RICHMOND, Va.--(BUSINESS WIRE)--Medalist Diversified REIT (NASDAQ: MDRR) (the "Company" or "Medalist"), a Virginia-based real estate investment trust that specializes in acquiring, owning and managing commercial real estate in the Southeast region of the U.S., announced that its Board of Directors has authorized and the Company has declared a quarterly dividend on its common stock (the "Common Stock") in the amount of $0.0675 per share (the "Dividend"). The Dividend will be payable in cash on O. ...

PART I. FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company presents its unaudited condensed consolidated financial statements for the period ended June 30, 2025, showing a net loss primarily due to the absence of a prior year property disposal gain [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to $77.7 million from $75.1 million, driven by assets held for sale and new intangible assets, while liabilities decreased and equity rose due to noncontrolling interests Condensed Consolidated Balance Sheet Highlights (as of June 30, 2025 vs. Dec 31, 2024) | Balance Sheet Item | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$77,657,148** | **$75,097,702** | | Investment properties, net | $59,850,435 | $64,424,038 | | Cash | $1,950,829 | $4,776,021 | | Assets held for sale | $9,432,904 | $— | | **Total Liabilities** | **$52,336,339** | **$54,095,456** | | Mortgages payable, net | $43,509,578 | $50,001,062 | | Liabilities associated with assets held for sale | $6,545,968 | $— | | Mandatorily redeemable preferred stock, net | $— | $1,488,221 | | **Total Equity** | **$25,320,809** | **$21,002,246** | | Total Stockholders' Equity | $13,409,060 | $15,032,607 | | Noncontrolling interests - Operating Partnership | $11,520,923 | $5,554,770 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the six months ended June 30, 2025, the company reported a net loss of $1.42 million, a significant shift from a net income of $1.43 million in 2024, primarily due to the absence of a property disposal gain Statement of Operations Summary (Six Months Ended June 30) | Metric | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Total Revenue | $4,786,813 | $4,872,795 | | Total Operating Expenses | $5,123,597 | $4,659,925 | | Gain on disposal of investment property | $— | $2,819,502 | | Operating Income (Loss) | ($373,225) | $2,980,535 | | Net (Loss) Income | ($1,420,262) | $1,434,227 | | Net (Loss) Income Attributable to Common Stockholders | ($1,525,485) | $835,696 | | Loss per common share - basic and diluted | ($1.13) | $0.75 (EPS) | Statement of Operations Summary (Three Months Ended June 30) | Metric | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Total Revenue | $2,465,173 | $2,301,156 | | Operating Income (Loss) | $241,506 | $215,775 | | Net (Loss) Income | ($331,163) | ($498,674) | | Net (Loss) Income Attributable to Common Stockholders | ($456,444) | ($521,702) | | Loss per common share - basic and diluted | ($0.34) | ($0.47) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash from operating activities decreased, investing activities shifted to a net use of cash, and financing activities continued to use cash, resulting in an overall decrease in cash Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Net cash flows from operating activities | $704,098 | $1,271,084 | | Net cash flows from investing activities | ($708,098) | $2,605,078 | | Net cash flows from financing activities | ($2,430,954) | ($2,221,225) | | **(Decrease) Increase in Cash** | **($2,434,954)** | **$1,654,937** | | Cash, beginning of period | $6,072,736 | $3,809,605 | | Cash, end of period | $3,637,782 | $5,464,542 | - A significant non-cash investing activity in the first six months of 2025 was the issuance of **$5,765,000** in Operating Partnership (OP) units for the acquisition of the Buffalo Wild Wings and United Rentals properties[21](index=21&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on the company's accounting policies and financial activities, including property portfolio composition, significant acquisitions, preferred stock redemption, debt structure, and subsequent events [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's strategy, which includes managing its legacy portfolio, expanding its Single Tenant Net Lease portfolio, and implementing a Delaware Statutory Trust program, alongside an analysis of its financial performance and liquidity - The company's current primary focus includes managing its legacy retail and flex-industrial properties, expanding its STNL portfolio, and implementing a Delaware Statutory Trust (DST) investment offering program[211](index=211&type=chunk) - Subsequent to the quarter end, on July 18, 2025, the company acquired a Tesla service, sales, and delivery facility in Pensacola, FL for **$14.5 million**, intended as the first property for its new DST Program[216](index=216&type=chunk)[217](index=217&type=chunk) FFO and AFFO Reconciliation (Six Months Ended June 30) | Metric | 2025 (unaudited) | 2024 (unaudited) | | :--- | :--- | :--- | | Net (loss) income | ($1,420,262) | $1,434,227 | | Adjustments (Depreciation, Gain on Sale, etc.) | $2,003,683 | ($2,160,408) | | **Funds from operations (FFO)** | **$583,421** | **$673,819** | | Further Adjustments (Straight line rent, Capex, etc.) | ($302,959) | ($86,284) | | **Adjusted funds from operations (AFFO)** | **$280,462** | **$587,535** | [Quantitative and Qualitative Disclosures about Market Risk](index=60&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section is omitted as the company qualifies as a smaller reporting company and is not required to provide such disclosures - As a smaller reporting company, Medalist Diversified REIT, Inc. is not required to provide quantitative and qualitative disclosures about market risk[313](index=313&type=chunk) [Controls and Procedures](index=60&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of June 30, 2025, with no material changes reported during the quarter - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective[318](index=318&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of June 30, 2025, based on the COSO 2013 framework[319](index=319&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=61&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently subject to any material litigation, nor is it aware of any threatened litigation that would materially impact its financial condition or results of operations - The company is not presently subject to any material litigation[322](index=322&type=chunk) [Risk Factors](index=61&type=section&id=Item%201A.%20Risk%20Factors) The company highlights new material risks associated with its investment in bitcoin, citing market volatility and regulatory uncertainty, and risks related to its new Delaware Statutory Trust Program - A new risk factor has been added regarding the company's investment in bitcoin, citing high market volatility and regulatory uncertainty[324](index=324&type=chunk) - The company has identified new risks associated with its DST Program, including potential litigation, bearing the performance risk of DST properties via master leases, and reduced asset liquidity[326](index=326&type=chunk)[327](index=327&type=chunk)[328](index=328&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=62&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period but repurchased 2,830 common shares at an average price of $12.05 per share during the three months ended June 30, 2025 Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1 - April 30, 2025 | 2,830 | $12.05 | | May 1 - May 31, 2025 | — | — | | June 1 - June 30, 2025 | — | — | | **Total** | **2,830** | **$12.05** | [Defaults Upon Senior Securities](index=63&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[334](index=334&type=chunk) [Other Information](index=63&type=section&id=Item%205.%20Other%20Information) During the three months ended June 30, 2025, none of the company's directors or officers adopted, terminated, or modified a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during the quarter[336](index=336&type=chunk) [Exhibits](index=63&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including amendments to credit agreements, purchase and sale agreements, loan agreements, officer certifications, and XBRL data files

Core Viewpoint - Zacks Investment Research has initiated coverage of Medalist Diversified REIT, Inc. (MDRR) with a "Neutral" recommendation, reflecting a mixed outlook for the company amid industry challenges [1] Company Overview - Medalist Diversified REIT, headquartered in Richmond, VA, focuses on acquiring, repositioning, renovating, leasing, and managing income-producing properties, primarily in legacy retail and flex-industrial assets in secondary and tertiary markets in Virginia, North Carolina, and South Carolina, along with a growing portfolio of single-tenant net lease (STNL) properties across the United States [2] Financial Performance - In Q1 2025, MDRR reported a 156.5% year-over-year increase in revenues from its STNL segment, attributed to strategic acquisitions of Buffalo Wild Wings and United Rentals properties, enhancing recurring income and cash flow visibility [3] - The company has successfully transitioned to fully leased STNL properties, which provide predictable, long-term rental income and reduce tenant turnover risk [4] Strategic Initiatives - Recent redemption of 8% Series A preferred stock has lowered financing costs and improved net income prospects for MDRR [4] - The company benefits from a mostly fixed-rate debt profile, which provides insulation from interest rate fluctuations and ensures predictable debt servicing [4] Market Positioning - MDRR's stock has underperformed compared to industry peers and the broader market over the past year, with valuation metrics indicating investor caution regarding the company's asset base, while also reflecting some optimism about its earnings potential [6] - The stock trades at a discount to peers based on asset value metrics, indicating concerns about property quality, scale, and financial leverage, but commands a premium on earnings-based multiples, suggesting expectations of improved operational performance following recent strategic changes [6] Governance and Risks - The company faces governance concerns due to related-party transactions, including STNL acquisitions from entities controlled by the REIT's CEO, which may deter institutional interest despite being approved under MDRR's policies [5] - MDRR continues to report net losses and operating expenses that exceed revenues, raising concerns about scale and efficiency, compounded by a small property base of just 12 developed assets, making it vulnerable to tenant attrition and limiting diversification [5]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%2E%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201%2E%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Medalist Diversified REIT, Inc. for the first quarter of 2025 and 2024, along with accompanying notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets increased to **$78,230 thousand** from **$75,098 thousand** at year-end 2024, primarily due to a rise in investment properties, while total liabilities decreased and total equity increased significantly Condensed Consolidated Balance Sheet Highlights | Balance Sheet Item | March 31, 2025 (Unaudited) ($ thousands) | December 31, 2024 ($ thousands) | | :--- | :--- | :--- | | **Assets** | | | | Investment properties, net | $68,705 | $64,424 | | Cash | $2,744 | $4,776 | | Assets held for sale | $397 | $0 | | **Total Assets** | **$78,230** | **$75,098** | | **Liabilities** | | | | Mortgages payable, net | $49,756 | $50,001 | | Mandatorily redeemable preferred stock, net | $0 | $1,488 | | **Total Liabilities** | **$52,384** | **$54,095** | | **Equity** | | | | Total Stockholders' Equity | $13,991 | $15,033 | | Noncontrolling interests - Operating Partnership | $11,453 | $5,555 | | **Total Equity** | **$25,845** | **$21,002** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2025, the company reported a net loss of **($1,027 thousand)**, a significant shift from a net income of **$1,933 thousand** in Q1 2024, primarily due to the absence of a large gain on property disposal Q1 2025 vs. Q1 2024 Statement of Operations | Metric | Q1 2025 (Unaudited) ($ thousands) | Q1 2024 (Unaudited) ($ thousands) | | :--- | :--- | :--- | | Total Revenue | $2,322 | $2,572 | | Total Operating Expenses | $2,865 | $2,575 | | Gain on disposal of investment property | $0 | $2,820 | | Operating (Loss) Income | ($553) | $2,765 | | Net (Loss) Income | ($1,027) | $1,933 | | Net (Loss) Income Attributable to Common Stockholders | ($1,007) | $1,357 | | Loss per common share - basic and diluted | ($0.74) | - | | Earnings per common share - diluted | - | $1.21 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For Q1 2025, net cash from operating activities was **$460 thousand**, while investing activities used **$227 thousand** and financing activities used **$2,067 thousand**, resulting in a net cash decrease of **$1,835 thousand** Q1 2025 vs. Q1 2024 Cash Flow Summary | Cash Flow Activity | Q1 2025 (Unaudited) ($ thousands) | Q1 2024 (Unaudited) ($ thousands) | | :--- | :--- | :--- | | Net cash flows from operating activities | $460 | $492 | | Net cash flows from investing activities | ($227) | $2,738 | | Net cash flows from financing activities | ($2,067) | ($1,904) | | **Net (Decrease) Increase in Cash** | **($1,835)** | **$1,327** | - Key non-cash investing activities in Q1 2025 included the issuance of **$5,765 thousand** in Operating Partnership (OP) units for the acquisition of the Buffalo Wild Wings and United Rentals properties[16](index=16&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's structure, accounting policies, and significant Q1 2025 transactions, including STNL property acquisitions, preferred stock redemption, and an impairment loss - As of March 31, 2025, the company owned **12** developed properties: **4** retail centers, **3** flex centers, and **5** single tenant net lease (STNL) properties[18](index=18&type=chunk) - In Q1 2025, the company acquired the Buffalo Wild Wings Property for **$2,620 thousand** and the United Rentals Property for **$3,145 thousand**, both paid for by issuing OP Units to related parties[93](index=93&type=chunk)[94](index=94&type=chunk) - On January 10, 2025, the company completed the final redemption of its remaining **60,000** shares of mandatorily redeemable preferred stock for **$1,500 thousand**, resulting in a loss on redemption of **$9,375**[111](index=111&type=chunk) - The company recorded a loss on impairment of **$61,803** in Q1 2025 due to early lease terminations by three tenants, which involved writing off tenant improvements, capitalized leasing commissions, and unbilled rent[43](index=43&type=chunk)[44](index=44&type=chunk)[46](index=46&type=chunk) - Subsequent to the quarter end, on April 28, 2025, the company terminated its **$4,000 thousand** Expanded Wells Fargo Line of Credit[123](index=123&type=chunk)[182](index=182&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=35&type=section&id=Item%202%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and results of operations for Q1 2025, highlighting strategic focus, property acquisitions, preferred stock redemption, and the shift to a net loss, while also providing non-GAAP measures - The company's current primary focus is on managing its legacy retail and flex-industrial portfolio, expanding its STNL portfolio, and implementing a Delaware Statutory Trust (DST) investment offering program[190](index=190&type=chunk) - In Q1 2025, the company acquired the United Rentals Property and the Buffalo Wild Wings Property, both from entities controlled by the company's CEO, Frank Kavanaugh, with transactions approved by the Audit Committee as arms-length[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) - On April 9, 2025, the company filed a new S-3 "shelf" registration statement, allowing it to issue up to **$100,000 thousand** of Common Shares over the next three years[203](index=203&type=chunk) Q1 2025 vs Q1 2024 Revenue Breakdown | Revenue Source | Q1 2025 (Unaudited) ($ thousands) | Q1 2024 (Unaudited) ($ thousands) | Change ($ thousands) | | :--- | :--- | :--- | :--- | | Retail center property | $1,492 | $1,850 | ($358) | | Flex center property | $681 | $664 | $17 | | STNL property | $149 | $58 | $91 | | **Total Revenues** | **$2,322** | **$2,572** | **($250)** | FFO and AFFO Reconciliation | Metric | Q1 2025 (Unaudited) ($ thousands) | Q1 2024 (Unaudited) ($ thousands) | | :--- | :--- | :--- | | Net (loss) income | ($1,027) | $1,933 | | **Funds from operations (FFO)** | **$10** | **$178** | | **Adjusted funds from operations (AFFO)** | **$217** | **$230** | [Quantitative and Qualitative Disclosures about Market Risk](index=53&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section has been omitted as the company is not required to provide quantitative and qualitative disclosures about market risk as a smaller reporting company - As a smaller reporting company, Medalist Diversified REIT, Inc. is not required to provide quantitative and qualitative disclosures about market risk[276](index=276&type=chunk) [Controls and Procedures](index=53&type=section&id=Item%204%2E%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and internal control over financial reporting were effective as of March 31, 2025 - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective[278](index=278&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of March 31, 2025, based on the COSO framework (2013)[279](index=279&type=chunk) [PART II. OTHER INFORMATION](index=53&type=section&id=PART%20II%2E%20OTHER%20INFORMATION) [Legal Proceedings](index=53&type=section&id=Item%201%2E%20Legal%20Proceedings) The company is not currently subject to any material litigation, nor is it aware of any threatened material litigation - The company reports no material legal proceedings and is not aware of any threatened litigation that would have a material adverse effect on its financial condition[282](index=282&type=chunk) [Risk Factors](index=54&type=section&id=Item%201A%2E%20Risk%20Factors) No material changes to risk factors were reported, except for a new risk concerning the potential impact of tariffs and trade restrictions on the company's tenants and business - A new material risk factor has been added regarding the potential negative impact of tariffs and trade restrictions on tenants' operations, which could affect occupancy rates, rental income, and cash flows[285](index=285&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=54&type=section&id=Item%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities in Q1 2025, but repurchased **8,490** common shares for **$106,624**, with **103,175** shares remaining available under the program Issuer Purchases of Equity Securities (Q1 2025) | Period | Shares Purchased | Average Price Paid ($) | Total Shares Purchased as Part of Program ($) | | :--- | :--- | :--- | :--- | | Jan 2025 | 0 | $0.00 | 0 | | Feb 2025 | 5,660 | $12.30 | 5,660 | | Mar 2025 | 2,830 | $13.00 | 2,830 | | **Total** | **8,490** | **$12.56** | **8,490** | - As of March 31, 2025, **103,175** shares remained available for repurchase under the Board-approved plans[291](index=291&type=chunk) [Defaults Upon Senior Securities](index=55&type=section&id=Item%203%2E%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities - None[293](index=293&type=chunk) [Mine Safety Disclosures](index=55&type=section&id=Item%204%2E%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[294](index=294&type=chunk) [Other Information](index=55&type=section&id=Item%205%2E%20Other%20Information) No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during Q1 2025 - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during the three months ended March 31, 2025[295](index=295&type=chunk) [Exhibits](index=55&type=section&id=Item%206%2E%20Exhibits) This section lists the exhibits filed with the quarterly report, including amendments to agreements and certifications by the CEO and CFO

Part I [Item 1. Business](index=5&type=section&id=ITEM%201.%20BUSINESS) The company manages a legacy portfolio of retail and flex properties while expanding its single tenant net lease portfolio under a new internal management structure - The company's current strategy focuses on managing its legacy retail and flex-industrial properties while actively expanding its portfolio of single tenant net lease (STNL) properties across the United States[19](index=19&type=chunk)[21](index=21&type=chunk) - In July 2023, the company terminated its external management agreement and **transitioned to an internal management structure** directed by its Board of Directors[22](index=22&type=chunk) - The company operates as an UPREIT, owning its properties through its subsidiary, Medalist Diversified Holdings, L.P., and has elected to be taxed as a REIT for federal income tax purposes since its taxable year ended December 31, 2017[20](index=20&type=chunk) - The company **does not have any direct employees**; its executive officers and staff are employed by Gunston Consulting, LLC under a staffing agreement[31](index=31&type=chunk) Portfolio Composition as of December 31, 2024 | Property Type | Number of Properties | | :--- | :--- | | Retail | 4 | | Flex/Industrial | 3 | | Single Tenant Net Lease (STNL) | 3 | | **Total** | **10** | [Item 1A. Risk Factors](index=7&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company identifies significant risks in its business, real estate investments, REIT status, financing, and common stock ownership - Business risks include **dependence on future investments**, competition for acquisitions, potential lack of portfolio diversification, and reliance on information systems which are vulnerable to cybersecurity threats[38](index=38&type=chunk)[48](index=48&type=chunk)[55](index=55&type=chunk) - Real estate industry risks include the **illiquidity of property investments**, potential environmental liabilities, and the risk of tenant defaults or non-renewal of leases, particularly from middle-market businesses[83](index=83&type=chunk)[85](index=85&type=chunk)[92](index=92&type=chunk) - **Failure to maintain REIT qualification** would result in higher corporate taxes and reduced cash available for distributions, and compliance may cause the company to forgo attractive opportunities[120](index=120&type=chunk)[124](index=124&type=chunk) - The company utilizes mortgage debt, which increases expenses and subjects it to **foreclosure risk**, while high interest rates may make it difficult to finance or refinance properties[147](index=147&type=chunk)[153](index=153&type=chunk) - The market price of the company's common stock is subject to volatility, and there is a risk the company **may not satisfy Nasdaq's continued listing requirements**[181](index=181&type=chunk)[190](index=190&type=chunk) [Item 1B. Unresolved Staff Comments](index=30&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[194](index=194&type=chunk) [Item 1C. Cybersecurity](index=30&type=section&id=ITEM%201C.%20CYBERSECURITY) Cybersecurity risk is managed by third parties under Board oversight, with no material incidents reported to date - The Board of Directors has oversight responsibility for cybersecurity risks, with management, led by the CFO, responsible for the assessment and management processes[200](index=200&type=chunk) - The company relies on third-party service providers to manage its cybersecurity efforts, including incident detection, response, and remediation[196](index=196&type=chunk)[201](index=201&type=chunk) - As of December 31, 2024, the company has **not identified any cybersecurity threats or incidents** that have materially affected or are reasonably likely to materially affect its business[199](index=199&type=chunk) [Item 2. Properties](index=31&type=section&id=ITEM%202.%20PROPERTIES) The company's portfolio consists of ten retail, flex, and single tenant net lease properties across three reportable segments Portfolio Summary as of December 31, 2024 | Segment | Property Name | Location | Type | | :--- | :--- | :--- | :--- | | Retail | Ashley Plaza | Goldsboro, NC | Retail | | Retail | Franklin Square | Gastonia, NC | Retail | | Retail | Lancer Center | Lancaster, SC | Retail | | Retail | Salisbury Marketplace | Salisbury, NC | Retail | | Flex | Brookfield Center | Greenville, SC | Flex/Industrial | | Flex | Greenbrier Business Center | Chesapeake, VA | Flex/Industrial | | Flex | Parkway Property | Virginia Beach, VA | Flex/Industrial | | STNL | Citibank Property | Chicago, IL | STNL | | STNL | East Coast Wings Property | Goldsboro, NC | STNL | | STNL | T-Mobile Property | Goldsboro, NC | STNL | [Retail Center Properties](index=32&type=section&id=Retail%20Center%20Properties) The retail portfolio includes four properties in the Carolinas, anchored by tenants like Hobby Lobby and Food Lion Retail Property Occupancy Rates (as of Dec 31) | Property | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Ashley Plaza | 100.0% | 98.0% | 100.0% | | Franklin Square | 100.0% | 98.6% | 93.2% | | Lancer Center | 80.2% | 100.0% | 100.0% | | Salisbury Marketplace | 88.3% | 85.3% | 91.2% | [Flex Center Properties](index=37&type=section&id=Flex%20Center%20Properties) The flex portfolio comprises three properties in Virginia and South Carolina, including one with a tenant-in-common ownership structure - The company owns an **82% tenant-in-common interest** in the Parkway Property, which could restrict its ability to sell or refinance the property without consent from the other owner[255](index=255&type=chunk)[259](index=259&type=chunk) Flex Property Occupancy Rates (as of Dec 31) | Property | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Brookfield Center | 100.0% | 100.0% | 100.0% | | Greenbrier Business Center | 94.8% | 95.1% | 79.9% | | Parkway Property | 100.0% | 100.0% | 100.0% | [Single Tenant Net Lease Properties](index=41&type=section&id=Single%20Tenant%20Net%20Lease%20Properties) The STNL portfolio includes three properties, one acquired from a related party and two reclassified from an existing retail center - The Citibank Property was acquired on March 28, 2024, from a related party for **$2.4 million**, paid via the issuance of Operating Partnership units[266](index=266&type=chunk) - The East Coast Wings and T-Mobile properties were previously part of the Ashley Plaza Property but are now disclosed separately as STNL properties, reflecting the company's strategic shift[269](index=269&type=chunk)[272](index=272&type=chunk) [Item 3. Legal Proceedings](index=43&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is not currently subject to any material legal proceedings - The company reports **no material litigation** or threatened legal proceedings outside the ordinary course of business[281](index=281&type=chunk) [Item 4. Mine Safety Disclosures](index=43&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company's operations - Not applicable[282](index=282&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=44&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's stock trades on Nasdaq, and recent activities include a private placement and share repurchases under an authorized program - On December 13, 2024, the company sold **230,000 shares** of common stock in a private placement at $12.50 per share to certain investors, including the CFO and two directors[287](index=287&type=chunk) Common Stock Repurchase Activity (Year Ended Dec 31, 2024) | Metric | Value | | :--- | :--- | | Shares Repurchased | 2,830 | | Total Cost | $32,467 | | Average Price per Share | $11.45 | | Shares Remaining for Repurchase | 111,665 | [Item 6. [Reserved]](index=45&type=section&id=ITEM%206.%20%5BRESERVED%5D) This item is reserved [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=45&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Revenue decreased due to a property sale, but net income improved significantly due to a gain on sale and lower operating expenses - Key activities in 2024 included the **sale of the Hanover Square Shopping Center for $13.0 million**, the acquisition of the Citibank STNL property, and a $2.875 million private placement[307](index=307&type=chunk)[308](index=308&type=chunk)[311](index=311&type=chunk) - The company's liquidity is supported by **$4.8M in unrestricted cash**, lender reserves, an expanded $4.0M line of credit, and cash from operations[351](index=351&type=chunk)[353](index=353&type=chunk) Key Financial Results Comparison (Years Ended Dec 31) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Total Revenue | $9,735,127 | $10,272,826 | | Operating Income (Loss) | $3,731,593 | ($997,164) | | Net Income (Loss) Attributable to Common Stockholders | $27,524 | ($4,571,279) | | Funds from Operations (FFO) | $1,908,177 | $91,030 | | Adjusted Funds from Operations (AFFO) | $1,372,493 | ($1,269,422) | [Results of Operations](index=54&type=section&id=Results%20of%20Operations) Revenue declined from a property sale, but lower operating expenses, particularly non-recurring restructuring costs, drove a significant increase in operating and net income - The decrease in total operating expenses was primarily driven by the **non-recurrence of $2.1 million in management restructuring expenses** from 2023 and a $658,680 decrease in depreciation[360](index=360&type=chunk) Revenue by Segment (YoY Comparison) | Segment | 2024 Revenue | 2023 Revenue | Change | | :--- | :--- | :--- | :--- | | Retail center properties | $6,624,734 | $7,541,914 | ($917,180) | | Flex center properties | $2,750,499 | $2,504,652 | $245,847 | | Single tenant net lease properties | $359,894 | $226,260 | $133,634 | | **Total Revenues** | **$9,735,127** | **$10,272,826** | **($537,699)** | FFO and AFFO Reconciliation Summary (Year Ended Dec 31, 2024) | Metric | Amount | | :--- | :--- | | Net income | $744,325 | | Depreciation & Amortization | $3,915,483 | | Gain on disposal of investment property | ($2,819,502) | | Other adjustments | $67,871 | | **Funds from Operations (FFO)** | **$1,908,177** | | Adjustments (Straight-line rent, Capex, etc) | ($535,684) | | **Adjusted Funds from Operations (AFFO)** | **$1,372,493** | [Liquidity and Capital Resources](index=52&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and liquidity improved due to operating activities and a property sale, supported by an expanded line of credit for future needs - Cash provided by operating activities **increased by $1.7 million YoY**, primarily due to the non-recurrence of $2.1 million in management restructuring expenses paid in 2023[340](index=340&type=chunk)[341](index=341&type=chunk) - Net cash from investing activities was **positive $2.1 million**, driven by $3.1 million in proceeds from the sale of the Hanover Square property[345](index=345&type=chunk)[346](index=346&type=chunk) - The company **expanded its Wells Fargo line of credit from $1.5 million to $4.0 million** and extended the maturity to September 2026, enhancing its financial flexibility[315](index=315&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=61&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, this section is not required and has been omitted - The company has omitted this section as it is a smaller reporting company[390](index=390&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=61&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section incorporates by reference the financial statements and data found in Item 15 - The consolidated financial statements and supplementary data are included in Item 15[391](index=391&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=61&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company reports no changes in or disagreements with its accountants - None reported[392](index=392&type=chunk) [Item 9A. Controls and Procedures](index=61&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and internal controls over financial reporting were effective as of year-end - Management concluded that both **disclosure controls and procedures and internal control over financial reporting were effective** as of December 31, 2024[394](index=394&type=chunk)[398](index=398&type=chunk) - The annual report does not include an attestation report from the registered public accounting firm regarding internal control over financial reporting, as permitted by SEC rules[399](index=399&type=chunk) [Item 9B. Other Information](index=62&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) The company modified its own Rule 10b5-1 plan during the year and has scheduled its 2025 Annual Meeting of Stockholders - The company plans to hold its **2025 Annual Meeting of Stockholders on June 17, 2025**[402](index=402&type=chunk) - No directors or officers adopted or modified Rule 10b5-1 trading plans in Q4 2024; the company modified its own plan in November 2024 to adjust the authorized purchase price[401](index=401&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=63&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) The required information is incorporated by reference from the company's definitive 2025 Proxy Statement - Information is incorporated by reference from the 2025 Proxy Statement[409](index=409&type=chunk) [Item 11. Executive and Director Compensation](index=63&type=section&id=ITEM%2011.%20EXECUTIVE%20AND%20DIRECTOR%20COMPENSATION) The required information is incorporated by reference from the company's definitive 2025 Proxy Statement - Information is incorporated by reference from the 2025 Proxy Statement[410](index=410&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=63&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) The required information is incorporated by reference from the company's definitive 2025 Proxy Statement - Information is incorporated by reference from the 2025 Proxy Statement[411](index=411&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=63&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) The required information is incorporated by reference from the company's definitive 2025 Proxy Statement - Information is incorporated by reference from the 2025 Proxy Statement[412](index=412&type=chunk) [Item 14. Principal Accountant Fees and Services](index=63&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) The required information is incorporated by reference from the company's definitive 2025 Proxy Statement - Information is incorporated by reference from the 2025 Proxy Statement[413](index=413&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=64&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section contains the index to financial statements, schedules, and exhibits, including the auditor's report and consolidated financial data - This section provides an index to the audited consolidated financial statements for the years ended December 31, 2024 and 2023, and Schedule III for Real Estate Properties[416](index=416&type=chunk)[417](index=417&type=chunk) [Report of Independent Registered Public Accounting Firm](index=65&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The auditor issued an unqualified opinion on the financial statements and identified investment property impairment as a critical audit matter - The auditor issued an **unqualified opinion**, concluding the financial statements are presented fairly in accordance with GAAP[420](index=420&type=chunk) - A **critical audit matter** was identified concerning the evaluation of investment properties for impairment, highlighting the subjective judgments involved in management's assessment[424](index=424&type=chunk)[426](index=426&type=chunk)[427](index=427&type=chunk) [Consolidated Financial Statements](index=67&type=section&id=Consolidated%20Financial%20Statements) The financial statements show decreased assets and liabilities from a property sale and a significant turnaround from a net loss to net income in 2024 Consolidated Balance Sheet Summary (as of Dec 31) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Total Assets | $75,097,702 | $82,746,016 | | Total Liabilities | $54,095,456 | $69,015,595 | | Total Equity | $21,002,246 | $13,730,421 | Consolidated Statement of Operations Summary (Year Ended Dec 31) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Total Revenue | $9,735,127 | $10,272,826 | | Total Operating Expenses | $8,723,519 | $11,269,990 | | Gain on disposal of investment property | $2,819,502 | $0 | | Net Income (Loss) | $744,325 | ($4,573,354) | [Notes to Consolidated Financial Statements](index=71&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail key accounting policies and transactions, including a major property sale, debt structure, and significant equity activities - The Hanover Square Shopping Center was sold on March 13, 2024, for $13.0 million, resulting in a **gain on disposal of $2.8 million**[530](index=530&type=chunk) - The company's mortgages payable totaled **$50.0 million** at year-end 2024, down from $50.8 million in 2023, with the Wells Fargo Mortgage Facility being the largest single debt instrument[547](index=547&type=chunk)[549](index=549&type=chunk) - In 2024, the company issued **230,000 common shares** in a private placement and **388,043 OP units**, and redeemed 140,000 shares of its mandatorily redeemable preferred stock[543](index=543&type=chunk)[567](index=567&type=chunk)[497](index=497&type=chunk)

PART I. FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents the unaudited condensed consolidated financial statements for the quarter ended March 31, 2024, showing a significant turnaround to a net income of $1.9 million primarily driven by a $2.8 million gain on the sale of an investment property [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2024, total assets decreased to $76.0 million from $82.7 million at year-end 2023, while total liabilities decreased to $58.3 million, leading to an increase in total equity to $17.7 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 (Unaudited) | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $75,981 | $82,746 | | Total Liabilities | $58,269 | $69,016 | | Total Equity | $17,712 | $13,730 | - The decrease in assets and liabilities is mainly attributed to the sale of the Hanover Square Shopping Center, which was classified as 'Assets held for sale' (**$9.7 million**) and had an associated mortgage (**$9.6 million**) at the end of 2023[8](index=8&type=chunk)[38](index=38&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the first quarter of 2024, the company generated a net income attributable to common shareholders of $1.36 million, a significant improvement from a net loss of $1.22 million in Q1 2023, primarily due to a $2.82 million gain on property disposal Q1 2024 vs Q1 2023 Performance (in thousands) | Metric | Q1 2024 (Unaudited) | Q1 2023 (Unaudited) | | :--- | :--- | :--- | | Total Revenue | $2,572 | $2,461 | | Gain on disposal of investment property | $2,820 | $0 | | Operating Income (Loss) | $2,765 | ($341) | | Net Income (Loss) Attributable to Common Shareholders | $1,357 | ($1,221) | | EPS - basic | $0.61 | ($0.55) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For Q1 2024, net cash from operating activities was $0.49 million, with investing activities generating $2.74 million from a property sale, while financing activities used $1.90 million, resulting in a total cash increase of $1.33 million Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2024 (Unaudited) | Q1 2023 (Unaudited) | | :--- | :--- | :--- | | Net cash from operating activities | $492 | $451 | | Net cash from investing activities | $2,738 | ($648) | | Net cash from financing activities | ($1,904) | ($481) | | **Net Increase (Decrease) in Cash** | **$1,327** | **($677)** | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail key financial events including the sale of Hanover Square Shopping Center for $13.0 million, generating a $2.8 million gain, and the acquisition of the Citibank Property for $2.4 million, alongside segment performance and the upcoming mandatory redemption of Series A preferred stock in February 2025 - On March 13, 2024, the company sold the Hanover Square Shopping Center Property for **$13.0 million**, resulting in a gain on disposal of **$2,819,502**[92](index=92&type=chunk) - On March 28, 2024, the company acquired the Citibank Property from an entity controlled by its CEO, Frank Kavanaugh, for **$2.4 million**, paid via the issuance of **417,391** operating partnership units[97](index=97&type=chunk)[148](index=148&type=chunk) - The company's 8.0% Series A cumulative redeemable preferred stock is mandatorily redeemable on February 19, 2025, requiring additional liquidity to fund this redemption[79](index=79&type=chunk)[102](index=102&type=chunk) Net Operating Income (NOI) by Segment - Q1 2024 vs Q1 2023 (in thousands) | Segment | Q1 2024 NOI | Q1 2023 NOI | | :--- | :--- | :--- | | Retail center properties | $1,421 | $1,322 | | Flex center properties | $505 | $366 | | STNL properties | $50 | $49 | | **Total NOI** | **$1,977** | **$1,737** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the positive impact of the Hanover Square property sale on Q1 2024 results, covering revenue and expense trends, liquidity, future capital needs, and improved non-GAAP measures like FFO and AFFO [Results of Operations](index=40&type=section&id=Results%20of%20Operations) In Q1 2024, revenues increased by $110,663 year-over-year to $2.6 million, driven by new leasing, while total operating expenses decreased by $227,148, leading to an operating income of $2.8 million compared to a prior-year operating loss Revenue by Segment - Q1 2024 vs Q1 2023 | Segment | Q1 2024 Revenue | Q1 2023 Revenue | Change | | :--- | :--- | :--- | :--- | | Retail center properties | $1,849,617 | $1,835,373 | $14,244 | | Flex center properties | $664,067 | $569,297 | $94,770 | | Single tenant net lease properties | $57,955 | $56,306 | $1,649 | | **Total Revenues** | **$2,571,639** | **$2,460,976** | **$110,663** | - Total operating expenses decreased by **$227,148** year-over-year, primarily due to the non-recurrence of **$241,450** in management restructuring expenses from Q1 2023 and a **$143,872** decrease in depreciation and amortization[223](index=223&type=chunk) - Net income attributable to common shareholders for Q1 2024 was **$1,357,398**, an increase of **$2,578,693** from the net loss of **($1,221,295)** in Q1 2023[237](index=237&type=chunk)[238](index=238&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The company's primary liquidity sources are rental receipts and capital markets, with $3.6 million in unrestricted cash as of March 31, 2024, and a key future need being the $5.0 million preferred stock redemption in February 2025 - A primary non-operating liquidity need is the **~$5.0 million** required to redeem the mandatorily redeemable preferred stock in February 2025[214](index=214&type=chunk) - As of March 31, 2024, the company's liquidity resources include **$3.6 million** in unrestricted cash and a **$1.5 million** line of credit with a full available balance[217](index=217&type=chunk) [Funds from Operations (FFO) and Adjusted FFO (AFFO)](index=44&type=section&id=Funds%20from%20Operations%20(FFO)%20and%20Adjusted%20FFO%20(AFFO)) The company presents FFO and AFFO as supplemental non-GAAP performance measures, with FFO at $178,453 and AFFO at $229,611 for Q1 2024, both significantly improved from prior-year losses FFO and AFFO Reconciliation (Non-GAAP) | Metric | Q1 2024 (Unaudited) | Q1 2023 (Unaudited) | | :--- | :--- | :--- | | Net income (loss) | $1,932,901 | ($1,233,806) | | **Funds from operations (FFO)** | **$178,453** | **($40,715)** | | Adjustments (Capital expenditures, non-cash rent, etc.) | $51,158 | ($616,823) | | **Adjusted funds from operations (AFFO)** | **$229,611** | **($657,538)** | [Quantitative and Qualitative Disclosures about Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company, identifying as a smaller reporting company, has elected to omit the discussion of quantitative and qualitative disclosures about market risk, as permitted by SEC regulations - As a smaller reporting company, the company is not required to provide information for this item and has omitted it[245](index=245&type=chunk) [Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and internal control over financial reporting as of March 31, 2024, concluding both were effective with no material changes reported - Management concluded that as of March 31, 2024, the company's disclosure controls and procedures were effective[248](index=248&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of March 31, 2024[249](index=249&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that it is not currently involved in any material litigation or legal proceedings outside of the ordinary course of business - The company is not presently subject to any material litigation[252](index=252&type=chunk) [Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, the company has omitted the discussion of risk factors in this quarterly report, as permitted by regulations - As a smaller reporting company, the company is not required to provide risk factor disclosures in its Form 10-Q[254](index=254&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company has a share repurchase program in place, which was expanded in October 2023, but no shares were repurchased under this program during the three months ended March 31, 2024 - The company did not make any share repurchases during the three months ended March 31, 2024[254](index=254&type=chunk) [Defaults Upon Senior Securities](index=48&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports that there were no defaults upon its senior securities during the reporting period - None reported[255](index=255&type=chunk) [Other Information](index=48&type=section&id=Item%205.%20Other%20Information) During the first quarter of 2024, the company adopted a Rule 10b5-1 trading arrangement, with no directors or officers adopting, terminating, or modifying any such trading plans during the same period - During Q1 2024, the Company adopted a Rule 10b5-1 trading arrangement; no shares were purchased under this plan during the quarter[257](index=257&type=chunk) [Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section provides an index of all exhibits filed with the Form 10-Q, including articles of incorporation, material contracts, officer certifications required by the Sarbanes-Oxley Act, and XBRL data files - Key exhibits filed include CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, and Inline XBRL documents[260](index=260&type=chunk)

[Form 8-K Current Report (April 8, 2024)](index=1&type=section&id=Form%208-K%20Current%20Report) [Results of Operations and Financial Condition](index=2&type=section&id=ITEM%202.02%20RESULTS%20OF%20OPERATIONS%20AND%20FINANCIAL%20CONDITION) Fiscal year 2023 results of operations and financial condition are incorporated by reference from Item 7.01 disclosures - Fiscal year 2023 results of operations and financial condition are incorporated by reference from Item 7.01 disclosures[6](index=6&type=chunk) [Regulation FD Disclosure](index=2&type=section&id=ITEM%207.01%20REGULATION%20FD%20DISCLOSURE) Medalist Diversified REIT released a shareholder letter reviewing FY2023 results and 2024 plans, along with a financial supplement for year-end 2023 - A letter from the President/CEO and CFO reviewed **fiscal year 2023 results** and outlined **fiscal year 2024 plans**[7](index=7&type=chunk) - The company released its **financial supplement** for the year ended December 31, 2023, furnished as Exhibit 99.2[8](index=8&type=chunk) [Other Information - Dividend Declaration](index=2&type=section&id=ITEM%208.01%20OTHER%20INFORMATION) The company declared Q1 2024 quarterly cash dividends for Common Stock and 8.0% Series A Preferred Stock, with payment and record dates specified Q1 2024 Dividend Declaration | Stock Class | Dividend per Share | Record Date | Payment Date | | :--- | :--- | :--- | :--- | | Common Stock | $0.02 | April 22, 2024 | April 25, 2024 | | 8.0% Series A Cumulative Redeemable Preferred Stock | $0.50 | April 22, 2024 | April 25, 2024 | [Financial Statements and Exhibits](index=2&type=section&id=ITEM%209.01%20FINANCIAL%20STATEMENTS%20AND%20EXHIBITS) This section lists the Form 8-K exhibits, including a shareholder letter and a financial supplement for year-end 2023 List of Exhibits | Exhibit Number | Description of Exhibit | | :--- | :--- | | 99.1 | Letter to Shareholders, dated April 8, 2024 | | 99.2 | Financial Supplement dated April 8, 2024 for the year ending December 31, 2023 | | 104 | Cover Page Interactive Data File (embedded within the Inline XBRL Document) |

Part I [Business](index=5&type=section&id=ITEM%201.%20BUSINESS) Medalist Diversified REIT, Inc. acquires and manages income-producing commercial properties, transitioning to internal management in 2023 and exploring single-tenant net lease assets - The company's primary focus is on acquiring and managing income-producing commercial properties, including flex-industrial, retail, multi-family, and hotel properties in the southeastern U.S.[19](index=19&type=chunk) - On July 18, 2023, the company terminated its external management agreement and transitioned to an internally managed structure[22](index=22&type=chunk) - The company is exploring a strategy to create and acquire single-tenant net lease assets, with a recent agreement to acquire the Citibank Property announced in February 2024[21](index=21&type=chunk) - As of December 31, 2023, the portfolio comprised **eight investments**: five retail properties and three flex/industrial properties[27](index=27&type=chunk) - The company has no employees; its Chief Financial Officer and Controller are employed by Gunston Consulting, LLC under a staffing agreement[31](index=31&type=chunk) [Risk Factors](index=7&type=section&id=ITEM%201A.%20RISK%20FACTORS) As a smaller reporting company, the registrant is not required to provide information on risk factors - As a smaller reporting company, the registrant is not required to provide information on risk factors[35](index=35&type=chunk) [Unresolved Staff Comments](index=7&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company has no unresolved comments from the SEC staff - None[36](index=36&type=chunk) [Cybersecurity](index=7&type=section&id=ITEM%201C.%20CYBERSECURITY) The company manages cybersecurity risks through internal processes and third-party providers, with no material incidents reported - The company has implemented information security processes to manage cybersecurity risks to its critical systems and data, utilizing both internal controls and third-party service providers[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk) - The Board of Directors oversees cybersecurity risk, with the Chief Financial Officer, Brent Winn, leading the risk assessment and management processes[41](index=41&type=chunk) - The company is not aware of any cybersecurity threats or incidents that have had or are reasonably likely to have a material impact on its business, strategy, or financial condition[40](index=40&type=chunk) [Properties](index=8&type=section&id=ITEM%202.%20PROPERTIES) The company's portfolio comprises eight retail and flex-industrial properties across North Carolina, Virginia, and South Carolina, with detailed property descriptions Property Portfolio Overview (as of December 31, 2023) | Name | Type | Location | Square Footage | Occupancy | Anchor Tenants | | :--- | :--- | :--- | :--- | :--- | :--- | | Franklin Square Property | Retail | Gastonia, NC | 134,239 | 98.6% | Ashley Furniture, Altitude | | Hanover Square Property | Retail | Mechanicsville, VA | 73,440 | 96.7% | Marshalls, Old Navy | | Ashley Plaza Property | Retail | Goldsboro, NC | 164,012 | 98.0% | Hobby Lobby, Harbor Freight, Ashley Home Store, Planet Fitness | | Lancer Center Property | Retail | Lancaster, SC | 181,590 | 100% | Badcock Furniture, KJ's Market, Big Lots | | Salisbury Marketplace Property | Retail | Salisbury, NC | 79,732 | 85.3% | Food Lion, CitiTrends, Family Dollar | | Brookfield Center Property | Flex | Greenville, SC | 64,880 | 100% | Gravitopia Trampoline Park, S&ME, Inc., Turning Point Greenville Church | | Greenbrier Business Center Property | Flex | Chesapeake, VA | 89,280 | 95.1% | Bridge Church | | Parkway Property | Flex | Virginia Beach, VA | 64,109 | 100% | GBRS Group, First Onsite | - The company owns an **84% tenant-in-common interest** in the Hanover Square Property and an **82% tenant-in-common interest** in the Parkway Property[44](index=44&type=chunk) - On June 13, 2022, the company entered into an **$18.6 million mortgage facility** with Wells Fargo to acquire the Salisbury Marketplace Property and refinance the Lancer Center and Greenbrier Business Center properties[118](index=118&type=chunk) [Franklin Square Property](index=8&type=section&id=Franklin%20Square%20Property) This 134,239 sq. ft. retail property in Gastonia, NC, was 98.6% leased as of December 31, 2023 Franklin Square Property - Major Tenants (as of Dec 31, 2023) | Tenant | Business | Leased Square Footage | % of Rentable Square Footage | 2023 Annual Rent | Lease Expiration | | :--- | :--- | :--- | :--- | :--- | :--- | | Ashley Furniture | Retail | 34,682 | 25.8% | $277,456 | 12/31/2025 | | Altitude Trampoline Park | Entertainment | 30,000 | 22.4% | $270,000 | 7/31/2029 | - Occupancy has improved significantly, rising from **81.2% in 2021 to 98.6% in 2023**[51](index=51&type=chunk) [Hanover Square Property](index=10&type=section&id=Hanover%20Square%20Property) The 73,440 sq. ft. Hanover Square retail property in Mechanicsville, VA, is 96.7% leased, with a sale agreement in place - On December 29, 2023, the company entered into an agreement to sell the Hanover Square Shopping Center for **$13 million** (later reduced by **$75 thousand**)[61](index=61&type=chunk) Hanover Square Property - Major Tenants (as of Dec 31, 2023) | Tenant | Business | Leased Square Footage | % of Rentable Square Footage | 2023 Annual Rent | Lease Expiration | | :--- | :--- | :--- | :--- | :--- | :--- | | Old Navy | Retail | 15,000 | 20.4% | $229,650 | 4/30/2029 | | Marshall's | Retail | 28,000 | 38.1% | $336,000 | 2/28/2027 | [Ashley Plaza Property](index=11&type=section&id=Ashley%20Plaza%20Property) This 164,012 sq. ft. retail property in Goldsboro, NC, was 98.0% leased as of December 31, 2023 Ashley Plaza Property - Major Tenants (as of Dec 31, 2023) | Tenant | Business | Leased Square Footage | % of Rentable Square Footage | 2023 Annual Rent | Lease Expiration | | :--- | :--- | :--- | :--- | :--- | :--- | | Ashley Home Store | Retail | 17,920 | 10.9% | $163,968 | 8/31/2028 | | Harbor Freight Tools | Retail | 21,416 | 13.1% | $159,840 | 2/28/2029 | | Hobby Lobby | Retail | 50,000 | 30.5% | $250,000 | 3/31/2029 | | Planet Fitness | Fitness | 20,131 | 12.3% | $181,179 | 4/30/2030 | [Brookfield Center Property](index=12&type=section&id=Brookfield%20Center%20Property) This 64,880 sq. ft. flex-industrial property in Greenville, SC, was 100% leased as of December 31, 2023 Brookfield Center Property - Major Tenants (as of Dec 31, 2023) | Tenant | Business | Leased Square Footage | % of Rentable Square Footage | 2023 Annual Rent | Lease Expiration | | :--- | :--- | :--- | :--- | :--- | :--- | | Turning Point Greenville Church | Religious | 9,000 | 13.9% | $102,109 | 9/30/2025 | | S&ME | Engineering | 8,582 | 13.2% | $97,161 | 10/31/2027 | | Gravitopia | Entertainment | 35,160 | 54.2% | $283,588 | 4/30/2026 | [Lancer Center Property](index=14&type=section&id=Lancer%20Center%20Property) This 181,590 sq. ft. retail property in Lancaster, SC, was 100% leased as of December 31, 2023 Lancer Center Property - Major Tenants (as of Dec 31, 2023) | Tenant | Business | Leased Square Footage | % of Rentable Square Footage | 2023 Annual Rent | Lease Expiration | | :--- | :--- | :--- | :--- | :--- | :--- | | Badcock Furniture | Retail | 35,876 | 19.8% | $108,000 | 6/30/2029 | | K.J.'s Market | Retail | 34,100 | 18.8% | $140,640 | 12/31/2025 | | Big Lots | Retail | 28,527 | 15.6% | $148,349 | 2/28/2034 | [The Greenbrier Business Center Property](index=15&type=section&id=The%20Greenbrier%20Business%20Center%20Property) This 89,280 sq. ft. flex-industrial property in Chesapeake, VA, was 95.1% leased as of December 31, 2023 - Occupancy rate increased from **79.9% in 2022 to 95.1% in 2023**[95](index=95&type=chunk) [Parkway Property](index=16&type=section&id=Parkway%20Property) This 64,109 sq. ft. flex-industrial property in Virginia Beach, VA, was 100% leased with a variable-rate loan - The variable interest rate on the mortgage loan was **7.05% as of Dec 31, 2023**, up from 4.3117% as of Dec 31, 2022[101](index=101&type=chunk) - an Interest Rate Protection Transaction caps the company's interest rate exposure at **5.25%** if the reference rate (now SOFR) exceeds 3%[102](index=102&type=chunk) [Salisbury Marketplace Property](index=18&type=section&id=Salisbury%20Marketplace%20Property) This 79,732 sq. ft. retail property in Salisbury, NC, was 85.3% leased as of December 31, 2023 Salisbury Marketplace Property - Major Tenants (as of Dec 31, 2023) | Tenant | Business | Leased Square Footage | % of Rentable Square Footage | 2023 Annual Rent | Lease Expiration | | :--- | :--- | :--- | :--- | :--- | :--- | | Food Lion | Retail | 31,762 | 39.8% | $324,096 | 12/31/2032 | | CitiTrends | Retail | 12,500 | 15.7% | $113,850 | 9/30/2027 | | Family Dollar | Retail | 8,470 | 10.6% | $87,115 | 12/31/2033 | [Legal Proceedings](index=20&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is not subject to any material litigation or threatened legal actions - The company is not presently subject to any material litigation, nor is any threatened, other than routine actions not expected to have a material adverse effect[119](index=119&type=chunk) [Mine Safety Disclosures](index=20&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Not Applicable[120](index=120&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=21&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock trades on Nasdaq, with a repurchase program authorized but no repurchases in Q4 2023 - The company's common stock is listed on the Nasdaq Capital Market under the symbol 'MDRR'[123](index=123&type=chunk) - As of December 31, 2023, there were approximately **7,583 holders of record**[123](index=123&type=chunk) - A share repurchase program was expanded in October 2023, authorizing the repurchase of an additional **200,000 common shares**, with no shares repurchased in the fourth quarter of 2023[126](index=126&type=chunk) [Reserved](index=21&type=section&id=ITEM%206.%20%5BRESERVED%5D) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section analyzes the company's financial performance and condition, highlighting key events, revenue changes, and liquidity [Recent Trends and Activities](index=22&type=section&id=Recent%20Trends%20and%20Activities) The company underwent a reverse stock split and management internalization, actively managing its property portfolio and financing - Completed a **1-for-8 reverse stock split** on May 3, 2023, to regain compliance with Nasdaq's minimum bid price requirement[135](index=135&type=chunk) - Internalized management on July 18, 2023, by terminating the external Management Agreement, resulting in management restructuring expenses of **$2.1 million**[139](index=139&type=chunk)[183](index=183&type=chunk) - Sold the Clemson Best Western Property on September 29, 2022, for **$10.015 million**, recognizing a loss on sale of **$421,096**[140](index=140&type=chunk) - Entered into an agreement to sell the Hanover Square Shopping Center for **$13 million** on December 29, 2023[142](index=142&type=chunk) - Entered into an agreement on February 15, 2024, to acquire a single-tenant net lease asset (Citibank Property) from a related party[143](index=143&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and restricted cash decreased to $3.8 million, with future liquidity needs including preferred stock redemption and debt repayment Cash Flow Summary | (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Net cash from operating activities | $104 | $1,195 | | Net cash used in investing activities | ($1,483) | ($9,319) | | Net cash (used in) provided by financing activities | ($474) | $6,403 | - The decrease in cash from operations in 2023 was primarily due to **$2.1 million in management restructuring expenses**[183](index=183&type=chunk) - Primary future liquidity needs include retiring **$5.0 million of mandatorily redeemable preferred stock** in February 2025 and repaying a **$1.0 million line of credit**[192](index=192&type=chunk) - Resources to meet future needs include **$2.2 million in unrestricted cash**, **$1.6 million in lender reserves**, a **$1.5 million line of credit** (with a **$1.0 million balance**), and projected proceeds of approximately **$2.6 million** from the sale of the Hanover Square Shopping Center[194](index=194&type=chunk)[199](index=199&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Total revenues decreased to $10.3 million due to a hotel property sale, while net loss improved to $4.6 million Revenue by Segment (2023 vs. 2022) | (In thousands) | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Retail center properties | $7,768 | $7,054 | $714 | | Hotel property | $0 | $1,508 | ($1,508) | | Flex center properties | $2,505 | $2,530 | ($25) | | **Total Revenues** | **$10,273** | **$11,091** | **($818)** | Key Operating Expenses (2023 vs. 2022) | (In thousands) | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Total Investment Property Operating Expenses | $2,664 | $3,980 | ($1,316) | | Legal, accounting and other professional fees | $1,391 | $1,628 | ($237) | | Management restructuring expenses | $2,067 | $0 | $2,067 | | Depreciation and amortization | $4,574 | $4,707 | ($133) | | **Total Operating Expenses** | **$11,270** | **$11,695** | **($425)** | - Net loss attributable to common shareholders was **$4.6 million in 2023**, compared to **$4.8 million in 2022**, an improvement of **$197,962**[219](index=219&type=chunk)[220](index=220&type=chunk) [Funds from Operations (FFO) and Adjusted FFO (AFFO)](index=36&type=section&id=Funds%20from%20Operations%20%28FFO%29%20and%20Adjusted%20FFO%20%28AFFO%29) FFO significantly decreased to $91 thousand in 2023, and AFFO became negative due to higher capital expenditures FFO Reconciliation | (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Net loss | ($4,573) | ($4,732) | | Depreciation & Amortization | $4,574 | $4,707 | | Loss on disposal of investment property | $0 | $421 | | Loss on impairment / Impairment of assets held for sale | $90 | $212 | | Loss on extinguishment of debt | $0 | $389 | | **Funds from operations (FFO)** | **$91** | **$997** | AFFO Reconciliation | (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Funds from operations (FFO) | $91 | $997 | | Capital expenditures | ($1,483) | ($1,019) | | Straight line rent | ($100) | ($150) | | Amortization of above/below market leases | ($275) | ($227) | | Other adjustments | $498 | $640 | | **Adjusted funds from operations (AFFO)** | **($1,269)** | **$241** | [Summary of Critical Accounting Policies](index=28&type=section&id=Summary%20of%20Critical%20Accounting%20Policies) Critical accounting policies include revenue recognition, asset acquisitions, impairment reviews, and maintaining REIT status - Acquisitions of investment properties are accounted for as asset acquisitions, with transaction costs capitalized[173](index=173&type=chunk) - Long-lived assets are reviewed for impairment whenever events indicate the carrying value may not be recoverable[174](index=174&type=chunk) - Maintaining REIT status is a critical accounting estimate, requiring distribution of at least **90% of adjusted taxable income** and meeting other operational tests[175](index=175&type=chunk) - Management has concluded that it is probable the company will be able to meet its obligations and continue as a going concern for at least one year from the financial statement issuance date[179](index=179&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, the registrant is not required to provide market risk disclosures - As a smaller reporting company, the registrant is not required to provide quantitative and qualitative disclosures about market risk[229](index=229&type=chunk) [Financial Statements and Supplementary Data](index=38&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) Consolidated financial statements and supplementary data are included in Item 15 of this report - The consolidated financial statements and supplementary data are included in Item 15 of this report and are incorporated by reference[230](index=230&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=39&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company reports no changes or disagreements with its accountants on financial disclosure - None[232](index=232&type=chunk) [Controls and Procedures](index=39&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and internal controls over financial reporting were effective - The CEO concluded that disclosure controls and procedures were **effective** as of December 31, 2023[234](index=234&type=chunk) - Management concluded that internal control over financial reporting was **effective** as of December 31, 2022[235](index=235&type=chunk) - There were no changes in internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls[237](index=237&type=chunk) [Other Information](index=39&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) No directors or officers adopted, terminated, or modified Rule 10b5-1 trading arrangements in Q4 2023 - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during the three months ended December 31, 2023[238](index=238&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=40&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) This section details executive officers, directors, board committees, governance policies, and discloses untimely SEC filings Executive Officers and Directors | Name | Age | Position | | :--- | :--- | :--- | | Francis P. Kavanaugh | 63 | Director, President, CEO, Secretary and Treasurer | | Timothy O'Brien | 55 | Chairman of the Board | | Neil P. Farmer | 67 | Independent Director | | David Lunin | 43 | Independent Director | | Emanuel D. Neuman | 44 | Independent Director | | Charles S. Pearson, Jr. | 66 | Independent Director | | C. Brent Winn, Jr. | 62 | Chief Financial Officer | - The Board has four standing committees: Audit, Compensation, Nominating and Corporate Governance, and Acquisition[253](index=253&type=chunk) - Charles S. Pearson, Jr. serves as the chairman of the audit committee and qualifies as an 'audit committee financial expert'[255](index=255&type=chunk)[256](index=256&type=chunk) - The company reported delinquent Section 16(a) filings for directors Francis P. Kavanaugh and Emanuel D. Neuman, who filed untimely Form 3s, with Mr. Kavanaugh also having three untimely Form 4 filings due to administrative errors[250](index=250&type=chunk) [Executive and Director Compensation](index=44&type=section&id=ITEM%2011.%20EXECUTIVE%20AND%20DIRECTOR%20COMPENSATION) CEO received no compensation in 2023, CFO received $250,000 salary, and directors received no compensation Summary Compensation Table (2023 & 2022) | Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | Francis P. Kavanaugh, CEO and President | 2023 | — | — | — | — | | C. Brent Winn, Jr., Chief Financial Officer | 2023 | 250,000 | — | — | 250,000 | | C. Brent Winn, Jr., Chief Financial Officer | 2022 | 250,000 | 50,000 | 126,600 | 426,600 | - No compensation was paid to directors during the fiscal year 2023[277](index=277&type=chunk) - Under the 2018 Equity Incentive Plan, a change in control results in the automatic vesting of outstanding equity awards[272](index=272&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=45&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Alfred Lee Finley is the only 5% stockholder, and management beneficially owns 16.17% of common stock Beneficial Ownership (as of March 6, 2024) | Name of Beneficial Owner | Percentage of all Shares (1) | | :--- | :--- | | **5% Stockholders** | | | Alfred Lee Finley | 14.67% | | **Named Executive Officers and Directors** | | | Francis P. Kavanaugh | 9.94% | | All Named Executive Officers and Directors as a Group (7 individuals) | 16.17% | - As of December 31, 2023, there were **61,413 securities** remaining available for future issuance under the company's equity compensation plans[285](index=285&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=47&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) The company has a staffing agreement with the CFO's entity and a policy for reviewing related party transactions - The company has a Staffing Agreement with Gunston Consulting, LLC, an entity owned by CFO C. Brent Winn, Jr., to employ staff on the company's behalf, reimbursing costs without markup[286](index=286&type=chunk) - The Board has a written policy requiring the audit committee to review and approve related person transactions exceeding **$120 thousand**[287](index=287&type=chunk) - A majority of the board members are independent, with CEO Francis P. Kavanaugh being the only non-independent director[289](index=289&type=chunk) [Principal Accountant Fees and Services](index=48&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Cherry Bekaert LLP billed approximately $303 thousand in 2023 for audit and tax services, all pre-approved Accountant Fees (Billed by Cherry Bekaert LLP) | Fee Type | 2023 | 2022 | | :--- | :--- | :--- | | Audit Fees | $212,012 | $228,283 | | Tax Fees | $90,826 | $77,822 | | **Total Fees** | **$302,838** | **$306,105** | Part IV [Exhibits and Financial Statement Schedules](index=49&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section includes audited consolidated financial statements, the auditor's report, notes, and supplementary schedules - This part includes the Report of Independent Registered Public Accounting Firm, Consolidated Financial Statements, Notes to Consolidated Financial Statements, and Schedule III – Real Estate Properties and Accumulated Depreciation[295](index=295&type=chunk) [Report of Independent Registered Public Accounting Firm](index=50&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Cherry Bekaert LLP issued an unqualified opinion, identifying investment property impairment as a critical audit matter - The auditor, Cherry Bekaert LLP, expressed an **unqualified opinion**, stating the financial statements present fairly, in all material respects, the financial position of the company[298](index=298&type=chunk) - A Critical Audit Matter was identified concerning the 'Evaluation of Investment Properties for Impairment' due to the subjective judgments and significant assumptions involved in the assessment[303](index=303&type=chunk)[306](index=306&type=chunk) [Consolidated Financial Statements](index=52&type=section&id=Consolidated%20Financial%20Statements) Total assets decreased to $82.7 million, with a net loss of $4.6 million in 2023 Consolidated Balance Sheet Summary | (In millions) | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $82.7 | $87.9 | | Total Liabilities | $69.0 | $69.2 | | Total Equity | $13.7 | $18.7 | Consolidated Statement of Operations Summary | (In millions) | 2023 | 2022 | | :--- | :--- | :--- | | Total Revenue | $10.3 | $11.1 | | Total Operating Expenses | $11.3 | $11.7 | | Operating loss | ($1.0) | ($1.4) | | Net Loss | ($4.6) | ($4.7) | | Net Loss Attributable to Common Shareholders | ($4.6) | ($4.8) | [Notes to Consolidated Financial Statements](index=56&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail management internalization, asset reclassification, preferred stock, mortgage debt, and related party transactions - The company transitioned from external to internal management on July 18, 2023, terminating its agreement with Medalist Fund Manager, Inc.[326](index=326&type=chunk) - The Hanover Square Shopping Center was reclassified to 'assets held for sale' as of December 1, 2023, with a carrying value of **$9.7 million**[335](index=335&type=chunk) - The company has **$5.0 million in 8.0% Series A mandatorily redeemable preferred stock** that must be redeemed on February 19, 2025[416](index=416&type=chunk)[421](index=421&type=chunk) - As of Dec 31, 2023, the company had total mortgage debt principal of **$61.0 million**, with maturities extending to 2041[444](index=444&type=chunk) - In connection with terminating the management agreement, the company paid a **$1.25 million termination fee** and a **$353 thousand Deferred Acquisition Fee**, which were part of **$2.1 million** in total management restructuring expenses for 2023[366](index=366&type=chunk) - Subsequent to year-end, the company agreed to acquire the Citibank Property from a related party and redeem **11,731.25 Operating Partnership Units** from a limited partner[510](index=510&type=chunk)[512](index=512&type=chunk)

PART I. FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Medalist Diversified REIT, Inc.'s unaudited condensed consolidated financial statements show decreased assets and equity, driven by net losses and a July 2023 management internalization [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of September 30, 2023, reflects decreased total assets and equity, primarily due to a widening accumulated deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 (Unaudited) | Dec 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$84,422** | **$87,915** | | Investment properties, net | $74,876 | $76,515 | | Cash & Restricted Cash | $4,750 | $5,663 | | **Total Liabilities** | **$70,151** | **$69,223** | | Mortgages payable, net | $60,617 | $61,340 | | Line of credit, short term, net | $1,000 | $0 | | **Total Equity** | **$14,271** | **$18,692** | | Accumulated deficit | ($35,341) | ($30,939) | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements of operations show decreased revenue and widened net losses for the three and nine months ended September 30, 2023, impacted by restructuring expenses Key Operating Results (in thousands) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $2,589 | $2,841 | $7,566 | $8,341 | | Total Operating Expenses | $3,655 | $3,113 | $9,047 | $8,841 | | *Management restructuring expenses* | *$1,453* | *$0* | *$1,846* | *$0* | | Operating Loss | ($1,067) | ($881) | ($1,482) | ($1,279) | | Net Loss Attributable to Common Shareholders | ($1,949) | ($1,754) | ($4,048) | ($3,759) | | Loss per share - basic and diluted | ($0.88) | ($0.80) | ($1.82) | ($1.77) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash flow statements for the nine months ended September 30, 2023, show decreased operating cash, reduced investing cash usage, and a shift to cash usage from financing activities Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash from operating activities | $416 | $1,673 | | Net cash from investing activities | ($1,144) | ($8,920) | | Net cash from financing activities | ($184) | $6,836 | | **Decrease in Cash** | **($913)** | **($411)** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's organization, accounting policies, and financial statement specifics, including the July 2023 management internalization, property portfolio, debt, and equity structure - As of September 30, 2023, the company owned and operated eight properties, primarily retail and flex-industrial centers in North Carolina and Virginia[21](index=21&type=chunk) - On July 18, 2023, the company terminated its external management agreement and is now managed by internal management directed by the Board, resulting in management restructuring expenses of **$1.85 million** for the nine months ended Sep 30, 2023[26](index=26&type=chunk)[65](index=65&type=chunk) - The company completed a 1-for-8 reverse stock split on May 3, 2023, to regain compliance with Nasdaq's minimum bid price requirement[135](index=135&type=chunk) Net Operating Income (NOI) by Segment (Nine Months Ended Sep 30) | Segment | 2023 (in thousands) | 2022 (in thousands) | | :--- | :--- | :--- | | Retail center properties | $4,195 | $3,607 | | Flex center property | $1,273 | $1,317 | | Hotel properties | $0 | $206 | | **Total NOI** | **$5,468** | **$5,130** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, operations, and liquidity, highlighting the impact of a 2022 property sale, management internalization costs, and negative FFO/AFFO - The company's strategy includes a focus on commercial properties (flex-industrial, retail), multi-family, and limited-service hotels in the southeastern U.S., while also evaluating single tenant net lease assets[198](index=198&type=chunk) - On July 18, 2023, the company internalized its management, terminating its agreement with the external manager and appointing an interim CEO, who was made permanent in October 2023[206](index=206&type=chunk) - Liquidity sources include **$3.0 million** in unrestricted cash, a **$1.5 million** line of credit (with **$1.0 million** drawn as of Sep 30, 2023), and potential proceeds from a Standby Equity Purchase Agreement (SEPA)[210](index=210&type=chunk)[251](index=251&type=chunk) FFO and AFFO Reconciliation (Nine Months Ended Sep 30, in thousands) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net loss | ($4,042) | ($3,732) | | **Funds from operations (FFO)** | **($532)** | **$768** | | Capital expenditures | ($1,144) | ($652) | | Other adjustments | ($11) | ($13) | | **Adjusted funds from operations (AFFO)** | **($1,687)** | **$103** | [Quantitative and Qualitative Disclosures about Market Risk](index=59&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company has omitted this section, as it is not required for a smaller reporting company - As a smaller reporting company, the registrant is not required to provide quantitative and qualitative disclosures about market risk[303](index=303&type=chunk) [Controls and Procedures](index=59&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that as of September 30, 2023, the company's disclosure controls and procedures and internal control over financial reporting were effective - Management concluded that as of September 30, 2023, the company's disclosure controls and procedures were effective[305](index=305&type=chunk) - Based on an evaluation against the COSO framework (2013), management concluded that internal control over financial reporting was effective as of September 30, 2023[306](index=306&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=60&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently subject to any material litigation outside of routine matters arising in the ordinary course of business, which are not expected to have a material adverse effect - The company is not presently subject to any material litigation[310](index=310&type=chunk) [Risk Factors](index=60&type=section&id=Item%201A.%20Risk%20Factors) The company, as a smaller reporting company, has omitted a discussion of risk factors as it is not required to provide this information - As a smaller reporting company, the registrant is not required to provide a discussion of risk factors[311](index=311&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=60&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase program, including the Board's October 2023 authorization for additional shares, with no repurchases made during Q3 2023 - On October 18, 2023, the Board authorized the repurchase of an additional **200,000 Common Shares**, increasing the total authorized for repurchase to **228,991 shares**[312](index=312&type=chunk) - No share repurchases were made during the three and nine months ended September 30, 2023[312](index=312&type=chunk) [Defaults Upon Senior Securities](index=60&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities - None[313](index=313&type=chunk) [Other Information](index=60&type=section&id=Item%205.%20Other%20Information) On November 13, 2023, the company entered a Staffing Agreement with Gunston Consulting, LLC, controlled by its CFO, to provide certain employees for a monthly fee - On November 13, 2023, the company entered into a Staffing Agreement with Gunston Consulting, LLC, an entity controlled by the company's CFO, to provide certain employees, including the CFO and controller[318](index=318&type=chunk) - The company will pay the consultant a monthly fee of **$26,197** for the CFO's services and **$11,154** for the controller's services, covering salary and related expenses[318](index=318&type=chunk) [Exhibits](index=62&type=section&id=Item%206.%20Exhibits) This section provides an index of the exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents, material agreements, and certifications

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's financial position weakened in H1 2023 with decreased assets and a wider net loss [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and equity declined by June 30, 2023, driven by a reduction in cash and net losses Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$85,323,778** | **$87,915,404** | | Investment properties, net | $75,495,791 | $76,514,952 | | Cash | $2,771,149 | $3,922,136 | | **Total Liabilities** | **$69,106,708** | **$69,222,965** | | Mortgages payable, net | $60,796,783 | $61,340,259 | | **Total Equity** | **$16,217,070** | **$18,692,439** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Revenue decreased in H1 2023 due to a hotel property sale, though the Q2 net loss narrowed slightly Statement of Operations Summary (Unaudited) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $2,515,901 | $2,595,901 | $4,976,877 | $5,499,865 | | Operating loss | ($74,256) | ($163,107) | ($414,972) | ($397,505) | | Net Loss Attributable to Common Shareholders | ($877,664) | ($1,014,887) | ($2,098,959) | ($2,004,171) | | Loss per share - basic and diluted | ($0.40) | ($0.47) | ($0.95) | ($0.96) | - The absence of hotel property revenue in 2023 is due to the **sale of the Clemson Best Western Property** on September 29, 2022[10](index=10&type=chunk)[60](index=60&type=chunk) [Condensed Consolidated Statements of Changes in Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) Total equity declined from $18.7 million to $16.2 million in H1 2023, primarily due to net loss and dividends Changes in Total Equity (Six Months Ended June 30, 2023) | Description | Amount | | :--- | :--- | | Balance, January 1, 2023 | $18,692,439 | | Net loss | ($2,095,705) | | Dividends and distributions | ($374,665) | | Retirement of fractional shares | ($4,999) | | **Balance, June 30, 2023** | **$16,217,070** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations decreased while cash used in financing and investing activities changed significantly Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash flows from operating activities | $862,923 | $1,573,772 | | Net cash flows from investing activities | ($740,959) | ($10,772,418) | | Net cash flows from financing activities | ($977,118) | $7,592,632 | | **Decrease in Cash and Restricted Cash** | **($855,154)** | **($1,606,014)** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key subsequent events include internalizing management, a reverse stock split, and suspending dividends - On July 18, 2023, the Company **terminated its Management Agreement** with Medalist Fund Manager, Inc. and is now internally managed[26](index=26&type=chunk)[151](index=151&type=chunk)[177](index=177&type=chunk) - A **1-for-8 reverse stock split** was completed on May 3, 2023, to regain compliance with Nasdaq's minimum bid price requirement[122](index=122&type=chunk)[126](index=126&type=chunk) - On July 12, 2023, the Board approved the **temporary suspension of dividends** on both common and mandatorily redeemable preferred stock[103](index=103&type=chunk)[173](index=173&type=chunk) - The company's portfolio consists of **eight properties**: six retail centers and two flex centers, concentrated in North Carolina, South Carolina, and Virginia[21](index=21&type=chunk) - A Special Committee of the Board was formed in March 2023 to explore strategic alternatives; on August 7, 2023, the company **ceased pursuing the sale of four properties**[174](index=174&type=chunk)[176](index=176&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strategic shifts, operational results showing a revenue mix change, and declining FFO/AFFO [Results of Operations](index=48&type=section&id=Results%20of%20Operations) Revenue shifted from hotel to retail properties following a sale, impacting year-over-year comparisons Revenue by Property Type (Three Months Ended June 30) | Property Type | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Retail center properties | $1,903,769 | $1,623,207 | $280,562 | | Hotel property | $0 | $362,851 | ($362,851) | | Flex center properties | $612,132 | $609,843 | $2,289 | | **Total Revenues** | **$2,515,901** | **$2,595,901** | **($80,000)** | Revenue by Property Type (Six Months Ended June 30) | Property Type | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Retail center properties | $3,795,448 | $3,148,292 | $647,156 | | Hotel property | $0 | $1,128,340 | ($1,128,340) | | Flex center properties | $1,181,429 | $1,223,233 | ($41,804) | | **Total Revenues** | **$4,976,877** | **$5,499,865** | **($522,988)** | [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is supported by rental receipts but faces pressure from debt service and manager termination fees - As of June 30, 2023, the company had **$2,771,149 in unrestricted cash** and a **$1,500,000 line of credit** with a zero balance[243](index=243&type=chunk)[244](index=244&type=chunk) - Primary non-operating liquidity needs include a **$1.25 million termination fee** and a **$352,717 deferred acquisition fee** payable to the former manager[241](index=241&type=chunk) [Funds from Operations (FFO)](index=56&type=section&id=Funds%20from%20Operations) Both FFO and AFFO declined significantly in the first half of 2023 compared to the prior year period FFO and AFFO (Six Months Ended June 30) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net loss | ($2,095,705) | ($1,988,322) | | **Funds from operations (FFO)** | **$264,752** | **$671,346** | | Capital expenditures | ($740,959) | ($492,703) | | Other adjustments | ($10,959) | ($133,247) | | **Adjusted funds from operations (AFFO)** | **($492,966)** | **$344,696** | [Quantitative and Qualitative Disclosures about Market Risk](index=59&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section is omitted as permitted for a smaller reporting company - As a smaller reporting company, the registrant is **not required to provide** quantitative and qualitative disclosures about market risk[290](index=290&type=chunk) [Controls and Procedures](index=59&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal controls over financial reporting were effective - Management concluded that **disclosure controls and procedures were effective** as of June 30, 2023[292](index=292&type=chunk) - Management concluded that **internal control over financial reporting was effective** as of June 30, 2023, based on the COSO 2013 framework[293](index=293&type=chunk) [PART II. OTHER INFORMATION](index=59&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=59&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently subject to any material litigation - The Company is **not presently subject to any material litigation** other than routine actions arising in the ordinary course of business[296](index=296&type=chunk) [Risk Factors](index=60&type=section&id=Item%201A.%20Risk%20Factors) This section is omitted as permitted for a smaller reporting company - As a smaller reporting company, the registrant is **not required to provide** a discussion of risk factors[297](index=297&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=60&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No equity securities were repurchased during the first half of 2023 - The Company **did not make any share repurchases** during the three and six months ended June 30, 2023[298](index=298&type=chunk) [Defaults Upon Senior Securities](index=60&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities occurred during the reporting period - There were **no defaults** upon senior securities during the period[299](index=299&type=chunk) [Other Information](index=60&type=section&id=Item%205.%20Other%20Information) The Board of Directors adjusted stock ownership limits, creating an exception for the interim CEO - On August 8, 2023, the Board **decreased the Aggregate Share Ownership Limit** and Common Share Ownership Limit from 9.8% to 3.6%[301](index=301&type=chunk) - An exception to the ownership limit was created for Francis P. Kavanaugh and his affiliates, establishing an **"Excepted Holder Limit" of 20%**[302](index=302&type=chunk) [Exhibits](index=61&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including certifications and corporate filings - The report includes various exhibits, such as certifications and filings related to **changes in ownership limits** and an **excepted holder limit**[306](index=306&type=chunk)