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 March 31, 2018, we owned two commercial real
properties. All of our revenue for such period is derived from the
rental income we receive under the two leases associated with these
two properties. As discussed in
Note 9 - Subsequent Events
, we acquired
a third commercial real estate property on April 23, 2018. We have
been funding our operations with borrowings under our Amended Note
(as defined herein) as described in
Note 4 - Liquidity and Capital
Resources.
We expect to continue to rely on borrowings to
provide working capital in the near term.
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 months ended March
31, 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, or ASU, No. 2016-18,
"
Statement of Cash Flows (Topic
230): Restricted Cash
", which requires restricted cash and
cash equivalents 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
March 31, 2017.
Cash, Restricted Cash and Cash Equivalents
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 security for our office
operating lease for our former headquarters and our credit
card.
The following table provides a reconciliation of cash, cash
equivalents, and restricted cash reported within the Consolidated
Balance Sheets that sums to the total of such amounts shown in the
Consolidated Statements of Cash Flows
.
Notes to Condensed Consolidated Financial Statements
(unaudited)
|
|
|
|
|
|
(Dollars in
thousands)
|
Cash
|
$
160
|
$
613
|
Restricted cash and
cash equivalents
|
91
|
91
|
Total cash, cash
equivalents, and restricted cash
|
$
251
|
$
704
|
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.
Voltari Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)
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.
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.
In February, 2017, the FASB issued ASU 2017-05,
“
Other Income - Gains and
Losses from the Derecognition of Nonfinancial Assets,
Clarifying the
Scope of Asset Derecognition Guidance and Accounting for Partial
Sales of Nonfinancial Assets”.
ASU 2017-05 clarifies that ASC 610-20 applies to
all nonfinancial assets (including real estate) for which the
counterparty is not a customer and clarifies that all businesses
are derecognized using the deconsolidation guidance. Additionally,
it defines an in substance nonfinancial asset as a financial asset
that is promised to a counterparty in a contract in which
substantially all the fair value of the assets promised in the
contract is concentrated in nonfinancial assets, which excludes
cash or cash equivalents and liabilities. The new guidance is
expected to impact the gain recognized when a real estate asset is
sold to a non-customer and a noncontrolling interest is retained.
Under the current guidance, a partial sale is recognized, and
carryover basis is used for the retained interest, however, the new
guidance eliminates the use of carryover basis and generally
requires a full gain to be recognized. We adopted this standard
effective January 1, 2018. The adoption of this standard will not
have an impact on our condensed consolidated financial
statements.
In May, 2017, the FASB issued
ASU 2017-09,
“
Compensation - Stock
Compensation
(Topic
718),
Scope of Modification
Accounting”
to provide clarity and to reduce diversity
in practice related to a modification when applying the guidance in
ASC 718, Compensation – Stock Compensation. The guidance in
ASC 718 defines a “modification” as a change in the
terms or conditions of a share-based payment award. The amendments
provide guidance about when changes in terms or conditions of a
share-based payment award require an entity to apply the existing
modification guidance in ASC 718. We adopted the amendments
effective January 1, 2018. The adoption of this standard will not
have an impact on our condensed consolidated financial
statements.
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 for us in the first quarter of 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), The American Institute of Certified
Public Accountants and the SEC did not, or are not expected to,
have a material effect on the Company’s results of operations
or financial position.
Voltari Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)
3. Real Estate Investments
Information
related to major categories of real estate investments, net, is as
follows (dollars in thousands):
|
|
|
|
Estimated
Useful life
|
|
|
Real Estate
Investments, at cost:
|
|
|
|
Land
|
|
$
2,345
|
$
2,345
|
Building,
fixtures and improvements
|
10 - 43
yrs.
|
3,494
|
3,494
|
Total
tangible assets
|
|
5,839
|
5,839
|
Acquired
Intangibles - In-place leases
|
5 to 13
yrs.
|
607
|
607
|
Total cost of Real
Estate Investments
|
|
6,446
|
6,446
|
Less: Accumulated
depreciation and amortization
|
|
(506
)
|
(451
)
|
Total cost of Real
Estate Investments, net
|
|
$
5,940
|
$
5,995
|
Depreciation
expense for the three months ended March 31, 2018 and 2017 amounted
to $30 thousand and $29 thousand respectively.
Intangible
amortization expense for the three months ended March 31, 2018 and
2017 amounted to $25 thousand and $26 thousand respectively, of
which $11 thousand of favorable lease amortization was reflected as
a reduction in revenue, for both periods.
Expected
in-place lease and favorable 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
|
$
74
|
2019
|
99
|
2020
|
57
|
2021
|
16
|
2022
|
16
|
Thereafter
|
108
|
Total
|
$
370
|
The following table presents future minimum base
rental receipts due to us over the next five (5) years, and
thereafter, is as follows (dollars in thousands):
Year
Ending December 31,
|
|
Balance of
2018
|
$
261
|
2019
|
348
|
2020
|
244
|
2021
|
160
|
2022
|
160
|
Thereafter
|
1,196
|
Total
|
$
2,369
|
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 March 31,
2018 consisted of cash and cash equivalents of $0.2 million, and
our ability to borrow on our Amended Note. See
Note 9
-
Subsequent Events
, for further
information on the increase in our rental income.
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. 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
reborrowing’s 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
March 31, 2018, borrowings from this loan facility totaled $6.0
million. The outstanding balance, including accumulated interest of
$0.4 million, totaled $6.4 million as of March 31,
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.
See
Note 9
-
Subsequent Events
, for more
information.
Voltari
Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)
5. 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 consolidated balance sheets at
March 31, 2018 and December 31, 2017.
Our
Series J preferred stock contains certain redemption features and
is classified as mezzanine equity at March 31, 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 $28.0 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
March 31, 2018, our Series J preferred stock had an aggregate
redemption value of approximately $59.2 million, including
paid-in-kind dividends of $28.0 million and accrued dividends of
$2.0 million. We recorded accretion associated with our Series J
preferred stock of $0.0 million and $0.2 million for the three
months ended March 31, 2018 and 2017, respectively.
6. Revolving Note
As of
March 31, 2018, borrowings from this loan facility totaled $6.0
million. The outstanding balance, including accumulated interest of
$0.4 million totaled $6.4 million as of March 31, 2018. On January
17, 2018, we borrowed an additional $0.5 million under the Amended
Note to fund ongoing operating costs and acquisition costs related
to the McClatchy Property (as defined herein) acquisition. See
Note 4
-
Liquidity and Capital Resources
and
Note 9
-
Subsequent Events
, for more
information.
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 period
indicated (dollars in thousands, except per share
data):
|
|
|
|
|
|
|
Net loss
attributable to common stockholders
|
$
(2,444
)
|
$
(2,413
)
|
|
|
|
Weighted-average
common shares outstanding - basic and diluted
|
8,994,814
|
8,994,814
|
|
|
|
Net loss per share
attributable to common stockholders - basic and
diluted
|
$
(0.27
)
|
$
(0.27
)
|
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. 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
|
Total securities
excluded from net loss per share attributable to common
stockholders
|
-
|
1,014,958
|
Voltari Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)
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.
9. Subsequent Events
On April 23, 2018, the Company, through its wholly owned
subsidiary, Voltari Holding, (the “Purchaser”),
completed its previously announced acquisition of a real estate
parcel in Columbia, South Carolina (the “McClatchy
Property”) from The State Media Company, a South Carolina
corporation (the “Seller”), pursuant to the terms of
that certain purchase and sale agreement, dated as of January 19,
2018, as amended on February 26, 2018, March 29, 2018 and April 6,
2018 (the “Purchase Agreement”), between Purchaser and
Seller, for a purchase price of $16,625,000, excluding costs, which
was paid using cash on hand and borrowings under the
Company’s Amended Note.
Upon the closing of the sale of the McClatchy Property, on April
23, 2018, the Company, through its wholly owned subsidiary, the
Purchaser entered into a triple net lease (the “Lease”)
with the McClatchy Company, a publicly traded Delaware company and
an affiliate of the Seller (“McClatchy”).
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 income for the
McClatchy Property is 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.
On
April 9, 2018, the Company borrowed an additional $1.0 million from
Koala. $500,000 of the proceeds were used to fund ongoing
operations and $500,000 of the proceeds were used to make an
additional deposit on the then pending purchase of the McClatchy
Property. After the $500,000 withdrawal to fund operations, there
is $4.0 million remaining available for working capital
purposes.
On
April 18, 2018, the Company borrowed an additional $16.0 million
from Koala to complete the purchase of the McClatchy Property,
bringing the principal balance outstanding under the Amended Note
to $23.0 million.