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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file no: 001-38719

MEDALIST DIVERSIFIED REIT, INC.

Maryland

 

47-5201540

(State or other jurisdiction

of incorporation)

 

(IRS Employer

Identification No.)

Post Office Box 8436

Richmond, VA 23226

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (804) 338-7708

1051 E. Cary Street Suite 601

James Center Three

Richmond, VA, 23219

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to section 12(b) of the Act:

 Title of Each Class

 

 

Trading
Symbol(s)

Name of each Exchange
on Which Registered

Common Stock, $0.01 par value per share

 

 

MDRR

The Nasdaq Capital Market

8.0% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share

MDRRP

The Nasdaq Capital Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes        No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

The number of shares of Common Stock, $0.01 par value per share, of the registrant outstanding at November 13, 2023 was 2,218,810.

Medalist Diversified REIT, Inc.

Quarterly Report on Form 10-Q

For the Quarter Ended September 30, 2023

Table of Contents

PART I. FINANCIAL INFORMATION

3

 

Item 1.

Financial Statements

3

 

Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022

3

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)

4

 

Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)

5

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 (unaudited)

7

 

Notes to Condensed Consolidated Financial Statements (unaudited)

8

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

37

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

59

Item 4.

Controls and Procedures

59

PART II. OTHER INFORMATION

60

Item 1.

Legal Proceedings

60

Item 1A.

Risk Factors

60

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

60

 

Item 3.

Defaults Upon Senior Securities

60

Item 4.

Mine Safety Disclosures

60

Item 5.

Other Information

60

Item 6.

Exhibits

62

 

Signatures

64

2

PART I.FINANCIAL INFORMATION

Item 1.   Financial Statements

Medalist Diversified REIT, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

    

September 30, 2023

December 31, 2022

 

(Unaudited)

    

ASSETS

 

  

 

  

Investment properties, net

$

74,875,809

$

76,514,952

Cash

 

3,015,859

 

3,922,136

Restricted cash

1,734,297

1,740,717

Rent and other receivables, net of allowance of $0 and $47,109, as of September 30, 2023 and December 31, 2022, respectively

 

94,782

 

402,434

Unbilled rent

 

1,097,570

 

1,022,153

Intangible assets, net

 

2,956,080

 

3,748,706

Other assets

 

647,268

 

564,306

Total Assets

$

84,421,665

$

87,915,404

LIABILITIES

 

 

Accounts payable and accrued liabilities

$

1,956,415

$

1,198,072

Intangible liabilities, net

 

1,946,772

 

2,234,113

Line of credit, short term, net

 

1,000,000

 

Mortgages payable, net

60,616,944

61,340,259

Mandatorily redeemable preferred stock, net

 

4,630,824

 

4,450,521

Total Liabilities

$

70,150,955

$

69,222,965

EQUITY

 

  

 

  

Common stock, 2,218,810 and 2,219,803 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

$

22,188

$

22,198

Additional paid-in capital

 

51,514,209

 

51,519,198

Offering costs

 

(3,350,946)

 

(3,350,946)

Accumulated deficit

 

(35,341,200)

 

(30,939,020)

Total Stockholders' Equity

 

12,844,251

 

17,251,430

Noncontrolling interests - Hanover Square Property

 

109,944

 

127,426

Noncontrolling interests - Parkway Property

480,766

470,685

Noncontrolling interests - Operating Partnership

 

835,749

 

842,898

Total Equity

$

14,270,710

$

18,692,439

Total Liabilities and Equity

$

84,421,665

$

87,915,404

See notes to condensed consolidated financial statements

3

Medalist Diversified REIT, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2023

    

2022

    

2023

    

2022

 

REVENUE

 

  

 

  

 

  

 

  

Retail center property revenues

$

1,930,494

$

1,850,797

$

5,725,942

$

4,999,089

Flex center property revenues

658,246

610,967

1,839,675

1,834,200

Hotel property room revenues

 

 

376,560

 

 

1,494,836

Hotel property other revenues

 

 

2,749

 

 

12,813

Total Revenue

$

2,588,740

$

2,841,073

$

7,565,617

$

8,340,938

OPERATING EXPENSES

 

  

 

  

 

Retail center property operating expenses

$

466,828

$

491,889

$

1,512,776

$

1,384,061

Flex center property operating expenses

180,164

189,720

535,065

511,771

Hotel property operating expenses

 

 

589,311

 

 

1,302,114

Bad debt expense

5,669

49,868

12,946

Share based compensation expenses

 

 

 

 

233,100

Legal, accounting and other professional fees

 

237,562

 

284,463

 

1,228,262

 

1,112,878

Corporate general and administrative expenses

 

162,649

 

99,323

 

364,868

 

335,538

Management restructuring expenses

1,452,904

1,846,329

Loss on impairment

 

 

 

50,859

 

36,670

Impairment of assets held for sale

175,671

Other expense

 

 

227,164

 

 

227,164

Depreciation and amortization

 

1,149,664

1,231,513

 

3,459,262

3,509,165

Total Operating Expenses

 

3,655,440

 

3,113,383

 

9,047,289

 

8,841,078

Loss on disposal of investment property

(389,471)

(389,471)

Loss on extinguishment of debt

(219,532)

(389,207)

Operating loss

 

(1,066,700)

 

(881,313)

 

(1,481,672)

 

(1,278,818)

Interest expense

 

900,182

 

989,255

 

2,612,642

 

2,704,835

Net Loss from Operations

 

(1,966,882)

 

(1,870,568)

 

(4,094,314)

 

(3,983,653)

Other income

 

20,522

 

126,434

 

52,249

 

251,197

Net Loss

 

(1,946,360)

 

(1,744,134)

 

(4,042,065)

 

(3,732,456)

Less: Net (loss) income attributable to Hanover Square Property noncontrolling interests

(225)

8,468

(1,482)

15,421

Less: Net income attributable to Parkway Property noncontrolling interests

 

2,199

 

16,782

 

10,081

 

31,027

Less: Net income (loss) attributable to Operating Partnership noncontrolling interests

 

493

 

(14,926)

 

(2,878)

 

(20,275)

Net Loss Attributable to Medalist Common Shareholders

$

(1,948,827)

$

(1,754,458)

$

(4,047,786)

$

(3,758,629)

Loss per share from operations - basic and diluted

$

(0.88)

$

(0.80)

$

(1.82)

$

(1.77)

Weighted-average number of shares - basic and diluted

 

2,218,810

 

2,179,993

 

2,219,262

 

2,121,540

Dividends paid per common share

$

$

0.16

$

0.16

$

0.48

See notes to condensed consolidated financial statements

4

Medalist Diversified REIT, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

For the nine months ended September 30, 2023

    

Common Stock

Noncontrolling Interests  

Additional

Offering

Accumulated

Shareholders’

Hanover Square

Parkway

Operating

 

Shares

    

Par Value

    

Paid in Capital

    

 

Costs

    

Deficit

    

Equity

    

Property

    

Property

    

Partnership

    

Total Equity 

Balance, January 1, 2023

2,219,803

$

22,198

$

51,519,198

$

(3,350,946)

$

(30,939,020)

$

17,251,430

$

127,426

$

470,685

$

842,898

$

18,692,439

 

Retire fractional shares resulting from reverse stock split

 

(993)

$

(10)

$

(4,989)

$

$

$

(4,999)

$

$

$

$

(4,999)

Net (loss) income

 

(4,047,786)

(4,047,786)

(1,482)

10,081

(2,878)

(4,042,065)

Dividends and distributions

 

(354,394)

(354,394)

(16,000)

(4,271)

(374,665)

Balance, September 30, 2023

 

2,218,810

 

$

22,188

 

$

51,514,209

 

$

(3,350,946)

 

$

(35,341,200)

 

$

12,844,251

 

$

109,944

 

$

480,766

 

$

835,749

 

$

14,270,710

For the nine months ended September 30, 2022

    

Common Stock

Noncontrolling Interests  

Additional

Offering

Accumulated

Shareholders’

Hanover Square

Parkway

Operating

Shares

    

Par Value

    

Paid in Capital

    

 

Costs

    

Deficit

    

Equity

    

Property

    

Property

    

Partnership

    

Total Equity 

Balance, January 1, 2022

2,006,577

$

20,065

$

49,785,887

$

(3,350,946)

$

(24,981,346)

$

21,473,660

$

146,603

$

500,209

$

877,917

$

22,998,389

 

Common stock issuances

180,676

$

1,807

$

1,537,080

$

$

$

1,538,887

$

$

$

$

1,538,887

Common stock repurchases

 

(33,509)

(335)

(286,208)

(286,543)

(286,543)

Share based compensation

 

26,250

263

232,837

233,100

233,100

Net (loss) income

 

(3,758,629)

(3,758,629)

15,421

31,027

(20,275)

(3,732,456)

Dividends and distributions

 

(1,014,048)

(1,014,048)

(41,200)

(48,600)

(12,812)

(1,116,660)

Balance, September 30, 2022

 

2,179,994

 

$

21,800

 

$

51,269,596

 

$

(3,350,946)

 

$

(29,754,023)

 

$

18,186,427

 

$

120,824

 

$

482,636

 

$

844,830

 

$

19,634,717

5

For the three months ended September 30, 2023

    

Common Stock

Noncontrolling Interests  

Additional

Offering

Accumulated

Shareholders’

Hanover Square

Parkway

Operating

 

Shares

    

Par Value

    

Paid in Capital

    

 

Costs

    

Deficit

    

Equity

    

Property

    

Property

    

Partnership

    

Total Equity 

Balance, July 1, 2023

2,218,810

$

22,188

$

51,514,209

$

(3,350,946)

$

(33,392,373)

$

14,793,078

$

110,169

$

478,567

$

835,256

$

16,217,070

 

Net (loss) income

 

$

$

$

$

(1,948,827)

$

(1,948,827)

$

(225)

$

2,199

$

493

$

(1,946,360)

Balance, September 30, 2023

 

2,218,810

 

$

22,188

 

$

51,514,209

 

$

(3,350,946)

 

$

(35,341,200)

 

$

12,844,251

 

$

109,944

 

$

480,766

 

$

835,749

 

$

14,270,710

For the three months ended September 30, 2022

    

Common Stock

Noncontrolling Interests  

Additional

Offering

Accumulated

Shareholders’

Hanover Square

Parkway

Operating

 

Shares

    

Par Value

    

Paid in Capital

    

 

Costs

    

Deficit

    

Equity

    

Property

    

Property

    

Partnership

    

Total Equity 

Balance, July 1, 2022

2,179,994

$

21,800

$

51,269,596

$

(3,350,946)

$

(27,650,766)

$

20,289,684

$

137,156

$

474,854

$

864,027

$

21,765,721

 

Net (loss) income

 

$

$

$

$

(1,754,458)

$

(1,754,458)

$

8,468

$

16,782