# Medalist Diversified, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Medalist Diversified, Inc.](/companies/mdrr.md) (CIK 1654595)
- Form: 10-Q
- Filed: 2023-11-13
- Accepted by EDGAR: Nov 13, 2023, 16:31 ET
- Period: 2023-09-30
- Accession: 0001558370-23-018846
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1654595/000155837023018846/mdrr-20230930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1654595/000155837023018846/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $2.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $7.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$1.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$1.5m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $900.2k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $2.6m | us-gaap:InterestExpense |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$1.9m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$4.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.88 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$1.82 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.88 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$1.82 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 2,218,810 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 2,219,262 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $415.6k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $374.7k | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2023-09-30 | $3.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2023-09-30 | $84.4m | us-gaap:Assets |
| Total liabilities | at 2023-09-30 | $70.2m | us-gaap:Liabilities |
| Short-term borrowings | at 2023-09-30 | $1.0m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2023-09-30 | $12.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 86,984 characters.

*The following discussion and analysis is based on, and should be read in conjunction with, the condensed consolidated financial statements and the related notes thereto of Medalist Diversified REIT, Inc. contained in this Quarterly Report.*

*This following discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks, uncertainties and assumptions. See “Cautionary Statement Regarding Forward-Looking Statements” for a discussion of the risks, uncertainties and assumptions associated with those statements. Our actual results may differ materially from those expressed or implied in the forward-looking statements as a result of various factors.*

### CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. We have used the words “approximately,” “anticipate,” “assume,” “believe,” “budget,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will” and similar terms and phrases to identify forward-looking statements in this Quarterly Report.

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:

- the competitive environment in which we operate;
- local, regional, national and international economic conditions;
- capital expenditures;
- the availability, terms and deployment of capital;
- financing risks;
- inflation;
- the general level of interest rates;
- changes in our business or strategy;
- fluctuations in interest rates and increased operating costs;
- our limited operating history;
- the degree and nature of our competition;
- our dependence upon our key personnel;
- defaults on or non-renewal of leases by tenants;
- decreased rental rates or increased vacancy rates;
- our ability to make distributions on shares of our common stock;
- difficulties in identifying properties to acquire and completing acquisitions;
- our ability to operate as a public company;
- potential natural disasters such as hurricanes;
- the impact of epidemics, pandemics, or other outbreaks of illness, disease or virus (such as COVID-19 and its variants);
- our ability to maintain our qualification as a REIT for U.S. federal income tax purposes;
- our ability to maintain an active trading market for our common stock on The Nasdaq Capital Market (“Nasdaq”) and maintain continued listing on Nasdaq and the likelihood that a delisting of our common stock from Nasdaq could result in significantly lower trading volumes and reduced liquidity for investors seeking to buy or sell our common stock;
- the reverse stock split may decrease the liquidity of the shares of our common stock and could lead to a decrease in our overall market capitalization;
- potential changes in the law or governmental regulations that affect us and interpretations of those laws and regulations, including changes in real estate and zoning or tax laws, and potential increases in real property tax rates; and
- related industry developments, including trends affecting our business, financial condition and results of operations.

The forward-looking statements contained in this Quarterly Report are based on historical performance and management’s current plans, estimates and expectations in light of information currently available to us and are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting us will be those that we have anticipated. Actual results may differ materially from these expectations due to the factors, risks and uncertainties described above, changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors, many of which are beyond our control. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove to be incorrect, our actual results may vary in material respects from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. Any forward-looking statement made by us in this Quarterly Report speaks only as of the date of this Quarterly Report. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable securities laws.

### Company Overview

Medalist Diversified REIT Inc. is a Maryland corporation formed on September 28, 2015. Beginning with our taxable year ended December 31, 2017, we believe that we have operated in a manner qualifying us as a real estate investment trust (“REIT”), and we have elected to be taxed as a REIT for federal income tax purposes. Our company serves as the general partner of Medalist Diversified Holdings, LP which was formed as a Delaware limited partnership on September 29, 2015.

Our company was formed to acquire, reposition, renovate, lease and manage income-producing properties, with a primary focus on (i) commercial properties, including flex-industrial and retail properties, (ii) multi-family residential properties and (iii) limited-service hotel properties in secondary and tertiary markets in the southeastern part of the United States, with an expected concentration in Virginia, North Carolina, South Carolina, Georgia, Florida and Alabama. We may also pursue, in an opportunistic manner, other real estate-related investments, including, among other things, equity or other ownership interests in entities that are the direct or indirect owners of real property, and indirect investments in real property, such as those that may be obtained in a joint venture. While these types of investments are not intended to be a primary focus, we may make such investments in our discretion. On October 6, 2023, our company released a letter from our then interim CEO and President which included an announcement that our company plans to start evaluating options to create stand-alone, single tenant net lease assets from our existing portfolio and to explore the acquisition of single tenant net lease assets outside of our existing portfolio. We are still evaluating these options and plan to continue to provide updates when appropriate.

As of September 30, 2023, our company owned and operated eight investment properties, the Shops at Franklin Square (the “Franklin Square Property”), a 134,239 square foot retail property located in Gastonia, North Carolina, the Hanover North Shopping Center (the “Hanover Square Property”), a 73,440 square foot retail property located in Mechanicsville, Virginia, the Ashley Plaza Shopping Center (the “Ashley Plaza Property”), a 164,012 square foot retail property located in Goldsboro, North Carolina, Brookfield Center (the “Brookfield Center Property”), a 64,880 square foot mixed-use industrial/office property located in Greenville, South Carolina, the Lancer Center, a 181,590 square foot retail property located in Lancaster, South Carolina (the “Lancer Center Property”), the Greenbrier Business Center (the “Greenbrier Business Center Property”), an 89,280 square foot mixed-use industrial/office property located in Chesapeake, Virginia, Parkway 3 & 4 (the “Parkway Property”), a 64,109 square foot mixed-use industrial office property located in Virginia Beach, Virginia, and the Salisbury Marketplace Shopping Center, a 79,732 square foot retail property located in Salisbury, North Carolina (the “Salisbury Marketplace Property”). As of September 30, 2023, we owned 84% of the Hanover Square Property as a tenant in common with a noncontrolling owner which owned the remaining 16% interest and 82% of the Parkway Property as a tenant in common with a noncontrolling owner which owns the remaining 18% interest.

For all periods prior to July 18, 2023, our company was externally managed by the Manager. On July 18, 2023, our company and the Manager entered into the Termination Agreement terminating the Management Agreement. Until the termination of the Management Agreement, the Manager made all investment decisions for our company. The Manager oversaw our company’s overall business and affairs and had broad discretion to make operating decisions on behalf of our company and to make investment decisions. After the termination of the Management Agreement, our company is managed by internal management directed by our company’s Board of Directors (the “Board”). Our company’s stockholders are not involved in its day-to-day affairs.

### Reporting Segments

We establish operating segments at the property level and aggregate individual properties into reportable segments based on product types in which we have investments. For the three and nine months ended September 30, 2023, our reportable segments were retail center properties and flex center properties. Although we sold our interest in the Clemson Best Western Hotel Property on September 29, 2022, we include hotel properties as a third reportable segment for the three and nine months ended September 30, 2022.

### Recent Trends and Activities

#### Reverse 1-for-8 Stock Split

On May 3, 2023, our company completed a reverse stock split of its Common Shares, and a corresponding adjustment to the outstanding common units of the Operating Partnership, at a ratio of 1-for-8 (the “Reverse Stock Split”). The Reverse Stock Split took effect at 5:00 p.m. Eastern Time on May 3, 2023 (the “Effective Time”) and automatically converted every eight Common Shares outstanding at that time into one Common Share. The Reverse Stock Split was intended to help our company regain compliance with Nasdaq’s Minimum Bid Price Requirement. On May 18, 2023, our company received written notice from the Nasdaq Stock Market, LLC stating that the Company had regained compliance with the Minimum Bid Price Requirement for continued listing on the Nasdaq Capital Market (“Nasdaq”) because our company’s Common Shares had a closing bid price of at least $1.00 per share for ten consecutive business days. Accordingly, Nasdaq’s Listing Qualifications Staff considers the matter closed.

#### Establishment of a Special Committee of the Board and Exploration of Strategic Alternatives

On March 10, 2023, the Board announced that it had established the Special Committee to explore potential strategic alternatives focusing on maximizing stockholder value. The Special Committee was comprised solely of independent directors and was charged with exploring potential strategic alternatives including, without limitation, a business combination involving our company, a sale of all or part of our company’s assets, joint venture arrangements and/or restructurings, and determining whether a strategic transaction is in the best interest of our company.

On April 18, 2023, our company provided an update on the Special Committee’s efforts. Specifically, our company announced that the Special Committee was in active discussions with potential parties in pursuit of those alternatives. On July 12, 2023, our company’s Board approved our company’s negotiation of the sale of its interests in four properties from our company’s portfolio. On August 7, 2023, our company announced that it had ceased to pursue the sale of these properties.

#### Internalization of Management

On July 18, 2023, our company entered into the Termination Agreement with the Manager, William R. Elliott and Thomas E. Messier, which provided for the immediate termination of the Management Agreement. In connection with the resulting internalization of our company’s management, Francis P. Kavanaugh was appointed interim CEO and President. On October 18, 2023, Mr. Kavanaugh was appointed CEO and President on a permanent basis.

#### Sale of the Clemson Best Western Property

On September 29, 2022, our company sold its interest in the Clemson Best Western Property, a 148 room hotel on 5.92 acres in Clemson, South Carolina, to an unrelated purchaser for $10,015,000. During the three months ended March 31, 2021, our company reclassified the Clemson Best Western Property as assets held for sale. As part of our continuing evaluation of the amounts previously used for the estimated fair value of the Clemson Best Western asset group that had been reclassified as assets held for sale, during the three months ended March 31, 2022, our company recorded an impairment charge of $175,671 associated with this reclassification. As a result of the closing of the sale of the Clemson Best Western Property on September 29, 2022, our company recognized a loss on disposal of investment properties of $421,096 for the three and nine months ended September 30, 2022.

#### Salisbury Marketplace Property Acquisition

On June 13, 2022, our company, through a wholly owned subsidiary, completed its acquisition of the Salisbury Marketplace Property, a 79,732 square foot retail property located in Salisbury, North Carolina. The Salisbury Marketplace Property, built in 1986, was 91.2% leased as of September 30, 2023, and is anchored by Food Lion, Citi Trends and Family Dollar. The purchase price for the Salisbury Marketplace Property was $10,025,000 paid through a combination of cash provided by our company and the incurrence of new mortgage debt. Our company’s total investment was $10,279,714 and we incurred $254,714 of acquisition and closing costs which were capitalized and added to the tangible assets acquired.

#### Wells Fargo Mortgage Facility

On June 13, 2022, our company, through its wholly owned subsidiaries, entered into a mortgage loan facility with Wells Fargo Bank (the “Wells Fargo Mortgage Facility”) in the principal amount of $18,609,500. The proceeds of the Wells Fargo Mortgage Facility were used to finance the acquisition of the Salisbury Marketplace Property and to refinance the mortgages payable on the Lancer Center Property and the Greenbrier Business Center Property. The Wells Fargo Mortgage Facility bears interest at a fixed rate of 4.50% for a five-year term. The monthly payment, which includes interest at the fixed rate, and principal, based on a 25-year amortization schedule, is $103,438. Our company has provided an unconditional guaranty of the payment of and performance under the terms of the Wells Fargo Mortgage Facility. The Wells Fargo Mortgage Facility credit agreement includes covenants to maintain a debt service coverage ratio of not less than 1.50 to 1.00 on an annual basis and a minimum debt yield of 9.5% on the Salisbury Marketplace, Lancer Center and Greenbrier Business Center properties, and to maintain liquid assets of not less than $1,500,000 on deposit with Wells Fargo Bank. As of September 30, 2023, our company believes that it is compliant with these covenants.

#### Wells Fargo Line of Credit

On June 13, 2022, our company, through its wholly owned subsidiaries, entered into a loan agreement with Wells Fargo Bank for a $1,500,000 line of credit (the “Wells Fargo Line of Credit”). As of September 30, 2023 and December 31, 2022, the Wells Fargo Line of Credit had an outstanding balance of $1,000,000 and $0, respectively. Outstanding balances on the Wells Fargo Line of Credit bear interest at a floating rate of 2.25% above the daily secured overnight financing rate (“SOFR”). As of September 30, 2023 and December 31, 2022, SOFR was 5.32% and 4.3%, respectively. The Wells Fargo Line of Credit has a one-year, renewable term, is unconditionally guaranteed by our company, and any outstanding balances are secured by the Lancer Center Property, the Greenbrier Business Center Property and the Salisbury Marketplace Property. On May 2, 2023, our company and Wells Fargo Bank entered into the First Amendment to Revolving Line of Credit Note which extended the maturity date of the Wells Fargo Line of Credit to June 9, 2024. We plan to continue to use the Wells Fargo Line of Credit for general working capital needs and to help fund future acquisitions.

#### Shelf Registration

On June 21, 2021, our company filed a shelf registration statement on Form S-3 with the SEC. The shelf registration statement is intended to provide additional flexibility to finance future business opportunities through timely and cost-effective access to capital markets. Under the shelf registration statement, our company may, from time to time, issue common stock up to an aggregate amount of $150 million. The shelf registration statement was declared effective by the SEC on July 27, 2021.

#### Standby Equity Purchase Agreement

On November 17, 2021, our company entered into a Standby Equity Purchase Agreement (the “SEPA”) with a financing entity. Under the SEPA, our company may sell up to $6,665,299 of our shares of common stock at our request any time during the 36 months following the execution of the SEPA. Any shares purchased pursuant to the SEPA would be purchased at 96.5% of the market price (as defined in the SEPA), subject to certain limitations, including that the financing entity could not purchase any shares that would result in it owning more than 4.99% of our company’s outstanding common stock. As of September 30, 2023, our company has generated net proceeds of $1,538,887 from the issuance of 180,675 shares of our common stock at an average price of $8.52 per share under the SEPA.

| ​ Issuance Date | ​ | ​ Shares Issued | ​ | ​ ​ Price Per Share | ​ | ​ ​ Total Proceeds |
| --- | --- | ---: | --- | --- | --- | --- |
| March 3, 2022 | ​ | 11,325 | ​ | $8.70 | ​ | $98,574 |
| March 14, 2022 |  | 34,524 |  | ​ 8.40 |  | ​ 290,000 |
| March 17, 2022 |  | 34,851 |  | ​ 8.61 |  | ​ 300,000 |
| March 21, 2022 |  | 59,258 |  | ​ 8.44 |  | ​ 500,000 |
| April 1, 2022 |  | 40,718 |  | ​ 8.60 |  | ​ 350,313 |
| **Total** |  | **180,676** | **​** | **$8.52** | **​** | **$1,538,887** |

#### Common Stock Repurchase Plan

In December 2021, the Board approved a program to purchase up to 62,500 Common Shares in the open market, up to a maximum price of $38.40 per share (the “Common Stock Repurchase Plan”). As of September 30, 2023, we have repurchased a total of 33,509 shares of our Common Shares in the open market under the Common Stock Repurchase Plan at an average price of $8.30 per share.

| ​ Purchase Date | ​ | ​ Shares Purchased | ​ | ​ ​ Price Per Share | ​ | ​ ​ Total Cost |
| --- | --- | ---: | --- | --- | --- | --- |
| January 4, 2022 | ​ | 50 | ​ | $8.48 | ​ | $424 |
| January 5, 2022 |  | 6,026 |  | ​ 8.48 |  | ​ 51,093 |
| January 6, 2022 |  | 12,500 |  | ​ 8.36 |  | ​ 104,556 |
| January 7, 2022 |  | 3,750 |  | ​ 8.40 |  | ​ 31,500 |
| January 10, 2022 |  | 6,250 |  | ​ 8.16 |  | ​ 51,000 |
| January 14, 2022 |  | 12 |  | ​ 8.08 |  | ​ 101 |
| January 21, 2022 |  | 4,921 |  | ​ 8.05 |  | ​ 39,603 |
| **Total** |  | **33,509** | ​ | **$8.30** | ​ | **$278,277** |

On October 18, 2023, the Board approved the repurchase of an additional 200,000 Common Shares for a maximum price of $6.00 per share under the Common Stock Repurchase Program previously approved by the Board in December 2021. Following the approval of the increase, our company may purchase up to 228,991 Common Shares in total under the program. Shares will be repurchased, if at all, in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended. Our company’s decision to repurchase its shares, as well as the timing of such repurchases will depend on a variety of factors that include the ongoing assessment of our company’s capital needs, market conditions and the price of our company’s common stock and other corporate considerations, all as determined by our company. The repurchase program does not obligate our company to acquire any particular amount of shares, and the repurchase program may be suspended or discontinued at any time at our company’s discretion.

#### Common stock grants under the 2018 Equity Incentive Plan

On March 2, 2022, the Compensation Committee approved a grant of 7,500 Common Shares to two employees of our Manager who also serve as directors of our company, a grant of 11,250 Common Shares to our company’s three independent directors, and a grant of 7,500 Common Shares to the chief financial officer of our company under the Equity Incentive Plan. The effective date of the grants was March 2, 2022. The Common Shares granted vested immediately and are unrestricted. However, the Equity Incentive Plan includes other restrictions on the sale of shares issued under the Equity Incentive Plan. Because the Common Shares vested immediately, the fair value of the grants, or $233,100, was recorded to share based compensation expense on our condensed consolidated statements of operations on the effective date of the grant. The fair value of the grants was determined by the market price of our Common Shares on the effective date of the grant.

On November 22, 2022, the Compensation Committee approved a grant of 9,554 Common Shares to two employees of our Manager who also serve as directors of our company, a grant of 14,331 Common Shares to our company’s three independent directors, a grant of 9,555 Common Shares to the chief financial officer of our company, and a grant of 6,370 Common Shares to the vice president and senior accountant of our company under the Equity Incentive Plan. The effective date of the grants was November 22, 2022. The Common Shares granted vested immediately and are unrestricted. However, the Equity Incentive Plan includes other restrictions on the sale of shares issued under the Equity Incentive Plan. Because the Common Shares vested immediately, the fair value of the grants, or $250,000, was recorded to share based compensation expense on our condensed consolidated statements of operations on the effective date of the grant. The fair value of the grants was determined by the market price of our Common Shares on the effective date of the grant.

#### Financing Activities

### Mortgages payable

Our company financed its acquisitions of its investment properties through mortgages, as follows:

*(unaudited)*

| ​ ​ ​ ​ Property | ​ ​ ​ ​ | ​ ​ ​ ​ Monthly Payment | ​ ​ ​ ​ | ​ ​ ​ Interest Rate | ​ ​ ​ ​ ​ | ​ ​ ​ ​ Maturity | ​ ​ ​ ​ | ​ ​ Balance September 30, 2023 | ​ ​ ​ | ​ ​ ​ ​ ​ December 31, 2022 | ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | --- | ---: | --- | --- | ---: | --- | ---: | --- |
| Franklin Square (a) |  | ​ Interest only |  | ​ | 3.808% | December 2031 | ​ | $13,250,000 | ​ | $13,250,000 | ​ |
| Hanover Square (b) | ​ | $78,098 |  | ​ | 6.94% | December 2027 | ​ | 9,683,815 | ​ | 9,877,867 | ​ |
| Ashley Plaza (c) | ​ | $52,795 |  | ​ | 3.75% | September 2029 | ​ | 10,765,077 | ​ | 10,930,370 | ​ |
| Brookfield Center (d) | ​ | $22,876 |  | ​ | 3.90% | November 2029 | ​ | 4,594,324 | ​ | 4,663,206 | ​ |
| Parkway Center (e) | ​ | $28,161 | ​ | ​ | Variable ​ | November 2031 | ​ | ​ 4,890,170 | ​ | ​ 4,992,427 | ​ |
| Wells Fargo Facility (f) | ​ | $103,438 | ​ | ​ | 4.50% | June 2027 | ​ | ​ 18,078,183 | ​ | ​ 18,351,981 | ​ |
| **Total mortgages payable** | **​** | **​** **​** | **​** | **​** | **​** **​** | **​** | **​** | **$61,261,569** | **​** | **$62,065,851** | ​ |

Amounts presented do not reflect unamortized loan issuance costs.

(a) The mortgage loan for the Franklin Square Property in the principal amount of $13,250,000 has a ten-year term and matures on December 6, 2031. The mortgage loan bears interest at a fixed rate of 3.808% and is interest only until January 6, 2025, at which time the monthly payment will become $61,800, which includes interest and principal based on a thirty-year amortization schedule. The mortgage includes covenants for our company to maintain a net worth of $13,250,000, excluding the assets and liabilities associated with the Franklin Square Property and to maintain liquid assets of no less than $1,000,000. As of September 30, 2023 and December 31, 2022, respectively, our company believes that we are compliant with these covenants. Our company has guaranteed the payment and performance of the obligations of the mortgage loan.

(b) The mortgage loan for the Hanover Square Property bore interest at a fixed rate of 4.25% until January 1, 2023, when the interest rate adjusted to a fixed rate of 6.94%, which was determined by adding 3.00% to the daily average yield on United States Treasury securities adjusted to a constant maturity of five years, as made available by the Federal Reserve Board, with a minimum of 4.25%. As a result of the interest rate change, as of February 1, 2023, the fixed monthly payment of $56,882 increased to $78,098 which includes interest at the fixed rate, and principal, based on a twenty-five -year amortization schedule. The mortgage loan agreement for the Hanover Square property includes covenants to (i) maintain a Debt Service Coverage Ratio (“DSCR”) in excess of 1.35 and (ii) maintain a loan-to-value of real estate ratio of 75%. As of September 30, 2023 and December 31, 2022, respectively, our company believes that we are compliant with these covenants.

(c) The mortgage loan for the Ashley Plaza Property bears interest at a fixed rate of 3.75% and was interest only for the first twelve months. Beginning on October 1, 2020, the monthly payment became $52,795 for the remaining term of the loan, which includes interest at the fixed rate, and principal, based on a thirty-year amortization schedule.

(d) The mortgage loan for the Brookfield Property bears interest at a fixed rate of 3.90% and is interest only for the first twelve months. Beginning on November 1, 2020, the monthly payment became $22,876 for the remaining term of the loan, which includes interest at the fixed rate, and principal, based on a thirty-year amortization schedule.

(e) The interest rate for the mortgage loan for the Parkway Property was originally based on ICE LIBOR plus 225 basis points, with a minimum rate of 2.25%. After the discontinuation of LIBOR on June 30, 2023, the ICE LIBOR index was replaced by 1 month CME Term SOFR (“SOFR”), with an adjusted margin of 236.44 basis points. Under the terms of the mortgage, the interest rate payable each month shall not change by greater than 1% during any six-month period and 2% during any 12-month period. As of September 30, 2023 and December 31, 2022 the rate in effect for the Parkway Property mortgage was 6.05% and 4.3117%, respectively. The monthly payment, which varies based on the interest rate in effect each month, includes interest at the variable rate, and principal based on a thirty-year amortization schedule. The mortgage loan for the Parkway Property includes a covenant to maintain a debt service coverage ratio of not less than 1.30 to 1.00 on an annual basis. As of September 30, 2023 and December 31, 2022, respectively, our company believes that it is compliant with this covenant.

On October 28, 2021, our company entered into the Interest Rate Protection Transaction to limit our exposure to increases in interest rates on the variable rate mortgage loan on the Parkway Property. Under this agreement, our interest rate exposure is capped at 5.25% if USD 1-Month ICE LIBOR exceeds 3%. Effective on July 1, 2023, the interest rate index under the Interest Rate Protection Transaction automatically converted to SOFR. For the period from September 1, 2022 through September 30, 2023, the applicable index (LIBOR or SOFR), exceeded the 3% cap, and payments from the Interest Rate Protection Transaction reduced our company’s net interest expense. Payments to our company from the Interest Rate Protection Transaction are recorded as an offset to interest expense on our company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2023. No such payments were received during the three and nine months ended September 30, 2022 because the LIBOR rate in effect did not exceed the LIBOR cap.

(f) On June 13, 2022, our company entered into a mortgage loan facility with Wells Fargo Bank (the “Wells Fargo Mortgage Facility”) in the principal amount of $18,609,500. The proceeds of this mortgage were used to finance the acquisition of the Salisbury Marketplace Property and to refinance the mortgages payable on the Lancer Center Property and the Greenbrier Business Center Property (see notes (g) and (h), below). The Wells Fargo Mortgage Facility bears interest at a fixed rate of 4.50% for a five-year term. The monthly payment, which includes interest at the fixed rate, and principal, based on a twenty-five-year amortization schedule, is $103,438. Our company has provided an unconditional guaranty of the payment of and performance under the terms of the Wells Fargo Mortgage Facility. The Wells Fargo Mortgage Facility credit agreement includes covenants to maintain a debt service coverage ratio of not less than 1.50 to 1.00 on an annual basis and a minimum debt yield of 9.5% on the Salisbury Marketplace, Lancer Center and Greenbrier Business Center properties, and to maintain liquid assets of not less than $1,500,000. As of September 30, 2023 and December 31, 2022, respectively, our company believes that we are compliant with these covenants.

Our company refinanced the mortgage loan for the Lancer Center Property using proceeds from the Wells Fargo Mortgage Facility discussed above. Our company accounted for this refinancing transaction under debt extinguishment accounting in accordance with ASC 470, and for the nine months ended September 30, 2022 recorded a loss on extinguishment of debt of $113,282. The original mortgage loan for the Lancer Center Property bore interest at a fixed rate of 4.00%. The monthly payment was $34,667 which includes interest at the fixed rate and principal, based on a twenty-five-year amortization schedule.

Our company refinanced the mortgage loan for the Greenbrier Business Center Property, using proceeds from the Wells Fargo Mortgage Facility discussed above. Our company accounted for this refinancing transaction under debt extinguishment accounting in accordance with ASC 470, and for the nine months ended September 30, 2022, recorded a loss on extinguishment of debt of $56,393. Our company assumed the original mortgage loan for the Greenbrier Business Center Property from the seller. The original mortgage loan bore interest at a fixed rate of 4.00% and would have been interest only until August 1, 2022, at which time the monthly payment would have become $23,873, which would have included interest at the fixed rate, and principal, based on a twenty-five-year amortization schedule.

### Off-Balance Sheet Arrangements

As of September 30, 2023, we have no off-balance sheet arrangements.

### Summary of Critical Accounting Policies

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to use judgment in the application of accounting policies, including making estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, or different assumptions were made, it is possible that different accounting policies would have been applied, resulting in different financial results or a different presentation of our financial statements. Below is a discussion of the accounting policies that we consider critical to an understanding of our financial condition and operating results that may require complex or significant judgment in their application or require estimates about matters which are inherently uncertain. A discussion of our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 2, “Summary of Significant Accounting Policies,” of our Condensed Consolidated Financial Statements. We believe that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition.

#### Revenue Recognition

Principal components of our total revenues for our retail center properties and flex center properties include base rents and tenant reimbursements. We accrue minimum (base) rent on a straight-line basis over the terms of the respective leases which results in an unbilled rent asset or deferred rent liability being recorded on the balance sheet. Certain lease agreements contain provisions that grant additional rents based on tenants’ sales volumes (contingent or percentage rent) which we recognize when the tenants achieve the specified targets as defined in their lease agreements. We periodically review the valuation of the asset/liability resulting from the straight-line accounting treatment of our leases in light of any changes in lease terms, financial condition or other factors concerning our tenants.

For the periods during which our company owned its hotel properties, revenues were recognized as earned, which is generally defined as the date upon which a guest occupies a room or utilizes the hotel’s services. Revenues from our company’s occupancy agreement with Clemson University were recognized as earned, which is as rooms were occupied by the University.

#### Rents and Other Tenant Receivables

For our retail center and flex center properties, we record a tenant receivable for amounts due from tenants such as base rents, tenant reimbursements and other charges allowed under the lease terms. We periodically review tenant receivables for collectability and determine the need for an allowance for the uncollectible portion of accrued rents and other accounts receivable based upon customer creditworthiness (including expected recovery of a claim with respect to any tenants in bankruptcy), historical bad debt levels and current economic trends. We consider a receivable past due once it becomes delinquent per the terms of the lease. A past due receivable triggers certain events such as notices, fees and other actions per the lease.

#### Accounting for Leases

Our company adopted Accounting Standards Update (“ASU”) 2016-02, *Leases (Topic 842)* on January 1, 2022 using the modified retrospective approach within ASU 2018-11, which allows for the application date to be the beginning of the reporting period in which the entity first applies the new standard. Our company historically has not been and is not currently a “lessee” under any lease agreements, and thus did not have any arrangements requiring the recognition of lease assets or liabilities on its balance sheet. As a “lessor”, our company has active lease agreements with over 130 tenants across our portfolio of investment properties.

Upon the adoption of ASC No. 842, our company has elected the practical expedient permitting lessors to elect by class of underlying asset to not separate non-lease components (for example, maintenance services, including common area maintenance) from associated lease components (the “non-separation practical expedient”) if both of the following criteria are met: (1) the timing and pattern of transfer of the lease and non-lease component(s) are the same and (2) the lease component would be classified as an operating lease if it were accounted for separately. If both criteria are met, the combined component is accounted for in accordance with ASC No. 842 if the lease component is the predominant component of the combined component; otherwise, the combined component is accounted for in accordance with the revenue recognition standard. Our company assessed the criteria above with respect to our operating leases and determined that they qualify for the non-separation practical expedient. As a result, we have accounted for and presented the revenues from these leases, including tenant reimbursements, as a single line item on our condensed consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022.

#### Acquisition of Investments in Real Estate

The adoption of ASU 2017-01, as discussed in Note 2, “Summary of Significant Accounting Policies” of the condensed consolidated financial statements included in this report, has impacted our accounting framework for the acquisition of investment properties. Upon acquisition of investment properties, our company estimates the fair value of acquired tangible assets (consisting of land, buildings and improvements, and furniture, fixtures and equipment) and identified intangible assets and liabilities, including in-place leases, above- and below-market leases, tenant relationships and assumed debt based on evaluation of information and estimates available at that date. Fair values for these assets are not directly observable and estimates are based on comparable market data and other information which is subjective in nature, including estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information.

#### Impairment of Long-Lived Assets

We periodically review investment properties for impairment on a property-by-property basis to identify any events or changes in circumstances that indicate that the carrying value of investment properties may not be recoverable. These circumstances include, but are not limited to, declines in the property’s cash flows, occupancy and fair market value. If any such events or changes in circumstances are identified, we perform a formal impairment analysis. We measure any impairment of investment property when the estimated undiscounted operating income before depreciation and amortization, is less than the carrying value of the property. To the extent impairment has occurred, we charge to income the excess of carrying value of the property over its estimated fair value. We estimate fair value using data such as operating income, estimated capitalization rates or multiples, leasing prospects and local market information. Our company also reviews its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of its intangible assets may not be recoverable, but at least annually.

#### REIT Status

We are a Maryland corporation that has elected to be treated, for U.S. federal income tax purposes, as a REIT. We elected to be taxed as a REIT under the Code for the year ended December 31, 2017 and have not revoked such election. A REIT is a corporate entity which holds real estate interests and must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its adjusted taxable income to stockholders. As a REIT, we generally will not be subject to corporate level federal income tax on our taxable income if we annually distribute 100% of our taxable income to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to regular federal and state corporate income taxes and may not be able to elect to qualify as a REIT for four subsequent taxable years. Our qualification as a REIT requires management to exercise significant judgment and consideration with respect to operational matters and accounting treatment. Therefore, we believe our REIT status is a critical accounting estimate.

#### Evaluation of our company’s Ability to Continue as a Going Concern

Under the accounting guidance related to the presentation of financial statements, our company is required to evaluate, on a quarterly basis, whether or not the entity’s current financial condition, including its sources of liquidity at the date that the condensed consolidated financial statements are issued, will enable the entity to meet its obligations as they come due arising within one year of the date of the issuance of our company’s condensed consolidated financial statements and to make a determination as to whether or not it is probable, under the application of this accounting guidance, that the entity will be able to continue as a going concern. Our company’s condensed consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In applying applicable accounting guidance, management considered our company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows and our company’s obligations due over the next twelve months, as well as our company’s recurring business operating expenses.

We have concluded that it is probable that we will be able to meet our obligations arising within one year of the date of issuance of these condensed consolidated financial statements within the parameters set forth in the accounting guidance. For additional information regarding our company’s liquidity, see Note 5 – Loans Payable and Note 8 – Commitments and Contingencies in the notes to our company’s condensed consolidated financial statements.

### Liquidity and Capital Resources

Our business model is intended to drive growth through acquisitions. Access to the capital markets is an important factor for our continued growth and success. Our primary liquidity needs are funding for (1) operations, including operating expenses, corporate and administrative costs, payment of principal of, and interest on, outstanding indebtedness, and escrow and reserve payments associated with long-term debt financing for our properties; (2) investing needs, including property acquisitions and recurring capital expenditures; and (3) financing needs, including cash dividends and debt repayments.

Internal liquidity to fund operating needs are expected to be provided primarily by the rental receipts from our retail and flex center properties.

### Cash Flows

At September 30, 2023, our consolidated cash and restricted cash on hand totaled $4,750,156 compared to consolidated cash on hand of $6,973,084 at September 30, 2022. Cash from operating activities, investing activities and financing activities for the nine months ended September 30, 2023 and 2022 are as follows:

#### Operating Activities

During the nine months ended September 30, 2023 our cash provided by operating activities was $415,603 compared to cash provided by operating activities of $1,673,481 for the nine months ended September 30, 2022, a decrease in cash provided by operating activities of $1,257,878.

Cash flows from operating activities has two components. The first component consists of net operating loss adjusted for non-cash operating activities. During the nine months ended September 30, 2023, operating activities adjusted for non-cash items resulted in net cash used in operating activities of $432,710. During the nine months ended September 30, 2022, operating activities adjusted for non-cash items resulted in net cash provided by operating activities of $1,113,651.

The second component consists of changes in assets and liabilities. Increases in assets and decreases in liabilities result in cash used in operations. Decreases in assets and increases in liabilities result in cash provided by operations. During the nine months ended September 30, 2023, net changes in asset and liability accounts resulted in $848,313 in cash provided by operations. During the nine months ended September 30, 2022, net changes in asset and liability accounts resulted in $559,830 in cash provided by operations. This increase of $288,483 in cash provided by operations resulting from changes in assets and liabilities is a result of decreased changes in other assets of $64,168, unbilled rent of $27,915 and rent and other receivables of $46,408, and increased changes in accounts payable and accrued liabilities of $149,992.

The net of (i) the $432,710 decrease in cash provided by operations from the first category and (ii) the $848,313 increase in cash provided by operations from the second category results in a total increase in cash provided in operations of $415,603 for the nine months ended September 30, 2023.

#### Investing Activities

During the nine months ended September 30, 2023, our cash used in investing activities was $1,144,354, compared to cash used in investing activities of $8,919,905 during the nine months ended September 30, 2022, a decrease in cash used in investing activities of $7,775,551. During the nine months ended September 30, 2023, cash used in investing activities consisted of $1,144,354 in capitalized expenditures, including $194,570 in building improvements, $11,323 in site improvements, $317,155 in capitalized leasing commissions, and $621,306 in capitalized tenant improvements. During the nine months ended September 30, 2022, cash used in investing activities consisted of $10,279,714 for the acquisition of the Salisbury Marketplace Property, and $651,653 in capitalized expenditures, including $270,062 in building improvements, $219,541 in capitalized leasing commissions, $95,167 in furniture, fixtures and equipment for the Clemson Best Western Hotel property, and $66,883 in capitalized tenant improvements, offset by $2,011,462 in cash received from the disposal of investment properties.

#### Financing Activities

During the nine months ended September 30, 2023, our cash used in financing activities was $183,946 compared to cash provided by financing activities of $6,835,531 during the nine months ended September 30, 2022, an increase in cash used in financing activities of $7,019,477. During the nine months ended September 30, 2023, cash used in financing activities consisted of $804,282 for mortgage debt principal payments, $374,665 for dividends and distributions and $4,999 for the retirement of fractional shares resulting from the Reverse Stock Split, offset by proceeds from the line of credit, short term, of $1,000,000. During the nine months ended September 30, 2022, financing activities generated $18,477,304 in net proceeds from mortgages payable and $1,538,887 in net proceeds, after issuance costs, from common stock issuances under our SEPA (see above), offset by cash used in financing activities, including dividends and distributions of $1,116,660, mortgage debt principal payments of $11,692,557 (including $10,962,484 of cash used to refinance the Lancer Center and Greenbrier Business Center properties and $730,073 in normal, monthly principal payments for our company’s other mortgages) and repurchases of our company’s common stock of $286,543, including costs and fees.

### Future Liquidity Needs

Liquidity for general operating needs and our company’s investment properties is generally provided by the rental receipts from our retail properties and flex center properties, and revenues from our hotel properties, if any. We expect to provide any liquidity for growth (acquisition of new investment properties) by raising additional investment capital. In addition, our company continually reviews and evaluates its outstanding mortgages payable for refinancing opportunities. While some of our mortgages payable are not pre-payable, some mortgages payable may present opportunities for refinancing.

The primary, non-operating liquidity need of our company is $170,004 to pay the accrued but undeclared dividends to holders of our mandatorily redeemable preferred and $268,067 in principal payments due on its mortgages payable during the remaining three months ending December 31, 2023. In addition to liquidity required to fund these dividends and principal payments, we may also incur some level of capital expenditures for our existing properties that cannot be passed on to our tenants. Our company plans to pay these obligations through a combination of cash on hand, potential dispositions and operating cash.

To meet these future liquidity needs, our company has the following resources:

- $3,015,859 in unrestricted cash as of September 30, 2023
- $1,734,297 held in lender reserves for the purposes of tenant improvements, leasing commissions, real estate taxes and insurance premiums;
- Our company’s $1,500,000 line of credit with Wells Fargo Bank, which had a $1,000,000 outstanding balance as of September 30, 2023;
- Cash generated from operations during the three months ending December 31, 2023, if any; and
- Potential proceeds from issuances of Common Shares under our company’s shelf registration or under the Standby Equity Purchase Agreement (see note 7 of the notes to the condensed consolidated financial statements), although there is no guarantee that any such issuances will be successful in raising additional funds.

### Results of Operations

#### Three months ended September 30, 2023

### Revenues

Total revenue was $2,588,740 for the three months ended September 30, 2023, consisting of $1,930,494 in revenues from retail center properties, and $658,246 from flex center properties. Total revenues for the three months ended September 30, 2023 decreased by $252,333 over the three months ended September 30, 2022, resulting from decreased hotel property revenues from the sale of our company’s Clemson Best Western Hotel Property on September 29, 2022, offset by increased flex center revenues and retail center revenues from new leasing activity.

*(unaudited)*

*(unaudited)*

| ​ ​ ​ ​ ​ Revenues | ​ ​ ​ ​ | ​ ​ For the three months ended September 30, 2023 ​ | ​ | ​ ​ 2022 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Increase / (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Retail center properties | ​ | $1,930,494 | ​ | $1,850,797 | ​ | $79,697 |
| Hotel property | ​ | — | ​ | 379,309 | ​ | (379,309) |
| Flex center properties | ​ | 658,246 | ​ | 610,967 | ​ | 47,279 |
| **Total Revenues** | **​** | **$2,588,740** | **​** | **$2,841,073** | **​** | **$(252,333)** |

Revenues from retail center properties were $1,930,494 for the three months ended September 30, 2023, an increase of $79,697 over revenues from retail center properties for the three months ended September 30, 2022. Increased revenues of $11,591 from the acquisition of the Salisbury Marketplace Property, $52,419 from new leasing activity at our Franklin Square Property, $3,303 from the Hanover Square Property, and $15,723 from the Lancer Center Property, were offset by slightly decreased revenue of $3,339 from the Ashley Plaza Property.

*(unaudited)*

*(unaudited)*

| ​ ​ ​ ​ ​ Retail Center Properties | ​ ​ ​ ​ ​ | ​ ​ For the three months ended September 30, 2023 ​ ​ | ​ ​ | ​ ​ 2022 ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ Increase / (Decrease) ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Franklin Square Property | ​ | $596,554 | ​ | $544,135 | ​ | $52,419 |
| Hanover Square Property | ​ | 327,348 | ​ | 324,045 | ​ | 3,303 |
| Ashley Plaza Property | ​ | 437,468 | ​ | 440,807 | ​ | (3,339) |
| Lancer Center Property | ​ | ​ 315,556 | ​ | ​ 299,833 | ​ | ​ 15,723 |
| Salisbury Property | ​ | ​ 253,568 | ​ | ​ 241,977 | ​ | ​ 11,591 |
| ​ | **​** | **$1,930,494** | **​** | **$1,850,797** | **​** | **$79,697** |

Revenues from the hotel property were $0 for the three months ended September 30, 2023, a decrease of $379,309 from hotel property revenues for the three months ended September 30, 2022, due to the sale of Clemson Best Western Property on September 29, 2022.

*(unaudited)*

*(unaudited)*

| ​ ​ ​ ​ ​ Hotel Property | ​ ​ ​ ​ | ​ ​ For the three months ended September 30, 2023 ​ | ​ | ​ ​ 2022 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Increase / (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Clemson Best Western Property | ​ | $— | ​ | $379,309 | ​ | $(379,309) |
| ​ | **​** | **$—** | **​** | **$379,309** | **​** | **$(379,309)** |

Revenues from flex center properties were $658,246 for the three months ended September 30, 2023, an increase of $47,279 over revenues from flex center properties for the three months ended September 30, 2022 due to increased revenues from the Brookfield Center Property of $12,833 and the Greenbrier Business Center Property of $36,766, offset by decreased revenues from the Parkway Center Property of $2,320.

*(unaudited)*

*(unaudited)*

| ​ ​ ​ ​ ​ Flex Center Properties | ​ ​ ​ ​ ​ | ​ ​ For the three months ended September 30, 2023 ​ ​ | ​ ​ | ​ ​ 2022 ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ Increase / (Decrease) ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Brookfield Center Property | ​ | $211,620 | ​ | $198,787 | ​ | $12,833 |
| Greenbrier Business Center Property | ​ | ​ 245,101 | ​ | ​ 208,335 | ​ | ​ 36,766 |
| Parkway Center Property | ​ | ​ 201,525 | ​ | ​ 203,845 | ​ | ​ (2,320) |
| **​** | **​** | **$658,246** | **​** | **$610,967** | **​** | **$47,279** |

### Operating Expenses

Total operating expenses were $3,655,440 for the three months ended September 30, 2023, consisting of $468,911 in expenses from the retail center properties, $183,750 in expenses from the flex center properties, $237,562 in legal, accounting and other professional fees, $162,649 in corporate general and administrative expenses, $1,452,904 in management restructuring expenses, and $1,149,664 in depreciation and amortization.

*(unaudited)*

*(unaudited)*

| ​ ​ ​ ​ ​ Operating Expenses | ​ ​ ​ ​ | ​ ​ For the three months ended September 30, 2023 ​ | ​ | ​ ​ 2022 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Increase / (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Retail center properties (1) | ​ | $468,911 | ​ | $491,889 | ​ | $(22,978) |
| Hotel property | ​ | — | ​ | 589,311 | ​ | (589,311) |
| Flex center properties (2) | ​ | 183,750 | ​ | 189,720 | ​ | (5,970) |
| **Total Investment Property Operating Expenses** | **​** | **652,661** | **​** | **1,270,920** | **​** | **(618,259)** |
| Legal, accounting and other professional fees (3) | ​ | 237,562 | ​ | 284,463 | ​ | (46,901) |
| Corporate general and administrative expenses | ​ | 162,649 | ​ | 99,323 | ​ | 63,326 |
| Management restructuring expenses | ​ | ​ 1,452,904 | ​ | — | ​ | 1,452,904 |
| Other expenses | ​ | ​ — | ​ | 227,164 | ​ | (227,164) |
| Depreciation and amortization | ​ | 1,149,664 | ​ | 1,231,513 | ​ | (81,849) |
| **Total Operating Expenses** | **​** | **$3,655,440** | **​** | **$3,113,383** | **​** | **$542,057** |

(1) Includes $2,083 and $0 of bad debt expense for the three months ended September 30, 2023 and 2022, respectively.

(2) Includes $3,586 and $0 of bad debt expense for the three months ended September 30, 2023 and 2022, respectively.

(3) Includes $120,005 and $94,590 in expenses paid to the Consultant pursuant to the Consulting Agreement for the three months ended September 30, 2023 and 2022, respectively.

Operating expenses for retail center properties were $468,911 for the three months ended September 30, 2023, a decrease of $22,978 over retail center property operating expenses for the three months ended September 30, 2022. Increased operating expenses from the Salisbury Marketplace Property of $7,424 and the Hanover Square Property of $5,074 were offset by decreased operating expenses from the Franklin Square Property of $20,256, the Ashley Plaza Property of $9,762, and the Lancer Center Property of $5,458.

*(unaudited)*

*(unaudited)*

| ​ ​ ​ ​ ​ Retail Center Properties | ​ ​ ​ ​ | ​ ​ For the three months ended September 30, 2023 ​ | ​ | ​ ​ 2022 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Increase / (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Franklin Square Property | ​ | $159,641 | ​ | $179,897 | ​ | $(20,256) |
| Hanover Square Property | ​ | 82,132 | ​ | 77,058 | ​ | 5,074 |
| Ashley Plaza Property | ​ | ​ 76,150 | ​ | ​ 85,912 | ​ | ​ (9,762) |
| Lancer Center Property (1) | ​ | 96,211 | ​ | 101,669 | ​ | (5,458) |
| Salisbury Property | ​ | 54,777 | ​ | 47,353 | ​ | 7,424 |
| Total | **​** | **$468,911** | **​** | **$491,889** | **​** | **$(22,978)** |

(1) Includes bad debt expense of $2,083 and $0 for the three months ended September 30, 2023 and 2022, respectively.

Operating expenses for the hotel property were $0 for the three months ended September 30, 2023, a decrease of $589,311 from hotel property expenses for the three months ended September 30, 2022 resulting from the sale of the Clemson Best Western Property on September 29, 2022.

*(unaudited)*

*(unaudited)*

| ​ ​ ​ ​ ​ Hotel Property | ​ ​ ​ ​ | ​ ​ For the three months ended September 30, 2023 ​ | ​ | ​ ​ 2022 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Increase / (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Clemson Best Western Property | ​ | $— | ​ | $589,311 | ​ | $(589,311) |
| ​ | **​** | **$—** | **​** | **$589,311** | **​** | **$(589,311)** |

Operating expenses for flex center properties were $183,750 for the three months ended September 30, 2023, a decrease of $5,970 from operating expenses for flex center properties for the three months ended September 30, 2022 due to decreased operating expenses from the Brookfield Center Property of $4,130 and from the Parkway Property of $9,223, offset by increased operating expenses from the Greenbrier Business Center of $7,383.

*(unaudited)*

*(unaudited)*

| ​ ​ ​ ​ ​ Flex Center Properties | ​ ​ ​ ​ ​ | ​ ​ For the three months ended September 30, 2023 ​ ​ | ​ ​ | ​ ​ 2022 ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ Increase / (Decrease) ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Brookfield Center Property | ​ | $62,563 | ​ | $66,693 | ​ | $(4,130) |
| Greenbrier Business Center Property | ​ | ​ 58,296 | ​ | ​ 50,913 | ​ | ​ 7,383 |
| Parkway Center Property (1) | ​ | ​ 62,891 | ​ | ​ 72,114 | ​ | ​ (9,223) |
| ​ | ​ | **$183,750** | **​** | **$189,720** | **​** | **$(5,970)** |

(1) Includes $3,586 and $0 of bad debt expense for the three months ended September 30, 2023 and 2022, respectively.

### Operating (Loss) Income

Operating loss for the three months ended September 30, 2023 was $1,066,700, an increase of $185,387 over the operating loss of $881,313 for the three months ended September 30, 2022. This increase was a result of increased management restructuring expenses of $1,452,904 and increased corporate general and administrative expenses of $63,326, offset by increased investment property operating income of $365,926, decreased depreciation and amortization expenses of $81,849, decreased legal, accounting and other professional fees of $46,901, decreased other expenses of $227,164, decreased loss on extinguishment of debt of $219,532, and decreased loss on disposal of investment properties of $389,471.

### Interest Expense

Interest expense was $900,182 and $989,255 for the three months ended September 30, 2023 and 2022, respectively, as follows:

*(unaudited)*

*(unaudited)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ For the three months ended September 30, 2023 | ​ | ​ ​ 2022 | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Increase / (Decrease) |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Franklin Square | ​ | $136,036 | ​ | $136,036 | ​ | $— |
| Hanover Square | ​ | 169,755 | ​ | 111,445 | ​ | 58,310 |
| Ashley Plaza | ​ | 107,697 | ​ | 109,795 | ​ | (2,098) |
| Clemson Best Western | ​ | — | ​ | 147,589 | ​ | (147,589) |
| Brookfield Center | ​ | 48,780 | ​ | 49,682 | ​ | (902) |
| Parkway Center | ​ | ​ 46,851 | ​ | ​ 58,780 | ​ | ​ (11,929) |
| Wells Fargo Mortgage Facility | ​ | ​ 215,019 | ​ | ​ 219,617 | ​ | ​ (4,598) |
| Wells Fargo Line of Credit | ​ | ​ 14,636 | ​ | ​ — | ​ | ​ 14,636 |
| Amortization and preferred stock dividends on mandatorily redeemable preferred stock | ​ | 161,408 | ​ | 156,311 | ​ | 5,097 |
| **Total interest expense** | **​** | **$900,182** | **​** | **$989,255** | **​** | **$(89,073)** |

Total interest expense for the three months ended September 30, 2023 decreased by $89,073 over the three months ended September 30, 2022. This decrease was a result of (i) decreased interest expense of $147,589 resulting from the sale of the Clemson Best Western Hotel Property, (ii) decreased interest expense from existing properties of $11,929 from the Parkway Property, $4,598 from the Wells Fargo Mortgage Facility, $2,098 from the Ashley Plaza Property and $902 from the Brookfield Property, offset by (iii) increased interest expense from the Hanover Square Property of $58,310 due to the interest rate increase in January 2023, increased interest expense from the Wells Fargo Line of Credit of $14,636, and increased amortization of preferred stock issuance costs of $5,097.

### Other Income

During the three months ended September 30, 2023, other income was $20,522, a decrease of $105,912 from other income of $126,434 for the three months ended September 30, 2022. Other income for the three months ended September 30, 2023 consisted of $12,337 in income related to the fair value change of the interest rate caps, and interest income of $8,185. Other income of $126,434 for the three months ended September 30, 2022 consisted of $126,127 related to the fair value change of the interest rate cap, and $307 of interest income.

### Net Loss

Net loss was $1,946,360 for the three months ended September 30, 2023, before adjustments for net income (loss) attributable to noncontrolling interests. After adjusting for noncontrolling interests, the net loss attributable to our common shareholders was $1,948,827. Net loss was $1,744,134 for the three months ended September 30, 2022, before adjustments for net income (loss) attributable to noncontrolling interests. After adjusting for noncontrolling interests, the net loss attributable to Medalist common shareholders was $1,754,458, for the three months ended September 30, 2022.

Net loss for the three months ended September 30, 2023 increased by $202,226 over the three months ended September 30, 2022, before adjustments for net loss attributable to noncontrolling interests. After adjusting for noncontrolling interests, the net loss attributable to our common shareholders for the three months ended September 30, 2023 increased by $194,369 over the three months ended September 30, 2022.

#### Nine months ended September 30, 2023

### Revenues

Total revenue was $7,565,617 for the nine months ended September 30, 2023, consisting of $5,725,942 in revenues from retail center properties, and $1,839,675 from flex center properties. Total revenues for the nine months ended September 30, 2023 decreased by $775,321 over the nine months ended September 30, 2022, resulting from decreased hotel property revenues from the sale of our company’s Clemson Best Western Hotel Property on September 29, 2022, offset by increased retail center property revenues from the acquisition of our Salisbury Marketplace Property and new leasing activity across our retail portfolio, and slightly increased flex center revenues.

*(unaudited)*

*(unaudited)*

| ​ ​ ​ ​ ​ Revenues | ​ ​ ​ ​ | ​ ​ For the nine months ended September 30, 2023 ​ | ​ | ​ ​ 2022 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Increase / (Decrease) ​ | ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- |
| Retail center properties | ​ | $5,725,942 | ​ | $4,999,089 | ​ | $726,853 | ​ |
| Hotel property | ​ | — | ​ | 1,507,649 | ​ | (1,507,649) | ​ |
| Flex center properties | ​ | 1,839,675 | ​ | 1,834,200 | ​ | 5,475 | ​ |
| **Total Revenues** | **​** | **$7,565,617** | **​** | **$8,340,938** | **​** | **$(775,321)** | **​** |

Revenues from retail center properties were $5,725,942 for the nine months ended September 30, 2023, an increase of $726,853 over retail center property revenues for the nine months ended September 30, 2022. Increased revenues of $440,663 from the acquisition of the Salisbury Marketplace Property, $269,069 from new leasing activity at our Franklin Square Property, $17,324 from the Hanover Square Property, and $14,167 from the Lancer Center Property were offset by slightly decreased revenues of $14,370 from the Ashley Plaza Property.

|  |  |  |  |  |
| --- | --- | --- | --- | --- |
| ​ | ​ | ​ ​ ​ ​ ​ | ​ | ​ ​ |
| **​** | ​ | **For the nine months ended** | ​ | **​** **​** |
| **​** | ​ | **September 30,** | ​ | **​** |
| **​** | ​ | **2023** **2022** | ​ | **Increase /** |
| **​** |  | **(unaudited)** **(unaudited)** |  | **(Decrease)** |

52

| Retail Center Properties |  | ​ |  | ​ |  | ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Franklin Square Property | ​ | $1,781,744 | ​ | $1,512,675 | ​ | $269,069 |
| Hanover Square Property | ​ | 987,121 | ​ | 969,797 | ​ | 17,324 |
| Ashley Plaza Property | ​ | 1,300,546 | ​ | 1,314,916 | ​ | (14,370) |
| Lancer Center Property | ​ | ​ 925,977 | ​ | ​ 911,810 | ​ | ​ 14,167 |
| Salisbury Property | ​ | ​ 730,554 | ​ | ​ 289,891 | ​ | ​ 440,663 |
| ​ | **​** | **$5,725,942** | **​** | **$4,999,089** | **​** | **$726,853** |

Revenues from the hotel property were $0 for the nine months ended September 30, 2023, a decrease of $1,507,649 from hotel property revenues for the nine months ended September 30, 2022, due to the sale of Clemson Best Western Property on September 29, 2022.

*(unaudited)*

*(unaudited)*

| ​ ​ ​ ​ ​ Hotel Property | ​ ​ ​ ​ | ​ ​ For the nine months ended September 30, 2023 ​ | ​ | ​ ​ 2022 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Increase / (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Clemson Best Western Property | ​ | $— | ​ | $1,507,649 | ​ | $(1,507,649) |
| ​ | **​** | **$—** | **​** | **$1,507,649** | **​** | **$(1,507,649)** |

Revenues from flex center properties were $1,839,675 for the nine months ended September 30, 2023, an increase of $5,475 from flex center property revenues for the nine months ended September 30, 2022 due to increased revenues from the Brookfield Center Property of $34,464 and the Greenbrier Business Center Property of $25,799, offset by reduced revenues from the Parkway Property of $54,788.

*(unaudited)*

*(unaudited)*

| ​ ​ ​ ​ ​ Flex Center Properties | ​ ​ ​ ​ ​ | ​ ​ For the nine months ended September 30, 2023 ​ ​ | ​ ​ | ​ ​ 2022 ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ Increase / (Decrease) ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Brookfield Center Property | ​ | $629,206 | ​ | $594,742 | ​ | $34,464 |
| Greenbrier Business Center Property | ​ | ​ 631,530 | ​ | ​ 605,731 | ​ | ​ 25,799 |
| Parkway Center Property | ​ | ​ 578,939 | ​ | ​ 633,727 | ​ | ​ (54,788) |
| **​** | **​** | **$1,839,675** | **​** | **$1,834,200** | **​** | **$5,475** |

### Operating Expenses

Total operating expenses were $9,047,289 for the nine months ended September 30, 2023, consisting of $1,531,354 in operating expenses from retail center properties, $566,355 in operating expenses from the flex center properties, $1,228,262 in legal, accounting and other professional fees, $364,868 in corporate general and administrative expenses, $1,846,329 in management restructuring expenses, loss on impairment of $50,859, and $3,459,262 in depreciation and amortization.

*(unaudited)*

*(unaudited)*

| ​ ​ ​ ​ ​ Operating Expenses | ​ ​ ​ ​ | ​ ​ For the nine months ended September 30, 2023 ​ | ​ | ​ ​ 2022 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Increase / (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Retail center properties (1) | ​ | $1,531,354 | ​ | $1,392,015 | ​ | $139,339 |
| Hotel property | ​ | — | ​ | 1,302,114 | ​ | (1,302,114) |
| Flex center properties (2) | ​ | 566,355 | ​ | 516,763 | ​ | 49,592 |
| **Total Investment Property Operating Expenses** | **​** | **2,097,709** | **​** | **3,210,892** | **​** | **(1,113,183)** |
| Share based compensation expenses | ​ | — | ​ | 233,100 | ​ | (233,100) |
| Legal, accounting and other professional fees (3) | ​ | 1,228,262 | ​ | 1,112,878 | ​ | 115,384 |
| Corporate general and administrative expenses | ​ | 364,868 | ​ | 335,538 | ​ | 29,330 |
| Management restructuring expenses | ​ | ​ 1,846,329 | ​ | — | ​ | 1,846,329 |
| Loss on impairment | ​ | 50,859 | ​ | 36,670 | ​ | 14,189 |
| Impairment of assets held for sale | ​ | — | ​ | 175,671 | ​ | (175,671) |
| Other expenses | ​ | ​ — | ​ | 227,164 | ​ | (227,164) |
| Depreciation and amortization | ​ | 3,459,262 | ​ | 3,509,165 | ​ | (49,903) |
| **Total Operating Expenses** | **​** | **$9,047,289** | **​** | **$8,841,078** | **​** | **$206,211** |

(1) Includes $18,578 and $7,954 of bad debt expense for the nine months ended September 30, 2023 and 2022, respectively.

(2) Includes $31,290 and $4,992 of bad debt expense for the nine months ended September 30, 2023 and 2022, respectively.

(3) Includes $407,018 and $285,154 in expenses paid to the Consultant pursuant to the Consulting Agreement for the nine months ended September 30, 2023 and 2022, respectively.

Operating expenses for retail center properties were $1,531,354 for the nine months ended September 30, 2023, an increase of $139,339 over retail center property operating expenses for the nine months ended September 30, 2022. Increased operating expenses resulted from the acquisition of the Salisbury Marketplace Property of $138,748, and from our existing properties, the Hanover Square Property, which increased by $14,372, and the Lancer Center Property, which increased by $2,474, were offset by reduced operating expenses from the Franklin Square Property, which decreased by $14,936 and the Ashley Plaza Property, which decreased by $1,319.

*(unaudited)*

*(unaudited)*

| ​ ​ ​ ​ ​ Retail Center Properties | ​ ​ ​ ​ | ​ ​ For the nine months ended September 30, 2023 ​ | ​ | ​ ​ 2022 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Increase / (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Franklin Square Property (1) | ​ | $526,644 | ​ | $541,580 | ​ | $(14,936) |
| Hanover Square Property | ​ | 248,876 | ​ | 234,504 | ​ | 14,372 |
| Ashley Plaza Property | ​ | ​ 250,262 | ​ | ​ 251,581 | ​ | ​ (1,319) |
| Lancer Center Property (2) | ​ | 310,524 | ​ | 308,050 | ​ | 2,474 |
| Salisbury Property (3) | ​ | 195,048 | ​ | 56,300 | ​ | 138,748 |
| ​ | **​** | **$1,531,354** | **​** | **$1,392,015** | **​** | **$139,339** |

(1) Includes bad debt expense of $0 and $211 for the nine months ended September 30, 2023 and 2022, respectively.

(2) Includes bad debt expense of $2,208 and $7,743 for the nine months ended September 30, 2023 and 2022, respectively.

(3) Includes bad debt expense of $16,370 and $0 for the nine months ended September 30, 2023 and 2022, respectively.

Operating expenses for the hotel property were $0 for the nine months ended September 30, 2023, a decrease of $1,302,114 from operating expenses from hotel properties for the nine months ended September 30, 2022 resulting from the sale of the Clemson Best Western Property on September 29, 2022.

*(unaudited)*

*(unaudited)*

| ​ ​ ​ ​ ​ Hotel Property | ​ ​ ​ ​ | ​ ​ For the nine months ended September 30, 2023 ​ | ​ | ​ ​ 2022 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Increase / (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Clemson Best Western Property | ​ | $— | ​ | $1,302,114 | ​ | $(1,302,114) |
| ​ | **​** | **$—** | **​** | **$1,302,114** | **​** | **$(1,302,114)** |

Operating expenses for flex center properties were $566,355 for the nine months ended September 30, 2023, an increase of $49,592 over flex center property operating expenses for the nine months ended September 30, 2022 due to increased operating expenses from the Greenbrier Business Center of $63,565 and the Brookfield Center Property of $3,130, offset by decreased operating expenses from the Parkway Property of $17,103.

*(unaudited)*

*(unaudited)*

| ​ ​ ​ ​ ​ Flex Center Properties | ​ ​ ​ ​ ​ | ​ ​ For the nine months ended September 30, 2023 ​ ​ | ​ ​ | ​ ​ 2022 ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ Increase / (Decrease) ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Brookfield Center Property | ​ | $192,953 | ​ | $189,823 | ​ | $3,130 |
| Greenbrier Business Center Property (1) | ​ | ​ 207,701 | ​ | ​ 144,136 | ​ | ​ 63,565 |
| Parkway Center Property (2) | ​ | ​ 165,701 | ​ | ​ 182,804 | ​ | ​ (17,103) |
| ​ | ​ | **$566,355** | **​** | **$516,763** | **​** | **$49,592** |

(1) Includes $25,170 and $0 of bad debt expense for the nine months ended September 30, 2023 and 2022, respectively.

(2) Includes $6,120 and $4,992 of bad debt expense for the nine months ended September 30, 2023 and 2022, respectively.

### Operating (Loss) Income

Operating loss for the nine months ended September 30, 2023 was $1,481,672, an increase of $202,854 over the operating loss of $1,278,818 for the nine months ended September 30, 2022. This increase was a result of increased management restructuring expenses of $1,846,329, increased legal, accounting and other professional fees of $115,384, increased corporate general and administrative expenses of $29,330, increased loss on impairment of $14,189, offset by decreased loss on disposal of investment properties of $389,471, decreased loss on extinguishment of debt of $389,207, decreased other expenses of $227,164, decreased impairment of assets held for sale of $175,671, decreased depreciation and amortization expenses of $49,903 and increased property operating income of $337,862 primarily resulting from the sale of the Clemson Best Western Hotel on September 29, 2022.

### Interest Expense

Interest expense was $2,612,642 and $2,704,835 for the nine months ended September 30, 2023 and 2022, respectively, as follows:

*(unaudited)*

*(unaudited)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ For the nine months ended September 30, 2023 | ​ | ​ ​ 2022 | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Increase / (Decrease) |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Franklin Square | ​ | $403,904 | ​ | $403,904 | ​ | $— |
| Hanover Square | ​ | 516,367 | ​ | 329,308 | ​ | 187,059 |
| Ashley Plaza | ​ | 321,281 | ​ | 327,450 | ​ | (6,169) |
| Clemson Best Western | ​ | — | ​ | 426,757 | ​ | (426,757) |
| Brookfield Center | ​ | 145,513 | ​ | 148,159 | ​ | (2,646) |
| Lancer Center | ​ | ​ — | ​ | ​ 127,107 | ​ | ​ (127,107) |
| Greenbrier Business Center | ​ | ​ — | ​ | ​ 82,564 | ​ | ​ (82,564) |
| Parkway Center | ​ | ​ 88,960 | ​ | ​ 132,760 | ​ | ​ (43,800) |
| Wells Fargo Mortgage Facility | ​ | ​ 641,678 | ​ | ​ 261,488 | ​ | ​ 380,190 |
| Wells Fargo Line of Credit | ​ | ​ 14,636 | ​ | ​ — | ​ | ​ 14,636 |
| Amortization and preferred stock dividends on mandatorily redeemable preferred stock | ​ | 480,303 | ​ | 465,338 | ​ | 14,965 |
| **Total interest expense** | **​** | **$2,612,642** | **​** | **$2,704,835** | **​** | **$(92,193)** |

Total interest expense for the nine months ended September 30, 2023 decreased by $92,193 over the nine months ended September 30, 2022. This decrease was a result of (i) decreased interest expense of $426,757 from the sale of the Clemson Best Western Property, (ii) decreased interest expense for the Ashley Plaza mortgage of $6,169 and the Brookfield Center mortgage of $2,646, offset by (iii) increased interest expense from the Wells Fargo Mortgage Facility, which refinanced the Lancer Center and Greenbrier Business Center mortgages payable, and financed the acquisition of the Salisbury Marketplace Property (net increase in interest expense of $126,719 for the three properties, combined), (iv) increased interest expense of $14,636 from the Wells Fargo line of credit, (v) increased amortization of preferred stock issuance costs of $14,965, and (vi) increased interest expense for the Hanover Square mortgage of $187,059.

### Other Income

During the nine months ended September 30, 2023, other income was $52,249, a decrease of $198,948 from other income of $251,197 for the nine months ended September 30, 2022. Other income for the nine months ended September 30, 2023 consisted of $24,674 in gain related to the fair value change of the interest rate cap and interest income of $27,575. Other income of $251,197 for the nine months ended September 30, 2022 consisted of $246,063 related to the fair value change of the interest rate cap, $3,913 of miscellaneous income and $1,221 of interest income.

### Net Loss

Net loss was $4,042,065 for the nine months ended September 30, 2023, before adjustments for net income (loss) attributable to noncontrolling interests. After adjusting for noncontrolling interests, the net loss attributable to our common shareholders was $4,047,786. Net loss was $3,732,456 for the nine months ended September 30, 2022, before adjustments for net income (loss) attributable to noncontrolling interests. After adjusting for noncontrolling interests, the net loss attributable to Medalist common shareholders was $3,758,629, for the nine months ended September 30, 2022.

Net loss for the nine months ended September 30, 2023 increased by $309,609 over the nine months ended September 30, 2022, before adjustments for net loss attributable to noncontrolling interests. After adjusting for noncontrolling interests, the net loss attributable to Medalist common shareholders for the nine months ended September 30, 2023 increased by $289,157 over the nine months ended September 30, 2022.

### Funds from Operations

We use funds from operations (“FFO”), a non-GAAP measure, as an alternative measure of our operating performance, specifically as it relates to results of operations and liquidity. We compute FFO in accordance with standards established by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”) in its March 1995 White Paper (as amended in November 1999, April 2002 and December 2018). As defined by NAREIT, FFO represents net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus real estate related depreciation and amortization (excluding amortization of loan origination costs and above and below market leases) and after adjustments for unconsolidated partnerships and joint ventures. Most industry analysts and equity REITs, including us, consider FFO to be an appropriate supplemental measure of operating performance because, by excluding gains or losses on dispositions and excluding depreciation, FFO is a helpful tool that can assist in the comparison of the operating performance of a company’s real estate between periods, or as compared to different companies. Management uses FFO as a supplemental measure to conduct and evaluate our business because there are certain limitations associated with using GAAP net income alone as the primary measure of our operating performance. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time, while historically real estate values have risen or fallen with market conditions. Accordingly, we believe FFO provides a valuable alternative measurement tool to GAAP when presenting our operating results.

NAREIT’s December 2018 White Paper states, “FFO of a REIT includes the FFO of all consolidated properties, including consolidated, partially owned affiliates”. Additionally, since the adjustments to GAAP net income, such as depreciation and amortization, used in the reconciliation of net income (loss) to determine FFO are not allocated between shareholders and noncontrolling interests (i.e. 100% of depreciation and amortization are “added back” without reduction to reflect the noncontrolling owners’ interest in such items), our company believes that the appropriate starting point for the calculation is the net income (loss) before allocation to noncontrolling interests. This allows our company to use FFO as a tool to measure the overall performance of its investment properties, as a whole, not just the portion of the investment properties controlled by our company’s shareholders.

Below is our company’s FFO, which is a non-GAAP measurement, for the nine months ended September 30, 2023 and 2022:

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ For the nine months ended September 30, 2023 | ​ | ​ ​ 2022 |
| --- | --- | ---: | --- | --- |
| Net loss | ​ | $(4,042,065) | ​ | ​ (3,732,456) |
| Depreciation of tangible real property assets (1) | ​ | 2,036,048 | ​ | ​ 1,890,428 |
| Depreciation of tenant improvements (2) | ​ | 624,762 | ​ | ​ 509,558 |
| Amortization of leasing commissions (3) | ​ | 108,159 | ​ | ​ 71,379 |
| Amortization of intangible assets (4) | ​ | 690,293 | ​ | ​ 1,037,800 |
| Loss on disposal of investment property (5) | ​ | ​ — | ​ | ​ 389,471 |
| Loss on impairment (5) | ​ | 50,859 | ​ | ​ 36,670 |
| Impairment of assets held for sale (5) | ​ | — | ​ | ​ 175,671 |
| Loss on extinguishment of debt (6) | ​ | ​ — | ​ | ​ 389,207 |
| Funds from operations | ​ | **$(531,944)** | ​ | **$767,728** |

(1) Depreciation expense for buildings, site improvements and furniture and fixtures.

(2) Depreciation of tenant improvements, including those (i) acquired as part of the purchase of the retail center and flex center properties and (ii) those constructed by our company for the retail center properties and flex center property subsequent to their acquisition.

(3) Amortization of leasing commissions paid for the retail center properties and flex center property subsequent to the acquisition of the properties.

(4) Amortization of (i) intangible assets acquired as part of the purchase of the retail center properties and flex center property, including leasing commissions, leases in place and legal and marketing costs.

(5) NAREIT’s December 2018 White Paper provides guidance for the treatment of impairment write-downs. Specifically, “To the extent there is an impairment write-down of depreciable real estate … related to a REIT’s main business, the write-down is excluded from FFO (i.e., adjusted from net income in calculating FFO).” Additionally, NAREIT’s December 2018 White Paper provides guidance on gains or losses on the sale of assets, stating “the REIT has the option to include or exclude such gains and losses in the calculation of FFO.”

(6) Consistent with the treatment of impairment write-downs, our company includes an adjustment for its loss on extinguishment of debt.

NAREIT’s December 2018 White Paper encourages companies reporting FFO to “make supplemental disclosure of all material non-cash revenues and expenses affecting their results for each period.” We believe that the computation of FFO in accordance with NAREIT’s definition includes certain items that are not indicative of the results provided by our operating portfolio and affect the comparability of our period-over-period performance. These items include non-cash items such as amortization of loans and above and below market leases, unbilled rent arising from applying straight line rent revenue recognition and share-based compensation expenses. Additionally, the impact of capital expenditures, including tenant improvement and leasing commissions, net of reimbursements of such expenditures by property escrow funds, is included in our calculation of AFFO. Therefore, in addition to FFO, management uses Adjusted FFO (“AFFO”), which we define to exclude such items. Management believes that these adjustments are appropriate in determining AFFO as their exclusion is not indicative of the operating performance of our assets. In addition, we believe that AFFO is a useful supplemental measure for the investing community to use in comparing us to other REITs as many REITs provide some form of adjusted or modified FFO. However, there can be no assurance that AFFO presented by us is comparable to the adjusted or modified FFO of other REITs.

Total AFFO for the nine months ended September 30, 2023 and 2022 was as follows:

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ For the nine months ended September 30, 2023 | ​ | ​ ​ 2022 |
| --- | --- | ---: | --- | ---: |
| Funds from operations | ​ | $(531,944) | ​ | $767,728 |
| Amortization of above market leases (1) | ​ | 75,437 | ​ | 159,388 |
| Amortization of below market leases (2) | ​ | (287,341) | ​ | (305,456) |
| Straight line rent (3) | ​ | (84,852) | ​ | (112,842) |
| Capital expenditures (4) | ​ | (1,144,354) | ​ | (651,653) |
| (Increase) decrease in fair value of interest rate cap (5) | ​ | (24,674) | ​ | (246,063) |
| Amortization of loan issuance costs (6) | ​ | 80,967 | ​ | 80,607 |
| Amortization of preferred stock discount and offering costs (7) | ​ | 180,303 | ​ | 165,338 |
| Share-based compensation (8) | ​ | — | ​ | 233,100 |
| Bad debt expense (9) | ​ | 49,868 | ​ | 12,946 |
| **Adjusted funds from operations (AFFO)** | ​ | **$(1,686,590)** | ​ | **$103,093** |

(1) Adjustment to FFO resulting from non-cash amortization of intangible assets.

(2) Adjustment to FFO resulting from non-cash amortization of intangible liabilities.

(3) Adjustment to FFO resulting from non-cash revenues recognized as a result of applying straight line revenue recognition for the retail center properties and flex center properties.

(4) Adjustment to FFO for capital expenditures, including capitalized leasing commissions, tenant improvements, building and site improvements and purchases of furniture, fixtures and equipment that have not been reimbursed by property escrow accounts. See Investing Activities, above, for detail of capital expenditures.

(5) Adjustment to FFO resulting from non-cash expenses recognized as a result of decreases in the fair value of the interest rate caps for the Parkway Property and Clemson Best Western Property.

(6) Adjustment to FFO for amortization of non-cash expenses recognized as a result of amortizing loan issuance costs over the terms of the respective mortgages.

(7) Adjustment to FFO for amortization of non-cash expenses recognized as a result of amortizing the preferred stock discount over its five-year term.

(8) Adjustment to FFO for amortization of non-cash expenses recognized as a result of amortizing the preferred stock offering costs over its five-year term.

(9) NAREIT’s December 2018 White Paper provides guidance on non-cash revenues and expenses, stating, “To provide an opportunity for consistent analysis of operating results among REITs, NAREIT encourages those reporting FFO to make supplemental disclosure of all material non-cash revenues and expenses affecting their results for each period. Our company has elected to include non-cash revenues (debt forgiveness) and non-cash expenses (bad debt expense) in its calculation of AFFO.

## Market risk

As filed, 180 characters.

We have omitted a discussion of quantitative and qualitative disclosures about market risk because, as a smaller reporting company, we are not required to provide such information.

## Controls and procedures

As filed, 3,405 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended (the “Exchange Act”)), that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the rules and regulations of the SEC and that such information is accumulated and communicated to management, including our Chief Executive Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

We have carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, regarding the effectiveness of our disclosure controls and procedures as of September 30, 2023, the end of the period covered by this Quarterly Report. Based on the foregoing, our principal executive officer and principal financial officer have concluded, as of September 30, 2023, that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in reports filed or submitted under the Exchange Act (i) is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate to allow for timely decisions regarding required disclosure.

### Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Our management, including our principal executive officer and principal financial officer, evaluated, as of September 30, 2023, the effectiveness of our internal control over financial reporting based on the framework in *Internal Control — Integrated Framework* issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on that evaluation, our principal executive officer and principal financial officer concluded that our internal control over financial reporting, as of September 30, 2023, were effective.

This Quarterly Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this Quarterly Report.

### Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 134 characters.

We have omitted a discussion of risk factors because, as a smaller reporting company, we are not required to provide such information.

Filed Nov 13, 2023.
Source: SEC EDGAR, the filing index for accession 0001558370-23-018846. Last ingested by Listed: Oct 30, 2026, 16:11 ET. No prices; not investment advice.