Medalist Diversified, Inc 10-Q for FY2022 Q1

Medalist Diversified, Inc. (MDRR)

10-Q 2022-05-09 For: 2022-03-31

Added on April 06, 2026

About this 10-Q

Medalist Diversified, Inc filed this 10-Q on May 9, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).

Headline figures

Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $2.9M; up 8.7% from $2.67M a year earlier
Net loss: $989.28K; compared with a net loss of $2.28M a year earlier
Diluted EPS: -$0.06; compared with -$0.39 a year earlier

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

	For the quarterly period ended March 31, 2022

	OR

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


Title of Each Class	Name of each Exchange on Which Registered	Trading Symbol(s)
Common Stock, $0.01 par value per share	The Nasdaq Capital Market	MDRR
8.0% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share	The Nasdaq Capital Market	MDRRP


Large accelerated filer	◻	Accelerated filer	◻

Non-accelerated filer	◻ (Do not check if a smaller reporting company)	Smaller reporting company	☒

		Emerging growth company	☒

PART I. FINANCIAL INFORMATION		3

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021	3

	Condensed Consolidated Statements of Operations for theThree Months Ended March 31, 2022 and 2021 (unaudited)	4

	Condensed Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2022 and 2021 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (unaudited)	6

	Notes to Condensed Consolidated Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	54

Item 4.	Controls and Procedures	54

PART II. OTHER INFORMATION		54

Item 1.	Legal Proceedings	54

Item 1A.	Risk Factors	54

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54

Item 3.	Defaults Upon Senior Securities	55

Item 4.	Mine Safety Disclosures	55

Item 5.	Other Information	55

Item 6.	Exhibits	56

Signatures		57


	March 31, 2022		December 31, 2021
	(Unaudited)
ASSETS
Investment properties, net	$	68,762,027	$	69,407,915
Cash		4,629,945		4,370,405
Restricted cash		3,449,089		3,013,572
Rent and other receivables, net of allowance of $25,793 and $13,010, as of March 31, 2022 and December 31, 2021, respectively		344,358		466,141
Assets held for sale		9,897,045		9,846,208
Unbilled rent		887,168		872,322
Intangible assets, net		3,724,381		4,200,392
Other assets		498,732		370,133
Total Assets	$	92,192,745	$	92,547,088

LIABILITIES
Accounts payable and accrued liabilities	$	1,345,520	$	1,307,257
Intangible liabilities, net		1,784,995		1,880,612
Mortgages payable, net		54,353,683		54,517,822
Mortgages payable, net, associated with assets held for sale		7,615,368		7,615,368
Mandatorily redeemable preferred stock, net		4,281,563		4,227,640
Total Liabilities	$	69,381,129	$	69,548,699

EQUITY
Common stock, 17,114,215 and 16,052,617 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	$	171,142		160,524
Additional paid-in capital		50,769,941		49,645,428
Offering costs		(3,350,946)		(3,350,946)
Accumulated deficit		(26,287,080)		(24,981,346)
Total Stockholders’ Equity		21,303,057		21,473,660
Noncontrolling interests - Hanover Square Property		136,284		146,603
Noncontrolling interests - Parkway Property		499,602		500,209
Noncontrolling interests - Operating Partnership		872,673		877,917
Total Equity	$	22,811,616	$	22,998,389
Total Liabilities and Equity	$	92,192,745	$	92,547,088


	Three Months Ended
	March 31,
	2022		2021
REVENUE
Retail center property revenues	$	1,525,085	$	1,193,641
Flex center property revenues		613,390		182,827
Hotel property room revenues		762,200		1,286,748
Hotel property other revenues		3,289		8,637
Total Revenue	$	2,903,964	$	2,671,853

OPERATING EXPENSES
Retail center property operating expenses	$	450,125	$	327,930
Flex center property operating expenses		161,381		54,088
Hotel property operating expenses		372,860		797,395
Bad debt expense		12,783		3,196
Share based compensation expenses		233,100		149,981
Legal, accounting and other professional fees		459,869		491,855
Corporate general and administrative expenses		80,706		69,137
Loss on impairment		36,670		—
Impairment of assets held for sale		175,671		—
Depreciation and amortization		1,155,197		653,233
Total Operating Expenses		3,138,362		2,546,815
Operating (loss) income		(234,398)		125,038
Interest expense		841,424		2,434,132
Net Loss from Operations		(1,075,822)		(2,309,094)
Other income		95,439		1,352
Net Loss		(980,383)		(2,307,742)
Less: Net loss attributable to Hampton Inn Property noncontrolling interests		—		(25,238)
Less: Net loss attributable to Hanover Square Property noncontrolling interests		(319)		(7,020)
Less: Net income attributable to Parkway Property noncontrolling interests		10,193		—
Less: Net (loss) income attributable to Operating Partnership noncontrolling interests		(973)		2,040
Net Loss Attributable to Medalist Common Shareholders	$	(989,284)	$	(2,277,524)

Loss per share from operations - basic and diluted	$	(0.06)	$	(0.39)

Weighted-average number of shares - basic and diluted		16,037,073		5,856,365

Dividends paid per common share	$	0.02	$	—


	Common Stock											Noncontrolling Interests
				Additional						Total
				Paid in		Offering		Accumulated		Shareholders’		Hampton Inn		Hanover Square		Parkway		Operating
	Shares	Par Value		Capital		Costs		Deficit		Equity		Property		Property		Property		Partnership		Total Equity
Balance, January 1, 2022	16,052,617	$	160,526	$	49,645,426	$	(3,350,946)	$	(24,981,346)	$	21,473,660	$	—	$	146,603	$	500,209	$	877,917	$	22,998,389

Common stock issuances	1,119,668	$	11,197	$	1,177,377	$	—	$	—	$	1,188,574	$	—	$	—	$	—	$	—	$	1,188,574
Common stock repurchases	(268,070)		(2,681)		(283,862)		—		—		(286,543)		—		—		—		—		(286,543)
Share based compensation	210,000		2,100		231,000		—		—		233,100		—		—		—		—		233,100
Net (loss) income	—		—		—		—		(989,284)		(989,284)		—		(319)		10,193		(973)		(980,383)
Dividends and distributions	—		—		—		—		(316,450)		(316,450)		—		(10,000)		(10,800)		(4,271)		(341,521)

Balance, March 31, 2022	17,114,215	$	171,142	$	50,769,941	$	(3,350,946)	$	(26,287,080)	$	21,303,057	$	—	$	136,284	$	499,602	$	872,673	$	22,811,616


	For the three months ended
	March 31,
	2022		2021
	(unaudited)		(unaudited)
Amortization of above market leases	$	(69,583)	$	(53,613)
Amortization of below market leases		95,617		50,376
	$	26,034	$	(3,237)


	For the
	remaining nine
	months ending
	December 31,
	2022		2023		2024		2025		2026		2027-2041		Total
Intangible Assets
Leasing commissions	$	160,998	$	178,745	$	140,415	$	117,225	$	83,901	$	406,299	$	1,087,583
Legal and marketing costs		39,357		39,978		23,911		14,122		7,091		20,675		145,134
Above market leases		111,696		84,096		36,312		19,224		13,562		23,900		288,790
Net leasehold asset		606,143		453,012		297,023		213,034		133,627		500,035		2,202,874
	$	918,194	$	755,831	$	497,661	$	363,605	$	238,181	$	950,909	$	3,724,381

Intangible Liabilities
Below market leases, net	$	(260,437)	$	(260,491)	$	(191,865)	$	(140,004)	$	(107,217)	$	(824,981)	$	(1,784,995)


	March 31, 2022		December 31,
Property and Purpose of Reserve	(unaudited)		2021
Clemson Best Western Property - improvements		50,013		50,012
Clemson Best Western Property - furniture, fixtures and equipment		315,955		275,109
Franklin Square Property - leasing costs		710,068		700,000
Brookfield Center Property – maintenance reserve		103,431		92,349
Greenbrier Business Center – capital reserve		150,000		150,000
Total	$	1,329,467	$	1,267,470


Payment Date	Record Date	Amount per share		For the period
April 27, 2020	April 24, 2020	$	0.37	February 19, 2020 - April 27, 2020
July 24, 2020	July 22, 2020		0.50	April 28, 2020 - July 24, 2020
October 26, 2020	October 23, 2020		0.50	July 25, 2020 - October 26, 2020
February 1, 2021	January 29, 2021		0.50	October 27, 2020 - February 1, 2021
April 30, 2021	April 26, 2021		0.50	February 2, 2021 – April 30, 2021
July 26, 2021	July 12, 2021		0.50	May 1, 2021 - July 26, 2021
October 27, 2021	October 25, 2021		0.50	July 27, 2021 – October 26, 2021
January 20, 2022	January 13, 2022		0.50	October 27, 2021 - January 19, 2022
April 21, 2022	April 18, 2022		0.50	January 20, 2022 - April 20, 2022


						March 31,
	Monthly		Interest			2022		December 31,
Property	Payment		Rate		Maturity	(unaudited)		2021
Franklin Square (a)		Interest only	3.808	%	December 2031	$	13,250,000	$	13,250,000
Hanover Square (b)	$	56,882	4.25	%	December 2027		10,071,489		10,134,667
Ashley Plaza (c)	$	52,795	3.75	%	September 2029		11,089,857		11,127,111
Brookfield Center (d)	$	22,876	3.90	%	November 2029		4,736,045		4,758,344
Lancer Center (e)	$	34,667	4.00	%	March 2026		6,447,916		6,488,034
Greenbrier Business Center (f)		Interest only	4.00	%	July 2026		4,495,000		4,495,000
Parkway Center (g)		Variable	Variable		October 2026		5,060,802		5,090,210
Unamortized issuance costs, net							(797,426)		(825,544)
Total mortgages payable, net						$	54,353,683	$	54,517,822


						Debt
		Principal				Issuance		Net Cash
Tranche	Closing Date	Amount		Discount		Costs – Cash		Proceeds
Tranche 1	October 27, 2020	$	1,500,000	$	(75,000)	$	(155,555)	$	1,269,445
Tranche 2	December 22, 2020		2,000,000		(100,000)		(207,407)		1,692,593
Tranche 3	January 5, 2021		1,500,000		(75,000)		(155,555)		1,269,445
Total		$	5,000,000	$	(250,000)	$	(518,517)	$	4,231,483


	For the three months ended March 31, 2022
	(unaudited)
			Amortization of
	Mortgage		discounts and		Other
	Interest		capitalized		interest
	Expense		issuance costs		expense		Total
Franklin Square	$	126,140	$	7,093	$	—	$	133,233
Hanover Square		104,854		3,223		—		108,077
Hampton Inn		—		—		—		—
Ashley Plaza		104,147		4,358		—		108,505
Clemson Best Western		138,531		—		386		138,917
Brookfield Center		46,254		2,838		—		49,092
Lancer Center		63,746		7,156		—		70,902
Greenbrier Business Center		44,950		693		—		45,643
Parkway Center		30,375		2,757		—		33,132
Amortization and preferred stock dividends on mandatorily redeemable preferred stock		—		53,923		100,000		153,923
Total interest expense	$	658,997	$	82,041	$	100,386	$	841,424


	For the three months ended March 31, 2021
	(unaudited)
			Amortization
	Mortgage		of discounts and		Other
	Interest		capitalized		interest
	Expense		issuance costs		expense		Total
Franklin Square	$	167,731	$	2,322	$	—	$	170,053
Hanover Square		110,832		3,234		—		114,066
Hampton Inn		169,000		9,000		4,378		182,378
Ashley Plaza		106,086		4,359		—		110,445
Clemson Best Western		138,531		22,437		1,576		162,544
Brookfield Center		47,084		2,838		—		49,922
Amortization and preferred stock dividends on mandatorily redeemable preferred stock		—		49,449		100,000		149,449
Amortization and interest on convertible debentures		—		1,455,324		36,219		1,491,543
Other interest		—		—		3,732		3,732
Total interest expense	$	739,264	$	1,548,963	$	145,905	$	2,434,132


	Three Months Ended
	March 31,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES

Net Loss	$	(980,383)	$	(2,307,742)

Adjustments to reconcile consolidated net loss to net cash flows from operating activities
Depreciation		771,560		454,774
Amortization		383,637		198,459
Loan cost amortization		28,118		44,190
Mandatorily redeemable preferred stock issuance cost and discount amortization		53,923		49,449
Convertible debenture issuance cost, discount and beneficial conversion feature amortization		—		1,455,324
Above (below) market lease amortization, net		(26,034)		3,237
Bad debt expense		12,783		3,196
Share-based compensation		233,100		149,981
Impairment of assets held for sale		175,671		—
Loss on impairment		36,670		—

Changes in assets and liabilities
Rent and other receivables, net		109,000		107,599
Unbilled rent		(14,846)		(88,092)
Other assets		(128,599)		(288,524)
Accounts payable and accrued liabilities		38,263		424,967
Net cash flows from operating activities		692,863		206,818

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures		(366,059)		(45,150)
Net cash flows from investing activities		(366,059)		(45,150)

CASH FLOWS FROM FINANCING ACTIVITIES

Dividends and distributions paid		(341,521)		(12,000)
Repayment of mortgages payable		(192,257)		(134,150)
Proceeds from sales of common stock, net of capitalized offering costs		1,188,574		—
Proceeds from sale of convertible debentures, net of capitalized offering costs		—		1,305,000
Offering costs paid related to common stock offering		—		(66,202)
Repurchases of common stock, including costs and fees		(286,543)		—


	March 31, 2022		December 31,
	(unaudited)		2021
Land	$	14,142,555	$	14,142,555
Site improvements		4,431,338		4,431,338
Buildings and improvements (1)		57,327,476		57,322,242
Investment properties at cost (2)		75,901,369		75,896,135
Less accumulated depreciation		7,139,342		6,488,220
Investment properties, net	$	68,762,027	$	69,407,915


	March 31,
	2022		December 31,
	(unaudited)		2021
Capitalized tenant improvements – acquisition cost allocation, net	$	1,699,457	$	1,840,612
Capitalized tenant improvements incurred subsequent to acquisition, net		291,973		257,340


			Mortgages
			Payable
			Associated
			with Assets
	Mortgages		Held for
	Payable		Sale		Total
For the remaining nine months ending December 31, 2022	$	658,777	$	7,750,000	$	8,408,777
2023		961,743		—		961,743
2024		995,251		—		995,251
2025		1,272,970		—		1,272,970
2026		10,940,397		—		10,940,397
Thereafter		40,321,971		—		40,321,971
Total principal payments and debt maturities		55,151,109		7,750,000		62,901,109
Less unamortized issuance costs		(797,426)		(134,632)		(932,058)
Net principal payments and debt maturities	$	54,353,683	$	7,615,368	$	61,969,051


	As of March 31, 2022
	(unaudited)				As of December 31, 2021
			Accumulated				Accumulated
			amortization of				amortization
	Accrued		capitalized		Accrued		of capitalized
	interest		issuance costs		interest		issuance costs
Franklin Square	$	43,448	$	9,457	$	—	$	2,364
Hanover Square		35,670		50,213		38,287		46,990
Ashley Plaza		35,811		45,037		—		40,679
Clemson Best Western		47,716		134,622		47,716		134,622
Brookfield Center		15,904		28,380		15,979		25,542
Lancer Center		21,905		25,127		22,042		17,971
Greenbrier Business Center		15,482		1,617		15,482		924
Parkway Center		10,463		4,595		9,966		1,838
Amortization and preferred stock dividends ⁽¹⁾ on mandatorily redeemable preferred stock		70,004		420,681		70,004		366,758
Total	$	296,403	$	719,729	$	219,476	$	637,688


For the remaining nine months ending December 31, 2022	$	5,006,964
2023		6,062,067
2024		4,869,830
2025		4,113,579
2026		2,901,598
Thereafter		5,251,352
Total minimum rents	$	28,205,390


Issuance Date	Shares Issued	Price Per Share		Total Proceeds
March 3, 2022	90,600	$	1.088	$	98,574
March 14, 2022	276,190		1.050		290,000
March 17, 2022	278,810		1.076		300,000
March 21, 2022	474,068		1.0547		500,000
Total	1,119,668	$	1.062	$	1,188,574


Purchase (Trade) Date	Shares Purchased	Price Per Share		Total Cost (1)
January 4, 2022	400	$	1.060	$	424
January 5, 2022	48,205		1.060		51,093
January 6, 2022	100,000		1.046		104,556
January 7, 2022	30,000		1.050		31,500
January 10, 2022	50,000		1.020		51,000
January 14, 2022	100		1.010		101
January 21, 2022	39,365		1.006		39,603
Total	268,070	$	1.038	$	278,277


	Three months ended March 31,
	2022		2021
Basic and diluted shares outstanding
Weighted average Common Shares – basic		16,037,073		5,856,365
Effect of conversion of operating partnership units		213,531		213,531
Effect of conversion of convertible debentures (1)		—		739,128
Weighted average Common Shares – diluted		16,250,604		6,809,024

Calculation of earnings per share – basic and diluted
Net loss attributable to common shareholders	$	(989,284)	$	(2,277,524)
Weighted average Common Shares – basic and diluted		16,037,073		5,856,365
Loss per share – basic and diluted	$	(0.06)	$	(0.39)


	For the three months ended March 31,
	Hotel properties				Retail center properties				Flex center property				Total
	2022		2021		2022		2021		2022		2021		2022		2021
Revenues	$	765,489	$	1,295,385	$	1,525,085	$	1,193,641	$	613,390	$	182,827	$	2,903,964	$	2,671,853
Operating expenses		372,860		797,395		450,125		327,930		161,381		54,088		984,366		1,179,413
Bad debt expense		—		—		7,791		3,196		4,992		—		12,783		3,196
Net operating income	$	392,629	$	497,990	$	1,067,169	$	862,515	$	447,017	$	128,739	$	1,906,815	$	1,489,244


Purchase Date	Shares Purchased	Price Per Share		Total Cost
January 4, 2022	400	$	1.060	$	424
January 5, 2022	48,205		1.060		51,093
January 6, 2022	100,000		1.046		104,556
January 7, 2022	30,000		1.050		31,500
January 10, 2022	50,000		1.020		51,000
January 14, 2022	100		1.010		101
January 21, 2022	39,365		1.006		39,603
Total	268,070	$	1.038	$	278,277


						Balance
						March 31,
	Monthly		Interest			2022		December 31,
Property	Payment		Rate		Maturity	(unaudited)		2021
Franklin Square (a)		Interest only	3.808	%	December 2031	$	13,250,000	$	13,250,000
Hanover Square (b)	$	56,882	4.25	%	December 2027		10,071,489		10,134,667
Ashley Plaza (c)	$	52,795	3.75	%	September 2029		11,089,857		11,127,111
Brookfield Center (e)	$	22,876	3.90	%	November 2029		4,736,045		4,758,344
Lancer Center (f)	$	34,667	4.00	%	March 2026		6,447,916		6,488,034
Greenbrier Business Center (g)		Interest only	4.00	%	July 2026		4,495,000		4,495,000
Parkway Center (h)		Variable	Variable	%	October 2026		5,060,802		5,090,210
Total mortgages payable						$	55,151,109	$	55,343,366


	For the three months ended
	March 31,				Increase /
	2022		2021		(Decrease)
Revenues
Retail center properties	$	1,525,085	$	1,193,641	$	331,444
Hotel properties		765,489		1,295,385		(529,896)
Flex center property		613,390		182,827		430,563
	$	2,903,964	$	2,671,853	$	232,111


	For the three months ended
	March 31,				Increase/
	2022		2021		(Decrease)
Franklin Square	$	133,233	$	170,053	$	(36,820)
Hanover Square		108,077		114,066		(5,989)
Hampton Inn		—		182,378		(182,378)
Ashley Plaza		108,505		110,445		(1,940)
Clemson Best Western		138,917		162,544		(23,627)
Brookfield Center		49,092		49,922		(830)
Lancer Center		70,902		—		70,902
Greenbrier Business Center		45,643		—		45,643
Parkway Center		33,132		—		33,132
Amortization and preferred stock dividends on mandatorily redeemable preferred stock		153,923		149,449		4,474
Amortization and interest on convertible debentures		—		1,491,543		(1,491,543)
Other interest		—		3,732		(3,732)
Total interest expense	$	841,424	$	2,434,132	$	(1,592,708)


Net income (loss)	$	(980,383)
Depreciation of tangible real property assets (1)		602,845
Depreciation of tenant improvements (2)		148,924
Amortization of leasing commissions (3)		19,791
Amortization of intangible assets (4)		383,637
Loss on impairment (5)		36,670
Impairment of assets held for sale (5)		175,671
Funds from operations	$	387,155


Funds from operations	$	387,155
Amortization of above market leases (1)		69,583
Amortization of below market leases (2)		(95,617)
Straight line rent (3)		(14,921)
Capital expenditures (4)		(366,059)
Increase in fair value of interest rate cap (5)		(91,042)
Amortization of loan issuance costs (6)		28,118
Amortization of preferred stock discount and offering costs (7)		53,923
Share-based compensation (9)		233,100
Bad debt expense (10)		12,783
Adjusted funds from operations (AFFO)	$	217,023

Exhibit Number		Description
3.1		Articles of Incorporation of Medalist Diversified REIT, Inc.*
3.2		Articles Supplementary to the Articles of Incorporation of Medalist Diversified REIT, Inc. designating the Company’s Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form 8-A filed on February 13, 2020).
3.3		Bylaws of Medalist Diversified REIT, Inc. *
4.1		Form of Certificate of Common Stock *
4.2		Form of Certificate of Series A Cumulative Redeemable Preferred Stock (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 8-A filed on February 13, 2020)
10.1		Purchase and Sale Agreement, dated as of April 8, 2022, by and between RCC Salisbury Marketplace, LLC and Medalist Diversified Holdings, L.P. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 13, 2022)

31.1		Certification by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. †

31.2		Certification by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. †

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. †

32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. †

101.INS		INSTANCE DOCUMENT

101.SCH		SCHEMA DOCUMENT

101.CAL		CALCULATION LINKBASE DOCUMENT

101.LAB		LABELS LINKBASE DOCUMENT

101.PRE		PRESENTATION LINKBASE DOCUMENT

101.DEF		DEFINITION LINKBASE DOCUMENT

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Date: May 9, 2022

	By:	/s/ Thomas E. Messier
		Thomas E. Messier

		Chief Executive Officer and Chairman of the Board
		(principal executive officer))

	By:	/s/ C. Brent Winn
		C. Brent Winn

		Chief Financial Officer
		(principal accounting officer and principal financial officer)

May 9, 2022	/s/ Thomas E. Messier
Date	Thomas E. Messier
	Chief Executive Officer and Chairman of the Board
	(principal executive officer)