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EX-31.1 - RULE 13A-14(A)/15D-14(A) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT T - Broad Street Realty, Inc.ex_128899.htm
EX-32.2 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION - Broad Street Realty, Inc.ex_128902.htm
EX-32.1 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION - Broad Street Realty, Inc.ex_128901.htm
EX-31.2 - RULE 13A-14(A)/15D-14(A) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT T - Broad Street Realty, Inc.ex_128900.htm
 

 

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

 

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

 

For the quarterly period ended September 30, 2018

 

OR

 

 

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

 

For the transition period from ___________ to _____________

 

Commission file number: 001-09043

 

MedAmerica Properties Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

36-3361229

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

Boca Center, Tower 1, 5200 Town Center Circle, Suite 550, Boca Raton, Florida 33486

(Address of principal executive offices) (Zip Code)

 

561-617-8050

(Registrant’s telephone number, including area code)

 

 

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

 

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

 

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

 

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

 

Large accelerated filer   ☐

Accelerated filer   ☐

Non-accelerated filer   ☐ 

Smaller reporting company   ☒

 

Emerging growth company   ☐

 

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

 

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

 

As of November 2, 2018, the registrant had 2,610,568 shares of common stock, $0.01 par value per share, outstanding.

 

 

 

MedAmerica Properties Inc.

 

Form 10-Q

 

Table of Contents

 

Part I — Financial Information

1

 

 

Item 1.

Financial Statements

1

 

 

 

Item 2.

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

10

 

 

Cautionary Statement Concerning Forward-Looking Statements

10

 

 

Overview

10

 

 

Critical Accounting Policies and Estimates

11

 

 

Results from Operations

11

 

 

General and Administrative Expenses

11

 

 

Interest Expense

12

   

Income Tax Expense

12

 

 

Net (Loss) Income Attributable to Common Shareholders

12

 

 

Financial Condition and Liquidity

12

 

 

Off-Balance Sheet Arrangements

13

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

13

 

 

 

Item 4.

Controls and Procedures

14

 

 

 

Part II — Other Information

14

 

 

Item 1.

Legal Proceedings

14

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

14

 

 

 

Item 3.

Defaults Upon Senior Securities

14

 

 

 

Item 4.

Mine Safety Disclosures

14

 

 

 

Item 5.

Other Information

14

 

 

 

Item 6.

Exhibits

15

 

 

 

Signatures

16

 

 

 

Part I — Financial Information

Item 1. Financial Statements

 

MedAmerica Properties Inc.

Condensed Consolidated Balance Sheets

 

   

September 30, 2018

   

December 31, 2017

 

 

 

(Unaudited)

         
ASSETS                

Current assets

               

Cash and equivalents

  $ 262,360     $ 708,382  

Prepaid insurance and other assets

    45,888       38,191  

Total current assets

    308,248       746,573  

Other assets

               

Equipment & furnishings, net

    19,384       21,808  

Total other assets

    19,384       21,808  
                 

Total assets

  $ 327,632     $ 768,381  
                 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

               

Current liabilities

               

Accounts payable and accrued expenses

  $ 43,057     $ 66,319  

Accrued dividends

    27,361       27,361  

Loan payable - insurance financing

    45,669       33,191  

Total current liabilities

    116,087       126,871  
                 

Total liabilities

    116,087       126,871  
                 

Stockholders' equity (deficit)

               

Series A Preferred stock, $0.01 par value, 20,000 shares authorized, 500 issued at September 30, 2018 and December 31, 2017

    5       5  

Common stock, $0.01 par value, 50,000,000 shares authorized, 2,610,568 issued at September 30, 2018 and December 31, 2017

    26,105       26,105  

Additional paid-in capital

    111,861,799       111,861,799  

Accumulated deficit

    (111,676,364 )     (111,246,399 )

Total stockholders' equity (deficit)

    211,545       641,510  
                 

Total liabilities and stockholders' equity (deficit)

  $ 327,632     $ 768,381  

 

See Notes to Condensed Consolidated Financial Statements

 

 

 

MedAmerica Properties Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

   

Nine months ended September 30,

   

Three months ended September 30,

 
   

2018

   

2017

   

2018

   

2017

 
                                 

General & administrative expenses

  $ 428,941     $ 368,331     $ 133,399     $ 261,461  

Loss from operations

    (428,941 )     (368,331 )     (133,399 )     (261,461 )

Interest expense

    (1,024 )     (16,618 )     (256 )     (1,230 )

Net loss

  $ (429,965 )   $ (384,949 )   $ (133,655 )   $ (262,691 )
                                 

Dividends for the benefit of preferred stockholders:

                               

Preferred stock dividends

    (3,750 )     (3,750 )     (1,250 )     (1,250 )

Deemed dividends on preferred stock conversion

    -       (148,125 )     -       -  

Net loss attributable to common stockholders

  $ (433,715 )   $ (536,824 )   $ (134,905 )   $ (263,941 )
                                 
                                 

Basic and diluted average number of common shares outstanding:

    2,610,568       1,185,284       2,610,568       1,438,206  
                                 

Net loss per common share basic and diluted

  $ (0.17 )   $ (0.45 )   $ (0.05 )   $ (0.18 )

 

See Notes to Condensed Consolidated Financial Statements

 

 

 

MedAmerica Properties Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

   

Nine months ended September 30,

 
   

2018

   

2017

 

Cash flows used in operating activities:

               

Net loss

  $ (429,965 )   $ (384,949 )

Adjustments to reconcile net loss to net cash used in operating activities:

               

Depreciation

    2,424       -  

Note assumed by related party

    -       (277,756 )

Changes in assets and liabilities:

               

Increase/(Decrease) in prepaid expenses and other assets

    37,972       31,703  

Decrease/(Increase) in accounts payable and accrued expenses

    (23,262 )     110,577  

Net cash used in operating activities

    (412,831 )     (520,425 )
                 

Cash flows provided by investing activities:

               

Acquisition of equipment and furnishings

    -       (22,716 )

Decrease in property deposits

    -       85,000  

Net cash provided by investing activities

    -       62,284  
                 

Cash flows provided by financing activities:

               

Payment of demand loan & accrued interest - related party

    -       (363,208 )

Proceeds on demand loan - related party

    -       169,138  

Payment of note payable - insurance financing

    (33,191 )        

Proceeds from common stock subscribed, net of expenses

    -       1,803,665  

Net cash (used in) provided by financing activities

    (33,191 )     1,609,595  
                 

Net increase (decrease) in cash

    (446,022 )     1,151,454  

Cash at beginning of period

    708,382       450  

Cash at end of period

  $ 262,360     $ 1,151,904  
                 

Supplemental disclosure of cash flow information:

               

Cash paid during the period for:

               

Interest

  $ 1,024     $ 16,618  

Franchise taxes

  $ 5,650     $ -  
                 

Non cash financing activities:

               
Financed insurance   $ 45,669     $

 

-

 

Deemed dividend on preferred stock conversion

  $ -     $ 148,125  

Issuance of common shares

  $ -     $ 888,774  

 

See Notes to Condensed Consolidated Financial Statements

 

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

 

 

Note 1. Nature of Operations

 

MedAmerica Properties Inc. (the “Company” or “MedAmerica”) was originally organized under the laws of the Commonwealth of Massachusetts in 1985, under the name VMS Hotel Investment Trust, for the purpose of investing in mortgage loans. The Company was subsequently reorganized as a Delaware corporation in 1987 and changed its name to B.H.I.T. Inc. In 2010, the Company changed its name from B.H.I.T. Inc. to Banyan Rail Services Inc. From 2009 to 2012, the Company experienced severe losses from an operating subsidiary in the rail services sector. In 2016, after exploring various industries and researching numerous companies, the board of directors elected to pursue investing in commercial real estate. The Company is pursuing the acquisition and management of strategically located medical office buildings.

 

In April 2017, our board of directors and the holders of a majority of our outstanding shares of common stock approved by written consent amendments to the Company’s certificate of incorporation to (1) change the name of the Company from “Banyan Rail Services Inc.” to “MedAmerica Properties Inc.,” and (2) effect a 1 for 10 reverse stock split of the issued and outstanding shares of common stock of the Company. On June 15, 2017, the Company filed these amendments with the Secretary of State of the State of Delaware and the name change and reverse stock split became effective with the Financial Industry Regulatory Authority, Inc. (“FINRA”) on June 20, 2017. As appropriate, all common stock share quantities have been updated to reflect the 1 for 10 reverse stock split.

 

 

 

Note 2. Principles of Consolidation and Basis of Presentation

 

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany account balances have been eliminated in consolidation. The accompanying Financial Statements give effect to all adjustments necessary to present fairly the financial position and results of operations and cash flows of the Company and its subsidiaries.

 

 

 

Note 3. Immaterial Error Correction

 

The Company has corrected an immaterial error in its previously filed Form 10-Q, for the quarter ended September 30, 2017. Net loss attributable to common stockholders decreased by $148,125 for the three months ended September 30, 2017 and the net loss per common share basic and diluted decreased by $(0.10) for the three months ended September 30, 2017 to reflect the deemed dividend on preferred stock exchange which was effective June 30, 2017 and originally reported in September 30, 2017 (See Note 7).

 

 

 

Note 4. Liquidity and Profitability

 

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company management believes that cash on hand and a line of credit from a related party (see Note 10) will be adequate to fund its limited overhead and other cash requirements for the next twelve months.

 

During 2017 the Company completed a private placement of its common stock, raising $1,940,005. At September 30, 2018, the Company had a cash balance of approximately $262,000 and working capital of approximately $192,000.

 

We have undertaken, and will continue to implement, various measures to address our financial condition, including:

 

 

Curtailing costs and consolidating operations, where feasible.

 

Seeking debt, equity and other forms of financing, including funding through strategic partnerships.

 

Reducing operations to conserve cash.

 

Investigating and pursuing transactions with third parties, including strategic partnerships.

 

Adding board member and senior advisor with extensive real estate experience.

 

The Company management believes that these measures, coupled with cash on hand and a line of credit from a related party will be adequate to fund its limited overhead and other cash requirements for the next twelve months. However, there can be no assurance that we will be able to secure the additional funding we need. If our efforts to do so are unsuccessful, we will be required to further reduce or eliminate our operations.

 

 

 

Note 5. Summary of Significant Accounting Policies

 

UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION

 

The unaudited interim condensed consolidated financial statements of the Company as of September 30, 2018 for the three and nine months ended September 30, 2018 and 2017 included herein have been prepared in accordance with the instructions for Form 10-Q under the Securities Exchange Act of 1934, as amended, and Article 10 of Regulation S-X under the Securities Act of 1933, as amended. Certain information and note disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations relating to interim condensed consolidated financial statements.

  

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company at September 30, 2018 and the results of its operations and its cash flow for the three and nine months ended September 30, 2018 and 2017. The results of operations and cash flows for such periods are not necessarily indicative of results expected for the full year or for any future period.

 

Use of Estimates

 

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States ("U.S. GAAP"), requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenues and expenses and disclosures of contingent assets and liabilities at the date and period ending of the financial statements. Actual results could differ from those estimates.

 

Cash

 

The Company considers all cash, bank deposits and highly liquid investments with an original maturity of three months or less to be cash equivalents. From time to time our cash deposits exceed federally insured limits.

 

Equipment and Furnishings

 

Equipment and furnishings are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from 3 to 7 years. Expenditures for repairs and maintenance are charged to expense as incurred. For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in income for the period statement of operations.

 

Fair Value of Financial Instruments

 

Recorded financial instruments as of September 30, 2018, consist of cash and cash equivalents, accounts payable, accrued liabilities and short-term obligations. The related fair values of these financial instruments approximated their carrying values due to either the short-term nature of these instruments or based on the interest rates currently available to the Company.

 

Income (Loss) Per Common Share

 

The Company computes net income (loss) per common share in accordance with the provision included in Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 260, Earnings per Share. Under ASC 260, basic and diluted income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares and common share equivalents outstanding during the period. Basic income (loss) per common share excludes the effect of potentially dilutive securities, while diluted income (loss) per common share reflects the potential dilution that would occur if securities or other contracts to issue common shares were exercised for, converted into or otherwise resulted in the issuance of common shares. The Company’s potentially dilutive securities are not included in the computation of diluted loss per share because their impact is anti-dilutive due to the net loss.

 

 

Income Taxes

 

The Company accounts for our income taxes using FASB ASC Topic 740, " Income Taxes ", which requires the recognition of deferred tax liabilities and assets for expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

 

The Company follows the provisions regarding Accounting for Uncertainty in Income Taxes, which require the recognition of a financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. We had no material unrecognized tax benefits and no adjustments to our financial position, results of operations or cash flows that were required. Generally, federal, state and local authorities may examine the Company's tax returns for three years from the date of filing. We do not expect that unrecognized tax benefits will increase within the next twelve months. We recognize accrued interest and penalties related to uncertain tax positions as income tax expense. 

 

Retained Earnings Distributions

 

The Company’s preferred stockholders are entitled to receive payment before any of the common stockholders upon a liquidation of the Company, and we cannot pay dividends on our common stock unless we first pay dividends required by our preferred stock.

 

Preferred Stock Dividends

 

The holder of Series A Cumulative Preferred Stock (“Preferred Stock”) are entitled to receive cumulative, non-compounded, cash dividends on each outstanding share of Preferred Stock at the rate of 10.0% of the issuance price per annum (“Preferred Dividends”), which began accumulating on January 1, 2010. The Preferred Dividends are payable semiannually to the holder of Preferred Stock, when and as declared by the Board of Directors.

 

Recently Issued Accounting Pronouncements

 

Management has determined that all recently issued accounting pronouncements will not have a material impact on the Company’s financial statements or do not apply to the Company’s operations.

 

 

 

Note 6. Equipment and Furnishings

 

The amount of equipment and furnishings are as follows:

 

 

Description

    September 30, 2018  

December 31, 2017

 

Office equipment and furnishings

  $

21,829

  $ 21,829  

Computer equipment

   

787

    787  

Total

   

22,616

    22,616  

Less accumulated depreciation

    (3,232 )   (808 )

Equipment and furnishings, net

  $ 19,384   $ 21,808  

 

Depreciation expense related to equipment and furnishings amounted to $808 and $2,424 for the three and nine months ended September 30, 2018.

 

 

 

Note 7. Preferred Stock and Common Stock

 

Stock Split

 

In April 2017, the board of directors and the then majority shareholder approved a 1 for 10 reverse stock split (“Stock Split”) of the issued and outstanding shares of common stock of the Company. On June 15, 2017, the Company filed an amendment to its certificate of incorporation with the Delaware Secretary of State effecting the Stock Split. The Stock Split became effective with the Financial Industry Regulatory Authority, Inc. (“FINRA”) on June 20, 2017.

 

Pursuant to the Stock Split, each outstanding share of the Company’s common stock was automatically exchanged for one - tenth of a share. As a result, each stockholder now owns a reduced number of shares of the Company’s common stock. The Stock Split affects all stockholders uniformly and does not affect any stockholder’s percentage ownership in the Company or the proportionate voting rights and other rights and preferences of the stockholders, except for adjustments that may result from the treatment of fractional shares, which have been rounded to the nearest whole share. The number of the Company’s authorized shares of common stock was not affected by the Stock Split.

 

Private Placement

 

From February 10, 2017 through December 31, 2017, the Company accepted subscriptions of $1,940,005 for unregistered shares of the Company’s common stock for $1.50 a share (the “2017 Private Placement”). The issuances of common stock were made in reliance on Section 4(a)(2) of the Securities Act of 1933 for the offer and sale of securities not involving a public offering and Rule 506(b) under the Securities Act. The proceeds from the 2017 Private Placement are being used for working capital and to fund operations. The Company issued 1,293,334 shares of common stock under the 2017 Private Placement, along with 2,500 shares of common stock under a prior private placement.

 

Preferred Stock Exchange

 

In April 2017, the Company offered our preferred shareholders shares of our common stock in exchange for their Series A cumulative preferred stock (“Preferred Stock”) and accumulated preferred dividends outstanding as of December 31, 2016. Pursuant to the offer, each share of Preferred Stock would be exchanged for 20 shares of (post-split) common stock and each dollar of preferred dividend would be exchanged for 0.2 shares of common stock. All preferred shareholders, except one, accepted the offer resulting in the conversion of 9,875 shares of Preferred Stock and $301,656 of accumulated preferred dividends into 257,831 shares of common stock, which were issued in the third quarter of 2017. The effective date of the exchange is June 30, 2017. This exchange resulted in deemed dividends on preferred stock conversion of $148,125.

 

Subsequent to the reverse stock split, the private placement and the preferred stock exchange, there are 2,610,568 shares of common stock issued and outstanding, consisting of 1,059,581 shares after the reverse stock split, 1,293,156 shares from the private placement and 257,831 shares from the preferred stock and preferred dividend exchange.

 

 

Preferred Stock Dividends

 

The holder of Preferred Stock are entitled to receive cumulative, non-compounded cash dividends on each outstanding share of Preferred Stock at the rate of 10.0% of the Issuance Price per annum (“Preferred Dividends”), which began to accrue on January 1, 2010. Preferred Dividends are payable semiannually to the holder of Preferred Stock. Any Preferred Dividends due and unpaid on any Payment Date, whether or not declared by the board of directors, shall accrue with any other due and unpaid Preferred Dividends, regardless of whether there are profits, surplus or other funds of the Company legally available for payment of dividends.

 

Substantially all the Preferred stockholders had previously agreed to accept common stock in lieu of cash for payment of Preferred Dividends. In February 2016, the Company issued 29,856 shares of common stock in lieu of $29,249 of Preferred Dividends for those Preferred stockholders who accepted the common stock in lieu of the cash offer. The total accrued but unpaid Preferred Dividends is $27,361 as of September 30, 2018 and December 31, 2017. An additional $8,750 of cumulative Preferred Dividends are undeclared and unaccrued as of September 30, 2018 and are not included in the balance sheet.

 

Common Stock

 

As of September 30, 2018, the Company’s board of directors and officers beneficially own 838,060 shares of the Company’s common stock or 32.10% of the outstanding common stock. Included in the 838,060 shares is 91,348 shares owned by Banyan Rail Holdings LLC and 351,966 shares owned by Marino Family Holdings LLC, companies controlled by our chairman, Gary O. Marino.

 

 

 

Note 8. Earnings (Loss) per Share

 

The Company excluded from its diluted earnings per share calculation 500 and 10,375 common shares issuable upon conversion of shares of convertible preferred stock and 70,000 and 60,000 stock options that were outstanding at September 30, 2018 and 2017, respectively, as their inclusion would be anti-dilutive.

 

.

 

 

Note 9. Stock-Based Compensation

 

On August 23, 2017, the Company issued an aggregate of 60,000 stock options to its directors and officers. The related stock compensation expense was not material.

 

On June 11, 2018, the Company issued an aggregate of 10,000 stock options to a director. The related stock compensation expense was not material.

 

The Company previously had stock option agreements with its directors and officers. Details of options activity is as follows:

 

   

Number of

Shares

   

Weighted

Average

Exercise Price

per Share

   

Weighted

Average

Fair Value at

Grant Date

   

Weighted

Average

Remaining Contractual

Life

   

Intrinsic

Value

 

Balance December 31, 2016

    -     $ -       -       -       -  

Options granted

    60,000       8.00       -       -       -  

Options exercised

    -       -       -       -       -  

Options expired

    -       -       -       -       -  

Balance December 31, 2017

    60,000     $ 8.00     $ -       -     $ -  

Options granted

    -       -       -       -       -  

Options exercised

    -       -       -       -       -  

Options expired

    -       -       -       -       -  

Balance March 31, 2018

    60,000     $ 8.00     $ -       -     $ -  

Options granted

    10,000       6.00       -       -       -  

Options exercised

    -       -       -       -       -  

Options expired

    -       -       -       -       -  

Balance June 30, 2018

    70,000     $ 7.71     $ -       -     $ -  

Options granted

    -       -       -       -       -  

Options exercised

    -       -       -       -       -  

Options expired

    -       -       -       -       -  

Balance September 30, 2018

    70,000     $ 7.71     $ -       4.11     $ -  

 

The fair values of stock options are estimated using the Black-Scholes method, which takes into account variables such as estimated volatility, expected holding period, dividend yield, and the risk-free interest rate. The risk-free interest rate is the five-year treasury rate at the date of grant. The expected life is based on the contractual life of the options at the date of grant. All 70,000 options were fully vested at grant date. The intrinsic value is not material.

 

 

 

Note 10. Related Party Relations and Transactions

 

Gary O. Marino, the Company’s chairman of the board, is the chairman, president, and chief executive officer of Boca Equity Partners LLC (“BEP”), Patriot Equity LLC (“Patriot”), Banyan Medical Partners LLC (“BMP”), and Banyan Surprise Plaza LLC (“BSP”). Mr. Marino owns 100% of Patriot, Patriot owns 100% of BMP and BSP through and along with other wholly owned subsidiaries. Mr. Marino, Mr. Paul S. Dennis, a member of the Company's board of directors, and Mr. Donald S. Denbo, a member of the Company's board of directors, also hold membership interests in BEP.

 

During 2016, the Company established BMP, and certain other subsidiaries wholly-owned by BMP. The Company formed these entities to acquire medical office buildings in the United States. The Company was unable to raise the capital needed to consummate the first medical building opportunity. On March 9, 2017, the Company sold BMP and BMP’s wholly-owned subsidiaries to Patriot. The selling price was $277,756 in the form of BMP assuming a portion of the Company’s note payable balance due to BEP. The consideration of $277,756 was used to recoup the $110,000 in property deposits as of December 31, 2016 and reimbursement of $117,756 of other 2016 and 2017 expenses incurred by the Company on behalf of BMP. This reimbursement of expenses is offset in general and administrative expenses as of June 30, 2017, which caused general and administrative expenses to have a credit balance of $7,270 during that quarter.

 

On July 27, 2016, the Company entered into a Demand Note and Loan Agreement (the “Note”) with BEP providing for draws of up to $250,000. Loans under the Note bore interest at an annual rate of 10% and outstanding principal and interest were due on demand. This Note was cancelled and terminated on December 31, 2016 when the Company entered into a new Demand Note and Loan Agreement (the “New Note”) with BEP for $471,826. The New Note represents advances from BEP under the New Note, payments made since the date of the New Note and interest accrued thereon. The New Note bore interest at the rate of 10% per annum and is payable upon demand. BEP is committed to  making advances to the Company under the New Note as the Company may from time to time request. The balance drawn on the New Note including accrued interest was paid in full May 31, 2017. The Note remains available to the Company to draw upon.  

 

On September 13, 2018, MedAmerica entered into an office lease and administrative support agreement (the “Agreement”) with BEP. The Agreement has a month-to-month term commencing on September 1, 2018. The Agreement provides for the Company’s use of a portion of BEP’s offices and certain overhead items at the BEP offices such as space, utilities and other administrative services for $5,000 a month. The Agreement replaces the June 8, 2017 office lease and administrative support agreement between the Company and BEP. Total expense incurred under these agreements amounted to $125,000 and $93,025 for the nine months ended September 30, 2018 and 2017, respectively and $35,000 and $45,000 for the three months ended September 30, 2018 and 2017, respectively.

 

During 2018 the Company's President and CEO performed work for International Rail Partners LLC (“IRP”), an entity controlled by the Company’s Chairman. The Company billed back IRP for compensation and expenses in the amount of $125,078 and $13,211 for the nine and three months ended September 30, 2018.

 

The Company’s directors have not received cash compensation for their services in 2018 or 2017 but were compensated with stock options. See footnote 9 Stock-Based Compensation for further discussion. In the third quarter of 2017, the Company hired a new president and chief executive officer and a new chief financial officer who are husband and wife. Also, in the third quarter of 2017, the Company issued 15,000 common stock options to the president and CEO and 45,000 shares to other board members and officers. The related stock compensation was not material.

 

As of September 30, 2018, the Company’s board of directors and officers beneficially own 838,060 shares of the Company’s common stock or 32.10% of the outstanding common stock. Included in the 838,060 shares are 91,348 shares owned by Banyan Rail Holdings LLC and 351,966 shares owned by Marino Family Holdings LLC, companies controlled by our chairman, Gary O. Marino.

 

Paul Dennis, director and previously interim president, interim chief executive officer and interim chief financial officer, participated in the 2017 Private Placement investing $150,000 for 100,000 shares of common stock.  

 

 

 

Note 11. Subsequent Events

 

The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial statements were issued for potential recognition or disclosure. The Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.

 

 

 

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

 

The following discussion should be read in conjunction with the accompanying unaudited Financial Statements and notes thereto included under Part I, Item 1 of this Quarterly Report on Form 10-Q. In addition, reference should be made to our audited Consolidated Financial Statements and notes thereto and related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC”).

 

Cautionary Statement Concerning Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains information about the Company, some of which includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 including statements regarding our beliefs regarding opportunities for strong cash flow and increased stock value for our stockholders from investing in medical office buildings. Forward-looking statements are statements other than historical information or statements about our current condition. You can identify forward-looking statements by the use of terms such as “believes,” “contemplates,” “expects,” “may,” “will,” “could,” “should,” “would,” or “anticipates,” other similar phrases, or the negatives of these terms. We have based the forward-looking statements relating to our operations on our current expectations, estimates and projections about us and the markets we serve. We caution you that these statements are not guarantees of future performance and involve risks and uncertainties. These statements should be considered in conjunction with the discussion in Part I, the information set forth under Item 1A, “Risk Factors” and with the discussion of the business included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our 2017 Annual Report on Form 10-K, filed with the SEC on April 2, 2018. We have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, the actual outcomes and results may differ materially from what we have expressed or forecast in the forward-looking statements. Any differences could result from a variety of factors, including the following:

 

 

Successfully raising capital to fund our operations;

 

Successfully finding medical office buildings to acquire with co-investment partners;

 

Successfully finding financing to acquire identified medical office buildings;

 

Successfully managing and operating medical office buildings acquired; and

 

Any of our other plans, objectives, expectations or intentions contained in this report that are not historical facts.

 

You should not place undue reliance on our forward-looking statements, which reflect our analysis only as of the date of this report. The risks and uncertainties listed above and elsewhere in this report and other documents that we file with the SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q, and any current reports on Form 8-K, must be carefully considered by any investor or potential investor in the Company. We undertake no obligation to update forward-looking statements, except as required by law.

 

Overview

 

MedAmerica is a real estate management company with limited operations. After exploring various industries, in 2016, the board of directors determined to pursue the sourcing, financing, asset management and co-investment of well-located medical office buildings throughout the United States with the intention of aggregating multiple properties within certain locations allowing us to gain efficiencies and diversify risk. We will source, provide all due diligence and oversee the financing for co-investment partners to acquire medical office buildings in a price range typically too small for REIT investing. We will then asset and property manage the portfolios and determine the optimal exit strategy.

 

We will seek investments with strong fundamentals in the highly-desired healthcare real estate sector that continues to grow by demand that is supported by expectations of an increase in the aging baby boomer population. We are focused on opportunistic medical office real estate investments located in the sunbelt states. Management is looking in these attractive geographic locations for investments that meet its criteria. We believe that investing in medical office buildings will generate strong cash flow and produce significantly increased value for our stockholders. Although we believe the acquisition and management of medical office buildings is fundamentally sound, there is no assurance that we will be successful in this endeavor or that we can locate and finance properties meeting our criteria in locations desirable to us. For more information concerning these risks, please see Part I, Section 1A - “Risk Factors” of our 2017 Annual report on Form 10-K, filed with the SEC on April 2, 2018.

 

In preparation for this new strategy, our management team is focused on repositioning the Company, both operationally and financially. As described in greater detail below, we have changed the name of the Company to identify with our new direction. In addition to seeking equity and debt financing, we have taken the actions described under “Recent Events” in our 2017 Annual report on Form 10-K to strengthen our balance sheet and pursue our new strategy.

 

 

Critical Accounting Policies and Estimates

 

In response to the SEC's financial reporting release, FR-60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies, the Company has selected its most subjective accounting estimation process for purposes of explaining the methodology used in calculating the estimate in addition to the inherent uncertainties pertaining to the estimate and the possible effects on the Company's financial condition.  These estimates involve certain assumptions that if incorrect could create a material adverse impact on the Company's results of operations and financial condition.  For a discussion of our significant accounting policies, See Note 5- "Summary of Significant Accounting Policies" in the accompanying Notes to Financial Statements.  

 

There were no material changes to our principal accounting estimates during the period covered by this report.    

 

Results from Operations

 

The following table summarizes our results for the three and nine months ended September 30, 2018 and 2017:

 

   

Nine months ended September 30,

   

Variance

   

Three months ended September 30,

   

Variance

 
      2018       2017                     2018       2017                
                                                             

General & administrative expenses

  $ 428,941     $ 368,331     $ 60,610     16.5 %   $ 133,399     $ 261,461     $ (128,062 )   -49.0 %

Loss from operations

    (428,941 )     (368,331 )     (60,610 )   16.5 %     (133,399 )     (261,461 )     128,062     -49.0 %

Interest expense

    (1,024 )     (16,618 )     15,594     -93.8 %     (256 )     (1,230 )     974     -79.2 %

Net loss

  $ (429,965 )   $ (384,949 )   $ (45,016 )   11.7 %   $ (133,655 )   $ (262,691 )   $ 129,036     -49.1 %
                                                             

Dividends for the benefit of preferred stockholders:

                                                           

Preferred stock dividends

  $ (3,750 )   $ (3,750 )   $ -     0.0 %   $ (1,250 )   $ (1,250 )   $ -     0.0 %

Deemed dividends on preferred stock conversion

    -       (148,125 )     148,125     N/A       -       -       -     N/A  

Net loss attributable to common stockholders

  $ (433,715 )   $ (536,824 )   $ 103,109     -19.3 %   $ (134,905 )   $ (263,941 )   $ 129,036     -48.9 %

 

General and Administrative Expenses

 

General and administrative expenses include: compensation expense, professional fees, insurance, office and rent expenses and costs related to being a public company.

 

For the nine months ended September 30, 2018, general and administrative expenses increased $60,610 compared to the nine months ended September 30, 2017. The 2017 results included $117,756 of prior year expenses reimbursed by a related party in connection with the sale of BMP. The 2018 results included $125,078 of expenses reimbursed by a related party relative to the Company’s President and CEO.

 

For the nine months ended September 30, 2018, net of the expense reimbursements the overall increase in general and administrative expenses is primarily due to:

 

 

A decrease in professional fees of approximately $220,000 of which $24,000 is a reimbursement by a related party in 2018;

 

A decrease in office and administration expenses of approximately $5,000;

 

Offset by an increase in acquisition costs of approximately $122,000 of which $118,000 is the reimbursement by a related party in 2017;

 

An increase in officers’ compensation expense of approximately $40,000 of which $40,000 is a reimbursement by a related party in 2018;

 

An increase in private placement of approximately $35,000;

 

An increase in rent of approximately $32,000 paid to a related party;

 

An increase in travel and entertainment of approximately $11,000 of which $62,000 is a reimbursement by a related party in 2018;

 

An increase in computer expense of approximately $10,000;

 

An increase in investors relations of approximately $10,000;

  An increase in taxes of approximately $9,000;
 

An increase in insurance of approximately $8,000;

 

An increase in other expenses of approximately $8,000

 

For the three months ended September 30, 2018, general and administrative expenses decreased $128,062 compared to the three months ended September 30, 2017. The 2018 results included $13,211 of expenses reimbursed by a related party relative to services provided by the Company’s President and CEO.

 

For the three months ended September 30, 2018, net of the expense reimbursement in 2018 the overall increase in general and administrative expenses is primarily due to:

 

 

A decrease in professional fees of approximately $134,000 of which $3,000 is a reimbursement by a related party in 2018;

 

A decrease in travel and entertainment of approximately $12,000 of which $4,000 is a reimbursement by a related party in 2018;

 

A decrease in rent of approximately $10,000 paid to a related party;

 

A decrease in office and administration expenses of approximately $2,000;

 

A decrease in investor relations of approximately $1,000;

 

Offset by an increase in private placement of approximately $23,000

 

An increase in insurance of approximately $4,000

 

An increase in dues and subscriptions of approximately $3,000

 

An increase in taxes of approximately $1,000

 

 

Interest expense

 

Interest expense was $1,024 and $16,618 for the nine months ended September 30, 2018 and 2017, respectively. Interest expense was $256 and $1,230 for the three months ended September 30, 2018 and 2017, respectively. The decrease in interest expense was due to the repayment of a related party note payable in 2017.

 

 

Income tax expense

 

Income tax expense was $0 for the three and nine months ended September 30, 2018 and 2017 due to a full valuation allowance being recorded by the Company for any deferred tax assets created as the result of any net operating losses generated by operations.

 

A valuation allowance is evaluated by considering all positive and negative evidence about whether the deferred tax assets will be realized. At the time of evaluation, the allowance can be either increased or reduced. A reduction could result in the complete elimination of the allowance if positive evidence indicates that the value of the deferred tax assets is no longer impaired and the allowance is no longer required.

 

 

Net loss attributable to common shareholders

 

Net loss attributable to common stockholders was $0.17 and $0.45 per share for the nine months ended September 30, 2018 and 2017, respectively. The difference of ($0.28) per common share is primarily the result of a 2017 reimbursement of deal costs by a related party of approximately $118,000, the 2018 reimbursement of expenses by a related party of approximately $125,000, an increase in 2018 general and administrative expenses of $61,000 and an increase in weighted average shares outstanding.

 

Net loss attributable to commons stockholders was $0.05 and $0.18 per share for the three months ended September 30, 2018 and 2017, respectively. The difference of ($0.13) per common share is primarily the result of a 2018 reimbursement of expenses by a related party of approximately $13,000, a decrease in 2018 general and administrative expenses of $128,000 and an increase in weighted average shares outstanding.

 

 

Financial Condition and Liquidity

 

Our cash balances at October 31, 2018, September 30, 2018 and December 31, 2017 were $237,815, $262,360 and $708,382, respectively. The following is a summary of our cash flow activity for the nine months ended September 30, 2018 and 2017:

 

   

Nine months ended September 30,

 
   

2018

   

2017

 

Net cash used in operating activities

  $ (412,831 )   $ (520,425 )

Net cash provided by investing activities

  $ -     $ 62,284  

Net cash (used in) provided by financing activities

  $ (33,191 )   $ 1,609,595  

 

Net cash used by in operating activities        

 

For the nine months ended September 30, 2018, net cash used in operating activities was $412,831 as compared to $520,425 for the nine months ended September 30, 2017. The decrease in cash used in operating activities was primarily due to the 2017 and 2018 reimbursement of costs by a related party, 2018 reduction in accounts payable and accrued expenses and 2018 increase in net operating activities.

 

Net cash provided by investing activities

        

For the nine months ended September 30, 2018, net cash provided by investing activities was $0 as compared to $62,284 for the nine months ended September 30, 2017. The decrease in cash provided by investing activities was primarily due to the decrease in property deposits and an increase in acquisition of equipment and furnishings.

 

 

Net cash (used in) provided by financing activities

 

For the nine months ended September 30, 2018, net cash used in financing activities was $33,191 as compared to net cash provided by financing activities of $1,609,595 for the nine months ended September 30, 2017. The decrease in net cash provided by financing activities was due primarily to the 2017 Private Placement which was launched on February 2017 and raised $1,803,665 (net of costs) through September 30, 2017. This was offset by a net decrease in the demand loan from a related party of approximately $194,070. The $33,191 used in financing activities during the nine months ended September 30, 2018 related to repayments of the note payable - insurance financing.

 

The Company recognizes that as a result of its limited operations, it will continue to rely upon the sale of stock or capital contributions from investors to generate cash flow and as we work towards generating positive cash from operating medical office buildings.

 

As of November 1, 2018, we had a cash balance of $237,815.   We believe that the cash on hand and access to the line of credit from a related party should meet our working capital needs for at least the next 12 months.  However, as part of our business model seeking to acquire medical office buildings, we intend to seek to raise equity.  We cannot assure you that we will commence this task or that we will be successful.  

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”) Rule 13a-15(e)) as of September 30, 2018.

 

Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2018. 

 

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the quarter ended September 30, 2018, identified in connection with our evaluation that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

  

 

 

Part II — Other Information

 

Item 1. Legal Proceedings

 

The Company is not a party, nor is its property the subject of, any material pending legal proceedings.

 

.

 

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

  

None                               

 

Item 3. Defaults Upon Senior Securities

 

Not applicable.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

 

Item 6. Exhibits

 

3.1 

Restated Certificate of Incorporation, Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2009 as filed April 15, 2010 is incorporated by reference herein. 

 

 

3.2

Certificate of Amendment of Certificate of Incorporation of B.H.I.T. Inc. Exhibit 3.1 to the Form 8-K filed January 6, 2010 is incorporated by reference herein.

 

 

3.3

Certificate of Correction.  Exhibit 3.1 to the Form 8-K filed March 14, 2011 is incorporated by reference herein.  

 

 

3.4

Certificate of Designation of Series A Preferred Stock.  Exhibit 3.1 to the Form 8-K dated February 5, 2010 is incorporated by reference herein.  

 

 

3.5

Certificate of Amendment to Certificate of Incorporation of MedAmerica Properties Inc. Exhibit 3.8 to the Form 10-K dated March 25, 2015 is incorporated by reference herein.  

 

 

3.6

Certificate of Amendment to Certificate of Incorporation of MedAmerica Properties Inc. Exhibit 3.1 to the Form 8-K filed June 19, 2017 is incorporated by reference herein. 

 

 

3.7

Amended and Restated Bylaws of the Registrant.  Exhibit D to the Definitive Proxy Statement filed August 9, 2000 is incorporated by reference herein. 

 

 

31.1*

Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

31.2*

Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

32.1**

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

32.2**

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

101.INS*

XBRL Instance Document

 

 

101.SCH*

XBRL Schema Document

 

 

101.CAL*

XBRL Calculation Linkbase Document

 

 

101.DEF*

XBRL Definition Linkbase Document

 

 

101.LAB*

XBRL Label Linkbase Document

 

 

101.PRE*

XBRL Presentation Linkbase Document

 

*Filed herewith

 

**Furnished herewith

 

 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

MedAmerica Properties Inc.

 

 

Date: November 13, 2018

By:

/s/ Joseph C. Bencivenga

 

 

Joseph C. Bencivenga

President and Chief Executive Officer

(Principal Executive Officer)

 

 

 

Date:  November 13, 2018

By:

/s/ Patricia K. Sheridan

 

 

Patricia K. Sheridan

Chief Financial Officer

(Principal Financial Officer)

 

 

16