Other		1,085		642
Total accounts payable and accrued liabilities	$	13,328	$	3,669

Other Liabilities

INDUS's other liabilities are comprised of the following:

	June 30, 2021		Dec. 31, 2020
Interest rate swap liabilities	$	5,937	$	8,766
Deferred compensation plan		4,791		4,335
Intangible liability, net		2,969		695
Prepaid rent from tenants		1,483		1,345
Security deposits of tenants		856		710
Lease liabilities		684		739
Contingent value rights liability		—		656
Other		321		321
Total other liabilities	$	17,041	$	17,567

Supplemental Cash Flow Information

Accounts payable and accrued liabilities related to additions to real estate assets increased by $8,767 and $515 in the 2021 six month period and 2020 six month period, respectively.

Interest payments were as follows:

For the Three Months Ended				For the Six Months Ended
June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
$	1,699	$	1,762	$	3,390	$	3,446

Capitalized interest related to real estate assets was as follows:

For the Three Months Ended				For the Six Months Ended
June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
$	223	$	33	$	345	$	33

Warrants and Contingent Value Rights

On August 24, 2020, pursuant to the Securities Purchase Agreement, INDUS: (i) sold 504,590 shares of its Common Stock; and (ii) issued a warrant (the “Warrant”) to Conversant to acquire 504,590 additional shares of Common Stock (subject to adjustment as set forth therein) at an exercise price of $60.00 per share (the “Exercise Price”). Conversant paid $50.00 per share of Common Stock and $4.00 per Warrant Share for the Warrant for total proceeds of $27,248, before expenses of $449. Pursuant to the Securities Purchase Agreement, for so long as Conversant owns shares of Common Stock constituting more than 4.9% of INDUS’s Common Stock issued and outstanding, Conversant will have the right to designate one member (the “Purchaser Nominee”) to INDUS’s Board of Directors (subject to certain terms and conditions set forth therein) and such Purchaser Nominee shall be nominated by the Board for re-election as a director at each subsequent meeting of the Company’s stockholders. Until the one-year anniversary of the date of the Securities Purchase Agreement, Conversant may not transfer any of the shares of Common Stock without INDUS’s prior written consent.

On August 24, 2020, INDUS and Conversant also entered into a Contingent Value Rights Agreement (the “Contingent Value Rights Agreement”), pursuant to which Conversant is entitled to a one-time cash payment in the event that INDUS’s volume weighted average share price per share of Common Stock for the thirty trading day period ending on the date of the one-year anniversary of the date of the Securities Purchase Agreement (the “30-Day VWAP”) is less than the purchase price paid by Conversant in respect of each common share (the “Common Shares Purchase Price”), subject to adjustment as described therein. If the 30-Day VWAP is less than the Common Shares Purchase Price, Conversant is entitled to a one-time cash payment per CVR calculated on a linear basis relative to the difference between the 30-Day VWAP and the Common Shares Purchase Price. Such payment will in no event exceed $2,523, which is 10% of the total paid by Conversant to purchase the Common Stock.

The Warrant is exercisable from the date of issuance and has a term of three years. The Exercise Price and the number of shares of Common Stock issuable upon exercise of the Warrant is subject to appropriate adjustments in the event of certain stock dividends, stock splits, stock combinations, reclassifications or similar events affecting the Common Stock. Upon a Fundamental Transaction (as defined in the Warrant) in which the consideration consists solely of cash, solely of marketable securities or a combination thereof, the remaining unexercised portion of the Warrant will automatically be deemed to be exercised or the Warrant will be terminated, depending on whether the purchase price per share of one share of Common Stock in such fundamental transaction is greater or less than the Exercise Price. In addition, if such Fundamental Transaction occurs prior to the one-year anniversary of the date of the Warrant, and the price per share of one share of Common Stock in such Fundamental Transaction is less than the Exercise Price, or if it is greater than the Exercise Price but less than the purchase price paid by the holder per Warrant Share, then the holder will be entitled to receive a cash payment up to an amount equal to the purchase price paid by the holder per Warrant Share in respect of any unexercised portion of the Warrant.

Both the Warrant and the CVRs are derivative financial instruments and reported as liabilities at their fair values on INDUS’s consolidated balance sheet as of June 30, 2021 (see Note 3). Although the fair value of the Warrant was $10,165 as of June 30, 2021, the maximum amount that INDUS would be required to pay if the Warrant were to be settled in cash is $2,018. On August 24, 2021, the cash settlement feature of the Warrant liability terminates and the fair value of the Warrant liability on that date will be reclassified to equity on INDUS’s consolidated balance sheet.

Income Taxes

As discussed above (see Note 1), INDUS intends to elect to be taxed as a REIT for the taxable year ending December 31, 2021. To qualify as a REIT, INDUS is required (among other things) to distribute at least 90% of its REIT taxable income to its stockholders and meet various other organization and operating requirements. Provided the Company qualifies for taxation as a REIT, it generally will not be subject to federal income taxes if it distributes 100% of its taxable income for each year to its stockholders. However, any taxable income from a taxable REIT subsidiary will be subject to federal, state and local income taxes. If INDUS fails to qualify as a REIT in any taxable year, and it is unable to avail itself of certain savings provisions set forth in the Code, all of its taxable income will be subject to regular federal corporate income tax, and it may not be able to qualify as a REIT for four subsequent taxable years. Additionally, even if INDUS qualifies for taxation as a REIT, it may be subject to certain state and local taxes on its income and property and to federal income taxes and excise taxes on its undistributed taxable income. INDUS may also be subject to a corporate income tax on any gains recognized during a five-year period following the REIT conversion that are attributable to built-in gains with respect to assets that were owned on January 1, 2021.

In connection with the election to be taxable as a REIT for the taxable year ending December 31, 2021, INDUS reassessed its deferred tax assets and deferred tax liabilities during the fourth quarter of fiscal 2020, which resulted in de-recognizing all of its deferred tax assets and deferred tax liabilities prior to December 31, 2020. Accordingly, there is no income tax benefit reflected in the Company’s results of operations for the 2021 second quarter and 2021 six month period. INDUS’s income tax benefit was $259 in the 2020 six month period reflecting an effective tax rate of 20.9%. The effective tax benefit rate for the 2020 six month period reflected the federal statutory income tax rate of 21% adjusted for effects of permanent differences and state income taxes.

INDUS’s federal income tax returns for fiscal 2017, fiscal 2018 and fiscal 2019 are open to examination by the Internal Revenue Service.