Blueprint
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-Q
☒ QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended June 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: 000-55419
Voltari Corporation
(Exact name of registrant as specified in its
charter)
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Delaware
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90-0933943
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(State of incorporation)
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(I.R.S. Employer
Identification Number)
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767 Fifth Avenue, Suite 4700
New York, NY 10153
(212) 388-5500
(Address, including zip code, and telephone number, including area
code, of registrant’s principal executive
offices)
Indicate by check
mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days. ☒
Yes ☐ No
Indicate by check
mark whether the registrant has submitted electronically every
Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit such files). ☒ Yes ☐ No
Indicate by check
mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, 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. (Check one):
Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated
filer
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☐
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Smaller reporting company
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☑
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(Do
not check if a smaller reporting company)
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Emerging
growth company
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☐
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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 August 7, 2018, there were 8,994,814 shares of the registrant's
common stock, par value of $0.001 per share,
outstanding.
TABLE OF CONTENTS
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Page
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PART
I
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Item 1.
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Condensed
Consolidated Financial Statements
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3
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Condensed
Consolidated Balance Sheets as of June 30, 2018 (Unaudited) and
December 31, 2017
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3
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Condensed
Consolidated Statements of Operations for the three and six months
ended June 30, 2018 and 2017 (Unaudited)
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4
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Condensed
Consolidated Statements of Comprehensive Loss for the three and six
months ended June 30, 2018 and 2017 (Unaudited)
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5
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Condensed
Consolidated Statement of Changes in Stockholders' Deficit for the
six months ended June 30, 2018 (Unaudited)
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6
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Condensed
Consolidated Statements of Cash Flows for the six months ended June
30, 2018 and 2017 (Unaudited)
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7
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Notes
to Condensed Consolidated Financial Statements
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8
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Item 2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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15
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Item
3.
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Quantitative
and Qualitative Disclosures About Market Risk
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20
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Item 4.
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Controls
and Procedures
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20
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PART
II
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Item 1.
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Legal
Proceedings
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21
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Item 1A.
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Risk
Factors
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21
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Item
5.
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Other
Information
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21
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Item
6.
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Exhibits
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21
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Signatures
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22
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PART I
Item 1. Condensed Consolidated Financial
Statements.
Voltari Corporation
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
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Assets
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Real estate
investments, net
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$22,613
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$5,995
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Cash and cash
equivalents
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344
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101
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Restricted
cash
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489
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91
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Prepaid expenses
and other current assets
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297
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435
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Other
assets
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66
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26
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Total
assets
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$23,809
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$6,648
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Liabilities,
redeemable preferred stock and stockholders’
deficit
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Accounts payable
and accrued expenses
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$547
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$641
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Accrued
compensation
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12
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6
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Tenant security
deposit payable
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403
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-
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Deferred rent
income
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17
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17
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Revolving
note
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23,000
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5,500
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Interest
payable
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566
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331
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Deferred rent
expense
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8
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15
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Accrued preferred
stock dividends
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2,066
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1,816
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Other
liabilities
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27
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112
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Total
liabilities
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26,646
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8,438
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Commitments
and contingencies
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—
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—
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Redeemable
preferred stock, $0.001 par value; 1,200,000 shares authorized, and
1,170,327 shares issued and outstanding at June 30, 2018 and
December 31, 2017. Redemption value: $61,269 and $57,227 at June
30, 2018 and December 31, 2017, respectively.
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$59,202
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$55,411
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Stockholders’
deficit
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Common
stock, $0.001 par value; 25,000,000 shares authorized at June 30,
2018 and December 31, 2017, 8,994,814 shares issued and outstanding
at June 30, 2018 and December 31, 2017.
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9
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9
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Additional paid-in
capital
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543,638
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547,680
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Accumulated
deficit
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(605,766)
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(604,951)
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Accumulated other
comprehensive income
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80
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61
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Total
stockholders’ deficit
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(62,039)
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(57,201)
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Total
liabilities, redeemable preferred stock and stockholders’
deficit
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$23,809
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$6,648
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The
accompanying notes are an integral part of these condensed
consolidated financial statements.
Voltari Corporation
Condensed Consolidated Statements of Operations
(in thousands, except share data and per share data)
(unaudited)
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Revenue
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$418
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$80
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$499
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$161
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Operating
expenses
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General and
administrative, excluding depreciation
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413
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406
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831
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944
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Depreciation and
amortization
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245
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45
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289
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89
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Acquisition and
transaction related
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1
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1
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37
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10
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Total
operating expenses
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659
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452
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1,157
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1,043
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Operating
loss
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(241)
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(372)
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(658)
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(882)
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Other
income (expenses)
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Other income
– net of expenses
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78
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89
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78
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89
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Interest expense
& Revolving note fees
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(184)
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(45)
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(235)
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(99)
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Net
loss
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$(347)
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$(328)
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$(815)
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$(892)
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Accretion of
redeemable preferred stock
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-
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(244)
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-
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(479)
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Series J redeemable
preferred stock dividends
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(2,066)
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(1,684)
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(4,042)
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(3,298)
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Net
loss attributable to common stockholders
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$(2,413)
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$(2,256)
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$(4,857)
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$(4,669)
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Net
loss per share attributable to common stockholders
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$(0.27)
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$(0.25)
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$(0.54)
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$(0.52)
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Weighted-average
common shares outstanding – basic and diluted
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8,994,814
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8,994,814
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8,994,814
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8,994,814
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The
accompanying notes are an integral part of these condensed
consolidated financial statements.
Voltari Corporation
Condensed Consolidated Statements of Comprehensive
Loss
(in thousands)
(unaudited)
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Net
loss
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$(347)
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$(328)
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$(815)
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$(892)
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Other comprehensive
income (loss):
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Foreign currency
translation adjustment
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14
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(1)
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19
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(4)
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Comprehensive
loss
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$(333)
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$(329)
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$(796)
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$(896)
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The
accompanying notes are an integral part of these condensed
consolidated financial statements.
Voltari Corporation
Condensed Consolidated Statement of Changes in Stockholders’
Deficit
(in thousands, except share data)
(unaudited)
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Additional
Paid-in Capital
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Accumulated
Other Comprehensive Income
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Balance
as of December 31, 2017
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8,994,814
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$9
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$547,680
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$(604,951)
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$61
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$(57,201)
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Net
loss
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—
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—
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—
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(815)
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—
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(815)
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Other comprehensive
income
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—
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—
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—
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—
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19
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19
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Redeemable
preferred stock dividends
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—
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—
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(4,042)
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—
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—
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(4,042)
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Balance
as of June 30, 2018
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8,994,814
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$9
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$543,638
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$(605,766)
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$80
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$(62,039)
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The
accompanying notes are an integral part of these condensed
consolidated financial statements.
Voltari Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
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Cash
flows from operating activities:
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Net
loss
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$(815)
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$(892)
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Adjustments to
reconcile net loss to net cash provided by (used in) operating
activities:
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Depreciation
and amortization
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289
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89
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Straight
line rental income
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(40)
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(8)
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Amortization
of above and below market lease intangibles
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20
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21
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Non-cash
interest expense
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235
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98
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Changes in
operating assets and liabilities:
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Prepaid
expenses and other current assets
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138
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132
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Accounts
payable, accrued expenses and other liabilities
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(188)
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(80)
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Tenant
security deposit payable
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403
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-
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Other
assets
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-
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(143)
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Deferred
rent expense
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(7)
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(4)
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Net
cash provided by (used in) operating activities
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35
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(787)
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Cash
flows from investing activities:
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Purchases
of real estate
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(16,894)
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-
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Net
cash used in investing activities
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(16,894)
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-
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Cash
flows from financing activities:
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Proceeds
from debt facilities
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17,500
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500
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Net
cash provided by financing activities
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17,500
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500
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Net
increase (decrease) in cash, restricted cash and cash
equivalents
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641
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(287)
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Cash,
restricted cash and cash equivalents, beginning of
period
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192
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504
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Cash,
restricted cash and cash equivalents, end of period
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$833
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$217
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Supplemental
disclosure of non-cash financing activities:
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Series J redeemable
preferred stock dividend paid-in-kind
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$3,791
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$3,212
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The
accompanying notes are an integral part of these condensed
consolidated financial statements.
Voltari Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Business Description and Basis of Presentation
Business Description
Voltari
Corporation (“Voltari” or the “Company”) is
in the business of acquiring, financing and leasing commercial real
properties through its wholly owned subsidiary, Voltari Real Estate
Holding LLC (“Voltari Holding”). The Company had
previously been engaged in the business of providing mobile
marketing and advertising solutions to brands, marketers and
advertising agencies. In August 2015, we began implementing a
transformation plan pursuant to which, among other things, we
exited our mobile marketing and advertising business. The majority
of the costs related to the transformation plan had been incurred
as of the end of 2017. Additional amounts to be incurred subsequent
to the year ended December 31, 2017, if any, cannot be reasonably
estimated. As of June 30, 2018, we owned three commercial real
properties. All of our revenue is derived from the rental income we
receive under the three leases associated with these three
properties. We have been funding our operations with borrowings
under our Amended Note (as defined herein) as described in
Note 4 - Liquidity and Capital
Resources.
Basis of Presentation
The
accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q
for interim financial reporting pursuant to the rules and
regulations of the Securities and Exchange Commission
(“SEC”). Accordingly, they do not include all the
information and footnotes required by U.S. generally accepted
accounting principles (“U.S. GAAP”) for complete
financial statements. The condensed consolidated balance sheet as
of December 31, 2017 included herein was derived from the
audited financial statements as of that date but does not include
all disclosures required by U.S. GAAP.
The
unaudited condensed consolidated financial statements have been
prepared on the same basis as the audited consolidated financial
statements and, in the opinion of management, reflect all normal
recurring adjustments which are necessary for a fair statement of
the results of the interim period. These unaudited condensed
consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and accompanying
notes for the fiscal year ended December 31, 2017 included in
our Annual Report on Form 10-K for the year ended December 31,
2017. The results of operations for the three and six months ended
June 30, 2018 are not necessarily indicative of the results to be
expected for the full year or for any other period. Certain amounts
from prior periods have been reclassified to conform with the
presentation in the current period.
The
preparation of the condensed consolidated financial statements in
conformity with U.S. GAAP requires management to make estimates and
assumptions in certain circumstances that affect the reported
amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the condensed consolidated
financial statements and the reported amounts of revenues and
expenses during the reporting period. The more significant
estimates include those involved in allocating the costs of real
estate investments, valuation of long-lived and intangible assets,
provision for income taxes, and accounting for our redeemable
preferred stock. Actual results could differ from those
estimates.
2. Summary of Significant Accounting Policies
Our
significant accounting policies are those that we believe are both
important to the portrayal of our financial condition and results
of operations.
Reclassifications
Certain
prior year balances have been reclassified to conform with the
current year presentation. As of January 1, 2018, the Company
adopted Accounting Standards Update (“ASU”) No.
2016-18, "Statement of Cash Flows
(Topic 230): Restricted Cash", which requires restricted
cash to be included with cash and cash equivalents when reconciling
beginning-of-period and end-of-period total amounts shown on the
Consolidated Statements of Cash Flows. As a result of the adoption,
Other assets were reduced by $91 thousand and Restricted cash was
increased for the same amount as of June 30, 2017.
Cash, Cash Equivalents and Restricted Cash
The
Company considers all highly liquid investments with maturities of
three months or less when purchased to be cash equivalents. The
Company's restricted cash consists of a security deposit for our
office operating lease for our former headquarters, our credit card
and the security deposit held on behalf of a tenant.
Voltari Corporation
Notes
to Condensed Consolidated Financial Statements
(unaudited)
The
following table provides a reconciliation of cash, cash
equivalents, and restricted cash reported within the Condensed
Consolidated Balance Sheets that sums to the total of such amounts
shown in the Condensed Consolidated Statements of Cash
Flows.
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Cash and cash
equivalents
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$344
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$126
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Restricted
cash
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489
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91
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Total cash, cash
equivalents, and restricted cash
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$833
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$217
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Significant Accounting Policies - Real Estate
Investments
As a
result of our entry into the business of acquiring, financing and
leasing commercial real properties, we have adopted the following
significant accounting policies. Management believes there have
been no other material changes to our significant accounting
policies discussed in Note 2 of our Annual Report on Form 10-K for
the fiscal year ended December 31, 2017, except for the
standards adopted this period.
Investments
in real estate are recorded at cost. Improvements and replacements
are capitalized when they extend the useful life of the asset.
Costs of repairs and maintenance are expensed as incurred. The fair
value of the tangible assets of an acquired property with an
in-place operating lease will be determined by valuing the property
as if it were vacant, and the “as-if-vacant” value will
then be allocated to the tangible assets based on the fair value of
the tangible assets. The fair value of in-place leases will be
determined by considering current market conditions, as well as
costs to execute similar leases. The fair value of above- or
below-market leases will be recorded based on the present value of
the difference between the contractual amount to be paid pursuant
to the in-place lease and the Company's estimate of the fair market
lease rate for the corresponding in-place lease, measured over the
remaining term of the lease, including any below-market fixed-rate
renewal options for below-market leases.
Depreciation
is computed using the straight-line method over the estimated
useful lives of up to 43 years for buildings, up
to 13 years for improvements and the shorter of the useful
life or the remaining lease term for tenant improvements and
leasehold interests. Capitalized above-market lease values are
amortized as a reduction of rental income over the remaining terms
of the respective leases. Capitalized below-market lease values are
amortized as an increase to rental income over the remaining terms
of the respective leases and expected below-market renewal option
periods. The value of in-place leases, exclusive of the value of
above-market and below-market in-place leases, are amortized to
expense over the remaining periods of the respective
leases.
The
Company’s revenues are derived from rental income, which
include rents due in accordance with the lease terms, reported on a
straight-line basis over the initial term of the leases. Our leases
with our tenants are classified as operating leases.
Recently Adopted Accounting Pronouncements
In May
2014, the FASB issued ASU 2014-09, "Revenue from Contracts with
Customers". The guidance in this ASU supersedes nearly all
existing revenue recognition guidance under U.S. GAAP and creates a
single, principle-based revenue recognition framework that is
codified in a new FASB ASC Topic 606. The core principle of this
guidance is for the recognition of revenue to depict the transfer
of goods or services to customers at an amount that reflects the
consideration to which the company expects to be entitled in
exchange for those goods or services. The ASU also requires
additional disclosure about the nature, amount, timing and
uncertainty of revenue and cash flows arising from customer
contracts, including significant judgments and changes in judgments
and assets recognized from costs incurred to obtain or fulfill a
contract. We adopted this standard effective January 1, 2018.
Currently, all revenues are derived from lease contracts which are
not within the scope of this guidance.
In
November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows - Restricted
Cash". The guidance requires that the statement of cash
flows explain the change during the period in the total of cash,
cash equivalents, and amounts generally described as restricted
cash or cash equivalents. Therefore, amounts generally described as
restricted cash and equivalents should be included with cash and
cash equivalents when reconciling the beginning and end of period
total amounts on the statement of cash flows. We adopted this
standard effective January 1, 2018 and have adjusted our cash flows
to reflect the new guidance.
Voltari Corporation
Notes
to Condensed Consolidated Financial Statements
(unaudited)
In
January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic
805), Clarifying the Definition of a Business”.
The amendments in this ASU provide a
more robust framework to use in determining when a set of assets
and activities is a business. The amendments provide more
consistency in applying the guidance, reduce the costs of
application, and make the definition of a business more
operable. The guidance changes the definition of a business
to exclude acquisitions where substantially all the fair value of
the assets acquired are concentrated in a single identifiable asset
or a group of similar identifiable assets. Given this change in
definition, we believe most of our real estate acquisitions will be
considered asset acquisitions. The new guidance will be
applied prospectively to any transactions occurring in the period
of adoption. We adopted this standard effective January 1,
2018. Under the new standard, transaction costs will be capitalized
under asset acquisitions and expensed for business combinations and
transactions that will be considered asset acquisitions will not be
afforded the one-year measurement period to complete any valuation
studies and resulting purchase price allocation. For our purchase
of the McClatchy property we capitalized $271 thousand of such
transaction costs.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, "Leases." The guidance significantly changes the accounting
for leases by requiring lessees to recognize assets and liabilities
for leases greater than 12 months on their balance sheet. The
lessor model stays substantially the same; however, there were
modifications to, conform lessor accounting with the lessee model,
eliminate real estate specific guidance, further define certain
lease and non-lease components, and change the definition of
initial direct costs of leases by requiring significantly more
leasing related costs to be expensed upfront. ASU 2016-02 is
effective as of January 1, 2019, and we are currently assessing the
impact of this standard on our condensed consolidated financial
statements.
In
February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from
Accumulated Other Comprehensive Income”, which amends
FASB ASC Topic 220, Income Statement - Reporting Comprehensive
Income. This ASU allows a reclassification out of accumulated other
comprehensive income into retained earnings for standard tax
effects resulting from the Tax Cuts and Jobs Act (the “Tax
Act”) and consequently, eliminates the stranded tax effects
resulting from the Tax Act. This ASU is effective for fiscal years
beginning after December 15, 2018, and interim periods within those
fiscal years. Early adoption is permitted. We are currently
evaluating the impact of this guidance on our condensed
consolidated financial statements.
Other
recent accounting pronouncements issued by the FASB (including the
Emerging Issues Task Force) and the SEC did not, or are not
expected to, have a material effect on the Company’s results
of operations or financial position.
3. Real Estate Investments
On April 23, 2018, we, through our wholly owned subsidiary, Voltari
Real Estate Holding LLC ("Voltari Holdings"), completed the
acquisition of a real estate parcel in Columbia, South
Carolina. Pursuant to a
Purchase and Sale Agreement, between Voltari Holdings and the State
Media Company, (the "Seller"), dated January 19, 2018, as amended,
for a purchase price of approximately $16.89 million, inclusive of
all costs. The purchase price was paid using cash on hand and
borrowings under the Company’s revolving loan facility with
Koala Holding LP ("Koala"), an affiliate of Mr. Carl C. Icahn, the
Company’s controlling stockholder.
The property (the "McClatchy Property") is subject to a triple net
lease (the "lease") with the McClatchy Company ("McClatchy"), an
affiliate of the seller. The Lease has an initial term of fifteen
years, with three five-year extension options (collectively, the
“Term”). During the Term, in addition to rent,
McClatchy is responsible for the payment of all real estate taxes,
utilities, tenant’s insurance and other property related
costs, and the maintenance of the McClatchy Property and its
premises. Refer to http://investors.mcclatchy.com/phoenix.zhtml?c=87841&p=irol-sec
for the financial statements of the tenant. The initial average annual rental receipts for the
McClatchy Property will be approximately $1,613,000 (the
“Base Rent”). On each of the fifth (5th) and tenth
(10th) anniversaries of the commencement date of the Lease, the
Base Rent will be increased by ten percent (10%) above the then
current Base Rent.
Voltari Corporation
Notes
to Condensed Consolidated Financial Statements
(unaudited)
Information
related to major categories of real estate investments, net, is as
follows (dollars in thousands):
|
|
|
|
Useful
life
|
|
|
Real Estate
Investments, at cost:
|
|
|
|
Land
|
|
$5,844
|
$2,345
|
Building,
fixtures and improvements
|
10 - 43
yrs.
|
15,890
|
3,494
|
Total
tangible assets
|
|
21,734
|
5,839
|
Acquired
Intangibles - In-place leases
|
5 to 13
yrs.
|
1,639
|
607
|
Total cost of Real
Estate Investments
|
|
23,373
|
6,446
|
Less: Accumulated
depreciation and amortization
|
|
(760)
|
(451)
|
Total cost of Real
Estate Investments, net
|
|
$22,613
|
$5,995
|
Depreciation
expense for the six months ended June 30, 2018 and 2017 amounted to
$247 thousand and $61 thousand respectively.
Intangible
amortization expense for the six months ended June 30, 2018 and
2017 amounted to $62 thousand and $49 thousand respectively, of
which a net of $20 thousand and $21 thousand, respectively, of
favorable and unfavorable lease amortization was reflected as a
reduction in revenue.
Included
in the accumulated depreciation and amortization balance are
amounts for in place leases and favorable leases, as of June 30,
2018 and December 31, 2017, amounting to $275 thousand and $213
thousand, respectively.
Expected
in-place lease and favorable and unfavorable lease amortization for
each of the next five (5) years, and thereafter, is as follows
(dollars in thousands):
Years
Ending December 31,
|
|
Balance of
2018
|
$85
|
2019
|
167
|
2020
|
125
|
2021
|
84
|
2022
|
84
|
Thereafter
|
819
|
Total
|
$1,364
|
The
following table presents future minimum base rental receipts due to
us over the next five (5) years (dollars in
thousands):
Year
Ending December 31,
|
|
Balance of
2018
|
$981
|
2019
|
1,961
|
2020
|
1,857
|
2021
|
1,773
|
2022
|
1,773
|
Thereafter
|
20,364
|
Total
|
$28,709
|
Voltari Corporation
Notes
to Condensed Consolidated Financial Statements
(unaudited)
4. Liquidity and
Capital Resources
Our
principal needs for liquidity since we began executing our
transformation plan in August, 2015, have been to fund operating
losses, working capital requirements, capital expenditures,
restructuring expenses, acquisitions and integration and debt
service. Our principal sources of liquidity as of June 30, 2018
consisted of cash and cash equivalents of $0.3 million, and our
ability to borrow on our Amended Note (as defined below). As of
June 30, 2018, there is $7.0 million remaining available under our
Amended Note, of which we can borrow up to $4.0 million for working
capital purposes.
5. Revolving Note
On
August 7, 2015, we, as borrower, and Koala Holdings LP, as lender,
an affiliate of Mr. Carl C. Icahn, the Company’s controlling
stockholder (“Koala”), entered into a $10 million
revolving loan facility (the “Prior Note”) at a rate
equal to the greater of the LIBOR rate plus 350 basis points, per
annum, and 3.75%, per annum, plus a fee of 0.25% per annum on
undrawn amounts. The Company sought and received the Prior Note to,
in part, allay potential concerns regarding the Company’s
ability to invest in and execute its transformation plan while
retaining cash levels sufficient to fund its ongoing operations.
There were no limitations on the use of proceeds under the Prior
Note. As collateral for the Prior Note, we pledged and granted to
Koala a lien on our limited liability company interest in Voltari
Holding.
On
March 29, 2017, we as borrower, and Koala, as lender, entered into
a revolving note (the “Amended Note”), which amended
and restated the Prior Note. The Amended Note provides that the net
proceeds thereunder in excess of $10 million will be used by the
Company for the acquisition, improvement, development,
modification, alteration, repair, maintenance, financing or leasing
of real property, including any fees and expenses associated with
such activities. Pursuant to the Amended Note, Koala made available
to the Company a revolving loan facility of up to $30 million in
aggregate principal amount (the “Commitment”). The
Company may, by written notice to Koala, request that the
Commitment be increased (the “Increased Commitment”),
provided that the aggregate amount of all borrowings, plus
availability under the aggregate Increased Commitment, shall not
exceed $80 million. Koala has no obligation to provide any
Increased Commitment and may refuse to do so in its sole
discretion. Borrowings under the Amended Note will bear interest at
a rate equal to the LIBOR Rate (as defined in the Amended Note)
plus 200 basis points, per annum, subject to a maximum rate of
interest of 3.75%, per annum, payable at maturity. The Amended Note
matures on the earliest of (i) December 31, 2020, (ii) the date on
which any financing transaction, whether debt or equity, is
consummated by the Company (or its successors and assigns) with net
proceeds in an amount equal to or greater than $30 million, and
(iii) at the Company’s option, a date selected by the Company
that is earlier than December 31, 2020 (the “Maturity
Date”). The Amended Note also allows the Company to, upon
written notice to Koala not more than 60 days and not less than 30
days prior to the Maturity Date, request that Koala extend the
Maturity Date to December 31, 2022. Koala may, in its sole
discretion, agree to extend the Maturity Date by providing written
notice to the Company on or before the date that is 20 days prior
to the Maturity Date. If an event of default exists, the Amended
Note will bear interest at a default rate equal to the greater of
the LIBOR Rate plus 300 basis points, per annum, or 4.5%, per
annum. Subject to the terms and conditions of the Amended Note, the
Company may repay all or any portion of the amounts outstanding
under the Amended Note at any time without premium or penalty. The
amounts available under the Commitment or Increased Commitment, as
the case may be, will increase and decrease in direct proportion to
repayments and reborrowings under the Amended Note, respectively,
from time to time. As collateral for the Amended Note, the Company
has pledged and granted to Koala a lien on the Company’s
limited liability company interest in Voltari Holding.
As of
June 30, 2018, borrowings from this loan facility totaled $23.0
million. The outstanding balance, including accumulated interest of
$0.6 million, totaled $23.6 million as of June 30,
2018.
In
light of the above, the condensed consolidated financial statements
were prepared on the basis that the Company will continue as a
going concern. Therefore, the accompanying condensed consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets and
liabilities or any other adjustments that might result in the event
the Company is unable to continue as a going concern.
Voltari Corporation
Notes
to Condensed Consolidated Financial Statements
(unaudited)
6. Redeemable Preferred Stock
Upon
completion of our rights offering in October 2012, we issued
1,199,643 shares of Series J preferred stock and warrants to
acquire 1,014,982 common shares in exchange for approximately $30
million in cash proceeds. Net proceeds from the rights offering of
approximately $27.8 million were allocated between Series J
preferred stock and common stock warrants based on their estimated
relative fair market values at the date of issuance as determined
by management with the assistance of a third-party valuation
specialist. The portion of the net proceeds from the rights
offering attributable to the Series J preferred stock was
determined to be approximately $26.4 million and is included in
Redeemable preferred stock on our Condensed Consolidated Balance
Sheets at June 30, 2018 and December 31, 2017.
Our
Series J preferred stock contains certain redemption features and
is classified as mezzanine equity at June 30, 2018, and December
31, 2017 since the shares are (i) redeemable at the option of the
holder upon the occurrence of certain events and (ii) have
conditions for redemption which are not solely within our control.
Our Series J preferred stock is redeemable at the option of the
holder if the Company undergoes a change in control, which includes
a person becoming a beneficial owner of securities representing at
least 50% of the voting power of our company, a sale of
substantially all of our assets, and certain business combinations
and mergers which cause a change in 20% or more of the voting power
of our company, and if we experience an ownership change (within
the meaning of Section 382 of the Internal Revenue Code of 1986, as
amended), which results in a substantial limitation on our ability
to use our net operating losses and related tax benefits. In the
event that a redemption event was to occur, currently the Company
would be precluded, under the terms of the Series J preferred stock
and applicable Delaware law, from making any material
redemptions.
The
difference between the carrying value of the Series J preferred
stock and its liquidation value was being accreted over an
anticipated redemption period of five years using the effective
interest method and was fully accreted as of September 30, 2017.
The shares of Series J preferred stock have limited voting rights
and are not convertible into shares of our common stock or any
other series or class of our capital stock.
Holders
of the Series J preferred stock are entitled to an annual dividend
of 14% (13% through December 31, 2017), which is payable in-cash or
in-kind at our discretion, on a quarterly basis. To date, we have
elected to pay all quarterly dividend payments on our Series J
preferred stock, in the cumulative amount of $29.9 million, in-kind
rather than in-cash. Accordingly, we have increased the carrying
value of our redeemable preferred stock for the amount of the
paid-in-kind dividend payments. Dividends on the Series J preferred
stock and the accretion increase the amount of net loss that is
attributable to common stockholders and are presented as separate
amounts on the condensed consolidated statements of
operations.
Our
Series J preferred stock has a preference upon dissolution,
liquidation or winding up of the Company in respect of assets
available for distribution to stockholders. The liquidation
preference of the Series J preferred stock is initially $25 per
share. If the dividend on the Series J preferred stock is paid
in-kind, which has been the case to date, the liquidation
preference is adjusted and increased quarterly (i) until October
11, 2017, by an amount equal to 3.25% of the liquidation preference
per share, as in effect at such time and (ii) thereafter, by an
amount equal to 3.5% of the liquidation preference per share, as in
effect at such time. The quarterly accretion will continue until
the shares are redeemed, or until the Company’s affairs are
liquidated, dissolved or wound-up.
As of
June 30, 2018, our Series J preferred stock had an aggregate
redemption value of approximately $61.3 million, including
paid-in-kind dividends of $29.9 million and accrued dividends of
$2.1 million. We recorded accretion associated with our Series J
preferred stock of $0.0 million and $0.5 million for the six months
ended June 30, 2018 and 2017, respectively.
Voltari Corporation
Notes
to Condensed Consolidated Financial Statements
(unaudited)
7. Net Loss Per Share Attributable to Common
Stockholders
The
following table sets forth the computation of basic and diluted net
loss per share attributable to common stockholders for the periods
indicated (dollars in thousands, except per share
data):
|
|
|
|
|
|
|
|
|
|
|
Net loss
attributable to common stockholders
|
$(2,413)
|
$(2,256)
|
$(4,857)
|
$(4,669)
|
|
|
|
|
|
Weighted-average
common shares outstanding – basic and diluted
|
8,994,814
|
8,994,814
|
8,994,814
|
8,994,814
|
|
|
|
|
|
Net loss per share
attributable to common stockholders – basic and
diluted
|
$(0.27)
|
$(0.25)
|
$(0.54)
|
$(0.52)
|
Basic
net loss per share attributable to common stockholders is computed
by dividing net loss attributable to common stockholders by the
weighted-average number of common shares outstanding during the
applicable period. Diluted net loss per share attributable to
common stockholders includes the effects of any warrants, options
and other potentially dilutive securities outstanding during the
period. Due to net losses, for the periods presented, there were no
potentially dilutive securities outstanding, therefore basic and
diluted net loss per share attributable to common stockholders are
equal. The following table presents the outstanding antidilutive
securities excluded from the calculation of net loss per share
attributable to common stockholders:
|
|
|
|
|
Common stock
issuable upon exercise of Warrants
|
-
|
1,014,958
|
Options to purchase
common stock
|
-
|
-
|
Total
securities excluded from net loss per share attributable to common
stockholders
|
-
|
1,014,958
|
8. Legal Proceedings
From
time to time, we are subject to claims and legal proceedings
arising in the normal course of business. We do not believe that we
are currently party to any pending legal action that could
reasonably be expected to have a material adverse effect on our
business, financial condition, results of operations or cash
flows.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
The following discussion should be read in conjunction with our
condensed consolidated financial statements included elsewhere
herein.
Forward-Looking Statements
Some of
the statements contained in this Quarterly Report on Form 10-Q,
including this Management’s Discussion and Analysis of
Financial Condition and Results of Operations, contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 12E of the Securities Exchange Act of 1934, as
amended, regarding our plans, objectives, expectations and
intentions. Such statements include, without limitation, any
statements regarding our transformation plan, our exit from the
mobile marketing and advertising business and our entry into the
real estate investment business, our plans to acquire additional
real estate properties, including potentially higher valued
properties, any statements regarding our ability to fund operating
expenses from the cash flows generated by our rental income, any
statements regarding our ability to generate profits, any
statements regarding various estimates we have made in preparing
our financial statements, statements that refer to projections of
our future operating performance, statements regarding any pro
forma financial information we present, the sufficiency of our
capital resources to meet our cash needs, the exit from or
disposition of certain of our businesses, and the potential costs
associated therewith, and the anticipated growth and trends in our
businesses. These forward-looking statements are subject to known
and unknown risks and uncertainties that could cause actual results
to differ materially from those anticipated.
Risks
and uncertainties that could adversely affect our business and
prospects include without limitation:
●
any
financial or other information included herein (including any pro
forma financial information) based upon or otherwise incorporating
judgments or estimates based upon future performance or
events;
●
our
ability to raise additional capital or generate the cash necessary
to continue and expand our operations or to fund the liquidation
preference on, or redeem, our Series J preferred stock if required
to do so;
●
our
ability to protect and make use of our substantial net operating
loss carryforwards;
●
our
ability to execute real estate acquisitions;
●
risks
generally associated with the commercial real estate investment
business, including the credit risk associated with our
tenants;
●
our
ability to continue to implement our transformation
plan;
●
our
ability to compete in the highly competitive real estate investment
industry;
●
the
impact of government regulation, legal requirements or industry
standards relating to commercial real estate;
●
our
limited experience acquiring and managing commercial real
properties;
●
our
ability to meet the criteria required to remain quoted on the OTCQB
Marketplace;
●
the
ongoing benefits and risks related to our relationship with Mr.
Carl C. Icahn, our principal beneficial stockholder and principal
lender, through certain of his affiliates;
●
the
impact and costs and expenses of any litigation we may be subject
to now or in the future; and
●
our
leadership transitions.
In some
cases, you can identify forward-looking statements by terms such as
“may,” “will,” “should,”
“could,” “would,” “expects,”
“plans,” “anticipates,”
“believes,” “estimates,”
“projects,” “predicts,”
“potential” and similar expressions intended to
identify forward-looking statements. Our actual results could be
different from the results described in or anticipated by our
forward-looking statements due to the inherent uncertainty of
estimates, forecasts, projections and pro forma financial
information, and may be materially better or worse than
anticipated. Given these uncertainties, you should not place undue
reliance on these forward-looking statements. Forward-looking
statements represent our estimates and assumptions only as of the
date of this report. We expressly disclaim any duty to provide
updates to forward-looking statements, and the estimates and
assumptions associated with them, after the date of this report, in
order to reflect changes in circumstances or expectations or the
occurrence of unanticipated events except to the extent required by
applicable securities laws. All of the forward-looking statements
are qualified in their entirety by reference to the factors
discussed above, as well as the risks and uncertainties discussed
in Item 1A - Risk Factors
of our Annual Report on Form 10-K, for the fiscal year ended
December 31, 2017. We qualify all of our forward-looking statements
by these cautionary statements. We caution you that these risks are
not exhaustive. We operate in a continually changing business
environment and new risks emerge from time to time.
References
in this Quarterly Report on Form 10-Q to “Voltari,”
“the Company,” “we,” “us” and
“our” are to Voltari Corporation and its
subsidiaries.
Business Overview
In
August 2015, we committed to, and began implementing a
transformation plan pursuant to which, among other things, we
exited our mobile marketing and advertising business and entered
into the business of acquiring, financing and leasing commercial
real estate properties. We lease our properties and intend to
continue to lease such properties pursuant to so-called
“double net” or “triple net” leases. In
order to continue to grow our real estate portfolio in a manner
designed to, over time, help us generate profits, we may pursue
higher valued properties such as the McClatchy Property (as defined
herein). We anticipate that any such higher valued properties would
likely generate relatively higher rental income and would likely
involve higher acquisition costs and may involve higher costs of
maintenance. There can be no assurance that we will be successful
in acquiring additional real estate properties, including any such
higher valued properties, on commercially reasonable terms, if at
all. As a result of the completion of the McClatchy Property acquisition (as
described below), our current monthly rental income has increased
to approximately $164,000.
Any
future acquisitions are intended to be initially financed through
borrowings available under our Amended Note (as defined herein)
with Koala Holding LP (“Koala”).
Real Property Acquisitions— On September 17,
2015, we acquired a real estate parcel in Long Branch, New Jersey.
The property is subject to a triple net lease with JPMorgan Chase
Bank, N.A. ("Chase"), the original term of which expires in June,
2020 (with two, five-year renewal options), pursuant to which Chase
is responsible for the payment of basic rent as well as the payment
of real estate taxes, maintenance costs, utilities, tenant's
insurance and other property related costs. Refer to http://investor.shareholder.com/jpmorganchase/sec.cfm
for the financial statements of the tenant. The purchase price was
approximately $3.63 million. As of June 30, 2018, the average
annual rental income for the property over the remaining term of
the original lease is approximately $203,000, exclusive of the
amortization of the above market lease
intangible.
On May
18, 2016, we acquired a real estate parcel in Flanders, New York.
The property is subject to a double net lease with 7-Eleven, Inc.
(“7-Eleven”), the original term (the “Original
Term”) of which expires in December 2029 (with four,
five-year renewal options (the “Renewal Term,” and
together with the Original Term, the “Term”)). During
the Term, 7-Eleven is responsible for the payment of basic rent, as
well as the payment of, subject to certain exceptions, real estate
taxes, utilities, tenant’s insurance and other property
related costs. The landlord is responsible for certain maintenance
and repair costs. The purchase price was approximately $2.82
million.
As of June 30, 2018, the average annual rental
income for the property over the remaining Original Term is
approximately $165,000, exclusive of the amortization of the above
market lease intangible.
On April 23, 2018, we acquired a real estate parcel in
Columbia, South Carolina. The
property (the "McClatchy Property") is subject to a triple net
lease (the “Lease”) with The McClatchy Company
(“McClatchy”), the original term (the
“Original Term”) of which is for fifteen years and
expires in April 2033 (with three, five-year renewal options (the
“Renewal Term,” and together with the Original Term,
the “Term”)). During the Term, McClatchy is responsible
for the payment of basic rent, as well as the payment of real
estate taxes, utilities, tenant’s insurance and other
property related costs. The purchase price was approximately $16.89
million inclusive of all costs. Refer to
http://investors.mcclatchy.com/phoenix.zhtml?c=87841&p=irol-sec for
the financial statements of the tenant. On each of the fifth (5th) and tenth (10th)
anniversaries of the commencement date of the Lease, the Base Rent
will be increased by ten percent (10%) above the then current base
rent. As of June 30, 2018, the average annual rental income
for the McClatchy property over the remaining Original Term is
approximately $1,782,000, exclusive of the amortization of the
above market lease intangible.
Results of Operations
Our
continuing operations for the three and six months ended June 30,
2018 and 2017 consist of revenues and expense related to commercial
real estate operations, as well as general and administrative
costs. Continuing operations includes all personnel and facilities
costs related to executive management, finance and accounting,
human resources and other general corporate staff, as well as all
legal and other professional fees, insurance and other costs not
directly attributable to the mobile marketing and advertising
business or our other discontinued operations.
Total revenue
Revenue
from continuing operations for the three and six months ended June
30, 2018 and 2017 consists of rental income from properties
acquired;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
$418
|
$80
|
$338
|
$499
|
$161
|
$338
|
●
For the three and
six months ended June 30, 2018, the revenue increase resulted from
the acquisition of the McClatchy Property.
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative, excluding depreciation
|
$413
|
$406
|
$7
|
$831
|
$944
|
$(113)
|
Depreciation and
amortization
|
245
|
45
|
200
|
289
|
89
|
200
|
Acquisition and
transaction related
|
1
|
1
|
-
|
37
|
10
|
27
|
Total
operating expenses
|
$659
|
$452
|
$207
|
$1,157
|
$1,043
|
$114
|
General and administrative, excluding depreciation
For the
three months ended June 30, 2018, general and administrative
expense, excluding depreciation, remained approximately the same as
for the three months ended June 30, 2017.
For the
six months ended June 30, 2018, general and administrative expense,
excluding depreciation, declined by approximately $0.1 million from
the six months ended June 30, 2017, due to:
●
$0.1 million
decrease in legal fees resulting from higher costs to execute our
transformation plan in 2017.
Other Income and expenses
For the
three and six months ended June 30, 2018 and June 30, 2017, other
income and expenses remained approximately the same.
Depreciation and amortization
Depreciation
and amortization expense for each of the three and six months ended
June 30, 2018 increased by $0.2 million, compared to the same
periods in 2017, related to the acquisition of the McClatchy
Property.
Interest expense and revolving
note fees
For the
three months ended June 30, 2018, Interest expense and revolving
note fees increased
$0.1 million, as a result of increased borrowings, as compared to
the three months ended June 30, 2017.
For the
six months ended June 30, 2018, Interest expense and revolving note
fees increased $0.1
million, as a result of increased borrowings, as compared to the
six months ended June 30, 2017.
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$(347)
|
$(328)
|
$(19)
|
$(815)
|
$(892)
|
$77
|
For the
three months ended June 30, 2018, net loss was $0.3 million,
compared to a net loss of $0.3 million, for the three months ended
June 30, 2017. The $0.0 million change resulted from:
●
$0.3 million
increase in rental income offset by;
●
$0.2 million
decrease in depreciation and amortization;
●
$0.1 million
increase in interest expense.
For the
six months ended June 30, 2018, net loss was $0.8 million, compared
to net loss of $.0.9 million for the six months ended June 30,
2017. The $0.1 million improvement in net loss is primarily due
to:
●
$0.3 million
increase in rental income;
●
$0.1 million
decrease in general and administrative expenses, offset
by;
●
$0.2 million
increase in depreciation and amortization;
●
$0.1 million
increase in interest expense.
Liquidity and Capital Resources
General
Our
principal needs for liquidity since we began executing our
transformation plan in August 2015, have been to fund operating
losses, working capital requirements, capital expenditures,
restructuring expenses, acquisitions and integration and debt
service. Our principal sources of liquidity as of June 30, 2018
consist of cash and cash equivalents of approximately $0.3 million,
and our ability to borrow on our Koala loan. Subsequent to our latest property
purchase we expect that our cash flows generated by our rental
income should be sufficient to fund our currently anticipated level
of operating expenses.
On August 7, 2015, we, as borrower, and Koala, as lender, an
affiliate of Mr. Carl C. Icahn, the Company’s controlling
stockholder ("Koala"), entered into a $10 million revolving loan
facility (the “Prior Note") at a rate equal to the greater of
the LIBOR rate plus 350 basis points, per annum, and 3.75%, per
annum, plus a fee of 0.25% per annum on undrawn amounts. The
Company sought and received the Prior Note to, in part, allay
potential concerns regarding the Company’s ability to invest
in and execute its transformation plan while retaining cash levels
sufficient to fund its ongoing operations. There were no
limitations on the use of proceeds under the Prior Note. As
collateral for the Prior Note, we pledged and granted to Koala a
lien on our limited liability company interest in Voltari
Holding.
On March 29, 2017, we as borrower, and Koala, as lender, entered
into a revolving note (the “Amended Note”), which
amended and restated the Prior Note. The Amended Note provides that
the net proceeds thereunder in excess of $10 million will be used
by the Company for the acquisition, improvement, development,
modification, alteration, repair, maintenance, financing or leasing
of real property, including any fees and expenses associated with
such activities. Pursuant to the Amended Note, Koala made available
to the Company a revolving loan facility of up to $30 million in
aggregate principal amount (the “Commitment”). The
Company may, by written notice to Koala, request that the
Commitment be increased (the “Increased Commitment”),
provided that the aggregate amount of all borrowings, plus
availability under the aggregate Increased Commitment, shall not
exceed $80 million. Koala has no obligation to provide any
Increased Commitment and may refuse to do so in its sole
discretion. Borrowings under the Amended Note will bear interest at
a rate equal to the LIBOR Rate (as defined in the Amended Note)
plus 200 basis points, per annum, subject to a maximum rate of
interest of 3.75%, per annum payable at maturity. The Amended Note
matures on the earliest of (i) December 31, 2020, (ii) the date on
which any financing transaction, whether debt or equity, is
consummated by the Company (or its successors and assigns) with net
proceeds in an amount equal to or greater than $30 million, and
(iii) at the Company’s option, a date selected by the Company
that is earlier than December 31, 2020 (the “Maturity
Date”). The Amended Note also allows the Company to, upon
written notice to Koala not more than 60 days and not less than 30
days prior to the Maturity Date, request that Koala extend the
Maturity Date to December 31, 2022. Koala may, in its sole
discretion, agree to extend the Maturity Date by providing
written notice to the Company on or before the date that is 20 days
prior to the Maturity Date. If an event of default exists, the
Amended Note will bear interest at a default rate equal to the
greater of the LIBOR Rate plus 300 basis points, per annum, or
4.5%, per annum.
Subject to the terms and conditions of the Amended Note, the
Company may repay all or any portion of the amounts outstanding
under the Amended Note at any time without premium or penalty. The
amounts available under the Commitment or Increased Commitment, as
the case may be, will increase and decrease in direct proportion to
repayments and reborrowings under the Amended Note, respectively,
from time to time. As collateral for the Amended Note, the Company
has pledged and granted to Koala a lien on the Company’s
limited liability company interest in Voltari
Holding.
As of
June 30, 2018, borrowings from this facility totaled $23.0 million
due to borrowings in connection with our real estate acquisitions
as well as for working capital requirements. After our $500,000
withdrawal to fund operations in the second quarter, there is $4.0
million remaining available for working capital
purposes.
We
expect that the acquisition of future commercial real properties,
the cost of operations and working capital requirements will be our
principal need for liquidity in the future. Our cash flows may be
affected by many factors including the economic environment,
competitive conditions in the commercial real estate industry and
the success of our transformation plan. We believe we will have
adequate resources to fund our operations, capital expenditures and
working capital needs for the next 12 months using our cash and
cash equivalents on hand, together with cash flows generated by our
rental income. We also have borrowings available under the Amended
Note. We currently intend to leverage real properties that we may
acquire, but cannot assure that we will be able to do so on
commercially reasonable terms, if at all.
To the
extent we are unable to replace or refinance the Amended Note prior
to its maturity we may not have sufficient capital resources to
repay any amounts borrowed thereunder. There can be no assurance
that we will be able to replace or refinance the Amended Note on
commercially reasonable terms, if at all.
Our
liquidity may be adversely affected if, and to the extent that, our
remaining Series J preferred stock becomes redeemable. The Company
believes that, if a redemption event were to occur, limited, if
any, funds would be available for such redemption under the terms
of the Series J preferred stock and applicable Delaware law.
As a result, in the event that a redemption event were to occur,
the Company currently expects that it would be precluded, under the
terms of the Series J preferred stock and applicable Delaware law,
from making any material redemptions.
Our
ability to achieve our business and cash flow plans is based on a
number of assumptions which involve significant judgments and
estimates of future performance, borrowing capacity and credit and
equity finance availability, which cannot at all times be assured.
Accordingly, we cannot assure that cash flows from operations and
other internal and external sources of liquidity will at all times
be sufficient for our cash requirements. If necessary, we may need
to consider actions and steps to improve our cash position and
mitigate any potential liquidity shortfall, such as modifying our
business plan, pursuing additional financing to the extent
available, pursuing and evaluating other alternatives and
opportunities to obtain additional sources of liquidity and other
potential actions to reduce costs. We cannot assure that any of
these actions would be successful, sufficient or available on
favorable terms. Any inability to generate or obtain sufficient
levels of liquidity to meet our cash requirements at the level and
times needed could have a material adverse impact on our business
and financial position.
Our
ability to obtain any additional financing depends upon many
factors, including our then existing level of indebtedness (if any)
and restrictions in any debt facilities to which we may be subject
now or may establish in the future, historical business
performance, financial projections, prospects and creditworthiness
and external economic conditions and general liquidity in the
credit and capital markets. Any financing (or subsequent
refinancing) may be costly to obtain and require us to satisfy
restrictive covenants, which could further limit or restrict our
business and results of operations or be dilutive to our
stockholders.
Cash flows
As of
June 30, 2018, and December 31, 2017, we had cash, restricted
cash and cash equivalents of $0.8 million and $0.2 million,
respectively. The $0.6 increase reflects:
●
$17.5 million in
additional borrowings on the Amend Note offset by;
●
$16.9 million used
for the purchase of real estate;
Net cash used in operating activities
The
change in our operating assets and liabilities was driven by a
decrease in prepaid expenses of $138 thousand, a decrease in
accounts payable, accrued expenses other liabilities of $188
thousand, offset by an increase in security deposits of $403 as a
result of the McClatchy lease, and a decrease in deferred rent
expense of $7 thousand.
Net cash from investing activities
For the
six months ended June 30, 2018, approximately $16.9 million cash
was used in investing activities to acquire our additional real
estate.
Net cash from financing activities
For the
six months ended June 30, 2018, cash in the amount of $17.5 million
was provided by borrowings on our Amended Note.
Off-Balance Sheet Arrangements
As of
June 30, 2018, and December 31, 2017, we do not have any
off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Our
condensed consolidated financial statements are prepared in
accordance with U.S. GAAP. The preparation of our financial
statements and related disclosures requires us to make estimates,
assumptions and judgments that affect the reported amount of
assets, liabilities, revenue, costs and expenses, and related
disclosures. We base our estimates and assumptions on historical
experience and other factors that we believe to be reasonable under
the circumstances. We evaluate our estimates and assumptions on an
ongoing basis. Our actual results may differ from these estimates
under different assumptions and conditions and in certain cases the
difference may be material. Our critical accounting policies and
estimates include those involved in recognition of revenue,
valuation of long-lived assets, valuation allowance on the deferred
tax asset, accounting for our redeemable preferred stock,
litigation and other loss contingencies. Estimates related to the
allocated cost of investments in real estate among land, other
tangible and intangible assets affect future depreciation and
amortization expense as well as the amount of reported
assets.
As a
result of our entry into the business of acquiring, financing and
leasing commercial real properties, we have adopted the significant
accounting policies described in Note 2 - Summary of Significant Accounting
Policies in our condensed consolidated financial statements
in this Quarterly Report on Form 10-Q.
Recent Accounting Pronouncements
See
discussion of recent accounting pronouncements in Note 2 - Summary of Significant Accounting
Policies in our condensed consolidated financial statements
in this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures about Market
Risk.
We are
not required to provide qualitative and quantitative disclosures
about market risk because we are a smaller reporting
company.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our
management evaluated, with the participation of our principal
executive officer and our principal financial officer, the
effectiveness of our disclosure controls and procedures as of the
end of the period covered by this Quarterly Report on Form 10-Q.
Based on this evaluation, our principal executive officer and our
principal financial officer have concluded that our disclosure
controls and procedures are effective to ensure that information we
are required to disclose in reports that we file or submit under
the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange
Commission's rules and forms and that such information is
accumulated and communicated to our management, including our
principal executive officer and our principal financial officer, as
appropriate to allow timely decisions regarding required
disclosure.
Changes in Internal Control Over Financial Reporting
There
were no changes in our internal control over financial reporting
that occurred during the period covered by this Quarterly Report on
Form 10-Q that have materially affected, or are reasonably likely
to materially affect, our internal control over financial
reporting.
PART II
Item 1. Legal Proceedings.
There
have been no material changes to the legal proceedings previously
disclosed in Part 1, Item 3
of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2017.
Item 1A. Risk Factors.
In
addition to the other information set forth in this report, you
should carefully consider the factors discussed in Part I, Item 1A in our Annual Report on
Form 10-K, for the year ended December 31, 2017, which could
materially affect our business, financial position and results of
operations. There have been no material changes to the risk factors
disclosed in Part I, Item
1A in our Annual Report on Form 10-K for the year ended
December 31, 2017.
Item 5. Other Information
None.
Item 6. Exhibits.
Exhibit
Number
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Exhibit
Description
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Certification
pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a),
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 – Principal Executive Officer. *
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|
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|
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Certification
pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a),
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 – Chief Accounting Officer. *
|
|
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|
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Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 – Principal Executive
Officer. *
|
|
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|
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Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 – Chief Accounting
Officer. *
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101.INS
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XBRL
Instance Document.*
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101.SCH
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XBRL
Taxonomy Extension Schema Document.*
|
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101.CAL
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XBRL
Taxonomy Extension Calculation Linkbase Document.*
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101.LAB
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XBRL
Taxonomy Extension Label Linkbase Document.*
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101.PRE
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XBRL
Taxonomy Extension Presentation Linkbase Document.*
|
|
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101.DEF
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XBRL
Taxonomy Extension Definition Linkbase Document.*
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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.
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VOLTARI CORPORATION
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Date:
August 13, 2018
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By:
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/s/
Kenneth Goldmann
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Kenneth
Goldmann
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Principal
Executive Officer
(Principal
Executive officer)
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Date:
August 13, 2018
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By:
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/s/
Peter Kaouris
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Peter
Kaouris
|
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Chief
Accounting Officer
(Principal
Financial officer)
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