$VLTC 10-Q, items that stood out for me...
https://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=12372378
Voltari Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)
3. Real Estate Investments
During 2015 and 2016 we acquired two real estate properties, one located in Long Branch, NJ and the other in Flanders, NY.
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5. Revolving Note
On August 7, 2015, we, as borrower, and Koala Holding LP (“Koala”), as lender, an affiliate of Carl C. Icahn, our controlling stockholder, entered into a revolving note (the “Prior Note”). Pursuant to the Prior Note, Koala made available to us a revolving loan facility of up to $10 million in aggregate principal amount. Borrowings under the Prior Note bore interest at a rate equal to the greater of the LIBOR rate plus 350 basis points, per annum, and 3.75%, per annum. The Prior Note also included a fee of 0.25%, per annum, on undrawn amounts and matured on the earliest of (i) December 31, 2017, (ii) the date on which any financing transaction, whether debt or equity, was consummated by us (or our successors and assigns) with net proceeds in an amount equal to or greater than $10 million, and (iii) at our option, a date selected by us that was earlier than December 31, 2017. Subject to the terms and conditions of the Prior Note, we could repay all or any portion of the amounts outstanding under the Prior Note at any time without premium or penalty, and any amounts so repaid would, until the maturity date, be available for re-borrowing. As collateral for the Prior Note, we pledged and granted to Koala a lien on our limited liability company interest in Voltari Real Estate Holding LLC (“Voltari Holding”). As of March 29, 2017, borrowings on this facility totaled $5.0 million.
On March 29, 2017, we and Koala amended and restated the Prior Note (the “Amended Note”). Pursuant to the Amended Note, Koala made available to the Company a revolving loan facility of up to $30 million in aggregate principal amount (the “Commitment”). The Company may, by written notice to Koala, request that the Commitment be increased (the “Increased Commitment”), provided that the aggregate amount of all borrowings, plus availability under the aggregate Increased Commitment, shall not exceed $80 million. Koala has no obligation to provide any Increased Commitment and may refuse to do so in its sole discretion. The Amended Note provides that the net proceeds thereunder in excess of $10 million will be used by the Company for the acquisition, improvement, development, modification, alteration, repair, maintenance, financing or leasing of real property, including any fees and expenses associated with such activities. Borrowings under the Amended Note will bear interest at a rate equal to the LIBOR Rate (as defined in the Amended Note) plus 200 basis points, per annum, subject to a maximum rate of interest of 3.75%, per annum. The Amended Note matures on the earliest of (i) December 31, 2020, (ii) the date on which any financing transaction, whether debt or equity, is consummated by the Company (or its successors and assigns) with net proceeds in an amount equal to or greater than $30 million, and (iii) at the Company’s option, a date selected by the Company that is earlier than December 31, 2020 (the “Maturity Date”). The Amended Note also allows the Company to, upon written notice to Koala not more than 60 days and not less than 30 days prior to the Maturity Date, request that Koala extend the Maturity Date to December 31, 2022. Koala may, in its sole discretion, agree to extend the Maturity Date by providing written notice to the Company on or before the date that is 20 days prior to the Maturity Date.
As of September 30, 2017, borrowings under the Amended Note equaled $5.5 million. The outstanding balance, including interest of $0.3 million, totaled $5.8 million.
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As of September 30, 2017, our Series J preferred stock had an aggregate redemption value of approximately $55.4 million, including paid-in-kind dividends of $24.4 million and accrued dividends of $1.8 million. We recorded accretion associated with our Series J preferred stock of $0.7 million and $0.6 million for the nine months ended September 30, 2017 and 2016, respectively.
In connection with the closing of our rights offering on March 30, 2015 , entities affiliated with Mr. Carl C. Icahn, our largest shareholder, became the owner of approximately 52.3% of our common stock, which resulted in a change of control of the Company. This constituted a redemption event pursuant to the terms and conditions of the Series J preferred stock, and as a result each holder of shares of Series J preferred stock had the right to require the Company to redeem all or a portion of such holder’s shares of Series J preferred stock. Entities affiliated with Mr. Carl C. Icahn waived their option to redeem Series J preferred stock in connection with the change in control resulting from the completion of the rights offering that closed on March 30, 2015. On April 13, 2015, we redeemed 29,316 shares of Series J preferred stock for approximately $1.0 million in cash from holders not affiliated with Mr. Carl C. Icahn. Following the April 13, 2015 redemption of Series J preferred stock, entities affiliated with Mr. Carl C. Icahn became the owner of approximately 97.9% of our Series J preferred stock.
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7. Liquidity and Capital Resources
Our principal needs for liquidity since we began executing our transformation plan in August, 2015, have been to fund operating losses, working capital requirements, capital expenditures, restructuring expenses, acquisitions and integration and debt service. Our principal sources of liquidity as of September 30, 2017, consisted of cash and cash equivalents of $0.6 million, and our ability to borrow on our Amended Note . See Note 5, Revolving Note, of our condensed consolidated financial statements for more information.
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10. Subsequent Events
On October 11, 2017, the Warrants to purchase 1,014,958 shares of common stock, expired without any such Warrants being exercised.
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Any future acquisitions are intended to be initially financed through borrowings available under our Amended Note (as defined herein) with Koala Holding LP (“Koala”).
Real Property Acquisitions —In connection with the execution of our transformation plan, on September 17, 2015, we acquired a real estate parcel in Long Branch, New Jersey. The property is subject to a triple net lease with JPMorgan Chase Bank, N.A. ("Chase"), the original term of which expires in June, 2020 (with two, five-year renewal options), pursuant to which Chase is responsible for the payment of basic rent as well as the payment of real estate taxes, maintenance costs, utilities, tenant's insurance and other property related costs. Refer to http://investor.shareholder.com/jpmorganchase/sec.cfm for the financial statements of the tenant. The purchase price was approximately $3.63 million. As of September 30, 2017, the average annual rental income for the property over the remaining term of the original lease is approximately $203,000.
On May 18, 2016, we acquired a real estate parcel in Flanders, New York. The property is subject to a lease with 7-Eleven, Inc. (“7-Eleven”), the original term (the “Original Term”) of which expires in December 2029 (with four, five-year renewal options (the “Renewal Term,” and together with the Original Term, the “Term”)). During the Term, 7-Eleven is responsible for the payment of basic rent, as well as the payment of, subject to certain exceptions, real estate taxes, utilities, tenant’s insurance and other property related costs. The landlord is responsible for certain maintenance and repair costs. The purchase price was approximately $2.82 million. As of September 30, 2017, the average annual rental income for the property over the remaining Original Term is approximately $163,000.
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Revenue for the nine months ended September 30, 2017 increased $61 thousand as a result of the addition of the Flanders property in May, 2016.
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General and administrative, excluding depreciation
For the three months ended September 30, 2017, general and administrative expense, excluding depreciation, declined by approximately $0.3 million from the three months ended September 30, 2016, due to a:
- $0.1 million decrease in personnel costs; and
- $0.2 million decrease in various other administrative costs.
For the nine months ended September 30, 2017, general and administrative expense, excluding depreciation, declined by approximately $1.0 million from the nine months ended September 30, 2016, due to a:
- $0.4 million decrease in personnel costs, resulting from January 2016 staff reductions, as well as staff reductions in connection with our transformation plan;
- $0.5 million decrease in accounting, legal and professional fees resulting from the execution of our transformation plan and acquisition of the Flanders property and completion of our IRS audit; and
- $0.1 million reduction in various other administrative costs.
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