
PART I. FINANCIAL INFORMATION Financial Statements This section presents Medalist Diversified REIT, Inc.'s unaudited condensed consolidated financial statements for Q1 2023, including balance sheets, operations, equity, cash flows, and detailed notes Condensed Consolidated Balance Sheets As of March 31, 2023, total assets decreased slightly to $86.5 million, liabilities remained stable at $69.3 million, and total equity declined to $17.3 million due to net loss Condensed Consolidated Balance Sheet Highlights (in USD) | Metric | March 31, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $86,535,677 | $87,915,404 | | Investment properties, net | $76,242,506 | $76,514,952 | | Cash | $3,048,100 | $3,922,136 | | Total Liabilities | $69,255,989 | $69,222,965 | | Mortgages payable, net | $61,065,672 | $61,340,259 | | Total Equity | $17,279,688 | $18,692,439 | Condensed Consolidated Statements of Operations Q1 2023 total revenue decreased to $2.46 million due to a hotel property sale, widening operating loss to $340,716 and net loss to $1.22 million Q1 2023 vs Q1 2022 Performance (in USD) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Total Revenue | $2,460,976 | $2,903,964 | | Operating loss | $(340,716) | $(234,398) | | Net Loss | $(1,233,806) | $(980,383) | | Net Loss Attributable to Common Shareholders | $(1,221,295) | $(989,284) | | Loss per share - basic and diluted | $(0.07) | $(0.06) | - The decrease in total revenue is primarily attributed to the absence of hotel property revenue in Q1 2023 ($0) compared to $765,489 in Q1 2022, following the sale of the Clemson Best Western Property10 Condensed Consolidated Statements of Changes in Equity Total equity decreased from $18.7 million to $17.3 million in Q1 2023, driven by a $1.23 million net loss and $178,945 in distributions - For the three months ended March 31, 2023, total equity decreased by approximately $1.4 million, from $18.69 million to $17.28 million12 - The decrease in equity was primarily due to a net loss of $1,233,806 and dividends/distributions of $178,94512 Condensed Consolidated Statements of Cash Flows Q1 2023 operating cash flow decreased to $450,724, investing cash used increased to $647,690, and financing shifted to a $480,522 outflow, resulting in a $677,488 cash decrease Cash Flow Summary (in USD) | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Net cash flows from operating activities | $450,724 | $692,863 | | Net cash flows from investing activities | $(647,690) | $(366,059) | | Net cash flows from financing activities | $(480,522) | $368,253 | | (Decrease) Increase in Cash | $(677,488) | $695,057 | Notes to Condensed Consolidated Financial Statements Notes detail the company's organization, accounting policies, eight-property portfolio, debt, equity, related-party agreements, segment performance, and subsequent events like a reverse stock split and strategic alternatives exploration - As of March 31, 2023, the company owned and operated eight properties, primarily retail and flex-industrial/office properties in the southeastern U.S18 - On May 3, 2023, the company completed a 1-for-8 reverse stock split to regain compliance with Nasdaq's minimum bid price requirement168 - On March 10, 2023, the Board established a Special Committee of independent directors to explore strategic alternatives to maximize stockholder value152176 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A discusses Q1 2023 financial performance, noting a revenue decrease to $2.5 million and increased net loss to $1.2 million, alongside strategic activities, liquidity, and non-GAAP FFO/AFFO reconciliation - Total revenue for Q1 2023 decreased by $442,988 compared to Q1 2022, mainly due to the sale of the Clemson Best Western Hotel Property in September 2022237 - Net loss attributable to common shareholders for Q1 2023 was $1,221,295, an increase from a net loss of $989,284 in Q1 2022255 FFO and AFFO Reconciliation (in USD) | Metric | For the three months ended March 31, 2023 | For the three months ended March 31, 2022 | | :--- | :--- | :--- | | Net loss | $(1,233,806) | $(980,383) | | Funds from operations (FFO) | $(40,715) | $387,155 | | Adjusted funds from operations (AFFO) | $(657,538) | $217,023 | Recent Trends and Activities Recent activities include a 1-for-8 reverse stock split for Nasdaq compliance, formation of a Special Committee for strategic alternatives, and property transactions including the sale of Clemson Best Western and acquisition of Salisbury Marketplace - Completed a 1-for-8 Reverse Stock Split on May 3, 2023, to regain compliance with Nasdaq's Minimum Bid Price Requirement191 - Established a Special Committee of independent directors on March 10, 2023, to explore strategic alternatives, including potential sales or business combinations192 - Sold the Clemson Best Western Property in September 2022 and acquired the Salisbury Marketplace Property in June 2022194195 - Entered into an $18.6 million mortgage facility and a $1.5 million line of credit with Wells Fargo in June 2022196197 Liquidity and Capital Resources Liquidity sources include rental receipts, $3.0 million unrestricted cash, and a $1.5 million undrawn line of credit, with near-term obligations including $780,584 in mortgage principal payments - As of March 31, 2023, the company had $3,048,100 in unrestricted cash and a $1,500,000 undrawn line of credit with Wells Fargo236 - Future liquidity needs include $780,584 in principal payments on mortgages for the rest of 2023 and dividends declared in April 2023234 - Cash flow from operations decreased to $450,724 in Q1 2023 from $692,863 in Q1 2022, primarily due to increased professional fees and the loss of operating income from the sold hotel property227228 Results of Operations Q1 2023 total revenue decreased by $443k to $2.46 million due to hotel sale, despite retail growth, leading to a widened operating loss of $341k and net loss of $1.23 million Revenue by Segment (in USD) | Segment | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Retail center properties | $1,891,679 | $1,525,085 | $366,594 | | Hotel property | $0 | $765,489 | $(765,489) | | Flex center properties | $569,297 | $613,390 | $(44,093) | | Total Revenues | $2,460,976 | $2,903,964 | $(442,988) | - Legal, accounting, and other professional fees increased by $307,209 year-over-year, primarily due to costs associated with the exploration of strategic alternatives243228 - Interest expense increased slightly to $864,052 from $841,424, reflecting the net impact of the new Wells Fargo mortgage facility and the payoff of other mortgages253 Quantitative and Qualitative Disclosures about Market Risk This section is omitted as the company, a smaller reporting entity, 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 risk265 Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of March 31, 2023, with no material changes during the quarter - Management concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective267 - Based on an evaluation using the COSO framework (2013), management concluded that the company's internal control over financial reporting was effective as of March 31, 2023268 - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls270 PART II. OTHER INFORMATION Legal Proceedings The company is not currently subject to any material litigation or threatened legal proceedings outside of routine business matters - The company is not presently subject to any material litigation271 Risk Factors This section is omitted as the company, a smaller reporting entity, is not required to provide a discussion of risk factors - As a smaller reporting company, the registrant is not required to provide a discussion of risk factors272 Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any shares in Q1 2023, with 268,070 shares repurchased under the program as of December 31, 2022 - The company did not make any share repurchases during the three months ended March 31, 2023273 - The Board authorized a share repurchase program in December 2021 for up to 500,000 shares. As of the end of 2022, 268,070 shares had been repurchased273 Defaults Upon Senior Securities The company reported no defaults upon senior securities - None274 Other Information The company reported no other information for this item - None276 Exhibits This section provides an index of all exhibits filed, including charter documents, material contracts, and officer certifications - The report includes an index of exhibits, such as charter documents, material contracts (including amendments to credit facilities and consulting agreements), and Sarbanes-Oxley certifications278279 Signatures